Genoa and the Multiple Crises of Globalisation
Walden Bello - TNI Fellow
Focus-on-Trade, No. 64, July 2001

Genoa is a name associated with the emergence of capitalism in Europe six centuries ago. Genoa may also now become a symbol of the crisis of corporate-driven globalisation.

The siege that thousands of protesters are planning to mount on the Group of Eight's annual summit in that historic Italian city in the third week of July has become emblematic of the global state of siege that now surrounds the key institutions of the global economy and global politics. The historical context of the coming meeting is that in a little over a decade, the system of global capitalism has passed from triumph to crisis. As the world stands on the brink of a deep recession, it would be useful to reflect on some of the key dimensions of this historic transition-on the multiple crises wracking the globalist project.

The last decade of the twentieth century began with the resounding collapse of the socialist economies of Eastern Europe and a lot of triumphalist talk about the genesis of a new market-driven global economy that rendered borders obsolete and rode on the advances of information technology. The key agents of the new global economy were the transnational corporations, which were depicted as the supreme incarnation of market freedom owing to their superior ability to bring about the most efficient mix of land, labour, capital, and technology.

Midway in the decade was born the World Trade Organisation (WTO), which was painted by partisans of globalisation as providing the legal and institutional scaffolding for the new global economy. By creating a rules-based global system grounded in the primordial principle of free trade, the WTO would serve as the catalyst of an economic process that would bring about the greatest good for the greatest number. It was the third pillar of a holy trinity that would serve as the guardian of the new economic order, the other two being the International Monetary Fund (IMF), which promoted ever freer global capital flows, and the World Bank, which would supervise the transformation of developing countries along free market lines and manage their integration into the new world economy.

Multilateralism in crisis

Yet even as the prophets of globalisation talked about the increasing obsolescence of the nation-state and the growing irrelevance of national interests, the main beneficiary of the new post-Cold War global order was the United States. Though it was supposedly a mechanism for freer trade, the WTO's most important agreements promoted monopoly for US firms: the Trade Related Intellectual Property Rights Agreement (TRIPs) consolidated the hold over high-tech innovations by US corporations such as Intel and Microsoft, while the Agreement on Agriculture institutionalised a system of monopolistic competition for third-country markets between the agribusiness interests of the United States and the European Union.

When the Asian financial crisis engulfed countries that had been seen by many in the US business and political elites as America's most formidable competitors, Washington did not try to save the Asian economies by promoting expansionary policies, Instead, it used the IMF to dismantle the structures of state-assisted Asian capitalism that had been regarded as formidable barriers to the entry of goods and investments from US transnationals that had been clamouring vociferously for years to get their piece of the "Asian miracle." It was less the belief in spreading the alleged benefits of free trade than maximising geo-economic and geo-strategic advantage that lay behind US support for the policies of the IMF, the World Bank, and the WTO. As Chalmers Johnson has noted, a good case can be made that Washington's opportunistic behaviour during the Asian financial crisis reflected the fact that "having defeated the fascists and the communists, the United States now sought to defeat its last remaining rivals for global dominance: the nations of East Asia that had used the conditions of the Cold War to enrich themselves." (1)

Acting to achieve its interests under multilateral cover was the preferred US strategy for most of the post-war period, whether it was the Bretton Woods institutions, United Nations, or the Group of Eight that provided the framework for "hegemonic leadership." Yet when these institutions got in the way of US interests, Washington did not hesitate to act unilaterally. This was increasingly the case in the 1990s, with the removal of the incentives for multilateral behaviour posed by Soviet competition.

The instrumental use of multilateral agencies was stark when it came to the UN. While using the United Nations to provide cover for its policy of isolating Iraq, Washington also refused to pay its dues to the UN for not kow-towing wholeheartedly to US policy. Or it simply disregarded the UN when it could not get a mandate and proceeded to work its will through more pliable institutions, as it did when it resorted to NATO cover for the bombing of Yugoslavia during the Kosovo conflict.

