Undoubtedly, today we are living in a world of ‘globalisation’ and the term of globalisation is one of the most used concepts of this world. Not only within the academic buildings, or within the mind of intellectual but also outside of buildings of daily life this term as a magical one-size-fits-all is used to describe and explain the changes in political, economical, financial, regional, etc. mainly as a result of intellectual indolence. But when we look concept closer and try to find a definition for this popular term we find that it is not easy to describe this term which explains everything except itself1.
Generally globalisation is seen as ‘the widening, deepening, and speeding up of worldwide interconnectedness in all aspects of contemporary social life’ (Held et al.: 1999, in Stohl : 2004 , p.227 ). However we consider this explanation as a little much nonspecific. For Philip G. Cerny term redefine the relation between territoriality and authority which shifts authority from state to supra or sub national units.(in Reich: 1998 ) Dreher, Gasoni and Martens (2008) give another political explanation for this ‘process’ during which governments ‘may shape or severally limit possibilities for private entrepreneurship’. Reich (1998), who in previous pages of his article said globalisation ‘is often distinguished more by what it is not, rather than what it is’, sees globalization as ‘the universalizing of American values (if not Anglo-Saxon ones)’ in following pages2.
Although globalisation has so many faces, during article we will focus the economic aspects of it. Although, for some writers globalisation process has millennium-years roots we shall concentrate two crucial date in is course: first globalisation era coincided with second industrial revolution in which a few countries, by helps of technological innovations and reducing costs (direct consequence of technological innovations), reached and even surpassed hegemony of Britain.
Secondly, late-1970s / ealy 1980s in which neoliberal policies become world-wide and Keynesian national capitalism turned into global capitalism. On the one hand, with the real corruption of Soviet Union and slogans of TINA, neoliberalism viewed as the only cure for economic problems, on the other hand, the world with this new one-size-fits-all solution became a small homogeneous village. However we will try to illuminate whether there were any convergence throughout these periods as claimed or they were periods of polarisation.
I. Globalisation as an Economic Concept
Even though globalisation is a multidimensional subject which has touched gender relations, human rights, fashion, media or technology etc. beyond above we mentioned, by and large, explanations and causes of this process revolve around economic core3. For example UN ESCWA (2003) gives a perfect example of economic approach of globalisation when it describes process as ‘the flow of goods, capital, services and movement of 1 Interestingly term’s first appearance in Webster’s dictionary was in 1961 and ‘virtually no academic or journalistic articles or books published before 1975 included the words globalism, globalizing, or globalization'(Scholte :2000 in Stohl : 2004 , p.227) And ‘[i]n 1980 there was fewer than 300 articles or books with the word global or globalization in the title. In 1995, the number was over 3.000’ (Guillen in Garrett :2000)
2 Sociologist George Ritzer (1993) decribes his concept of ‘The McDonaldization of Society’ as ‘the process by which the principles of the fast-food restaurant are coming to dominate more and more sectors of American society as well as the rest of the world’ (Ritzer, 1993, p. 4 in Stohl :2004 p.229). John A. Agnew(), gives a respectable reading of American dream, the lands of consumer- citizen, opposed to Sovietic utopia, the worker-state, and universality and expansion of this dream in his article A World That Knows No Boundaries?
