
Issue No 67		18 August 2000

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Economics

Globalony

By Frank Stillwell

Frank Stillwell looks at the contradictory nature of the globalising economy and fears it is turning into a race to the bottom.

'Nation states are dinosaurs waiting to die' - Kenichi Ohmae.
'Globaloney' - anon.

'Globalisation' seems to be the buzz-word of the present era. It is recurrently heralded by politicians, business leaders and media commentators as being inevitable, if not wholly welcome.

We are encouraged to accept the logic of closer international integration and to make the appropriate adjustments in economic and social structures.

The process of globalisation is represented as one driven by the progressive forces of technological change and economic liberalisation, breaking down the barriers formerly imposed by the tyranny of distance and by political parochialism. It is exemplified by the assertion that globalisation is 'unavoidable, necessary and desirable'.

Against that is a rapidly growing recognition of the contestable nature of globalisation, both as a concept and as an actual process.

Is it a useful 'way of seeing' contemporary political economic trends? Is it really such a sharp break with the past?

Some analysts emphasise the uneven character of globalisation, as between its impacts on labour, capital and finance, for example, or between different parts of the globe. Some emphasise the continued growth of economic, social and cultural interchange between nations, while denying the waning of the significance of nation states which the term globalisation is commonly held to imply.

Other writers note the lack of congruity between the economic aspects of globalisation and the local places and spaces which are the focal points for identity and participation in the social, cultural and political aspects of our lives.

On this view, the limited nature of globalisation, and its disjuncture with other contemporary concerns, leaves plenty of space for political choices at local, national and supra-national levels.

The contradictory character of globalisation is increasingly evident. The balance between global production and consumption is a case in point.

To the extent that investment by transnational corporations in production facilities is attracted to particular localities by low-wage labour, there is a 'race to the bottom' in living standards. Different localities engage vigorously in beggar-thy-neighbour competition. But that leaves the question of from where the additional demand for the products will come.

For any one export-oriented nation this is not a problem, since the sales of the products do not depend on the incomes of the local workforce. Low wages at home and high incomes abroad is the optimal situation for such a nation's exporting businesses.

However, if all nations are simultaneously engaged in reducing labour costs, there is a global tendency to economic over-production (unless the enhanced spending power of managerial and professional elites outweights the depressing effect of wage-cutting).

This is one way of interpreting the financial crisis of the South East Asian region in the late 1990's - as a mis-match between productive capacity and the level of effective demand, resulting in cuts in the volume of economic activity and increased unemployment.

A second contradiction concerns the fiscal crisis of the state. The financial problems of national governments are accentuated by the way that international competition generates a second type of 'race to the bottom' - the depression of corporate taxation levels as a means of attracting mobile capital.

That undermines the capacity of government to finance substantial public expenditures. This in turn limits the employment-generating capacity (both direct and indirect) of the public sector. Neo-liberal ideologies emphasising the desirability of 'small government' seek to legitimise this outcome.

In practice, the outcome is typically 'different government' - more directly serving the interests of private capital - rather than smaller government. But the effect of both the policies and the supporting ideologies is to further undermine any residual commitments to the pursuit of full employment through expansionary fiscal policies.

Employment levels come to be regarded as incidental outcomes arising from global market processes. But, here too there is a potentially troublesome tension. To the extent that permanent pools of unemployment lead to the development of a social 'underclass', that is threatening to the social order and the perceived legitimacy of the underlying economic system.

A third contradiction arises because of the clash between the economic aspects of globalisation and the ecological constraints on economic growth.

Globalisation driven by capital accumulation is by its very nature anti-ecological. It produces a third type of 'race to the bottom', as firms relocate their resource-extractive and/or polluting activities in these countries most keen to attract capital investment, even at the expense of environmental standards. Limiting that tendency are some embryonic forms of global environmental regulation, restricting environmentally-degrading activities.

The various 'summits' at Toronto, Montreal, Rio de Janiero and (most recently) in Kyoto, are illustrative. While the implementation of these international environmental agreements depends on voluntary compliance by nation states, the competitive economic pressures will tend to continue dominating the cooperative elements necessary for more ecologically sustainable outcomes.

However, in the longer term (and in some cases a relatively short term) the resource and environmental constraints can be expected to bite harder. The growing concerns about depletion of oil reserves are a case in point. To the extent that the globalisation process is directed towards the acceleration of economic growth it accentuates the economy-environment conflicts.

These three contradictions are illustrative of the tensions associated with contemporary globalisation. The pursuit of a 'level playing field' for global capital thereby accentuates some major imbalances of the capitalist economy - between capital and labour, between economy and environment, and between the private power of corporations and the democratic institutions within nation states.

These contradictions make the process of globalisation intensely political. Not surprisingly, responses occur at various levels - global, national and local. Their coordination has become a key feature of contemporary progressive politics.

Selected References on Globalisation

K. Ohmae, The End of the Nation State: the Rise of Regional Economics, Harper Collins, London, 1996.

R. Catley, Globalising Australian Capitalism, Cambridge University Press, Melbourne, 1996.

M. Latham, Civilising Global Capital: New Thinking for Australian Labor, Allen & Unwin, Sydney, 1998; and L. Tanner, Open Australia, Pluto Press, Sydney 1999.

P. Hirst, and G. Thompson, Globalisation in Question, Polity Press, Oxford, 1997.

J. Wiseman, Global Nation? Australia and the Politics of Globalisation, Cambridge University Press, Cambridge, 1998.

H.P. Martin and H. Schumann, The Global Trap: Globalisation and the Assault on Democracy and Prosperity, Zed Books, London, 1997.

P. Dicken, Global Shift, 2nd Edition, Harper & Row, London, 1992.

M. Horsman and A. Marshall, After the Nation State: Citizens, Tribalism and the New World Disorder, Harper Collins, London 1994.

R. Burbach, O. Nunez and B. Kagarlitsky, Globalisation and Its Discontents: the Rise of Postmodern Socialisms, Pluto Press, London, 1997.

R. Bryan, and M. Rafferty, The Global Economy in Australia, Allen & Unwin, Sydney, 1998.

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Issue 67 contents

Interview: Slyly Selling the Silver
In their recently published book Privatisation, Sell-off? or Sell out? (ABC Books), Bob and Betty Walker took a long hard look at the major government asset sales of the last decade. Here they tell Workers Online what they've learnt.

Politics: Dysfunctional Society
Noel Pearson looks at the plight of Aboriginal people through a prism of class and comes up with a challenging perspective on Aboriginal welfare, law and order and the state of our society.

History: Money Power
Should the People or the Banks Rule? Reserve Bank Governor McFarlane thinks he knows the answer. Eddie Ward was pretty strongly of the opposite view when the ALP introduced the Commonwealth Banking Legislation in 1945.

International: Soccer Pro Tackles Nike
Olympic sponsor Nike is under pressure over its human rights record in the run up to the Sydney Games.

Economics: Globalony
Frank Stillwell looks at the contradictory nature of the globalising economy and fears it is turning into a race to the bottom.

Satire: IVF Debate: Federal Government Tells Lesbians: "Get Fucked"
MELBOURNE, Monday: The Federal Court decision to allow single women and lesbians to use infertility treatment in Victoria has been attacked by the Federal Government, the Catholic Church and by pro-family community groups.

Review: Confessions Of A Union Buster
It's not a new tome but the threat for Australian Unions remains the same if not greater as when this book appeared five years ago.

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