The G-8 (then G-7, without Russia) emerged in the 1970s to provide a mechanism for more multilaterally-shared decision-making among the advanced capitalist countries, especially in economic matters. Yet, especially under the administration of George W. Bush, Washington has embarked on a unilateralist course that has brought it to sharp conflict with other members on the burning issues of climate change, missile defence, and reconciliation between the two Koreas. The brusque junking of a painstakingly negotiated agreement, the Kyoto Protocol on Climate Change, marks a new low in unilateralist behaviour, and its contribution to eroding the European Union-United States alliance that has served as the foundation of Western hegemony in the last 50 years cannot be underestimated.

Legitimacy crisis

Increasing resort to unilateralism and the brazen manipulation of multilateral mechanisms to achieve hegemony by the United States was a key source of the crisis of legitimacy that began to grip the global order in the late 1990s. But equally important as the erosion of multilateralism as a source of de-legitimisation was the spreading realisation that the system could not deliver on its promise. That the system could not create prosperity for all but only the illusion of it was something that many observers had known for sometime. However, the realities of growing global poverty and inequality were neutralised by the high growth rates and the prosperity of a few enclaves of the world economy, like East Asia in the 1980s, which were (mistakenly) painted as paragons of market-led development. However, when the Asian economies collapsed in 1997, the follies of neoliberal economics were brought to the fore. All talk about the Asian financial crisis being caused by crony capitalism could not obscure the fact that it was the liberation of speculative capital from the constraints of regulation, largely in response to pressure from the International Monetary Fund (IMF), that brought about Asia's collapse. The IMF also came under severe public scrutiny for imposing draconian programs on the Asian economies in the wake of the crisis-policies that merely accelerated economic contraction, saved foreign banks and speculative investors, and restructured economies along "American lines."

The IMF's role in East Asia triggered a fresh re-examination of its role in imposing structural adjustment programs in much of Africa, South Asia, and Latin America in the 1980s, and the fact that these programs had, as they did in Asia, exacerbated stagnation, widened inequalities, and deepened poverty now became widely realised-so much so that the IMF, in a desperate effort to exorcise its record, felt compelled to change the name of the extended structural adjustment fund facility (ESAF) into the poverty reduction and growth facility prior to the World Bank-IMF annual meeting in Washington in September 1999.

The Asian financial crisis triggered the unravelling of the legitimacy of the IMF. In the case of the WTO, the situation was even more dramatic. In the last five years of the decade, growing numbers of people and communities began to realise that in signing on to the WTO, they had signed on to a charter for corporate rule that enshrined what consumer advocate Ralph Nader called the principle of "trade uber alles," or corporate trade above equity, justice, environment, and most everything else we hold dear. Many developing countries discovered that in signing on to the WTO, they had signed away their rights to development. The many streams of discontent and opposition converged in the streets of Seattle and the meeting rooms of the Seattle Convention Centre in December 1999 to bring down the third ministerial of the WTO and trigger a severe institutional crisis from which the organisation has yet to recover.

The World Bank, under the leadership of Australian-turned-American James Wolfensohn, appeared to be charting a course that would allow it to escape the damage inflicted on its sister institutions, until it was subjected to fire in early 2000 from an unexpected quarter: the Meltzer Commission. Ever since he took over as chief of the institution in the mid-1990s Wolfensohn had managed to defuse criticism through very skilled public relations work and co-option of non-governmental organisations (NGOs). But when the same criticisms that had been made by people from the left were made by a commission created by the US Congress, the game was up. Headed by conservative academic, Alan Meltzer, the commission concluded that the Bank's performance when it came to addressing its avowed goal of eliminating global poverty was miserable and that it would be better to devolve the task to regional bodies.

Not surprisingly, in the face of criticism coming from left to right, reform of the multilateral system has been prominent in the rhetoric of the multilateral agencies and the G-8 governments that are their most powerful backers. Debt forgiveness, a new global financial architecture, and reform of the decision-making structures of the WTO and Bretton Woods twins have been among the high-profile issues on which expectations of change were promoted.