3 We are aware of other approaches to subject, for example Reza Aslan mentioned that ‘no single force can be said to have had a greater impact on propelling globalization forward than religion, which has always sought to spread its message’ beyond the ethnic and territorial frontiers of its origin. ( Reza Aslan : 2009 in Herrington, :2013 p.146). Also, missionary works were an important part of discoveries and incorporate these new lands into international trade-chain. However we find economics-related concerns as main historical force and see the unworldly religions as just a justification of economy-political worldly concerns. As Jomo Kenyatta verbalises in a concise style, the Bible is was step of conquering lands in Africa and as history teaches us religion has been the most crucial export commodity of all ages (-to add another aspect to dependency theories- mainly because of that you can change them but cannot produce anywhere else.) [labour]’ (in Herrington : 2013, p.148). Likewise Kevin H. O’Rourke and Jeffrey G. Williamson (2002) view globalization as ‘the integration of international commodity markets’ (in Herrington : 2013, p.148). While Friedman (1999) regards globalisation as being post-World War I which characterised by ‘turbocharged’ change (in Dreher, Gasoni and Martens : 2008, p.6), other researchers focus on second War. Philip McMichael, describe globalization ‘project’ as ‘historically specific’ and ‘grows out of the dissolution of the developmental project'(McMichael :1996 in Reich: 1998 ). Thomas D. Hall (2000) does not agree with this novelty, for him ‘globalization is not just a ‘current thing’ but has been going on for centuries or, in some views, millennia’ (Carlson :2002 , p.4). Some economic historians from the Annales School have described the emergence of a world economy beginning in the 15th century 4 ( Bairoch and Kozul-Wright : 1996). For Christopher Chase-Dunn (1999) the great chartered companies of 17th century are start point of economic globalisation (in Carlson : 2002 p.4) Immanuel Wallerstein (1974) ,who insert outset between these dates into ‘the long sixteenth century’ (ca. 1450-1620) with the emergence of a ‘European world-economy’, gives another economic-centric explanation of transform: [This new system was] economic but not a political entity, unlike empires, city-states and nation-states. In fact, it precisely encompasses within its bounds (it is hard to speak of boundaries) empires, city-states, and the emerging ‘nation-states.’ It is a ‘world’ system, not because it encompasses the whole world, but because it is larger than any juridically-defined political unit. And it is a ‘world-economy’ because the basic linkage between the parts of the system is economic, although this was reinforced by cultural links and eventually, as we shall see, by political arrangements and even confederal structures.(Carlson: 2002, p.8 italics added) For Rodrik (l997)the world economy was probably even more integrated at the height of the gold standard in the 18th century than it is now (in Kartasasmita,: 2000). Some academics regard European colonialism which dates from 1492 as the ‘breeding ground’ for globalisation5 (Dreher , Gasoni and Martens: 2008) while others , like Kevin H. O’Rourke, and Jeffrey G. Williamson instead argue that globalisation took off in the early 19th century circa 1828 (O’Rourke and Williamson :2002 in Herrington : 2013, p.150). Arrighi (1999) agrees with the determining role of 19th century on globalisation even though he dates it half-century later ; ‘a worldencompassing economy sharing close to real-time information first came into existence not in the 1970s but the 1870s, when a system of submarine telegraph cables began to integrate financial and other major markets across the globe in a way not fundamentally different from today’s satellite-linked markets.’6(in Carlson:2002) For Thomas L. Friedman there are only two era which deserve label of ‘globalisation’: 1990s in which capitalism declares its victory over communism and ‘Globalization Round I’ which lasted from mid-1800s to the late 1920s (Herrington : 2013, p.149). For us I must be searched in lates of 19th and first decades of 20th century. But what did happen during this time? 4 Although the rise of West ,predominantly, is seen as the reason of globalisation , Janet Abu-Lughod (1989, 1993) ,who argues that the modern world-system may be traced back to the twelfth, thirteenth and fourteenth-centuries, views it as a result of the withdrawal of the East, rather than the rise of the West. (Carlson :2002 p.8 ) Also, for Nobel laureate Amartya Sen (2002) the role played by West was ‘very minor’ in early phases of globalisation which ‘at least a few thousand years old’.(Dreher , Gasoni and Martens : 2008, p.6) 5 This era was also during which Vasco da Gama sailed around the Cape of Good Hope. For Adam Smith these two discoveries were the two of most important events in recorded history.(in Herrington : 2013 p.150) Whereas Michael Hardt and Antonio Negri (2000) have accepted the importance of world trade in pre-capitalist epoch , for them the ‘explicit foundation’ of globalism is on capitalism.((Dreher , Gasoni and Martens: 2008 p.6-7) For Dreher et al (2008) the establishment and expansion of the first global trade networks of the Dutch and English colonial trading companies would not have been possible without a system of capital reinvestment, private ownership and commercial insurance’ and what differ capitalism from other economic systems is the role of ‘non-productive accumulation of reinvested capital’ (Giddens 2000 in Dreher et al (2008). 6 Also in this century luxuries became possible for the first time in human history due to falls in costs of transporting across oceans, which open the way to large-scale intercontinental trade ( O’Rourke and Williamson 1998; Findlay and O’Rourke, ch. 1 in Dowrick and DeLong: 2003 p.191)
