Globalization Marches On

Growing popular outrage has not challenged corporate power.

Noam Chomsky March 26, 2010

On Feb. 19, 2009, workers assemble cell phones in a factory in Chengdu, Sichuan Province, China. (Photo by: China Photos/Getty Images)

Shifts in glob­al pow­er, ongo­ing or poten­tial, are a live­ly top­ic among pol­i­cy mak­ers and observers. One ques­tion is whether (or when) Chi­na will dis­place the Unit­ed States as the dom­i­nant glob­al play­er, per­haps along with India.

Since Obama was supposed to be their man in Washington, the architects of policy quickly delivered instructions: Unless Obama fell back into line, they would shift funds to the opposition.

Such a shift would return the glob­al sys­tem to some­thing like it was before the Euro­pean con­quests. Eco­nom­ic growth in Chi­na and India has been rapid, and because they reject­ed the West’s poli­cies of finan­cial dereg­u­la­tion, they sur­vived the reces­sion bet­ter than most. Nonethe­less, ques­tions arise.

One stan­dard mea­sure of social health is the U.N. Human Devel­op­ment Index. As of 2008, India ranks 134th, slight­ly above Cam­bo­dia and below Laos and Tajik­istan, about where it has been for many years. Chi­na ranks 92nd – tied with Belize, a bit above Jor­dan, below the Domini­can Repub­lic and Iran.

India and Chi­na also have very high inequal­i­ty, so more than a bil­lion of their inhab­i­tants fall far low­er on the scale.

Anoth­er con­cern is the U.S. debt. Some fear it places the U.S. in thrall to Chi­na. But apart from a brief inter­lude end­ing in Decem­ber, Japan has long been the biggest inter­na­tion­al hold­er of U.S. gov­ern­ment debt. Cred­i­tor lever­age, fur­ther­more, is overrated.

In one dimen­sion – mil­i­tary pow­er – the Unit­ed States stands alone. And Oba­ma is set­ting new records with his 2011 mil­i­tary bud­get. Almost half the U.S. deficit is due to mil­i­tary spend­ing, which is untouch­able in the polit­i­cal system.

When con­sid­er­ing the U.S. economy’s oth­er sec­tors, Nobel lau­re­ate Joseph Stiglitz and oth­er econ­o­mists warn that we should beware of deficit fetishism.” A deficit is a stim­u­lus to recov­ery, and it can be over­come with a grow­ing econ­o­my, as after World War II, when the deficit was far worse.

And the deficit is expect­ed to grow, large­ly because of the hope­less­ly inef­fi­cient pri­va­tized health care sys­tem – also vir­tu­al­ly untouch­able, thanks to business’s abil­i­ty to over­pow­er the pub­lic will.

How­ev­er, the frame­work of these dis­cus­sions is mis­lead­ing. The glob­al sys­tem is not only an inter­ac­tion among states, each pur­su­ing some nation­al inter­est” abstract­ed from dis­tri­b­u­tion of domes­tic pow­er. That has long been understood.

Adam Smith con­clud­ed that the prin­ci­pal archi­tects” of pol­i­cy in Eng­land were mer­chants and man­u­fac­tur­ers,” who ensured that their own inter­ests are most pecu­liar­ly attend­ed to,” how­ev­er griev­ous” the effects on oth­ers, includ­ing the peo­ple of England.

Smith’s max­im still holds, though today the prin­ci­pal archi­tects” are multi­na­tion­al cor­po­ra­tions and par­tic­u­lar­ly the finan­cial insti­tu­tions whose share in the econ­o­my has explod­ed since the 1970s.

In the Unit­ed States we have recent­ly seen a dra­mat­ic illus­tra­tion of the pow­er of the finan­cial insti­tu­tions. In the last pres­i­den­tial elec­tion they pro­vid­ed the core of Pres­i­dent Obama’s funding.

Nat­u­ral­ly they expect­ed to be reward­ed. And they were – with the TARP bailouts, and a great deal more. Take Gold­man Sachs, the top dog in both the econ­o­my and the polit­i­cal sys­tem. The firm made a mint by sell­ing mort­gage-backed secu­ri­ties and more com­plex finan­cial instruments.

Aware of the flim­si­ness of the pack­ages they were ped­dling, the firm also took out bets with the insur­ance giant Amer­i­can Inter­na­tion­al Group (AIG) that the offer­ings would fail. When the finan­cial sys­tem col­lapsed, AIG went down with it.

Goldman’s archi­tects of pol­i­cy not only par­layed a bailout for Gold­man itself but also arranged for tax­pay­ers to save AIG from bank­rupt­cy, thus res­cu­ing Goldman.

Now Gold­man is mak­ing record prof­its and pay­ing out fat bonus­es. It, and a hand­ful of oth­er banks, are big­ger and more pow­er­ful than ever. The pub­lic is furi­ous. Peo­ple can see that the banks that were pri­ma­ry agents of the cri­sis are mak­ing out like ban­dits, while the pop­u­la­tion that res­cued them is fac­ing an offi­cial unem­ploy­ment rate of near­ly 10 per­cent, as of Feb­ru­ary. The rate ris­es to near­ly 17 per­cent when all Amer­i­cans who wish to be ful­ly employed are counted.

Bring­ing Oba­ma to heel

Pop­u­lar anger final­ly evoked a rhetor­i­cal shift from the admin­is­tra­tion, which respond­ed with charges about greedy bankers. I did not run for office to be help­ing out a bunch of fat-cat bankers on Wall Street,” Oba­ma told60 Min­utes in Decem­ber. This kind of rhetoric was accom­pa­nied with some pol­i­cy sug­ges­tions that the finan­cial indus­try doesn’t like (e.g., the Vol­ck­er Rule, which would bar banks receiv­ing gov­ern­ment sup­port from engag­ing in spec­u­la­tive activ­i­ty unre­lat­ed to basic bank activ­i­ties) and pro­pos­als to set up an inde­pen­dent reg­u­la­to­ry agency to pro­tect consumers.

