Imperialist Globalization and
the Fight for a Different Future

Part 2: Global Economy: Dirty Little Secrets

by Raymond Lotta

Revolutionary Worker #934, November 30, 1997


To understand the important trends in the world economy, we have to understand that capitalism functions in a historically specific global economic and political framework. World War 2 put the United States on top of the imperialist dungheap. Not only were Germany and Japan defeated, but the U.S.'s allies, Great Britain and France, were greatly weakened. The U.S. stood head and shoulders above the other imperialist powers: in productive capacity, finance, and military capability. The world economy was reorganized on the basis of the outcome of World War 2. The United States was the prime mover and chief beneficiary.

The war-torn economies were rebuilt in a new, more integrated framework of world investment and trade. Germany and Japan were put back on their feet in large part to act as strategic-economic bulwarks against the then-socialist Soviet Union and, later, Maoist China. New international economic relations and a new dollar-based monetary order were established. New global institutions, like the World Bank and the International Monetary Fund, acted both as a glue and lubricant for these arrangements.

World trade grew enormously. And, most important, there was a huge outflow of investment capital--among the imperialist economies and into the natural resources, agricultural, and, especially in the 1960s, into the manufacturing sectors of the Third World. Cheap raw materials, high rates of return on manufacturing investments, and imperialist-led transformation in the Third World were vital ingredients of the postwar boom.

But things turned into their opposite. The brutal extension of empire inflamed resistance and national liberation struggles. Growth in the world economy led to crisis.

By the early 1970s, the Western imperialists were running up against certain limits. The economic revitalization of Western Europe and Japan were posing competitive challenges to the U.S. The costs of waging the genocidal war in Vietnam fractured the international monetary order. Global inflation raged. The gold-dollar system broke down. As the U.S. was facing defeat in Vietnam, Japan was replacing the U.S. as the main capital exporter in the Asia-Pacific region. Profitability was declining throughout the advanced industrial countries; and long term investments were being held back. At the same time, the dependent and distorted development taking place in the Third World was raising new barriers to imperialist expansion.

A turning point occurred in 1974-75. The imperialist world economy experienced its first global contraction since the Great Depression of the 1930s and entered into a deep structural crisis. The boom of the postwar period had come to an end and the primary and dominant position of U.S. imperialism in the world capitalist order was being undermined.

This crisis was marked by a sharp slowdown in growth and investment. Between 1948 and 1973, the world economy grew at a rate of 5 percent; but between 1974 and 1989, growth fell by half, to 2.5 percent. This crisis was also marked by acute financial instability--massive currency fluctuations and dangers of collapse of major banking institutions in the 1980s.

The Third World debt crisis exploded in connection with this global crisis. On the one hand, slowdown and slackening profitability in the advanced countries in the 1970s and early 1980s pushed banks to invest huge amounts of surplus loan capital to a select circle of Third World countries. Countries like Mexico and Brazil were important growth centers for imperialism. On the other hand, because of slow growth and increasingly protected markets in the imperialist economies, debtor countries found it harder to successfully export and earn foreign exchange. And their dependence on the advanced capitalist countries for capital and technology heightened their demand for loans and more loans.


But there was more to the picture. Rivalry between the United States and the social-imperialist Soviet Union was intensifying.

Now the Soviet Union had once been a socialist country. But in 1956 a new exploiting class seized power and turned the Soviet Union into a state-capitalist society. These new capitalist rulers set out to forge an international empire. A "bipolar" imperialist world was taking shape. From the early 1970s onward, the Soviet Union was increasingly forced to mount, and was increasingly capable of mounting, a global challenge to the Western imperialist bloc. And by the late 1970s, the Soviet bloc was itself beset with serious economic difficulties.

The most defining geopolitical fact of the late 1970s and the decade of the 1980s was this: the crisis of the world economy was interacting with and intensifying the global rivalry between the United States and the Soviet Union. Something had to give, one or the other had to come out on top. These two blocs were on a collision course towards world war. What in fact happened as a result of these pressures was that one imperialist superpower, the Soviet Union, collapsed.

The collapse of the Soviet Union and its bloc in 1989-91 represents the most decisive change in interimperialist relations since the end of World War 2. With the breakdown of the "cold war" structure of international relations has come the resolution of certain contradictions, even while others persist and sharpen.