II. First Globalism Era: 1870-1913 7
Colonialism was central to mercantilism:colonies provide raw materials , demand market for the manufacture of metropole and the mecantilistic insistence on national power helped established state authority in Europe which in turn contribute the development of the global political economy(Cohen :2011, p.20) and the first country managed to shift from mercantilism to industrial stage was Britain. The Industrial Revolution began about 1780 in Britain and although had affected just some regions of country, it made Britain the hegemonic power of politico-economical world. By 1860 Britain had become home of 37 percent of European industrial production, 20 percent of world industrial production, and 80 percent of newer technology industries (Cohen : 2011, p.20). By the financial leadership of Great Britain (with the spread of the gold standard, adoption of appropriate legal institutions and convertible currencies) , as Jeffrey Sachs and Andrew Warner (1995) has mentioned, we see a large and stable international capital flows 1860s onward. In the same article which discuss the period of 1870-1913 writers have given two other dominant feature of period : firstly, by the spread of capitalist institutions and free trade and capital flows industrialization spread rapidly beyond the core North Atlantic economies to include the emerging markets of Continental Europe and Japan and during this time poorer economies grew faster than the richer economies. Secondly low tariff barriers and technological breakthroughs in long-distance transportation and communications stimulated export growth and rising trade shares which include Latin America, much of Asia and parts of Africa -which specialized in raw material exports and imported manufactured goods- (in (Bairoch and Kozul-Wright : 1996 p.4). During the period in question we have seen significant changes in GDP per capita which increased from about $750 in 1870 to more than $1,000 by 1913 (Jones: 2003) and economic parameter of other North countries, especially in the US’8. Whereas Britain’s share of world trade fell from 24 percent in 1870 to 14.1 percent in 1913, Germany’s share rose from 9.7 to 12.2 percent and the U.S. share rose from 8.8 to 11.1 percent. (Cohen : 2011, p.21). On the eve of World War I, the United States had become the largest industrial power, accounting for about 32 percent of world manufacturing production in 1913 -increased from 7.2 in 1860- [TABLE 2]. Beyond the USA and Germany, by 1913, Belgium, Switzerland, Germany and Sweden had relatively important share in world production, more than half that of the US. Also the share of developed countries in new technology increased dramatically during this time9 [TABLE A 1]. Share of world trade % 1870 1913 Britain 24 14.1 Germany 9.7 12.2 The US 8.8 11.1 TABLE 1 However, Britain continued to dominate in international finance by 1913 with increased foreign liabilities of Britain, the United States emerged as a net creditor; thus financial eminence shifted from London to New York after the war. (Cohen : 2011, p.21 and Bairoch and Kozul-Wright : 1996 p.7). Then addition to its leadership position in manufacturing output the US became the financial centre of the world. If the 19th century passed away by Britainic hegemony, we can say ,undoubtedly, 20th century would be the century of American hegemony. 7 This period coincides with Second Industrial Revolution (1870-1913/4).Throughout period capitalism ,by help of this revolution, shed skin and transform into a new stage called by Lenin as imperialism. 8 ‘Relative to the rest of the world, American growth in manufacturing output was incredible. By 1913 the United States was to account for fully one-third of the world’s total industrial production.’ (Agnew: [no date]) 9 ‘..[During this period] [ I]f technological progress was an important source of economic growth, it was not an exogenous one…[D]uring this period the State became a much more active agent in technological change’ [T]here was also growing State involvement in the area of technological progress through the creation of demand for new product, including in emerging military complexes … as well as more direct funding of technical education and research activities. ‘(Hobsbawm, 1994b, p. 308 and Freeman, 1989 in Bairoch and Kozul-Wright : 1996 p.22-23) Importance of Foreign Direct Investment (FDI) and Foreign Portfolio Investment During Period Generally, international production is seen as mark of this period and FDI is ignored or downplayed by historians. However, Bairoch and Kozul-Wright have described this rhetoric as a myth and have mentioned that during era FDI accounted for one-third of overseas investment and FDI reached over 9 percent of world output in 1913, a figure which had not been surprassed until the early 1990s. But, not surprisingly, much of the trade occurred during period was intra-firm trade (Wilkins, 1995 in Bairoch and Kozul-Wright: 1996 p.10). Between 1870-1913, the growth of foreign portfolio investment exceeded the growth of trade, FDI and output. By 1913, the volume of international capital flows had reached 5 per cent of the Gross National Production (GNP) of the capital exporting countries and there was a considerable integration of international financial