Globalization and State Power - Essay Example

 Globalization and State Power Two volatile contradictions simultaneously intersperse in the world today: (1) the competition among highly industrialized capitalist nation-states, and (2) the ill effects of globalization on developing and underdeveloped societies, or the North-South divide. The bickering among the capitalist nation-states is still largely in the economic realm, however the impact on the political sphere is manifest and many thinkers have posited that globalization impacts greatly on the withering of the nation-state. Seeing that the economic gap between the North and South keeps on widening, it cannot be gainsaid that the political and military repercussions of this schism can significantly change the complexion and direction of inter-capitalist competition that can in turn alter global politics in a manner that could change the nation-state as we now know it to be. In political society, we have governments (parliaments; legislature, executive and judiciary), dominant political parties ("leftist", "centrist" and "rightist"), the police, the military service, penology, welfare service, central banks and national treasuries. The Constitution, of course, since it codifies the ideological will of political society. Many social foundations and educational institutions fall in this sphere. Included, too, are international global associations (World Bank, International Monetary fund, World Trade Organization, ASEAN, NATO, Warsaw Pact), etc. Civil war and war between states fall in this chunk. The capitalist nation-state is an embodiment of political society. The nation-state still clings to the throne as the prime cultural institution in contemporary political society. It is, however, fast losing grip. Globalization The end of the Cold War and the powerful wave of Globalization vastly reconfigured the world order. We have seen the end of the old colonial world and the rise of Islamic militancy in the mid-90s. Post-Cold War globalization served to unleash many pent-up social contradictions previously held hostage by the Cold War, like racial and ethnic clashes both within the North and South alike. The most profound changes, however, are in the economic realm. Globalization—the accelerated expansion and heightened contradictions of international capitalism—is bound to intensify even more within the decade. (Hirst & Thompson, 2000) Vicious international competition among highly industrialized capitalist nation-states animates the world order. Economic globalization was mainly corporate-led. Incessant retooling of knowledge-based or high-tech corporations, including the mighty armaments industry and the rest of the multinational corporations in industrialized countries, keeps on accelerating the pace of globalization even more. Big corporate interests are more and more taking over the foreign policy directions of their respective governments. Alongside globalization is the concept of “neoliberalism”. Neoliberalism has the same essence as the classic liberal economics. The latter was in vogue between the Industrial Revolution around the early 1900s and Keynesian economics around the 1930s Great Depression. Laissez faire (“free competition”, to some) is at the core of both classical liberalism and neoliberalism. Laissez faire oppose Keynesian solutions that require vigorous state economic intervention. (Fischer 2003). Neoliberalism, ironically, is forced to adopt Keynesian solutions through the active manipulation of interest rates to keep inflation at bay. Furthermore, the US government as well as the Western European states actively subsidize their agricultural sectors, and even intervene politically in rearranging trade and financial mechanisms in their favor. These totally negate whatever “liberalism” or “free competition” there is in neoliberalism. Globalization and “Political Legitimacy”: Accepting the paradigms without question Political legitimacy means the degree of acceptance of the public towards a given political structure or arrangement. Capitalism underscored the fact that the mass of the species can be owned at a price—as commodities. The elite is only interested in buying the reptilian and primitive mammalian capacities of the Homo Sapiens—or labor power, as Marx calls it. Proletarians are proletarians because what is bought at a price does not include the price of his humanity—his self-consciousness. Proletarians are proletarians because as soon as they start their working shift, they throw their self-consciousness in the closet, and instantly become primitive mammals that tend machines. This is the application of the price form on humans in class society. Multiplied several times over on the global scale and one sees an iron-clad arrangement called globalization that has been accepted by many without question and has therefore gained political capital and legitimacy. The tasks of applying the capital form on humans rests in political society through the wage system. The minimum wage that is dictated by political society is the price of the proletariat as capital. The wage system ensures that the proletariat is just a capital input that can be owned at a price even if he or she becomes unemployed. Contemporary human society, according to Marx, is a vast labor camp decorated with fancy neon signs. The creation of trade blocs that has led to the diminution of the nation-state The Second Word War and the military requirements of the Cold War ironically kicked off the revolution in science and technology, specifically in the fields of electronic computing, communications, air and space transport, biological warfare, and nuclear technology. Capitalist production techniques immensely benefited from these developments. The technological race seethes with greater intensity. A war over the control and monopoly of knowledge-intensive capital—especially information-communications-technology (ICT) and biotechnology—still rages among capitalist firms and nation-states. New, better, and increasingly cheaper commodities now flood the world market. The fight to open up more markets is the order of the day, not only to realize greater profits, but to stave off the increasing pressures of capitalist overproduction. (Robertson, 2003) Quite predictably, protectionist trade wars erupted between the large markets in northern America, Europe, and Asia. In an effort to secure commodity markets, tariff-cutting regional free trade associations sprouted along the continents, such as the North American Free Trade Agreement (NAFTA), the European Union, and closer the ASEAN Free Trade Agreement of 1993 (AFTA). The AFTA, for example, promises to reduce tariff rates to a maximum of 5% among its members. The Association of Southeast Asian Nations or ASEAN comprise AFTA. China is also being coaxed by the ASEAN to gobble up AFTA through the Free Trade Agreement (FTA), which promises to be the world’s largest free trade arrangement that would cover 1.7 billion consumers. What this has resulted in is a slow but sure diminution of sovereignty on the part of the developing nations. What happens is that these developing nations bend over backwards and shift their domestic policies in order to accommodate the trade regulations imposed by new global economic arrangements under superpower-dominated trade blocs. A good example of this would be the last-minute deal brokered in the WTO in December of 2005 during the Hong Kong Ministerial.  The Agreement purports to offer a “development package” to underdeveloped economies, but exacts from them backbreaking commitments in the WTO core issues of services, agriculture, and non-agricultural market access. In Non-Agricultural Market Access (NAMA), on the table are drastic cuts in non-agricultural tariffs, reduced flexibilities for developing countries as a result of the adoption of the Swiss Formula, and limitations on development options. This reduces drastically the policy space of third world countries to protect their interests. However, it is not enough to merely examine the provisions of this current round of negotiations. Rather, it is imperative to view this within the larger picture of globalization and neo-liberalist politics; and as part of a sinister pattern of economic imperialism and sabotage. It is both anti-development and anti-human rights. It is anti-development because it curtails the development space of developing economies by exacting unwieldy concessions and pushing for greater market access in a manner as precipitate as it is unjust. It encourages corporate monopoly by pandering to the interests of multinational and transnational corporations while emasculating developing nations and leaving them very little room to negotiate and to muscle in their legitimate demands. It is anti-human rights in that it makes human rights subordinate to corporate agenda. Food security, the right to livelihood, the right to basic services and utilities are compromised in the name of liberalization. The collapse of trade barriers and the expansion of economic access have only resulted in a schism that grows wider and wider by the day and a world more and more fractured by divisiveness and strife. The mad corporate scramble for markets requires political intervention and badgering from the most powerful nation-states. The US government eased out the loose General Agreements on Tariff and Trade (GATT) regime in favor of the formidable World Trade Organization (WTO). In the final analysis, the WTO served to preserve the US’s lead in knowledge-based industries, eliminate the trade restrictions of developing countries imposed on transnational corporation (TNC) subsidiaries, and hold on to US’s advantage in international services. A “neoliberal” free-trade regime would better serve US corporations under WTO’s strong enforcement mechanism to break down trade barriers. Changes in the sphere of finance capital are also in the offing. The 1944 Anglo-Saxon Bretton Woods institutions—the International Monetary Fund (IMF) and the World Bank (WB)—were established supposedly to promote world economic stability and growth, respectively. Buttressed by the world largest banks and controlled no less by the imperialist interests of the world strongest powers, mainly US state interests, the IMF-WB tandem presides over the commanding heights of an uncertain international capitalist financial order. (O’Rourke & Williamson) Mounting debts and debt-servicing difficulties in the 70s forced the economies of many developing countries to rely on the IMF’s and the WB’s rescue packages and economic management. Since the debt crisis of the 1980s, both the IMF and the WB imposed “structural adjustment” prescriptions on developing countries: (1) cutbacks in government expenditures, especially in social spending; (2) rollback or containment of wages; (3) privatization of state enterprises and deregulation of the economy; (4) elimination or reduction of protection for the domestic market and less restrictions on the operations of foreign investors; and (5) successive devaluations of the local currency in the name of achieving export competitiveness. Much rethinking is going on right now since the Asian financial crisis of 1997-99, as well as the post-Soviet Russian economic meltdown. Both the IMF and WB were forced to increasingly assume orientations that are objectively opposed to each other. The IMF promotes and enforces macroeconomic policies to governments, mainly among the developing countries, along generally neoliberal prescriptions. The WB now concentrates on issues related to poverty, albeit along neoliberal prescriptions, too. Clashes are unavoidable. Even the former WB chief economist, Joe Stiglitz, has been castigating the IMF. In one his his recent works on the Asian crisis of the late 90s and the Russian economic collapse, he