These initiatives have, for the most part, proved disappointing, with little in the way of concrete action. The most prominent reform initiative, the G-8's plan to lighten the servicing of the external debt of the 41 highly indebted poor countries (HIPC), has actually delivered a debt reduction of only $1 billion since it began in 1996-or a reduction of their debt servicing by only three percent in the past five years!

When it comes to the question of the international financial architecture, serious discussion of controls on speculative capital like the Tobin tax has been avoided. An unreformed IMF continues to be at the centre of the "firefighting system." A pre-emptive, pre-crisis credit line at the Fund (which no country wants to use) and a toothless Financial Stability Forum-where there is little developing country participation-appear to be the only "innovations" to emerge from the Asian, Russian, and Brazilian financial crises of the last three years.

Reform of the decision-making structures of the multilateral institutions that serve as the key rule-setting and global management institutions of contemporary capitalism was also supposed to be spearheaded by the G-8. Yet, talk about democratising the WTO has vanished, with Director General Mike Moore saying that that the non-transparent "consensus" system that triggered the developing country revolt in Seattle in December 1998 is "non-negotiable." (2) And with respect to the IMF and the World Bank, there is no longer any discussion about diluting the voting shares of the US and European Union in favour of greater voting power for the developing countries, much less of doing away with the feudal practices of always having a European head the Fund and an American to lead the Bank.

The corporation under scrutiny

By the end of the last decade of the twentieth century, in short, the triumphalism that marked the beginning of the decade had evaporated and given way to a deep crisis of legitimacy of the multilateral order. The crisis of the multilateral system was, moreover, translating into a deepening unease globally with the prime actor of globalisation: the corporation.

Several factors came together to focus public attention on the corporation in the 1990s-the most egregious being the predatory practices of Microsoft, the environmental depredations of Shell, the irresponsibility of Monsanto and Novartis in promoting genetically modified organisms, Nike's systematic exploitation of dirt-cheap labour, and Mitsubishi, Ford, and Firestone's concealment from consumers of serious product defects. A sense of environmental emergency was also spreading by the beginning of the 21st century, and to increasing numbers of people, the rapid melting of the polar ice caps could be traced to Big Oil and the automobile giants' continuing promotion of an environmentally destabilising petroleum civilisation, and, more generally, to the process of uncontrolled growth driven by the transnational corporations (TNCs).

Ironically, in the United States, it was during the apogee of the New Economy that the distrust of the corporation was also at its highest in decades. According to Business Week survey, "72 per cent of Americans say business has too much power over their lives." (3) And the magazine warned: "Corporate America, ignore these trends at your peril." (4)

Some of the more enlightened members of the global elite took such arnings seriously, and their annual meeting in Davos, Switzerland, became the venue to elaborate a response that would go beyond the bankrupt strategy of denying that corporate-driven globalisation was creating tremendous problems to promote a vision of "globalisation with compassion." Yet, the task was formidable, for it became increasingly clear that in an unregulated global market, it was even more difficult to reconcile the demands of social responsibility with the demands of profitability. The best that "globalisation with a conscience" could offer was, as C. Fred Bergsten, a noted pro-globalisation advocate, admitted, a system of "transitional safety nets...to help the adjustment to dislocation" and "enable people to take advantage of the phenomenon [of globalisation] and roll with it rather than oppose it." (5)

The strategic nexus

Corporate power is one dimension of global power. But there is, equally of consequence, strategic power, and this, even more than corporate power, is concentrated in the United States. Strategic power cannot be reduced, as in orthodox Marxism, to simply being determined by the dynamics of corporate control. The US state cannot be reduced simply to being a servant of US capital. The Pentagon has its own dynamics, and one cannot understand the US role in the Balkans or its changing posture towards China as simply determined by the interests of US corporations. Indeed, in Asia, it has been strategic extension, not corporate expansionism, that has been the mainspring of US policy, at least until the mid-1980s. And, in the case of China, US capital's desire to exploit the China market has increasingly found itself in opposition to the Pentagon's definition of China as the Enemy, which must be headed off at the pass instead of being assisted by western investment to become a full-blown threat. In many instances, indeed, corporate power and state power may not be in synch.