markets ( (Bairoch, 1976, p. 99 and Zevin, 1988 in Bairoch and Kozul-Wright : 1996). Western Europe was the major source of supply of foreign capital throughout this period. In 1874, the combined total of Britain, Germany and France amounted to some $6 billion. By 1914 this figure had risen to $33 billion out of a total of $44 billion. Among these leading financial powers, Britain was, unquestionably, the single largest overseas investor during this period and London was the main centre of the international financial system; between 1870 and 1914 the average annual outflow of capital was around 4 per cent of national income, and actually reached a staggering 9 per cent in 1913 when Britain accounted for about 43 percent of the world’s foreign investment. (Bairoch and Kozul-Wright : 1996 and Cohen: 2011, p.21) However, there was so many investment during this period and between 1890 and 191310, in developing world we saw a jump in growth rates [TABLE A 2], we cannot label First Globalisation Era under ‘convergence’ because the gap with the developed countries was not closed. Even at the end of period there was few industrialised countries11 and they invest in specific countries. For example Russia was second host of FDI after the US. While in 1860 the three leading industrial nations produced a little over a third of total output, by 1913 their share was a little under two-thirds (of a much larger total) and more interestingly throughout period the industrial output of non-developed countries decreased dramatically to under one tenth from over one-third [TABLE 2]. The reason of his deindustrialization in the South , for Bairoch and Kozul-Wright, was massive inflow of European manufactured imports which eventually undercut industrial capacity of India, Latin America and Middle East. (Bairoch, 1982 and Batou, 1990 in Bairoch and Kozul-Wright : 1996)12. TABLE 2 Percentage distribution of the world’s manufacturing production(industrial output) Source: Bairoch (1982) in Bairoch and Kozul-Wright : 1996 p.7 10 These years (1890-913) were not years of liberalism but protectionism, especially in large countries : ‘If by 1913 trade policy in the developed world is best described as islands of liberalism surrounded by a sea of protectionism, the developing world might best be characterized as an ocean of liberalism with islands of protectionism. In many cases, openness to trade was the direct result of colonial rule, where the general principle consisted of free access to all the products of the colonial power.’ Bairoch and Kozul-Wright : 1996 p.4 11 The term of convergence can be used just for these countries and generally their investment was nearly reciprocal. 12 Interestingly, Charles I. Jones conclude his article (2003) with that ‘Although it is true that this era of globalization witnessed a divergence of incomes between the countries in the charmed circle and those outside, this does not mean that globalization brought no benefits to the periphery, or even that it was not a force working to promote convergence .’ To use words of Reich(1998), we know ‘what it is not’ and ask ‘what it is’ if not divergence and also what is the reason of so much hesitation in using term of ‘divergence’. During period in question world trade was dominated by intra-European trade and Europe’s trade with overseas areas;Europe accounted for 66.9 per cent of total trade at the beginning of this period and 62 per cent in 1913 with a corresponding small rise in the North American share (Kenwood and Lougheed, 1994, p. 80-81 in Bairoch and Kozul-Wright : 1996).
III. Golden Age and Neoliberalism as Second Globalisation Era13
We cannot say, by following prevailing viewpoint, there was an open, stable international economy in the interwar period14. For hegemonic stability theorists the reason was the lack of a global hegemon15. Throughout the interwar period Britain was no longer able, and the United States was not yet willing, to assume the hegemon’s role. (Cohen:2002). In 1936, Britain, the United States, and France reached an agreement that recognized international responsibility for exchange rates, which promoted open and stable economic relations after World War II . In 1944 ,under the leadership of the US, delegates from 44 countries negotiated the rule for financial and commercial relations among nations (Bretton Woods) which yielded by establishment of IMF (short-term loans for balance of payments), World Bank (long-term loans fo development) and GATT (trade negotiations). Although the negotiations was ‘the first successful attempt . . . by a large group of nations to shape and control their economic relations,’ the Bretton Woods conference itself were ‘very much an Anglo-American affair, with Canada playing a useful mediating role,’ and the Soviet Union ,the only Communist state in negotiations, played a limited role (Dormael : 1978 and Gardner:1972 in Cohen:2002). Although for some writers current round of globalisation began after WWII and accelerated n 80s and 90s(for example Kartasasmita:2000), for us crucial point is around 70s16 and there are some important difference between pre and post of this date (The differences are so much that we can argue that second globalisation era started then). Until late-70s ,in the light of Keynesian policies, governments were important stimulant and decision-makers of domestic and international macroeconomic activities. Capitalism of Golden age (post WWII to late-70s) was restrained/bridled one (which described by Seeraj Mohamed ( 2008) as ‘patient’ capitalism) under the norm of welfare states and social democracies.