These shifts and changes have had far-reaching geopolitical and economic effects.

The U.S. has reemerged as the sole imperialist superpower. It has gained a certain amount of freedom to impose settlements to its imperialist advantage on "hot spots" like South Africa and Central America.

For the Western imperialists, the ending of the global showdown between the U.S.-led and the Soviet-led blocs has freed up some technology and capital, which are being applied more extensively to global production and marketing systems. This is especially true for the U.S.--even as it retains its deadly arsenals capable of destroying humanity many times over, even as it continues to carry out its murderous interventions. The ending of the global confrontation with the Soviet bloc has also reduced the geopolitical risks to some capital investment in parts of the Third World.

The field on which the imperialists are scrambling for markets has widened. Hundreds of millions of workers from the former Soviet social-imperialist bloc and from China, where capitalism was restored in 1976 after Mao died, have become part of a more integrated global labor pool.

These are significant changes. World capitalism has undergone a certain restructuring, and its global geopolitical framework has been altered. This has been a stimulus to investment, growth, and further reorganization.

But a particular feature of the world situation is that for all these changes, the world economy lacks expansiveness and is marked by instability. And for huge sections of the masses worldwide, poverty and desperation deepen.

In the years 1990-95, world output grew at an annual average rate of less than 2.5 percent. Today, Western Europe is mired in slow growth. Japan has yet to emerge from the recession and financial crisis of the early 1990s. Russia is going through one of the most brutal economic episodes of 20th-century economic history. In the imperialist countries overall, investment in new plants and equipment and growth in productivity have not regained the levels of the postwar expansion. Overcapacity plagues key global industries, like auto. A large share of the world's capital flows are short-term and speculative. Financial and monetary instability loom as threats in the world economy.

Third World countries still face a huge debt burden. In 1995, the debt owed was three times greater than in 1980. In Africa, economic stagnation, disease, and the breakdown of infrastructure continue to ravage much of the continent. Mexico has suffered through crises in the mid-1990s. The imperialist "welfare state" is under massive assault, while life-destroying "austerity" and "adjustment" programs imposed by the IMF are the norm in the Third World.

There is a global jobs crisis. The global downturn of the early 1990s has ended. But 30 percent of the world's labor force remains unemployed or underemployed--a level not seen since the Great Depression. In Western Europe, 1 out of 9 workers is without a job. In Asia, Africa, and Latin America, close to 1 billion people are unemployed or doing jobs that don't pay enough to survive on. In Latin America, 8 out of every 10 new jobs "created" in the last few years have been in the so-called "informal economy" of poorly paying, unregulated jobs. Each year, some 75 million people from the Third World migrate to other countries in search of work.

The U.S. economy has been in recovery for six years. This has been a period in which the U.S. has sought aggressively to strengthen its position in international markets. Domestically, the U.S. recovery has been fueled by corporate revamping, downsizing, and the adoption of new information and cost-saving technologies; and by the harsh restructuring of the U.S. labor force and labor-management relations. With Japan and Germany facing difficulties, the U.S. has regained some competitive economic advantage.

The U.S. is still the largest and strongest economy in the world. But its global economic strength--its share of world output and world investment--has declined relative to the situation of the 1950s and 1960s. The U.S. came out of the "cold war" financially weakened. Big trade deficits and the need to curb budget deficits make it more difficult for the U.S. to resort to expansionary government spending and monetary policy.

The effects of what I am describing are highly significant. The U.S. is not able to play the same kind of "locomotive" role in the world economy. By "locomotive" I mean the U.S. is not able to stimulate growth and pull along other national economies in the way it had in the decades following World War 2. And importantly, no other imperialist power is in a position to do so, or to play the kind of leading and orchestrating role in the world economy that the U.S. did in the decades following World War 2. At the same time, there is intense geoeconomic competition and rivalry among the U.S., Japan, and a now-unified Germany.

There are contradictory elements in the world situation--some more and some less favorable to the people's struggles. But within this situation overall, there is plenty of basis for revolutionary advance: for protracted people's wars to further develop and for new ones be launched in the oppressed nations; for revolutionary struggles and revolutionary preparations to be carried out in the imperialist countries, where contradictions--including the class contradiction--are sharpening; and for more favorable conditions to be created worldwide through struggle.