Since Oba­ma was sup­posed to be their man in Wash­ing­ton, the prin­ci­pal archi­tects of gov­ern­ment pol­i­cy wast­ed lit­tle time deliv­er­ing their instruc­tions: Unless Oba­ma fell back into line, they would shift funds to the polit­i­cal oppo­si­tion. If the pres­i­dent doesn’t become a lit­tle more bal­anced and cen­trist in his approach, then he will like­ly lose” the sup­port of Wall Street, Kel­ly S. King, a board mem­ber of the lob­by­ing group Finan­cial Ser­vices Round­table, told the New York Times in ear­ly Feb­ru­ary. Secu­ri­ties and invest­ment busi­ness­es gave the Demo­c­ra­t­ic Par­ty a record $89 mil­lion dur­ing the 2008 campaign.

Three days lat­er, Oba­ma informed the press that bankers are fine guys,” sin­gling out the chair­men of the two biggest play­ers, JP Mor­gan Chase and Gold­man Sachs: I, like most of the Amer­i­can peo­ple, don’t begrudge peo­ple suc­cess or wealth. That’s part of the free-mar­ket sys­tem,” the pres­i­dent said. (Or at least free mar­kets” as inter­pret­ed by state cap­i­tal­ist doctrine.)

That turn­about is a reveal­ing snap­shot of Smith’s max­im in action.

The archi­tects of pol­i­cy are also at work on a real shift of pow­er: from the glob­al work force to transna­tion­al capital.

Econ­o­mist and Chi­na spe­cial­ist Mar­tin Hart-Lands­berg explores the dynam­ic in a recent Month­ly Review arti­cle. Chi­na has become an assem­bly plant for a region­al pro­duc­tion sys­tem. Japan, Tai­wan and oth­er advanced Asian economies export high-tech parts and com­po­nents to Chi­na, which assem­bles and exports the fin­ished products.

The spoils of power

The grow­ing U.S. trade deficit with Chi­na has aroused con­cern. Less noticed is that the U.S. trade deficit with Japan and the rest of Asia has sharply declined as this new region­al pro­duc­tion sys­tem takes shape. U.S. man­u­fac­tur­ers are fol­low­ing the same course, pro­vid­ing parts and com­po­nents for Chi­na to assem­ble and export, most­ly back to the Unit­ed States. For the finan­cial insti­tu­tions, retail giants, and the own­ers and man­agers of man­u­fac­tur­ing indus­tries close­ly relat­ed to this nexus of pow­er, these devel­op­ments are heav­en sent.

And well under­stood. In 2007, Ralph Gomory, head of the Alfred P. Sloan Foun­da­tion, tes­ti­fied before Con­gress, In this new era of glob­al­iza­tion, the inter­ests of com­pa­nies and coun­tries have diverged. In con­trast with the past, what is good for America’s glob­al cor­po­ra­tions is no longer nec­es­sar­i­ly good for the Amer­i­can people.”

Con­sid­er IBM. Accord­ing to Busi­ness Week, by the end of 2008, more than 70 per­cent of IBM’s work force of 400,000 was abroad. In 2009 IBM reduced its U.S. employ­ment by anoth­er 8 percent.

For the work force, the out­come may be griev­ous,” in accor­dance with Smith’s max­im, but it is fine for the prin­ci­pal archi­tects of pol­i­cy. Cur­rent research indi­cates that about one-fourth of U.S. jobs will be off­shorable” with­in two decades, and for those jobs that remain, secu­ri­ty and decent pay will decline because of the increased com­pe­ti­tion from replaced workers.

This pat­tern fol­lows 30 years of stag­na­tion or decline for the major­i­ty as wealth poured into few pock­ets, lead­ing to what has prob­a­bly become the great­est inequal­i­ty between the haves and the have-nots since the end of Amer­i­can slavery.

While Chi­na is becom­ing the world’s assem­bly plant and export plat­form, Chi­nese work­ers are suf­fer­ing along with the rest of the glob­al work force. This is an unsur­pris­ing out­come of a sys­tem designed to con­cen­trate wealth and pow­er and to set work­ing peo­ple in com­pe­ti­tion with one anoth­er worldwide.

Glob­al­ly, work­ers’ share in nation­al income has declined in many coun­tries – dra­mat­i­cal­ly so in Chi­na, lead­ing to grow­ing unrest in that high­ly ine­gal­i­tar­i­an society.

So we have anoth­er sig­nif­i­cant shift in glob­al pow­er: from the gen­er­al pop­u­la­tion to the prin­ci­pal archi­tects of the glob­al sys­tem, a process aid­ed by the under­min­ing of func­tion­ing democ­ra­cy in the Unit­ed States and oth­er of the Earth’s most pow­er­ful states.

The future depends on how much the great major­i­ty is will­ing to endure, and whether that great major­i­ty will col­lec­tive­ly offer a con­struc­tive response to con­front the prob­lems at the core of the state cap­i­tal­ist sys­tem of dom­i­na­tion and control.

If not, the results might be grim, as his­to­ry more than amply reveals.

Noam Chom­sky is Insti­tute Pro­fes­sor and Pro­fes­sor of Lin­guis­tics (Emer­i­tus) at the Mass­a­chu­setts Insti­tute of Tech­nol­o­gy, and the author of dozens of books on U.S. for­eign pol­i­cy. His most recent book is Who Rules the World? from Met­ro­pol­i­tan Books.
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