Since the late 1970s, the world’s economy and dominant nations have been
marching to the tune of (neoliberal) globalization, whose impact and effects on
average people’s livelihood and communities everywhere are generating great
popular discontent, accompanied by a rising wave of nationalist and
anti-elitist sentiments. But what exactly is driving globalization? And who
really benefits from globalization? Are globalization and capitalism
interwoven? How do we deal with the growing levels of inequality and massive
economic insecurity? Should progressives and radicals rally behind the call for
the introduction of a universal basic income? In the unique and exclusive
interview below, two leading minds of our time, linguist and public
intellectual Noam Chomsky and Cambridge University economist Ha-Joon Chang,
share their views on these essential questions.
C. J. Polychroniou: Globalization is usually
referred to as a process of interaction and integration among the economies and
people of the world through international trade and foreign investment with the
aid of information technology. Is globalization then simply a neutral,
inevitable process of economic, social and technological interlinkages, or
something of a more political nature in which state action produces global
transformations (state-led globalization)?
Ha-Joon Chang: The biggest myth
about globalization is that it is a process driven by technological progress.
This has allowed the defenders of globalization to brand the critics as “modern
Luddites” who are trying to turn back the clock against the relentless progress
of science and technology.
However, if technology is what determines the degree of globalization,
how can you explain that the world was far more globalized in the late 19th and
the early 20th century than in the mid-20th century? During the first
Liberal era, roughly between 1870 and 1914, we relied upon steamships and wired
telegraphy, but the world economy was on almost all accounts more globalized
than during the far less liberal period in the mid-20th century (roughly
between 1945 and 1973), when we had all the technologies of transportation and
communications that we have today, except for the internet and cellular phones,
albeit in less efficient forms.
The reason why the world was much less globalized in the latter period
is that, during the period, most countries imposed rather significant
restrictions on the movements of goods, services, capital and people, and
liberalized them only gradually. What is notable is that, despite [its] lower
degree of globalization … this period is when capitalism has done the best: the
fastest growth, the lowest degree of inequality, the highest degree of
financial stability, and -- in the case of the advanced capitalist economies --
the lowest level of unemployment in the 250-year history of capitalism. This is
why the period is often called “the Golden Age of Capitalism.”
Technology only sets the outer boundary of globalization -- it was
impossible for the world to reach a high degree of globalization with only sail
ships. It is economic policy (or politics, if you like) that determines exactly
how much globalization is achieved in what areas.
The current form of market-oriented and corporate-driven globalization
is not the only -- not to speak of being the best -- possible form of
globalization. A more equitable, more dynamic and more sustainable form of
globalization is possible.
We know that globalization properly began in
the 15th century, and that there have been different stages of globalization
since, with each stage reflecting the underlying impact of imperial state power
and of the transformations that were taking place in institutional forms, such
as firms and the emergence of new technologies and communications. What distinguishes
the current stage of globalization (1973-present) from previous ones?
Chang: The current stage of
globalization is different from the previous ones in two important ways.
The first difference is that there is less open imperialism.
Before 1945, the advanced capitalist countries practised [overt]
imperialism. They colonized weaker countries or imposed “unequal treaties” on
them, which made them virtual colonies -- for example, they occupied parts of
territories through “leasing,” deprived them of the right to set tariffs, etc.
Since 1945, we have seen the emergence of a global system that rejects
such naked imperialism. There has been a continuous process of
de-colonialization and, once you get sovereignty, you became a member of the
United Nations, which is based upon the principle of one-country-one-vote.
Of course, the practice
has been different -- the permanent members of the Security Council of the UN
have a veto and many international economic organizations (the International
Monetary Fund, the World Bank) are run on the principle of one-dollar-one-vote
(voting rights are linked to paid-in capital). However, even so,
the post-1945 world order was immeasurably better than the one that came before
it. [This is how this cocksucker survives in Cambridge and the World Bank, I
suppose.]
Unfortunately, starting in the 1980s but accelerating from the
mid-1990s, there has been a rollback of the sovereignty that the post-colonial
countries had been enjoying. The birth of the WTO (World Trade Organization) in
1995 has shrunk the “policy space” for developing countries. The shrinkage was
intensified by subsequent series of bilateral and regional trade and investment
agreements between rich countries and developing ones, like Free Trade
Agreements with the US and Economic Partnership agreements with the European
Union.
The second thing that distinguishes the post-1973 globalization is that
it has been driven by transnational corporations far more than before.
Transnational corporations existed even from the late 19th century, but
their economic importance has vastly increased since the 1980s.