asserted that the “IMF prescriptions of demanding that crisis-torn countries implement budget cuts and higher interest rates to restore market calm worsens recessions and plunge more people into abject poverty.” It remains to be seen how the big powers would refashion the IMF and the WB to better serve international finance capital and rein in the trade wars. In the medium term, a lot has to do on how the mighty US dollar—which is still the world’s currency—would fare against the Euro. If there are trade wars, there are also currency wars. The European Monetary Union (EMU), which is the foundation of the Euro, is all set to challenge the might of the US dollar. Another is the disturbing state of both the Japanese and US economy. Still, another are Argentina-style financial collapses, or another round of an Asian financial crisis that can seriously hurt the stability of the whole international financial system. Impact on the Welfare-State: A Diminution on the power of the nation-state to care The provision of welfare is a sovereign act that a nation must decide on its own. It enacts domestic policies for the upliftment of the lives of its citizens. Apart from the economic conditions which allowed for the state’s generosity in regards to welfare provision, political rationales have also been forwarded as contributory to the rise of the welfare state. The widespread victory of Labour parties in Europe, particularly in Britain, for example, is said to have led to an increase in social policies targeted towards the social and economic security of the working class, the main beneficiaries of the welfare state and the backbone of these parties. (Korpi 2003) Esping-Andersen also articulates another view of the welfare state’s “golden age” as a political move to instill social citizenship among the citizenry: “In moral terms, the welfare state promised a more universal, classless justice and solidarity of ‘the people’: it was presented as a ray of hope to those who were asked to sacrifice for the common good in the war effort. The welfare state was therefore also a political project of nation-building: the affirmation of liberal democracy against the twin perils of fascism and bolshevism. Many countries became self-proclaimed welfare states not so much to give a label to their social policies as to foster social integration.” (1997) The presence of several contributory factors accountable for the welfare state’s “golden age” precludes the existence also of more than one factor responsible for its decline. While the problem of demographic shifts is largely recognized as contributory to the challenges faced by welfare states today, globalization has been attacked as the biggest challenge for welfare states. (Andersen 2003; Cochrane 2001; Rieger 1999; Yeates 2001) Yeates provides a basic definition of globalization as “an an extensive network of economic, cultural, social, and political interconnections and processes which routinely transcend national boundaries.” (2001) Characterized by an “increased ease of movement of goods, services, capital, people, and information across national borders” and a “diffusion of global norms and values”, (Secretary of State 2000) globalization is said to affect how labour markets work, pressuring welfare states to retrench labor policies which, though beneficial to the local labor force, will in the long run result in their diminished competitiveness in the international arena. (Andersen 2003) This global demand for more flexible and less protectionist labor policies, as well as globalization’s requisite for dramatic reductions in trade tariffs is expected to bear heavily on the finances of welfare states as well as result in reducing the autonomy of nation states to determine their own social and economic policy. (Cochrane 2001) The interplay and impact of demographics and globalization, as well as the role of external impositions in the construction of social policy reforms is best examined when one looks at the Hungarian model. In contrast to the cases of Germany and the US, the case of Hungary differs in the extent by which its reforms in social policy and welfare were directly influenced by external forces and organizations. Hungary’s transition from a "socialist" regime towards a "liberal" one gave way to several challenges in social policy. (Lelkes 2000) Primary among these problems was the decline in employment figures: With a population of around 10 million, only 3.8 million were employed. (Ferge 2004) Low fertility rates produced an old-age demographic dependency rate of 40% in 1994, tempered only by a relatively high age-specific adult mortality rate. (Simonovits 2006) The decrease in available resources for social expenditure brought about by the decrease in employment, the increase in the demand for such expenditure, and Hungary’s movement towards membership in the EU thus combined into a need for reforms of existing social policy. The reforms that were undertaken by Hungary, unlike that of the US and Germany, were influenced by major international institutions, notably the World Bank and the IMF. Resident missions from both the World Bank (WB) and USAID directly took part in the construction of new reforms within Hungary’s Ministry of Finance. (Deacon 2004) Mandatory private account schemes approved and encouraged by the World Bank replaced the old Pay-As-You-Go system in 1998. (Deacon 2004) As a consequence also of economic and trade programs undertaken to meet economic and trade requisites of EU membership, Hungary cut its public social expenditure nearer to the EU average. (Ferge 2004) From the case of Hungary, we can see how the influence of international institutions, much of which coincides with the globalization movement, can dictate the formation of not only economic policy but of social policy as well. From the example of Hungary, we can see where the opponents of globalization are coming from