I know I have covered a lot of ground. But this is part of the larger context in which we can better understand the current wave of imperialist globalization. During the last 20 years or so, there has been substantial increase in the degree of integration of the world economy. In response to crisis as well as to new imperialist investment opportunities, major industries have been reorganized on a world scale. Agriculture in the Third World is becoming more fully integrated into the production and marketing chains of imperialist agribusiness. Organizational and technological transformations have taken and are taking place in the operation of world capitalism--and they are having profound economic and social effects.

But these changes are taking place within the same system of imperialism. This is the same economics of exploitation, the same politics of domination. And this new wave of imperialist globalization will lead to more of the same results: to more oppression, to new flashpoints of crisis and imperialist conflict...and to heightened resistance.

This wave of economic globalization revolves around three interrelated developments. The most important of these is the intensified globalization of production. New production, transport, and communications technologies play a key role here. On the one hand, they have made it possible for imperialist capital to more easily break down production processes and to scatter and interlink activities in different countries--and in this way to raise the overall rate of profit. On the other hand, a much larger proportion of world production is being tied together more tightly under the organizational control and domination of transnational capital.

The intensified globalization of production is a development of qualitative significance. A much wider range of manufacturing, agricultural, and service activities have been globalized. More so than ever, capital compares investment costs and opportunities globally. More so than ever, capital is criss-crossing national borders. More so than ever, the labor process is being integrated, transformed, and cheapened on a global scale.

Some of this globalized production takes the form of the "global factory"--where different phases of production are carried out in different countries. Some of this globalized production is directly controlled by the transnational corporations, such as in auto and other capital-intensive sectors. The latest round of U.S. auto investments in Mexico combine modern technology and high productivity with wage payments that are one-eighth the U.S. level.

Some of this globalized production, especially more labor-intensive production like the garment sweatshops in Central America and East Asia, is contracted out to Third World suppliers. Some of it involves more high-tech activities. In Bangalore in India, we see "high-tech plantations"--where companies produce software for the world's computer systems, where professionals get paid one-fifth what they would in the U.S.

Globalization is contributing to "new hierarchies" of imperialist production. The imperialist countries keep a lock on certain strategic high-tech industries, like telecommunications and aerospace, while they assign light industries (like textiles) and certain assembling aspects of some of the new high-growth industries (like chips for computers) to some of the poorer oppressed nations. Some of the declining, heavy industries formerly concentrated in the imperialist countries, like steel and shipbuilding, have expanded in a few Third World countries. A growing share of the world's manufacturing exports are being produced in the Third World.

The most striking manifestation of globalization in the 1990s has been the dramatic increase in the outflow of private imperialist capital into the Third World. In fact, direct foreign investment in the oppressed nations has increased three-fold over the last five years alone--and in 1995 foreign investment in the Third World represented about 35 percent of total foreign investment, up from 18 percent as recently as 1988. During the 1990-93 recession, flows of new foreign direct investment out of the imperialist countries declined. But in the same period, imperialist investment in the Third World increased 50 percent. The markets and profits mined in the oppressed nations have been an important stimulus to the imperialist economies.

Why this substantial increase in capital flows to certain regions of the Third World? On the one hand, in the face of slow growth and intense competitive pressures in the world economy, imperialist capital needs to cheapen costs. It needs mobility, the ability to more easily move investment capital to wherever profits are highest. On the other hand, as I already mentioned, the resolution of the U.S.-Soviet showdown has reduced certain geopolitical risks and obstacles to the export of capital and technology to the Third World.

A second and related development is the further globalization of finance--of banking, capital markets, and electronic trading systems that make it possible to move huge amounts of capital around the world with relative ease. Financial globalization and integration allow capital to be more rapidly combined and deployed, and more easily invested and disinvested.

This is the era of "fast and faster capitalism," in which capital must respond quickly to profit opportunities. Huge amounts of short-term capital flow from one country to another in search of quick profits; funds flow in and out of Third World financial and stock markets. The vast growth of the financial sector and of speculative capital flows have much to do with the slowdown in long-term capital formation in the imperialist countries.