They have also influenced the shaping of the global rules in a way that
enhances their power. Most importantly, they have inserted the investor-state
dispute settlement (ISDS) mechanism into many international agreements. Through
this mechanism, transnational corporations can take governments to a tribunal
of three adjudicators, drawn from a pool of largely pro-corporate international
commercial lawyers, for having reduced their profits through regulations. This
is an unprecedented extension of corporate power.
Noam, are globalization and capitalism
different?
Noam Chomsky: If by “globalization”
we mean international integration, then it long pre-dates capitalism. The silk
roads dating back to the pre-Christian era were an extensive form of
globalization. The rise of industrial state capitalism has changed the scale
and character of globalization, and there have been further changes along the
way as the global economy has been reshaped by those whom Adam Smith called “the
masters of mankind,” pursuing their “vile maxim”: “All for ourselves, and
nothing for other people.”
There have been quite substantial changes during the recent period of
neoliberal globalization, since the late 1970s, with Reagan and Thatcher the
iconic figures -- though the policies vary only slightly as administrations
change. Transnational corporations are the driving force, and their political
power largely shapes state policy in their interests.
During these years, supported by the policies of the states they largely
dominate, transnational corporations have increasingly constructed global value
chains (GVCs) in which the “lead firm” outsources production through intricate
global networks that it establishes and controls. A standard illustration is
Apple, the world’s biggest company. Its iPhone is designed in the US. Parts
from many suppliers in the US and East Asia are assembled mostly in China in
factories owned by the huge Taiwanese firm Foxconn. Apple’s profit is estimated
to be about 10 times that of Foxconn, while value added and profit in China,
where workers toil under miserable conditions, is slight. Apple then sets up an
office in Ireland so as to evade US taxes -- and has recently been fined $14
billion by the EU in back taxes.
Reviewing the “GVC world” in the British journal International
Affairs, Nicola Phillips writes that production for Apple involves thousands of
firms and enterprises that have no formal relationship with Apple, and at the
lower tiers may be entirely unaware of the destination of what they are
producing. This is a situation that generalizes.
The immense scale of this new globalized system is revealed in the 2013
World Investment Report of the United Nations Commission on Trade and
Development. It estimates that some 80 percent of global trade is internal to
the global value chains established and run by transnational corporations,
accounting for perhaps 20 percent of jobs worldwide.
Ownership of this globalized economy has been studied by political
economist Sean
Starrs. He points out that the conventional estimates of national wealth
in terms of GDP are misleading in the era of neoliberal globalization. With
complex integrated supply chains, subcontracting and other such devices,
corporate ownership of the world’s wealth is becoming a more realistic measure
of global power than national wealth, as the world departs more than before
from the model of nationally discrete political economies. Investigating
corporate ownership, Starrs finds that in virtually every economic sector –
manufacturing, finance, services, retail and others -- US corporations are well
in the lead in ownership of the global economy. Overall, their ownership is
close to 50 percent of the total. That is roughly the maximum estimate of US
national wealth in 1945, at the historical peak of US power. National
wealth by conventional measures has declined from 1945 to the present, to
maybe 20 percent. But US corporate ownership of the globalized economy has
exploded.
The standard line of mainstream politicians
is that globalization benefits everyone. Yet, globalization produces winners
and losers, as Branko Milanovic’s book Global Inequality has shown,
so the question is this: Is success in globalization a matter of skills?
Chang: The assumption that
globalization benefits everyone is based on mainstream economic theories that
assume that workers can be costlessly re-deployed, if international trade or
cross-border investments make certain industries unviable.
In this view, if the US signs NAFTA with Mexico, some auto workers in
the US may lose their jobs, but they will not lose out, as they can retrain
themselves and get jobs in industries that are expanding, thanks to NAFTA, such
as software or investment banking.
You will immediately see the absurdity of the argument -- how many US
auto workers do you know who have retrained themselves as software engineers or
investment bankers in the last couple of decades? Typically, ex-auto-workers
fired from their jobs have ended up working as night-shift janitors in a
warehouse or stacking shelves in supermarkets, drawing much lower wages than
before.
The point is that, even if the
country gains overall from globalization, there will always be losers,
especially (although not exclusively) workers who have skills that are not
valued anymore. And unless these losers are compensated, you cannot say
that the change is a good thing for “everyone”.…
Of course, most rich countries have mechanisms through which the winners
from the globalization process (or any economic change, really) compensate the
losers. The basic mechanism for this is the welfare state, but there are also
publicly financed retraining and job-search mechanisms -- the Scandinavians do
this particularly well -- as well as sector-specific schemes to compensate the “losers”
(e.g., temporary protection for firms to promote restructuring, money for
severance payments for the workers). These mechanisms are better in some
countries than others, but nowhere are they perfect and, unfortunately, some
countries have been running them down. (The recent shrinkage of the welfare
state in the UK is a good example.)