in regards to the degree by which globalization can reduce the autonomy of individual states in forming their own economic and social policy. Poverty and the decline of the nation-state Consistently on the losing end of the heightened inter-capitalist competition are the underdeveloped societies of the South. More than the capital-labor frictions within industrialized economies, the North-South divide can easily assume dominance within the decade. (Rodrik, 1997). Even the United Nations admit, for example, that the IMF, World Bank and the WTO are “unfair” or “out of touch”. The United Nations Human Development report for 2002 noted that the divide between the rich and the poor, the powerful and the powerless, sparked a powerful “anti-globalization backlash” that is “one of the most important movements of our time”. The finest example was the Battle of Seattle years ago. Almost half of the voting powers of the WB and the IMF are controlled by seven states—United States, Japan, France, Britain, Saudi Arabia, Germany and Russia. As for the WTO, all member-countries have a seat and a vote, but decision-making is largely in the hands of Canada, the European Union, Japan and the United States. Among all these states, the United States holds greatest influence in these three global institutions. The financial systems of the nation-states in Asia, Africa and Latin America deserve utmost and continuous scrutiny. The Asian financial crisis of the 90s, the Mexican debt crunch, and the more recent Argentinean financial collapse are easily replicable in the underdeveloped and developing world. More of these can easily shake the pillars of the world financial system. More of these breeds greater political and social chaos in the third world. (Keohane & Nye, 2000.) Poverty, famine, drought, pestilence, environmental disasters, toxic wastes and the AIDs epidemic continue to hound a large chunk of humanity in Africa, Asia and Latin America. Internal colonialism, more ethnic differences threaten to explode in orgies of violence, up to genocide. Glaring forms of human intolerance—against the children, elderly, gays and lesbians, and national minorities—pervade the underdeveloped world. In this set-up, only one thing is certain: the nation-state is at its weakest. Actual revolutions have a high probability of success when the state is at its weakest. The nation-state is most vulnerable when (1) political society ruptures from the rest of society, and when (2) the state tears itself away from the rest of political society. This is the malady behind what Lenin called "symptoms" of a "revolutionary situation" or "national crisis". Indeed, many nation-based revolutions were victorious. However, most revolutions lost steam, lost their "staying power", and crumbled. The broad outlines of globalization were extrapolated 150 years ago in the Manifesto of Marx. If the 1940s signaled the "triumph of money", contemporary globalization signifies the total triumph of capital over the whole of humanity. In other words, economic globalization is the total hegemony of capital in human society. There is an added dimension to this globalization problematique. A world financial crisis clashed head-on with the creeping effects of the technological-cybernetic revolution vis-a-vis the superstructures of human society. Neo-liberal economics can lead to depression economics. Perhaps globalization is already portentous for all of us. A global economic depression is even scarier. What appears most worrisome, however, is that the spheres of contemporary human society are simultaneously experiencing convulsions. In the same vein, they may well be arenas of social revolution.   Works Cited Adelantado, J & Calderon E. (2006) Globalization and the welfare state: the same strategies for similar problem? Journal of European Social Policy 16: 374-386. Andersen, T. (2003) European Integration and the Welfare State. Journal of Population Economics 16:1-19. Cochrane A, Clarke J & Gewirtz S (2001) Comparing Welfare States Second Edition. London. Sage Deacon, B. (2004) Globalization of the Welfare State? World Society, Transnational Social Policy and ‘New Welfare States’. Germany: Hanse Institute for Advanced Studies. Ferge, Z., Juhász, G. (2004): Accession and social policy: the case of Hungary, Journal of European Social Policy 14(3): 233-251. Fischer, Stanley. “Globalization and Its Challenges.” The American Economic Review, Vol. 93, No. 2, Papers and Proceedings of the One Hundred Fifteenth Annual Meeting of the American Economic Association, Washington, DC, January 3-5, 2003 (May, 2003), pp. 1-30 Hirst, Paul, and Grahame Thompson. Globalization in Question: The International Economy and Possibiities of Governance. London: Polity, 2000. Keohane, Robert and Joseph Nye. “Globalization: What's New? What's Not? (And So What?)” Foreign Policy, No. 118 (Spring, 2000), pp. 104-119. Korpi, W. (2003) Welfare State Regress in Western Europe: Politics, Institutions, Globalization and Europeanization. Sweden: Swedish Institute for Social Research, Stockholm University O’Rourke, Kevin and Jeffrey Williamson. Globalization and History. USA: MIT Press, 2001. Robertson, Roland. Globalization: Social Theory and Global Culture. London: Sage Publications, 2004. Rodrik, Dani. “Sense and Nonsense in the Globalization Debate”. Foreign Policy, No. 107 (Summer, 1997), pp. 19-37. Scholte, Jan Aart. Globalization: A Critical Introduction. London: Palgrave McMillan, 2005. Secretary of State for International Development 2000, Eliminating World Poverty: Making Globalisation Work for the Poor. Her Majesty’s Stationery Office, London. Simonovits, A. (2006) Social Security Reform in the US: Lessons from Hungary. Institute of Ecoomics, Hungarian Academy of Science. Available at: www.aeaweb.org/annual_mtg_papers/2006/0106_1430_0902.pdf Yeates N (2001) Globalisation and Social Policy: Beyond the State. London. Sage. Read More