Global Policy Forum

Beyond Globophobia


By Doug Henwood

The Nation
November 13, 2003

"Globalization" has been on so many lips that it's easy to forget how recently it entered daily speech. Shown nearby is a graph of the word's appearances in the New York Times and Washington Post since 1980. After flatlining its way through the 1980s and early '90s, "globalization"--as a word, at least--took off in a near-vertical ascent in the late 1990s.

What does it mean exactly? Like many deeply ideological words, it's rarely defined; everyone knows what it means. Elites mean something like the internationalization of economic, political and cultural life, as if these haven't long been internationalized. Non-elites seem to mean everything bad that's happened lately. Writing in the American Prospect in 2001, Mark Greif reported on a focus group held for corporate clients worried about the antiglobalization backlash. Thirty Americans were convened by a Jungian market researcher and asked what globalization meant to them. Some responses: "Nothing's's all machines." "No more privacy." "There's no mystery anymore...." Pressed for detail, respondents complained about speedup, the "fight for the dollar," powerlessness, growing gaps between haves and have-nots, the deterioration of healthcare. An impressive array of complaints, but it's not clear how "globalization" is their cause. They sound like venerable complaints about capitalism.

Experts often do little better. The French international relations analyst Dominique Moí¯si defined globalization as "complexity, interaction and simultaneity," a phrase that could also describe a crowd chatting in a bar. The British sociologist Bob Jessop avers that the word "is best used to denote a multicentric, multiscalar, multitemporal, multiform, and multicausal process... the complex, emergent product of many different forces operating on many scales." Indeed.

Whatever it is, globalization is usually taken as a recent arrival. But from the first, capitalism has paid little respect to national borders. After the breakup of the Roman Empire, Italian bankers devised complex foreign-exchange instruments to evade church prohibitions on interest. Those cross-border capital flows moved in tandem with trade flows. And with 1492 began the slaughter of the First Americans and the plunder of the Western Hemisphere. That act of primitive accumulation, along with the enslavement of Africans and the colonization of Asia, made Europe's takeoff possible. As John Maynard Keynes put it:

the booty brought back by Drake in the Golden Hind may fairly be considered the fountain and origin of British foreign investment. Elizabeth paid off out of the proceeds the whole of her foreign debt and invested a part of the balance (about £42,000) in the Levant Company; largely out of the profits of the Levant Company there was formed the East India Company, the profits of which during the seventeenth and eighteenth centuries were the main foundation of England's foreign connections; and so on.

He was exaggerating a bit, but the fundamental point is solid.

For a less literary take we can turn to the International Monetary Fund's Anne Krueger, who said in a 2002 speech given in Melbourne:

The phrase "emerging market" only came into common use in the 1980s, but capital flows into developing countries of course have a much longer history. Stock markets were operating in Turkey by 1866, India by 1875, and Brazil by 1877. Widespread sovereign borrowing--in the sense that we think of it now--got under way in the late eighteenth century, when the spread of constitutional forms of government led to more stable nation-states that recognized continuing liabilities to lenders....

International flows of investment capital were particularly robust in the late nineteenth and early twentieth centuries, against a backdrop of free trade and exchange rates fixed under the gold standard. Indeed, flows to developing countries were larger in relation to the world economy during this first "golden age" of financial globalization than they are today. Here in Australia, capital flows financed half of all domestic investment in the late 1880s.

Or, in the words of James Petras: "From the 15th to the 19th century Latin America's external trade and investment had greater significance than in the 20th century. Similarly, one-third of English capital formation in the 17th century was based on the international slave trade." Capitalism was relentlessly global until World War I; the 1920s effort to restore the old order failed miserably in 1929. Capitalism's retreat to national economies and trading blocs was a sign of crisis. At the end of World War II, one of capital's main tasks was to restructure the international monetary system, and Washington laid great emphasis on getting the world trading system going again. A return to economic health required that the global mechanisms be restored.