In your view, Ha-Joon Chang, is the
convergence of globalization and technology likely to produce more or less
inequality?
Chang: As I have argued above,
technology and globalization are not destiny.
The fact that income inequality actually fell in Switzerland between
1990 and 2000 and the fact that income inequality has hardly increased in
Canada and the Netherlands during the neoliberal period show that countries can
choose what income inequality they have, even though they are all faced with
the same technologies and same trends in the global economy.
There is actually a lot that countries can do to influence income
inequality. Many European countries, including Germany, France, Sweden and
Belgium are as unequal as (or occasionally even more so than) the US, before
they redistribute income through progressive tax and the welfare state. Because
they redistribute so much, the resulting inequalities in those countries are
much lower.
Noam, in what ways does globalization
increase capitalism’s inherent tendencies toward economic dependence,
inequality and exploitation?
Chomsky: Globalization during the
era of industrial capitalism has always enhanced dependence, inequality and
exploitation, often to horrendous extremes. To take a classic example, the
early industrial revolution relied crucially on cotton, produced mainly in the
American South in the most vicious system of slavery in human history -- which
took new forms after the Civil War with the criminalization of Black life and
sharecropping. Today’s version of globalization includes not only
super-exploitation at the lower tiers of the global value chains system but
also virtual genocide, notably in Eastern Congo where millions have been
slaughtered in recent years while critical minerals find their way to high-tech
devices produced in the global value chains.
But
even apart from such hideous elements of globalization ... pursuit of
the “vile maxim” quite naturally yields such consequences. The Phillips study I
mentioned is a rare example of inquiry into “how inequalities are produced and
reproduced in a [global value chains] world [through] asymmetries of market
power, asymmetries of social power, and asymmetries of political power.” As Phillips shows, “The consolidation and mobilization of
these market asymmetries rests on securing a structure of production in which a
small number of very large firms at the top, in many cases the branded
retailers, occupy oligopolistic positions -- that is, positions of market
dominance, and in which the lower tiers of production are characterized by
densely populated and intensely competitive markets…. The consequence across
the world has been the explosive growth of precarious, insecure and
exploitative work in global production, performed by a workforce significantly
made up of informal, migrant, contract and female workers, and extending at the
end of the spectrum to the purposeful use of forced labour.”
These consequences are enhanced by deliberate trade and fiscal policies,
a matter discussed particularly by Dean Baker. As he points out, in the US, “from December 1970 to
December of 2000, manufacturing employment was virtually unchanged, apart from
cyclical ups and downs. In the next seven years, from December of 2000 to
December of 2007, manufacturing employment fell by more than 3.4 million, a
drop of almost 20 percent. This plunge in employment was due to the explosion
of the trade deficit over this period, not automation. There was plenty of
automation (a.k.a. productivity growth) in the three decades from 1970 to 2000,
but higher productivity was offset by an increase in demand, leaving total
employment little changed. This was no longer true when the trade deficit
exploded to almost 6 percent of GDP in 2005 and 2006 (more than $1.1 trillion
in today’s economy).”
These were substantially consequences of the high-dollar policy and the
investor-rights agreements masquerading as “free trade” -- among the political
choices in the interests of the masters, not the results of economic laws.
Ha-Joon Chang, progressives aim to develop
strategies to counter the adverse effects of globalization, but there is little
agreement on the most effective and realistic way to do so. In this context,
the responses vary from alternative forms of globalization to localization?
What’s your take on this matter?
Chang: In short, my preferred option
would be a more controlled form of globalization, based on far more
restrictions on global flows of capital and more restrictions on the flows of
goods and services. Moreover, even with these restrictions, there will inevitably be
winners and losers, and you need a stronger (not weaker) welfare
state and other mechanisms through which the losers from the process get
compensated. Politically, such a policy combination will require stronger
voices for workers and citizens.
I don’t think localization is a solution, although the feasibility of
localization will depend on what the locality is and what issues we are talking
about. If the locality in question is one village or a neighborhood in an urban
area, you will immediately see that there are very few things that can be “localised.”
If you are talking about a German land (state) or US state, I can see how it
can try to grow more of its own food or produce some currently imported
manufactured products for itself. However, for most things, it is simply not
viable to have the majority of things supplied locally. It would be unwise to
have every country, not to speak of every American state, manufacture its own
airplanes, mobile phones, or even all of its food.
