Political and economic intertwinements of globalisation

The world ain’t what it used to be. Globalisation arguably started as long ago as Macedonian Alexander the Great’s military expansion towards the East, followed by the Roman Empire’s far-flung hold on the ancient world (and if one really wanted to push the argument, you could claim that it commenced almost 150 000 years ago when the first members of Homo and Gyna sapiens began to spread out across the globe from where they originated in Africa).

Conventional wisdom has it, though, that it is a phenomenon of recent origin, and some scholars (such as Steger) insist on distinguishing between “globality” (the condition of global interconnectedness at various levels) and “globalization” (the process of developing or driving such interconnectedness and interaction). One thing is certain, though, if one starts examining this field of study, namely, that it is a very complex thing indeed.

For one thing, the political vocabulary of the nation state, as it was forged in the crucible of modern thought since the Peace of Westphalia in the 17th century — which put an end to the religious wars of the Reformation — is no longer adequate to articulate the many and varied strands of political and economic power which sometimes cohere with the vaunted “sovereign” power of the nation state, and sometimes transcends, or undermines, this power.

For another, if people believed, naively, at one time, that a definite distinction and separation between economic affairs and political affairs could be effected, it has become apparent that in the condition of globality no such separation can be done, even if the distinction remains valid. And not only are the political and the economic inseparably intertwined; throw in the cultural (including the religious) and the social too, and, of course, the ecological. Ever since the dawn of complexity theory (the popular paradigm of which is the so-called “butterfly effect”) the realisation has grown that everything in this world is somehow interconnected.

The pollution in China now can be seen to have an effect on the kinds of sunsets that people observe halfway around the globe from China, for example, and the mutual cultural influences between and among different countries may be detected in the appearance of interesting new cuisine as well as dress fashions far from the countries where they originated. Chinese food in South Africa, to mention but one example, is not the same as Chinese food in mainland China — it has adapted itself to local conditions and tastes, and vice versa, as I discovered to my horror when I ordered a Western dish in a Chinese restaurant.

But to return to the realm of the political and economic: this is arguably where the destiny of the earth and its inhabitants will be decided, albeit with the constant influence of the cultural and social diversity in the world. As several thinkers have noted (among them philosopher Johann Rossouw), there was a time when the religious sphere of society dominated the economic and the political (pre-modernity); this was followed by the dominance of the political sphere over the economic and the religious (the modern era of the nation state); and more recently, from about the 1950s, the economic sphere has been in the ascendant (postmodernity). And importantly, the dominant social sphere is the one, at any given time, that receives priority in the making of far-reaching decisions.
Although postmodernity is characterised by the dominant status of the economic sphere in relation to other societal spheres, however — didn’t Fredric Jameson describe the postmodern as the “cultural logic of late capitalism”? — this does not negate the intertwinement of all of these domains today. The political and the economic, particularly, are related in a seemingly paradoxical way, because one could easily argue for the priority of either: economic relations and developments require political decisions, but the latter are always made in the context of economic conditions that influence the political decisions and events. “Political economy”, indeed.

As far as globality and its further unfolding, globalisation, in the political and economic domains are concerned, a few things must be kept in mind. The first is, again, that in both domains, things have become bewilderingly complex. When the international Bretton Woods conference of the mid-1940s, crafted by economist JM Keynes, set out to bring order to the world’s economy in the aftermath of the 2nd World War by creating institutions such as the World Bank, GATT (later to become the World Trade Organisation) and the IMF, together with the linking of countries’ currencies to a gold-standard pegged to the US dollar, little could they foresee that this era of “controlled capitalism” would wither before the economic chaos of the 1970s.

The sudden rise in the oil-price, together with the political convulsions across the world, eroded the industrial competitiveness of the US to the point where Nixon abandoned the gold standard and ushered in the era of free-floating exchange rates, which, together with the increasing liberalisation and internationalisation of finance and trade, has contributed to the sensitivity of interacting global markets and economies to events in every country across the globe (an economic “butterfly effect”) — recall the worldwide effects of the financial crisis triggered in the US by irresponsible, irrational financial transactions in 2008.

Satellite, internet-based and fibre-optic technology has further accelerated this process of economic liberalisation and internationalisation — one can literally, since the 1990s, conduct “business@the speed of thought”, as Bill Gates phrased it. The net result of all the accompanying high-risk financial competition is more complexity, high volatility and chronic insecurity of global currency markets. Given the intertwinement of the social, political and economic domains, this means that the insecurity of the global financial sector impacts on societies worldwide, so that an emerging market-country or -region could just as easily be the scene of colossal profits on the part of global speculators, as one of declining social welfare because of the globalisation of financial transactions. A telling example is the notorious South-east Asia Crisis of the late 1990s, where a drastic economic turnabout was triggered by just such events in international finance.

The bewildering thing about the economic domain today, is that there seems to be some kind of “disconnect” between the world of “real” economic production and the abstract sphere of global finance, where astronomical amounts are involved in transactions concerning events that have not even happened yet (“futures”, etc). And yet, what happens in this abstract domain of virtual capital, has very real effects in the social world.