Having said this, a primordial aim of the US transnational garrison state that is ensconced deeply in East Asia, the Middle East, and Europe and projects power to the rest of the globe, is the maintenance of a global order that secures the primacy of US economic interests. New York Times columnist Thomas Friedman may be wrong about the benign impact of globalisation, but he is definitely on target when he asserts that:

The hidden hand of the market will never work without a hidden fist

McDonald's cannot flourish without McDonnell Douglas, the designer of the US Air Force F-15. And the hidden fist that keeps the world safe for Silicon Valley's technologies to flourish is called the US Army, Air Force, Navy, and Marine Corps. (6)

With the growing illegitimacy of corporate-driven globalisation and the growing divide between a prosperous minority and an increasingly marginalized majority, military intervention to maintain the global status will become a constant feature of international relations, whether this is justified in terms of fighting drugs, fighting terrorism, containing "rogue states," opposing "Islamic fundamentalism," or containing China.

One cannot say, however, that the military structure of US hegemony is suffering as profound a crisis of legitimacy as that which has gripped the processes and institutions of corporate globalisation. The US military structure remains solidly rooted in both Europe and Asia, and the reason it remains so is to be found at the level of the ideological: the deep-seated fear of both European and Asian elites that without the US to serve as a "benevolent hegemon," they would not be able to create by themselves benign regional orders that would ensure the peace among themselves.

Nonetheless, this sentiment is not as strong as before. The collapse of Soviet power created the condition for a reassessment by Washington's allies of the role of US power. Doubts have increased with the Pentagon's insistence on building a missile defence system against potential rather than real enemies while preparing the ground for a new Cold War crusade against China. Indeed, these developments have indeed opened the eyes of many of Washington's allies that the greatest threat to their security may now be Washington itself.

Democratic degeneration

It is not, however, corporate power or military power that is the US's strongest asset but, following the thinking of Antonio Gramsci, its ideological power-its "soft power."

The US is a Lockean democracy, and its ability to project its mission as the extension of systems centred on free elections to choose governments devoted to promoting liberal rights and freedoms continues to be a strong fountain of legitimacy in many parts of the world. The trend away from authoritarian regimes and toward formal democracies in the Third World happened in spite of rather than because of the United States. Yet, especially under the Clinton administration, Washington was able to skilfully jibe to catch the democratic winds, in the process reconstructing its image from being a supporter of repressive regimes to being an opponent of dictatorships.

In the last few years, however, Washington or Westminster-style democracies-or, as William Robinson calls them, "polyarchies" (7) - with their focus on formal rights and formal elections and their bias against economic equality achieved through such measures as asset and income redistribution -- have degenerated into increasingly stagnant and polarised political systems, such as those in the Philippines, Brazil, and Pakistan. The World Bank and the Asian Development Bank continually talk about the plague of corruption in developing countries. It is, however, the deeper corruption that is embedded in economic and political structures that are superficially democratic but perverted by the realities of economic inequality that is the greater concern of the vast masses of people in the South.

This stagnation of Third World liberal democratic systems has been paralleled by the realisation of increasing numbers of Americans that their liberal democracy has been so thoroughly corrupted by corporate money politics that it deserves being designated a plutocracy. Indeed, as William Pfaff notes, "nothing on the scale of the American system of political expenditure and influence exists anywhere." (8) The fact that the candidate most favoured by Big Business lost the popular vote--and according to some studies, the electoral vote as well-and still ended up president of the world's most powerful liberal democracy has not helped in shoring up the legitimacy of the political system in a country that has been described by many observers as already being in a state of "cultural civil war."

There is also a growing crisis with democratic governance in Europe, brought on partly by the increasing captivity of party politics to moneyed interests, as the case of Helmut Kohl and the Christian Democratic Party illustrated. But there is as well another, related cause of disaffection, and this is the non-transparent process that technocratic elites allied to corporate elites have, in the name of European integration and rationalisation, eroded the principle of subsidiarity by funnelling effective decision-making power upwards to technocratic structures, at the apex of which stands the European Commission, that are largely unaccountable to electorates on the ground.