The Keynesian concern of full employment by manipulating investment and aggregate demand and if necessary by controlling over trade and capital flows provided more job security, better wages and benefits for workers such as health insurance. 13 Other term used for refer periods are Fordism and post-Fordism, Monopoly Capitalism and late Capitalism and Modernism and post-Modernism. For Kotz (2002) neoliberalism is an ‘updated version’ of ‘the Old Religion of classical liberalism’ that was ‘dominant in the US and UK prior to the Great Depression of the 1930s’ and asks ‘How can the re-emergence of a seemingly outdated and outmoded economic theory be explained’? 14
‘Contrary to much conventional wisdom, ‘ Bairoch and Kozul-Wright ( 1996) argue that the ‘ inter-war period was not one of stagnation but contained spurts of rapid growth. Indeed, the 1920s grew considerably faster than any previous decade, and taking a longer perspective there was, in fact, very little difference in the annual growth rate in the globalization era and the period 1913-195. It is also a myth that globalization tendencies were absent from the inter-war period. Although the average annual growth of trade in the 1920s was slower than in the previous epoch it was actually faster than in the period 1870-1890 and trade grew very rapidly between 1924-1929.’ 15 For example, Kindleberger (1973) noted that ‘the world economic system was unstable unless some country stabilized it. . . . When every country turned to protect its national private interest, the world public interest went down the drain’ (Horowitz: 2004) 16 ‘[in 1970s] [t]he globalization of production through the growth of ‘ Newly Industrializing Countries (also aided by US Cold War military expenditures in the case of countries such as South Korea and Taiwan) and the increased flow of trade and foreign direct investment between already industrialized countries finally undermined the geographical production/consumption nexus (often referred to as ‘central Fordism’) that was the leitmotif of the early postwar decades.'( Agnew:[no date]) However, the end of (negotiant Keynes’) Breton Woods17 ,the rise of Thatcherism18 in the United Kingdom and Reaganism in the United States recoloured the picture and policies changed from ‘national capitalism19’ to freetrade global liberalism20. Within this narrowed frame there is no need for governmental actions because market can adjust itself now (and ,as a logical result of this statement, no need for command economies like Soviet Union or welfare states). While capitalism changed from ‘patient’ to ‘impatient’ capitalism(Mohamed:2008) it brought so many new things with itself.
One of the most dramatic changes in neoliberal period was liberalisation of financial markets and international financial flows21. During period, most countries of developing (ex-socialist or third world) and developed world liberalised their financial sectors and opened their markets to capital flows [CHART A 2]. Seeraj Mohamed sees this as the main result of global instability and common financial crises after 70s compared to financial and 17 ‘Rise of German and Japanese economies after the world posed a serious threat for US industry . While its global position in international trade declined the US maintained a dominant role in financial markets. As a result the US supported globalisation of financial markets while the aim of maintaining high exports with Europe became less important and the US abandoned its support for the Bretton Woods. Also the US pre and after Bretton Woods had played an active role in undermining national capitalism in Europe and pushed for integrated and open markets to spread jurisdiction across borders, even by using military coups for this aim.’ (Mohamed:2008 p. 12) And nearly simultaneously, Briain to strengthen City of London an important finance centre, allowed developments in Eurodollar markets in 1960s. ‘Britain acted unethically by opening an offshore market for dollar transactions. Britain was undermining the financial regulations and controls developed in other countries to maintain economic stability so that they could maintain their role as an international financier'(Mohamed:2008 p. 11-12) and in this circumstances, it was impossible to maintain Breton Woods system which dependent on cooperation between countries. “Indeed, US hegemony had been in trouble since around 1960 when the London gold crisis showed the potential weakness of the gold-dollar exchange mechanism at the heart of the Bretton Woods system. By 1971, when the Nixon