💾 Archived View for library.inu.red › file › solidarity-federation-global-fiction.gmi captured on 2023-01-29 at 13:59:33. Gemini links have been rewritten to link to archived content
➡️ Next capture (2024-07-09)
-=-=-=-=-=-=-
Title: Global Fiction Author: Solidarity Federation Date: Spring 1998 Language: en Topics: economics, capitalism, Direct Action Magazine, globalization Source: Retrieved on November 30, 2004 from https://web.archive.org/web/20041130181935/http://www.directa.force9.co.uk/archive/da6-features.htm Notes: Published in Direct Action #6 — Spring 1998.
The communications revolution is stripping away the cultural, economic
and political barriers that defined the nation state. Or is it?
The idea that we live in a global market is now accepted as reality. In
this new global village the concept of national government is becoming
increasingly irrelevant. In future it will no longer be state power that
shapes our lives but the power of market forces. The history of the
nation state is at an end.
Not so fast.
If the free market vision of a global market is a reality, then we live
in revolutionary times. The establishment of a true global market will
require a massive shift of wealth from the rich north to the undeveloped
nations of the Southern Hemisphere. For, if the global capital markets
operate in line with market theory, production and investment should be
abandoning the high waged rich economies in search of higher rates of
returns on offer in the low waged underdeveloped nations. And here lies
the problem, for much of the global market hype is based on abstract
market theory, rather than economic reality.
It is certainly true that the high taxing, high spending, national
governments are still with us. On average, the nation states of the rich
north consume some 47% of Gross Domestic Product (GDP). It seems that
national governments still have a few pounds to play with. So much for
the power of markets to impose economic discipline.
Is this continuing massive state spending spree, causing investment to
flood into the poorer nations of the world? Well, not quite. Average
direct foreign investment (FDI), the amount companies invest abroad in
property, machinery, etc., is only the equivalent of 6% of total company
domestic investment. Of this relatively small amount, only 9% was
invested in the developing nations. Between 1970–89 the world’s rich
economies managed to swallow up 90% of total world FDI — the country
taking the lions share being the USA. These figures reflect the fact
that in the 1990s only 10% of domestic investment in the emerging
economies was financed from abroad.
Even the demon of the “left” and exploiter of low wage economies, the
multi-national corporations (MNCs), remains firmly rooted in home
territory. On average, MNCs satisfy over two thirds of their production
and locate two thirds of their employees in their home country. Modern
manufacturing requires highly sophisticated support networks, for
example specialised suppliers, research and development facilities,
access to highly trained labour, with much of this support supplied free
by the state. Add to this the fact that, due to the increasing use of
technology, labour costs now only make up around 10% of total productive
cost, and it is not hard to see why MNCs remain rooted in the rich
northern economies.
Despite the perception to the contrary, companies generally still
operate within national boundaries. There is still a strong correlation
between domestic saving and domestic investment. Companies still tend to
raise funds, invest, and produce for the domestic economy. 80% of
Britain’s GDP is still produced for consumption on the domestic markets.
The figures for Japan and the USA are even higher, around 90%. Also, GDP
does not measure human activity not exchanged on the markets, most
notably unpaid work like bringing up children. If this was to be
included, the picture emerges of national economies still very much
geared to meeting human “needs” within national borders.
The fact that national borders are still very much with us should come
as no surprise, for society does not function according to the dictates
of free market theory. People, workplaces, goods and services cannot
simply be transported around the globe in search of higher profit, they
tend to be fixed by locality. For instance, according to market theory,
the sole factor in deciding where to live, is levels of income. Human
beings are slightly more complex, they are fixed to locality by a common
culture, family ties and a sense of belonging. They do not continually
move around the world in search of ever-higher standards of living.
National borders cannot be simply wished away by simplistic market
theory.
To argue that national economies are still very much with us is not to
say that there has not been an increase in cross border trade. But
statistics can always be deceptive, and the growth in cross border trade
does not demonstrate that we are moving in the direction of a global
market. What is beginning to emerge is the existence of regional trading
blocks, centred around Europe, the Americas and Asia. Trade within these
regional blocks is growing at the expense of trade between the regions.
Exports within America, Europe and Asia rose from 31% percent of total
world exports in 1980, to 43% in 1992. Well over 50% of Britain’s
exports now go to EEC countries.
It should be stressed that for reasons already outlined, these regional
trading blocks have a long way to go before they become “super state”
regional economies. The regions are dominated by the US, Japanese and
German economies. Even in the European block, which is attempting to
introduce monetary union, it is likely that economic inequalities will
remain, with the German economy remaining the dominant force.
The other notable thing about the emergence of these regional trading
blocks, is the way they were formed. They did not result from some
natural free market process, spurred on by the introduction of new
technology. They were planned by supposedly enfeebled nation states
often against the will of the citizens and in opposition from sectors of
the market. For example, the overwhelming majority of European citizens
are against European monetary union. Did the Mexican people embrace the
latest NAFTA free trade agreement? Not exactly – the Mexican State is
still killing those who have tried to make a stand against it.
Even international currency markets have little to gain from free trade
and monetary stability; they rely on monetary instability for their
quick profits.
Nor is the theory of a global market flawed simply because it confuses
market theory with economic reality. Central to the global market idea
is that of invincible high-tech global finance slaying the demon of
state power. The world’s lurch towards free market doctrine and the
abandonment by governments of Kenynesian economic management had nothing
to do with technology. Change was brought about as a result of the
inflation and recession that hit the world’s economies in the 1970s. It
was from this instability that the power of the financial markets grew.
The long post war boom was built on the dominance of the US economy. It
was this that allowed monetary stability to be established. The world’s
governments agreed upon a fixed rate exchange system. Currencies were
fixed to the dollar, which in turn was backed by massive gold reserves.
Known as the Brettons Wood system, the fixed rate exchange system
prevented the sort of currency speculation that we see today.
Unfortunately, as is always the case with capitalism; out of stability,
so instability grew. To finance the war against communism, America
resorted to printing money. This led not only to inflation within the
domestic economy, but as the dollar acted as the world reserve currency,
inflation was injected into the world’s economies. Further, as the
American economic dominance began to be challenged by German and
Japanese based capitalism, pressure grew to deflate the value of the
dollar.
Amid rising inflation and mounting economic crisis, the dollar was
finally devalued in the 1970s, leading to the collapse of the fixed
exchange rate system, and its replacement with the present currency
markets. New technology did not create the currency markets, it only
speeded up the whole chaotic process.
The key to ending deflationary economic policies is to re-establish
economic stability, which would in turn lead to monetary stability and
the curtailment of currency speculation, high-tech or otherwise. If this
could be achieved, rising employment and increased funds would allow the
nation state to spend less of GDP on unemployment benefit and more on
welfare provision. How this could be achieved though, given the unstable
nature of capitalism, is hard to conceive.
From the perspective of those seeking an alternative to the current
mess, there are a number of things to be born in mind. The current
economic woes cannot be blamed on faceless international financial
speculators, as national governments and the left increasingly tend to
do. They are caused by economic slump, which in turn stems from the
nature of capitalism. Further, it should be remembered that national
economies are still very much with us. There is still much to be gained
from organising within national boundaries as well as internationally.
Finally, we should ignore all the hype concerning the global market.
World trade deals, aimed at bringing down economic barriers, have little
to do with globalism. The aim of such deals is yet further exploitation
of weaker economies by the richer economies of the north. The
establishment of a truly world economy will require democratic control
and democratic planning, words not to be found in the free market
dictionary.