The crisis of overproduction

What makes the crisis of legitimacy of the key institutions of the global economic and political system so volatile from the point of view of the elites of the North is that is intersecting with a profound structural crisis of the global economy.

The G-8 came into existence to co-ordinate the macroeconomic policies of the rich countries in order to navigate between the Scylla of inflation and the Charybdis of stagnation. However, in the last few years, efforts to synchronise fiscal and monetary initiatives have proved elusive, and what modicum of co-operation was achieved has failed to bring Japan out of a decade-long recession or prevent the onset of a new global recession.

The reason that the economic slowdown seems to be immune to orthodox fiscal and monetary mechanisms, even when co-ordinated across borders, is that structural imbalances have been building up for some time. The boom of the early and mid-nineties resulted in a burst of global investment activity that led to tremendous overcapacity all around. (9) The indicators are stark. The US computer industry's capacity has been rising at 40 per cent annually, far above projected increases in demand. The world auto industry is now selling just 74 per cent of the 70.1 million cars it builds each year. So much investment took place in global telecommunications infrastructure that traffic carried over fibre-optic networks is reported to be only 2.5 per cent of capacity. (10)

Seen in retrospect, profits stopped growing in the US corporate sector after 1997, (11) leading firms to a wave of mergers, the main purpose of which was the elimination of competition. The most prominent of these were the Daimler Benz-Chrysler-Mitsubishi union, the Renault take-over of Nissan, the Mobil-Exxon merger, the BP-Amoco-Arco deal, and the blockbuster "Star Alliance" in the airline industry.

Another avenue that was taken to avoid the crunch of profitability in industry was to push investment to speculative activity, notably to the stock market and the real estate sector, leading to the spectacular boom and bust in East Asia in the 1990s. (12) It was this same hothouse speculation that underpinned the Wall Street-Silicon Valley complex that drove the US economy and the global economy in the nineties. This "New Economy" seemed for a time to defy the laws of economics, with Internet stars such as Amazon.com registering an explosive and seemingly permanent rise in stock values even as they continued to operate at a loss.

But all talk about the emergence of a New Economy vanished when the law of gravity caught up with the speculative sector in late 1990s, resulting in the wiping out of $4.6 trillion in investor wealth in Wall Street, a sum that, as Business Week pointed out, was half of the US Gross Domestic Product and four times the wealth wiped out in the 1987 crash. (13)

Two things about this structural crisis, in short, are increasingly clear: it is no ordinary bust and it comes at an extraordinary time of great popular disaffection with the globalist project and its key institutions.

The global protest movement

In retrospect, with the deepening crisis of legitimacy of the prime institutions of the global system in the latter half of the 1990s, Seattle was a cataclysm that was waiting to happen. The force of pent up global rage went on to manifest itself in Washington during the World Bank-IMF spring meeting in April 2000, in Chiang Mai, Thailand, during the Asian Development Bank annual meeting in May 2000, in Melbourne during the World Economic Forum gathering in early September 2000, and in Prague during the World Bank-IMF annual meeting in late September 2000.

While the global elite assembled in Davos in late January 2001 to ponder the meaning of the burgeoning "anti-globalisation movement," some 12,000 representatives of civil society organisations and political movements met in Porto Alegre, Brazil, to declare that "another world is possible." The World Economic Forum had found its political and ideological nemesis in the World Social Forum. Celebration of the power of the movement was one aspect of Porto Alegre; the other was the gathering of energies for the next move. That move was directed at the Summit of the Americas in Quebec City in late April 2001, which had been called to push forward a key project of the US corporate elite, the Free Trade Area of the Americas (FTAA). Despite the effort of some of the established media to portray the protesters as either uninformed or anarchists, the confrontation in Quebec, like Seattle, was a major setback, in terms of legitimacy, for the system of corporate-driven globalisation. So was the clash with 20,000 protesters that grabbed the centre stage during the European Union summit in Gothenburg three weeks ago.