The third factor is the globalization of macroeconomic policy in the oppressed nations. What I mean is the virtual takeover of the national management of Third World countries by the International Monetary Fund (IMF) and World Bank. This has been in response to the debt crisis. With this tightening of external authority has come the imposition of IMF austerity and adjustment policies that cut living standards and wages, the reprogramming of these economies towards export production, and the tighter integration of domestic markets for wealth, assets, and real estate with the international economy.

This kind of economic control is hardly new in the history of imperialism. But two things need to be said about what has been happening in the Third World during the last two decades. To begin with, IMF adjustment programs--and they have been applied simultaneously in more than 100 debtor countries--resulted in a vast transfer of financial resources from the Third World to the imperialist countries in the 1980s. At the same time, and continuing in the 1990s, IMF/World Bank policies have promoted the development of cheap-labor manufacturing that thrives on poverty and huge reserves of surplus labor in the countryside. These policies have promoted the fuller integration of cheap-labor manufacturing into the world market.

In the countryside of the Third World, globalization is resulting in agriculture becoming further capitalized and more peasants becoming proletarianized. But globalization is also resulting in peasants and the rural poor being exploited in more intense ways. I'm talking about subsistence production, sharecropping, bonded labor, seasonal labor. I'm talking about rural impoverishment being utilized to lower costs and wages. Far from transforming every peasant into a worker, imperialism is utilizing semifeudal oppression as part of its overall oppressive workings.


The imperialists have a certain common agenda. They ganged up on Iraq. They have used IMF/World Bank "structural adjustment" programs to extract debt payments and to expand their joint freedom to exploit and plunder in the Third World. They have used "trade liberalization" agreements to further pry open the economies of the oppressed nations to foreign investment, ownership, and control. They have used recent World Trade Organization agreements to set a framework for international economic activity.

These agreements enable the imperialists to more easily invest their capital wherever profits are the highest, while being able to sell across borders wherever the markets are greatest. The imperialists are formalizing what are called "intellectual property rights"--to increase their control over and their profits from the accumulated knowledge of humanity.

But embedded in this new wave of globalization is competition to cheapen costs. Embedded in globalization is interimperialist rivalry--over the exact terms of and the enforcement authority behind their trade and investment rules, over who will be the dominant force in particular regions. The Asia-Pacific region is an important arena and battleground, precisely because this is the most dynamic growth region in a world economy gripped by slow growth. And the U.S. and Japanese imperialists are using forums like APEC (Asia Pacific Economic Cooperation) to advance their economic and strategic agendas in this region.

One aspect of the intensifying geoeconomic competition among the imperialists is a trend towards regionalization and the formation of regional economic blocs. The U.S. is tightening its economic hold over Latin America. Japan is attempting to secure and extend its dominant economic position in East Asia. Germany is playing a more assertive role in continental Europe. All the imperialists trade and invest in these regions, and Russia is kind of a wild-card right now. But there is this trend towards economic blocs.

On the one hand, Japanese-led regional integration in Asia and U.S.-led regional integration through NAFTA are part of a process of lowering labor costs and raising profitability. On the other hand, regional integration is part of a strategy by which rival imperialists are forging privileged trade and investment positions from which they can more effectively compete with each other worldwide. Part of the reason the U.S. has been bolstering its investment and trade position in Latin America is exactly to strengthen its capacity to compete with Japan worldwide.


So to sum up. Globalization is about greater geographic capital mobility, about the ability of capital to switch resources from one low-cost location to another, and to use the threat of relocation as a club over workers. It is about the ability to combine up-to-date technology with the cheapest labor and worldwide marketing connections. Globalization is about increasing the wholesale penetration of the oppressed countries by the banks and corporations of the imperialist countries. It is about removing protections for workers and relaxing environmental regulations--in the name of "harmonizing" standards. It is about forcing workers and farmers to meet the threat of ever-lower wages and ever-more oppressive working conditions.

These are some of the "dirty little secrets" of imperialist globalization. On the one hand, globalization is an ongoing trend of capitalist development. On the other hand, globalization is an economic and ideological assault on the masses of people worldwide.


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