Administration abrogated the Bretton Woods Agreement, the US faced a declining rate of economic growth and needed recourse to a competitive devaluation of the dollar. Thus, and ironically, the explosion of globalization that followed has been based on the explicit pursuit of US national economic interest without much by way of either negotiation or agreement with other states…. [Namely and basically ] [u]nder the Bretton Woods system US governments could not devalue the US$ to stimulate US national exports and national economic growth. Ironically, therefore, the more open, freewheeling world economy that came into existence beginning in the 1970s had its origins in the self-serving actions of a US government. ‘( (Triffin 1960; Cafruny 1990 in Agnew:[no date] ) 18 From a neoliberal perspective there is only one economy: free/open market economy and all other institutions must be designed according to this and it was Margaret Thatcher who sloganeered ‘There is no alternative(TINA)’. Not surprisingly these words came from the Britain (to be honest, there had never been an alternative in this country which,paradoxically, can governs the borderless world but cannot think beyond its borders). And in the early 1990s Fukuyama went one step beyond and announced ‘end of history’. Now, for us, there is no alternative for living after the end of history and waiting the end of our life without any utopian hope about our future. Tragically, at the end of itself, history saw an unashamed person who did not hesitate in playing the role of God (of apocalypse) whose book, namely intellectual depth, consists of just these three word. 19 Block (1977) refers Keynesian solution as national capitalism. In this solution international cooperation should not interfere with the attainment of full employment and instead should support full employment goals possibly through high levels of international trade and controls over trade and capital flows should be used to ensure full employment. ( in Mohamed: 2008 p.8) 20 Sachs and Warner (1995) make a direct parallel between features of 19th century and late 20th century : ‘The world economy at the end of the 20th century looks much like the world economy at the end of the 19th century. A global capitalist system is taking shape, drawing almost all regions of the world into arrangements of open trade and harmonized institutions. As in the 19th century, this new round of globalization promises to lead to economic convergence for the countries that join the system’ Sachs and Warner: 1995 in Bairoch and Kozul-Wright: 1996 p.5) . According to Marxist theory, every class and concept has to create its intellect to survive and to prevail. In the last quarter of 19th century the new face of capitalism creates subjectivist theorists ((Neo-classical macroeeconomics) , and n 1970s and 80s fresher face of capitalism creates rational expectations(Lucas), Friedmanian normative claims, Edmund Phelps’ (with Milton Friedman) concepts of natural unemployment rate and inutility of governmental interventions (Newclassical macroeceonomic). And between them Keynes was the sound of national capitalism. 21 ‘Helleiner (1994) shows that the policies of the US and Britain at the Bretton-Woods negotiations were opposed to a liberal international financial order. At the Bretton-Woods negotiations White and Keynes agreed on the control of capital flows across borders because it could hamper national macroeconomic planning measures of the new interventionist welfare states. Both were concerned about capital flight motivated by short-term speculative gain. Keynes macroeconomic stability of Golden Age22. As a result of increasing influence of financial system and shorttermness of investment produced by global competition creates higher unemployment23 and lower economic growth24. Stockenhammer (2004) gives a more satisfying explanation for high unemployment than Keynesian wagerigidity or unemployment hysteresis when he finds over-finacialisation (because within the neoliberal era turnover and profits of large firms derived from financial activities rather than their real sector traditional businesses ) of European firms as main reason of lack of aggregate demand which consequently and reciprocally creates unemployment ( Stockenhammer :2004 , Krippner, 2002; Crotty, 2002; and Dumenil and Levy, 2001 in Mohamed: 2008 p.3-5). Also for Blecker (1999) speculative ‘hot money’ and huge daily transactions on the world’s foreign exchange which rocketted from $15 billion in 1973 to $1.5 billion in 1998( Gilpin 2001p.26 and BIS 2001b:98’100 in Scholte :2005 p.3 ), often leads to global financial pressures that cause ‘perverse changes in exchange rates that destabilize the global trading system and undermine domestic economic production.’ (in Mohamed: 2008 p.5-21) Moreover developed North countries,especially the USA25, and mega-institutions like IMF and World Bank26 exert huge influence on developing countries to implement neoliberal policies. A liquidity preference among wealth holders of developing countries creates less investment and employment opportunities in these countries. As a result of these, developing countries have become more and more dependent on FDI’27 subcontracting from was also concerned about more ‘normal’ capital flows resulting from interest differentials between countries that could lead to capital outflows. His concern was that countries with capital account deficits would not be able to use low interest rates as part of their macroeconomic strategy. If markets were open there would be significant flows of capital to countries with higher interest rates. Both Keynes and White also agreed that the new welfare state had to be protected from capital flight because wealthy people may want to avoid ‘burdens of social legislation’ or have ‘political reasons’ to send there money abroad.’ Helleiner, 1994: 34 in Mohamed: 2008 p.9. 22 A question must be asked about subject is that: Is neoliberalism the result of first and second oil crises or otherwise? As everybody knows that ‘das Capital’ has a short-term horizon and this shor-termness is the main reason of financial crises. But interestingly while Neoliberal economics has so much and so wide-ranging opinions to criticise myopia of Keynesian economics and policy-makers, it has not any logical reason to criticise myopia of capital. 23
‘There is only one thing that is worse than being exploited by capitalists. And that is not being exploited by capitalists.’ Joan Robinson (in Nayyar: 2006, p.4) 24
‘The annual rate of growth of real global GDP fell from 4.9% in 1950-73 (the Golden Age) to 3% in 1973-1998. This is a decline in the rate of growth of 39%. When one calculates the decline in growth rate considering GDP per capita, there was a 55% drop in growth. Maddison shows that for the same periods there was a 43% decline in growth in Latin America and a 38% decline in Africa. The only major area where GDP growth rates increased was Asia…. [The] United Nations estimates that world GDP grew at an annual rate of 5.4% in the 1960s, 4.1% in the 1970s, 3% in the 1980s, and 2.3% in the 1990s.'(Maddison :2001, p.26 and Crotty: 2002, p.3 in Mohamed: 2008 p.3 emphasis added). But interestingly Neyyar (2006) contradicts that : ‘Over the past fifty years, world GDP multiplied almost twelve-fold while per capita income more than trebled ‘ 25 ‘ It is little exaggeration to claim that in the five decades after 1945 American dominion was at the centre of a remarkable explosion in ‘interactional’ capitalism. Based initially on the expansion of mass consumption within the most industrialized countries, it later involved the reorganization of the world economy around a massive increase in trade in manufactured goods and foreign direct investment. But this was not a recapitulation of the previous world economy. Abandoning territorial imperialism, ‘Western capitalism … resolved the old problem of overproduction, thus removing what Lenin believed was the major incentive for imperialism and war’ ‘(Calleo 1987, 147 in Agnew). 26 The IMF and the World Bank … have become both more powerful and more autonomous of their member states than was intended when they were founded in the 1940s( Agnew:[no date])
‘The Bretton Woods institutions … act as watchdogs for moneylenders in international capital markets… IMF programmes of stabilization and World Bank programmes of structural adjustment seek to harmonize policies and institutions across countries, which is in consonance with the needs of globalization.'(Nayyar: 2006, p.5) 27 ‘Many analysts view foreign direct investment as the most important form of cross-border economic interchange. It is associated with the movement of technology and organizational methods, not just goods.'(Kotz:2002) ‘US firms invested US$133 billion abroad in 1998, while foreign firms invested US$193 billion in the US. Overall world FDI flows more than tripled between 1988 and 1998, from US$192 billion to US$610 billion, and the ratio of FDI to GDP is generally rising in both developed and developing countries. Developing countries received about a quarter of developed countries28.