Add to this the tremendous economic power of globally transnational corporations — in 2003, 51 of the largest economies in the world were corporations; only 49 were countries — and my earlier reference to the dominance of the economic sphere over other societal spheres is put into better perspective. The global reach of TNCs’ power is captured in Ulrich Beck’s ironic remark, that the only thing worse than being colonised by the corporations, is not being colonised by them. Here’s the rub — the financial clout of these economic giants explains their ability to by-pass national labour laws by “colonising” investment-hungry developing countries for purposes of transnational production at rock-bottom labour-costs (the notorious Nike sweatshops in Eastern countries being the prime example). Given their global strategies of profit-generation, transnational corporations directly influence the economies, the politics and the social welfare of countries worldwide — for example, the power that Nokia of Finland has over politicians, potentially, to lower corporate taxes and in the process affect the financial basis of the collectively beneficial egalitarian social welfare dispensation.

The final consideration regarding the economic aspect of globalisation bears on the asymmetry of power between the “developed” North and the “developing” South. The three international financial institutions, the IMF, the World bank and the WTO, all located in the North, determine the conditions under which developing countries can borrow money, usually predicated on the latter’s willingness to embark on “structural adjustment programmes” (today framed in terms of the neoliberal economics rules of the so-called “Washington consensus”, including deregulation and privatisation). This is supposed to uplift these countries economically to the point where they are sufficiently productive to obviate further financial dependence, but in practice it seldom works out accordingly.

One glance at the extent of debt repayments by developing (mainly African) countries, as opposed to loan investments by the WB and the IMF, destroys the illusion that it is the former that benefit in the process — in 1997 debt repayments totalled $292-billion, while new loans came to $269-billion, which makes the wealthy North the recipient of $23-billion in profit. And as the example of Argentina – once the blue-eyed boy of the IMF and the WB as far as model development behaviour goes — shows, the kind of austerity measures demanded by these institutions when the going gets tough, sometimes provoke citizens’ reactions (like mass strikes), which can paralyse a country’s economy — in Argentina’s case leading to its defaulting on its colossal debt of over $140-billion in 2002, and eventually causing the value of its currency to drop to levels that entailed the impoverishment of its citizens. These are some of the consequences of this new form of (economic) colonisation.

What about the political dimension of globality and globalisation? Suffice it to say (because this post is getting too long for most readers’ attention-span) that the power and sovereignty (in practice, if not formally) of nation states have decreased, but not totally disappeared, as some scholars tend to argue. It has been weakened by increasing political and economic (including technological) interdependence among states (for combatting international terrorism, or for the consolidation of global communications networks, for example), on the one hand, and by the growth in political power of smaller political and economic entities such as regions, provinces and even cities (which have in many cases entered into political and economic agreements that by-pass the governments of the countries concerned), as well as by the growth of supranational institutions such as the United Nations, on the other.

At the same time, though, the nation state has reasserted its political power through immigration control and the tightening of security measures post-9/11, despite the concomitant increase in cooperation with other countries. And governments also regularly implement legal measures to attract foreign investment.

Given the hegemonic status of economic decisions and processes, however, it should surprise no one that the major representative institutions of the economic sphere, today, wield an enormous amount of power — so much so that some have argued that political institutions have all but relinquished their power to these economic entities (corporations, as well as the three major international financial institutions). If this were true, in practice it would mean that nation states would not be able to resist the advances of corporations and their ilk, and would be helpless when it comes to the encroachment of the latter on the terrain of a nation’s interests — for example, when a corporation indicates its desire to invest in a country’s economy, with major advantages to itself, but less so for the country in question.

But is this necessarily the case? Of course not. While it is difficult, if not impossible, for any government to resist or ignore the reigning economic paradigm at any given time — at present neoliberal capitalist economics, but slowly changing — it is still possible for a state to negotiate an agreement with potential foreign investors that would benefit it as much, if not more than, the investor in the long run.

This depends on more than one factor, of course, such as the corruptibility of a government’s or local company’s representatives who negotiate with the would-be investors, as well as the extent to which the investing company wishes to do business with the country concerned. If it is a trade agreement that involves import or (usually) export of manufactured goods, the benefits may be equal to both parties, with no serious consequences, or alternatively, entail labour exploitation on the part of the corporation (like Nike, setting up subsidiary manufacturing plants in a foreign country, for example).

But if the investment has the form of extracting minerals of some kind from the soil of the foreign country, the matter would be more fraught with possible loss for the latter. In cases such as these the nation state can and should assert its power by negotiating an agreement which ensures that more wealth is generated for the country than for the corporation concerned. I have read many an article and report indicating the disadvantageous position of (the people of) Nigeria, for instance, vis-á-vis the economic power of the Dutch oil company, Shell, which gets much more out of exploiting Nigerian oil reserves than the country’s people do (although I suspect, judging by these reports, that a small Nigerian elite benefits hugely in financial terms).

How can such exploitation be avoided in the context of globality and globalisation, then? Barring the advent of corruption, which always robs the people of a country of wealth or resources, in which they should share, by channeling wealth into the pockets of a few corrupt individuals, governments ought to be the guardians of a country’s natural and other economic resources, even if it requires legislation to limit a corporation’s access to its wealth. I am not talking of nationalisation here — no company would participate in wealth-generation if it does not get something out of it, but neither should foreign companies siphon off all the potential wealth from another country, whether it is oil, gold, diamonds, iron, copper, or whatever. In short, a mechanism must be found to ensure that developing countries not be defrauded by so-called “foreign investors”. The very concept should raise one’s suspicion and alertness; after all, an “investor” wishes to “invest” with a view to profiting from it. Ergo, limit their profits without begrudging them these altogether. The economic interdependence between countries and other economic entities, today, together with the intertwinement of the political and the economic spheres in the condition of globality and globalisation, allows for such win/win situations.