Globalization is thought to be the source of many economic ills. Is it? We First Worlders have to be very careful when complaining about its pressure on living standards, since the initial European rise to wealth depended largely on the colonies, and we still derive benefit from cheap labor and cheap resources. It's embarrassing to hear echoes of Pat Buchanan in the complaints by Ralph Nader and his associates that NAFTA and the World Trade Organization threaten US sovereignty. Washington has abused the sovereignty of scores of nations over the decades.

I won't deny that plant relocations to Mexico have put a sharp squeeze on US employment and earnings, or that the threat of those things has reduced workers' bargaining power. But how much has this contributed to downward mobility and increasing stress? Econometricians say that trade explains about 20-25 percent of the decline in the US real hourly wage during the 1970s and '80s. While not insignificant, that still leaves 75-80 percent to be explained, and the main culprits there are mainly of domestic origin. And why, if globalization was so decisively immiserating, did the real hourly wage rise after 1995, reversing a two-decade slide, even as NAFTA took effect and trade penetration increased?

An important reason that trade doesn't explain more of our economic history since the early 1970s is that 80 percent of us work in services--and a quarter of those in government--which are insulated from international competition. What did "globalization" have to do with Teddy Kennedy and Jimmy Carter's transport deregulation, or with Reagan's firing of the air traffic controllers, or with Clinton's signing of the welfare bill? What does "globalization" have to do with tuition increases at public universities or attacks on affirmative action? While lots of people blame corporate downsizings on globalization, the more powerful influences were Wall Street portfolio managers, who are always demanding higher profits.

Are globalized economies more unequal than nonglobalized ones? The consulting firm A.T. Kearney has been computing a yearly globalization index for Foreign Policy magazine. If you chart the relation of the index to country rankings for inequality, the results are not what a typical antiglobalization activist would expect.

The relation is far from perfect, but if anything, more globalized countries are less unequal than less globalized ones. Western European social democracies are more globalized than the United States but less unequal--as is Canada, to a lesser degree. South Korea is much more globalized than Brazil but less unequal; so is Mexico. The point is not that promoting globalization would promote equality, but that the foregrounding of globalization as the cause of inequality isn't a simple case to make. Income distribution depends more on domestic institutions like unions and welfare states than on internationalization.

Of course, this is hardly a rigorous exercise, and it compares levels at one given moment. Has "globalization" contributed to inequality? While it's an article of faith among activists that it has, it's actually quite difficult to prove the case either way: It all depends on how you define and measure. Most studies by economists focus on recent history--but over the long term, global income gaps have widened considerably. According to economic historian Angus Maddison's estimates, African and American incomes were roughly equal in 1600 (because the Americans measured were the native population), but with industrialization, they started diverging in earnest. American incomes were three times Africa's in 1820, five times in 1870, ten times in 1913, and twenty times in 1998. When was the moment of "globalization"?

Capitalism has always produced poverty alongside wealth, and capitalism has from the first been an international and internationalizing system--so it makes little sense to try to isolate the "global" aspect as the major culprit in the production of inequality.

The MNCs

Those who identify globalization as the major force behind the production of inequality frequently point to an alleged "race to the bottom," driven by multinational corporations (MNCs), which constantly ransack the globe searching for low costs and high returns. This case isn't easy to prove either.

If you look at the distribution of investment by US multinationals abroad, several things stand out. First, such investments are overwhelmingly located in rich countries. Over half is accounted for by Western Europe, Canada adds another 10 percent and the richer countries of Asia, 8 percent. So more than two-thirds of the total stock of US foreign direct investment is in countries with incomes roughly comparable to ours. Throw in the four classic Asian Tigers, and you've got more than three-quarters of the total. The poorer countries of Europe are home to less than 1 percent of US foreign investment, and China, even less. Mexico accounts for just 3 percent of the total stock, not much of an increase from 1980. That's not to say that Mexico isn't important in certain industries (like autos and electronics), or that it isn't an important club that employers use to scare workers--but the relocation of production to Mexico isn't quite the driving force of economic evolution that it's sometimes thought to be.

The poorer countries aren't the profit gushers one might expect either. Rates of return in Mexico are high, but Switzerland's are higher, and Latin America's overall figure is below Canada's and Western Europe's.