During period the bargaining power of MNCs relative to developing countries have increased considerably because there have been so many destination for capital but so few MNCs which have been able to make such a significant investments. Burke and Epstein (2001) argue that FDI and the other activities of MNCs ’embody a destructive asymmetry’ and ”the structure of international production, and the emerging neo-liberal rules that govern it, work primarily to enhance the bargaining power of MNCs at the expense of citizens in both the rich countries of the North and poorer countries of the South’ (in Mohamed: 2008 p.25- 27). Conclusion To conclude the essay we should touch some points. Firstly, nor in the first globalisation era neither in its ‘fresher’ version Neoliberalist age has the world experienced convergence (except few first comers coreindustrialised countries and lands of Asian miracle). Especially during Neolibealism, not only divergence,income inequality and polarization/fragmentation between countries have harshened , but also within countries[CHART A 3] 29… Secondly, not only developing countries but also developed countries experienced a more successful era under Keynesian Golden age in growth rates30 and labour productivity[Table A 2 and A 4 ]. However, in today’s neoliberal ‘obsessive of free[dom]’ village, it is nearly impossible to discuss the national capitalism. And, although the [full] employment is the most unquestioning way of decreasing poverty, , neoliberal freedom-frominterventions economy does not have any aim like this and economists of this ‘land of nowhere’, interestingly, unemployment is a natural thing [NAIRU]. We has apologised for this arrogance but according to these big brains of ‘science of economics’ the laws of nature in long term are independent of short term ones, namely it is not the same nature. world FDI inflows in 1988-98 on average, though the share fluctuated substantially from year to year. FDI is now the largest form of private capital inflow to developing countries’ (World Bank, 2000 in Kartasasmita:2000 p.3 emphasis added.) Throughout period. the share of international trade in total output rose from 27 to 39 percent for developed countries and from 10 to 15 percent for developing countries.(ibid) For market integrations (FDI ,trade and portfolio) between 1970-1997, please look at CHART A1 and TABLE A3. 28 However, Chang (2002) shows that to become a developed country you have to protect your infant industries from global competition and this is the way of not newly industrialized countries of Asia but also of Germany, Switzerland and the US.(in Mohamed: 2008 p.18-19) What Amsden adds to this conclusion is that after neoliberal policies ,unless you were not a country which is large, have a big domestic power and market like China and India, it is not easy to establish a success like South Korea did . And interestingly, South Korea improved the productivity of industry without FDI but by recruiting retired engineers and managers from the US and Western Europe to transfer skills to local workers. (in Mohamed: 2008 p.19-27) And Kotz(2002) presents that before the period of ‘cutthroat competition’ and wild accumulation known as the Robber Baron era, the protectionist tendencies of government in the US were important parts of market-forces : ‘In the period when capitalism first became well established in the US, during 1800-1860, the government played a relatively interventionist role. The federal government placed high tariffs on competing manufactured goods from Europe, and federal, state, and local levels of government all actively financed, and in some cases built and operated, the new canal and rail system that created a large internal market.’ 29 In other words, relatively more of total global income inequality is now accounted for within countries than between them although between country differences have also increased (see, e.g. Pritchett 1997; Galbraith 2002 in Agnew) ‘There is a growing polarization between the winners and the losers. The gap between rich and poor countries, between rich and poor in the world’s population and between rich and poor people within countries, has widened.'(Nayyar :2006) 30 ‘While GDP growth improved slightly in 1990-99, it remained well below that of the era of state-regulated capitalism. Some analysts cite the fact that GDP growth accelerated after 1995, averaging 4.1% per year during 1995-99 . However, it is not meaningful to compare a short fragment of the 1990s business cycle expansion to the long run performance of the economy during 1948-73 [and, easily, one] can find four year subperiods during 1948-73 in which growth far exceeded the rate during 1995-99. For example, GDP grew at 5.8% per year during 1962-66 (US Bureau of Economic Analysis, 2000). ‘ (US Bureau of Economic Analysis, 2000 in Kotz:2000 ) Thirdly, if trade was the sign of Golden Age, then, investment is of the post-modern age and the most important aim of small countries is to attract investment31 to deeply integrate into world chain of trade and capital flow. If they lucky enough they can manage this, otherwise they only thing they can attract is ‘hot money’. As a result of bargaining power mentioned earlier, the gainer of these transactions are ‘big firms of big countries32’. And small countries has become the satellite-domestic-markets of these firms while the hopes for a prophet of Exodus are fading. Lastly the most important and difficult question to answer is the one asked by G.A.Agnew, ‘Who is US’?(namely, defining an country economically). The answer of this question will reshape the history of globalisation and will give us more precise pictures and forecasts on globalisation. For example a territorialbased explanation of the U.S. 1986 trade deficit of $144 billion from a flow-based approach becomes ‘a trade surplus of $77 billion if the activities of U.S.- owned firms outside the United States and foreign-owned firms in the United States are included in the calculations (Julius 1990 in Agnew)’