Genoa: next stop in the anti-globalisation express

To contain the anti-globalisation shock troops that are now on the road headed for Genoa, nervous Italian authorities are deploying 20,000 police and troops, backed up by 15 helicopters, four aircraft, and seven naval boats. In a sign of panic, the government has announced that it will close Genoa's airport between July 18 and 22 and seal off a "red zone" in the inner city that will be kept free of demonstrators.

Undaunted, protest organisers say they will bring 200,000 people to Genoa and that they will definitely breach the red zone. They may yet make Genoa the most dramatic example of the mass "withdrawal of consent" that is shaking the system of global capitalism to the core.

One must not, of course, overestimate the impact of these protests so far, nor gloss over their weaknesses in terms of shared agenda or decision-making. However, neither must one underestimate their consequences. As C. Fred Bergsten, one of the most ardent promoters of the Washington Consensus, now admits, "the anti-globalisation forces are now in the ascendancy." (14) Bergsten is haunted by a "Gramscian" fear: the structures of the system may appear to still be solid, but when legitimacy or consensus goes, it may only be a matter of time before the structures themselves begin to unravel, especially when one factors in the crisis of overproduction noted above, with the recession, unemployment, and increases in poverty and inequality that will come with it.

The future in the balance

Yet the crisis of the system will not necessarily result in its replacement by a more benign system of international relations. As Rosa Luxemburg so presciently pointed out before the rise of fascism in crisis-ridden Europe in the early part of the 20th century, the outcome may be "barbarism," where the ideals and themes of the progressive opposition are hijacked and perverted by demagogic forces that are hostile to freedom, equality, and democracy. Which is why the articulation of the alternative or the alternatives is so critical. Creating these alternative visions and programs centred on a participatory process to create the institutions that would once again subordinate the market to society, promote genuine equality across gender and colour lines and within and among countries, and establish a benign relationship between human community and the biosphere remains the great challenge of the opponents of corporate-driven globalisation.

On the success of this enterprise depends a future that now hangs in the balance.

References

  1. Chalmers Johnson, Blowback: The Costs and Consequences of American Empire (New York: Henry Holt and Company, 2000), p. 206.
  2. Michael Moore, speech at UNCTAD X, Bangkok, Feb. 15, 2000.
  3. "Too Much Corporate Power," Business Week, Sept. 11, 2000, p. 53.
  4. "New Economy, New Social Contract," Business Week, Sept. 11, 2000, p. 80.
  5. C. Fred Bergsten, "The Backlash against Globalization," speech delivered at 2000 meeting of the Trilateral Commission, Tokyo, April 2000 (downloaded from Internet).
  6. Thomas Friedman, The Lexus and the Olive Tree (New York: Farrar, Straus Giroux, 1999), p. 50.
  7. See William Robinson, Promoting Polyarchy: Globalization, US Intervention, and Hegemony (Cambridge: Cambridge University Press, 1996).
  8. William Pfaff, "Money Politics is Winning the American Election," International Herald Tribune, March 11-12, 2000, p. 8.
  9. See, among other analyses, Robert Brenner, "The Economics of Global Turbulence," New Left Review 229 (May-June 1998) and A. Gary Shilling, Deflation (Short Hills, NJ: Lakeview Publishing Co., 1998).
  10. "Too Much of Everything," Business Week, April 9, 2001, pp. 74-76.
  11. John Plender, "Falling from Grace," Financial Times, March 27, 2001, p. 14.
  12. Ravi Arvind Palat, "Miracles of the Day Before?: The Great Asian Meltdown and the Changing World-Economy," Development and Society, Vol. 28, No. 1 (June 1999), p. 40.
  13. "When the Wealth is Blown Away," Business World, March 26, 2001, p.33.
  14. Bergsten, "The Backlash against Globalization...".

Copyright 2001 Focus on the Global South