By Michael Roberts
Apart from inflation and war, what grips current economic thought is the apparent failure of what mainstream economics likes to call ‘globalisation’. What mainstream economics means by globalisation is the expansion of trade and capital flows freely across borders. In 2000, the IMF identified four basic aspects of globalisation: trade and transactions, capital and investment movements, migration and movement of people, and the dissemination of knowledge. All these components apparently took off from the early 1980s as part of the ‘neoliberal’ reversal of previous national macro-management policies adopted by governments in the environment of the Bretton Woods world economic order (ie US hegemony). Then the call was to break down tariff barriers, quotas and other trade restrictions and allow the multi-nationals to trade ‘freely’ and to switch their investments abroad to cheap labour areas to boost profitability. This would lead to global expansion and harmonious development of the productive forces and resources of the world, it was claimed.
There was nothing new in this phenomenon. There have been periods of increased trade and capital export before since capitalism became the dominant mode of production in the major economies by the mid-19th century. In 1848, the authors of the Communist Manifesto noted the increasing level of national inter-dependence brought on by capitalism and predicted the universal character of the modern world society: “The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed…. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations.”
Indeed, we can distinguish previous periods of ‘globalisation’. There was the period of 1850-70 which saw trade and investment expand sharply in Europe and the US (after the civil war), under the auspices of the British hegemony. The depression of the 1870s to 1890s saw the end of that wave. But another wave of global expansion took place in 1890s through to WW1, as new capitalist powers usurped British hegemony. No one power established hegemony and that globalisation wave was stopped in its tracks by world war and continued to reverse through the Great Depression of the 1930s and up to WW2. Then there was a new wave of global expansion under Bretton Woods and US hegemony, before the profitability crisis of the 1970s led to slumps and retraction. From the mid-1980s and through 1990s, there was the largest expansion of trade and cross-border investment in the history of capitalism, with the US and European capitalism spreading its wings further and China entering global manufacturing and trading markets.