Having said that, I am not against all forms of localization. There are
certainly things that can be more locally provided, like certain food items or
health care.
One final question: The idea of a universal
basic income is slowly but gradually gaining ground as a policy tool in order
to address the problem of poverty and concerns over automation. In fact,
companies like Google and Facebook are strong advocates of a universal basic
income, although it will be societies bearing the cost of this policy while
most multinational firms move increasingly to using robots and other
computer-assisted techniques for performing tasks traditionally done by labor.
Should progressives and opponents of capitalist globalization in general
support the idea of a universal basic income?
Chang: Universal basic income (UBI)
has many different versions, but it is a libertarian idea in the sense that it
puts emphasis on maximizing individual freedom rather than on collective
identity and solidarity.
All citizens in countries at more than middle-income level have some
entitlements to a basic amount of resources. (In the poorer countries, there
are virtually none.) They have access to some health care, education, pension,
water and other “basic” things in life. The idea behind UBI is that the
resource entitlements should be provided to individuals in cash (rather than in
kind) as much as possible, so that they can exercise maximum choice.
The right-wing version of UBI, supported by Friedrich von Hayek and
Milton Friedman, the gurus of neoliberalism, is that the government should provide
its citizens with a basic income at the subsistence level, while providing no
(or little) further goods and services. As far as I can see, this is the
version of UBI supported by the Silicon Valley companies. I am totally against
this.
There are left-wing libertarians who support UBI, who would set its
level quite high, which would require quite a high degree of income
redistribution. But they too believe that collective provision of “basic” goods
and services through the welfare state should be minimized (although their “minimum”
would be considerably larger than the neo-liberal one). This version is more
acceptable to me, but I am not convinced by it.
First, if the members of a society are collectively provisioning some
goods and services, they should have the collective right to influence how
people use their basic entitlements.
Second, provision through a citizenship-based universal welfare state
makes social services like health, education, child care, unemployment
insurance and pensions much cheaper through bulk purchases and pooling of risk.
The fact that the US spends at least 50 percent more on health care than other
rich countries do (17 percent of GDP in the US compared to at most 11.5 percent
of GDP in Switzerland) but has the worst health indicators is very suggestive
of the potential problems that we could have in a system of UBI combined with
private provision of basic social services, even if the level of UBI is high.
Chomsky: The answer, I think,
is: ”it all depends” -- namely, on the socioeconomic and political
context in which the idea is advanced. The society to which we should aspire, I
think, would respect the concept “jedem nach seinen Bedürfnissen”: to
each according to their needs. Among the primary
needs for most people is a life of dignity and
fulfillment. That translates in particular as work undertaken
under their own control, typically in solidarity and interaction with others,
creative and of value to the society at large. Such work can take many forms:
building a beautiful and needed bridge, the challenging task of
teaching-and-learning with young children, solving an outstanding problem in
number theory, or myriad other options. Providing for such needs is surely
within the realm of possibility.
In the current world, firms increasingly turn to automation, as they
have been doing as far back as we look; the cotton gin, for example. Currently,
there is little evidence that the effects are beyond the norm. Major impacts
would show up in productivity, which is in fact low by the standards of the
early post-World War II era. Meanwhile there is a great deal of work to be done
-- from reconstructing collapsing infrastructure, to establishing decent
schools, to advancing knowledge and understanding, and far more. There are many
willing hands. There are ample resources. But the socioeconomic system is so
dysfunctional that it is not capable of bringing these factors together in a
satisfactory way -- and under the current Trump-Republican campaign to create a
tiny America trembling within walls, the situation can only become worse.
Insofar as robots and other forms of automation can free people from routine
and dangerous work and liberate them for more creative endeavors (and,
particularly in the leisure-deprived US, with time for themselves), that’s all
to the good. UBI could have a place, though it is too crude an instrument to
achieve the preferable Marxist version.
C.J. Polychroniou
is a political economist/political scientist who has taught and worked
in universities and research centers in Europe and the United States. His main
research interests are in European economic integration, globalization, the
political economy of the United States and the deconstruction of neoliberalism’s
politico-economic project. He is a regular contributor to Truthout as well as a
member of Truthout’s Public Intellectual Project. He has published several
books and his articles have appeared in a variety of journals, magazines,
newspapers and popular news websites. Many of his publications have been
translated into several foreign languages, including Croatian, French, Greek,
Italian, Portuguese, Spanish and Turkish.
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