Globalization in Retreat
Date: Sunday, January 07 2007
GLOBALIZATION IN RETREAT
by Walden Bello*
When it first became part of the English vocabulary in the early
1990s, globalization was supposed to be the wave of the future.
Fifteen years ago, the writings of globalist thinkers such as Kenichi
Ohmae and Robert Reich celebrated the advent of the emergence of the
so-called borderless world. The process by which relatively
autonomous national economies become functionally integrated into one
global economy was touted as "irreversible." And the people who
opposed globalization were disdainfully dismissed as modern-day
incarnations of the Luddites that destroyed machines during the
Fifteen years later, despite runaway shops and outsourcing, what
passes for an international economy remains a collection of national
economies. These economies are interdependent no doubt, but domestic
factors still largely determine their dynamics.
Globalization, in fact, has reached its high water mark and is
BRIGHT PREDICTIONS, DISMAL OUTCOMES
During globalization's heyday, we were told that state policies no
longer mattered and that corporations would soon dwarf states. In
fact, states still do matter. The European Union, the U.S.
government, and the Chinese state are stronger economic actors today
than they were a decade ago. In China, for instance, transnational
corporations (TNCs) march to the tune of the state rather than the
other way around.
Moreover, state policies that interfere with the market in order to
build up industrial structures or protect employment still make a
difference. Indeed, over the last ten years, interventionist
government policies have spelled the difference between development
and underdevelopment, prosperity and poverty. Malaysia's imposition
of capital controls during the Asian financial crisis in 1997-98
prevented it from unraveling like Thailand or Indonesia. Strict
capital controls also insulated China from the economic collapse
engulfing its neighbors.
Fifteen years ago, we were told to expect the emergence of a
transnational capitalist elite that would manage the world economy.
Indeed, globalization became the "grand strategy" of the Clinton
administration, which envisioned the U.S. elite being the primus
inter pares -- first among equals -- of a global coalition leading
the way to the new, benign world order. Today, this project lies in
shambles. During the reign of George W. Bush, the nationalist faction
has overwhelmed the transnational faction of the economic elite.
Nationalism-inflected states are now competing sharply with one
another, seeking to beggar one another's economies.
A decade ago, the World Trade Organization (WTO) was born, joining
the World Bank and the International Monetary Fund (IMF) as the
pillars of the system of international economic governance in the era
of globalization. With a triumphalist air, officials of the three
organizations meeting in Singapore during the first ministerial
gathering of the WTO in December 1996 saw the remaining task of
"global governance" as the achievement of "coherence," that is, the
coordination of the neoliberal policies of the three institutions in
order to ensure the smooth, technocratic integration of the global
But now Sebastian Mallaby, the influential pro-globalization
commentator of the Washington Post, complains that "trade
liberalization has stalled, aid is less coherent than it should be,
and the next financial conflagration will be managed by an injured
fireman." In fact, the situation is worse than he describes. The IMF
is practically defunct. Knowing how the Fund precipitated and
worsened the Asian financial crisis, more and more of the advanced
developing countries are refusing to borrow from it or are paying
ahead of schedule, with some declaring their intention never to
borrow again. These include Thailand, Indonesia, Brazil, and
Argentina. Since the Fund's budget greatly depends on debt repayments
from these big borrowers, this boycott is translating into what one
expert describes as "a huge squeeze on the budget of the
The World Bank may seem to be in better health than the Fund. But
having been central to the debacle of structural adjustment policies
that left most developing and transitional economies that implemented
them in greater poverty, with greater inequality, and in a state of
stagnation, the Bank is also suffering a crisis of legitimacy. This
can only be worsened by the recent finding of an official high-level
expert panel headed by former IMF chief economist Kenneth Rogoff that
the Bank has been systematically manipulating its data to advance its
pro-globalization position and conceal globalization's adverse
But the crisis of multilateralism is perhaps most acute at the WTO.
Last July, the Doha Round of global negotiations for more trade
liberalization unraveled abruptly when talks among the so-called
Group of Six broke down in acrimony over the U.S. refusal to budge on
its enormous subsidies for agriculture. The pro-free trade American
economist Fred Bergsten once compared trade liberalization and the
WTO to a bicycle: they collapse when they are not moving forward. The
collapse of an organization that one of its director generals once
described as the "jewel in the crown of multilateralism" may be
nearer than it seems.
WHY GLOBALIZATION STALLED
Why did globalization run aground?
First of all, the case for globalization was oversold. The bulk of
the production and sales of most TNCs continues to take place within
the country or region of origin. There are only a handful of truly
global corporations whose production and sales are dispersed
relatively equally across regions.
Second, rather than forge a common, cooperative response to the
global crises of overproduction, stagnation, and environmental ruin,
national capitalist elites have competed with each other to shift the
burden of adjustment. The Bush administration, for instance, has
pushed a weak-dollar policy to promote U.S. economic recovery and
growth at the expense of Europe and Japan. It has also refused to
sign the Kyoto Protocol in order to push Europe and Japan to absorb
most of the costs of global environmental adjustment and thus make
U.S. industry comparatively more competitive. While cooperation may
be the rational strategic choice from the point of view of the global
capitalist system, national capitalist interests are mainly concerned
with not losing out to their rivals in the short term.
A third factor has been the corrosive effect of the double standards
brazenly displayed by the hegemonic power, the United States. While
the Clinton administration did try to move the United States toward
free trade, the Bush administration has hypocritically preached free
trade while practicing protectionism. Indeed, the trade policy of
the Bush administration seems to be free trade for the rest of the
world and protectionism for the United States.
Fourth, there has been too much dissonance between the promise of
globalization and free trade and the actual results of neoliberal
policies, which have be en more poverty, inequality, and stagnation.
One of the very few
places where poverty diminished over the last 15 years is China. But
interventionist state policies that managed market forces, not
neoliberal prescriptions, were responsible for lifting 120 million
Chinese out of poverty. Moreover, the advocates of eliminating
capital controls have had to face the actual collapse of the
economies that took this policy to heart. The globalization of
finance proceeded much faster than the globalization of production.
But it proved to be the cutting edge not of prosperity but of chaos.
The Asian financial crisis and the collapse of the economy of
Argentina, which had been among the most doctrinaire practitioners of
capital account liberalization, were two decisive moments in
reality's revolt against theory.
Another factor unraveling the globalist project derives from its
obsession with economic growth. Indeed, unending growth is the
centerpiece of globalization, the mainspring of its legitimacy.
While a recent World Bank report continues-amazingly--to extol rapid
growth as the key to expanding the global middle class, global
warming, peak oil, and other environmental events are making it clear
to people that the rates and patterns of growth that come with
globalization are a surefire prescription for an ecological
The final factor, not to be underestimated, has been popular
resistance to globalization. The battles of Seattle in 1999, Prague
in 2000, and Genoa in 2001; the massive global anti-war march on Feb.
15, 2003, when the anti-globalization movement morphed into the
global anti-war movement; the collapse of the WTO ministerial meeting
in Cancun in 2003 and its near collapse in Hong Kong in 2005; the
French and Dutch peoples' rejection of the neoliberal, pro-
Constitution in 2005 -- these were all critical junctures in a decade-
long global struggle that has rolled back the neoliberal project. But
these high-profile events were merely the tip of the iceberg, the
summation of thousands of anti-neoliberal, anti-globalization
struggles in thousands of communities throughout the world involving
millions of peasants, workers, students, indigenous people, and many
sectors of the middle class.
This column appeared in Foreign Policy in Focus on Dec. 27, 2006:
[Proofreader's note: this article was edited for spelling and typos on January 8, 2007]