Another image in need of a rethink is that of a "global assembly line." The share of world output accounted for by US multinationals has changed little over the past two decades: It was 9 percent of world product in 1982 and 8 percent in 1999. And the output of US MNCs is overwhelmingly domestic; 76 percent of their output in 1999 was within these borders, almost exactly the same share as in 1982. Over the same seventeen-year period, old-fashioned exports have actually grown faster than production by US multinationals abroad. Output by foreign branches of US multinationals accounted for less than 2 percent of world product in 1999, a share that has changed little over the past two decades. Their operations in Mexico accounted for 0.1 percent of world product. These are not large numbers.

That's not to say that production isn't being internationalized in some areas. But it's concentrated mainly in a few industries--autos, electronics, textiles. And the multinationalization that has occurred is much more selective than global. Auto production, for example, is increasingly integrated among the three NAFTA countries, neighbors with long borders and long ties. In this case, "regionalization" is a better description than "globalization."

Nationalist Nostalgias

Among some antiglobo activists, there's a strange nostalgia for the nation-state, as if it's one of the innocent structures that globalization is undermining. At least two aspects of the nostalgia for the nation are worth picking apart. First, in the narrow economic sense, fond memories of the pre-1980 protectionist regimes are often evoked. Like many nostalgias, the historical record doesn't justify the sentiment. Even the most protected developmental state is shaped by external forces; the height of the tariff walls and the vigor of the state intervention themselves are testimony to that. But they seem to flourish in particular historical enclaves, like the Latin American import-substitution model from the 1930s through the debt crisis of the early 1980s, and run into trouble when their moment passes. By the late 1960s, for example, growth slowed in Latin America as import-substitution reached its limits. Domestic firms were inefficient, and average incomes were too low to sustain a home consumer market. Labor agitation was met with repression. As sociologist Ankie Hoogvelt wrote, "Politically, the easiest option for the national bourgeoisie was to suppress internal revolt by blaming the continuation of imperialist forms of domination of their countries, while masking their own complicity in this domination."

Instead of chasing nationalist chimeras, why not go "globalization" one better? Many activists in the wrongly named "antiglobalization" movement still talk locally, even as they're acting and thinking globally. This might be a good time to junk local self-reliance as an ideal and embrace a deeply global perspective.

Along those lines, there's an inspiring quote from Michael Hardt and Antonio Negri's Empire. The book itself is not without its problems--prolixity and abstraction to start with--but at least two things are welcome about its megahit status. One is its theoretical ambition, its attempt to think about the dispersed, hard-to-specify nature of power today. Another is its optimism, thanks to its roots in autonomist Marxism, an approach that emphasizes the creative and revolutionary power of workers on their own, and not expressed through state or party. Next to typical left pessimism, autonomists can seem dreamily optimistic, seeing struggle and victory where others see apathy and defeat. And closely related to that cheeriness is its absolute refusal to look backward. A lot of supposedly progressive thinkers and activists would love to recover a lost world of nation-states or self-sufficient localities. Hardt and Negri will have none of this:

We insist on asserting that the construction of Empire is a step forward in order to do away with any nostalgia for the power structures that preceded it and refuse any political strategy that involves returning to that old arrangement, such as trying to resurrect the nation-state to protect against global capital. We claim that Empire is better in the same way that Marx insists that capitalism is better than the forms of society and modes of production that came before it. Marx's view is grounded on a healthy and lucid disgust for the parochial and rigid hierarchies that preceded capitalist society as well as on a recognition that the potential for liberation is increased in the new situation.

In our normal work lives, we're all linked--often invisibly-- with a vast network of people, from across the office or factory to the other side of the world. Standard globalization narratives, mainstream or critical, often efface this fact, seeing capital, rather than the billions who produce the goods and services that the world lives on, as the dominant creative force. That cooperative labor deserves to be acknowledged in itself, as the creative force that it is, but also as a source of great potential power. Empire uses a lyric from Ani DiFranco as one of its epigraphs: "Every tool is a weapon if you hold it right." They could have also used a line from Patti Smith: "We created it. Let's take it over."

More Information on Defining Globalization
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FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.