>X-Sender: [EMAIL PROTECTED] >Mime-Version: 1.0 >Date: Tue, 15 Feb 2000 09:52:09 -0500 >To: [EMAIL PROTECTED] >From: Tim Rourke <[EMAIL PROTECTED]> >Subject: A WORLD IN ECONOMIC CRISIS*B >X-MIME-Autoconverted: from quoted-printable to 8bit by >dijkstra.uwaterloo.ca id JAA13166 >Sender: [EMAIL PROTECTED] >Precedence: bulk > >http://www.transnational.org > > >A WORLD IN ECONOMIC CRISIS* > >By Johan Galtung, dr hc mult, Professor of Peace Studies >American Ritsumeikan Troms" Witten/Herdecke Universities >Director, TRANSCEND: A Peace and Development Network >----------------------------------- > > >3. On the hyper-capitalism crisis: the independent cluster > > We are dealing with a conjunction of factors, and it would >be misleading to do what many do, use "globalization" to cover >the causal burden alone. But globalization certainly matters, >and more particularly in its dynamic expression, as > >[1] Increasing globalization: global market penetration by >corporations that under the WTO regime (Uruguay Round) are truly >transnational (not merely multi-national), making state borders >and national origin irrelevant. Of course this has consequences. > > For one thing, in spite of superb networking and real time >decision-making, the world is not only big, but also complex, >making global and holistic analyses difficult. We would expect >more imbalances/asynchronies in the consumption/production and >the production/finance interfaces across such huge distances in >space and time, not to mention in social (= structural+cultural) >space. Even in a local village market there may be an excess, >or a deficit of products at the end of the day, and prices may >go down or up. The money-lender may have given credit >insufficiently informed by heart and/or brain. How, then, about >the nation, the state, the region, the world? > > The Soviet answer was to impose balance through planning, >diktat; in practice focusing on production only, disregarding >consumer demand except for necessities (this was the strong >point); and on the production economy only. The approach was >reductionist, assuming the primacies of necessities and of >production. But the hyper-capitalist way is also reductionist >(therein lies its commando character): supply-side monetarism >gives primacy to production/supply over consumption/demand, and >to the finance economy over the productive economy. > > The consequences in terms of overproduction, relative to >demand backed up by purchasing power, and undersupply of >necessities because they are not "demanded", only needed, are >obvious, as are also short term gains for financiers and >managers. But here we have another perspective: reductionism as >a response to information overload. Globalization makes the >economy even more of a morass; some simple guiding principles >are needed. The Soviet economy used "State interests first, then >human needs", by implementing the Plan. The hyper-capitalists >use "finance economy first, with stable currencies in space (no >fluctuation in currency rates) and time (no inflation) over time >(no fluctuation); then a productive world Market economy driven >by egoistic cost-benefit." The marxists reified the Plan and >the liberals the Market, as expressions of the will of the >masses/buyers-sellers, when in reality both could easily be >manipulated by a handful of people (and in fact were and are). > > Second, Smithian, globalizing Anglo-Saxon markets penetrate >not only the borders between states (eliminating tariff and non- >tariff barriers), between nations (reducing taste differences), >center and periphery (reaching the most remote corner/village, >spearheaded by Coca Cola), classes (only with purchasing power), >the genders (reducing gender differences in economic behavior), >but also the border between monetized and non-monetized markets, >and between growth and subsistence economies. Local markets are >destroyed with mass-produced, cheap goods, and the subsistence, >non-monetized economies by buying/destroying the necessary >factors of production, such as land and other natural resources. >National monetized markets started this process, regional >economies continued, global markets destroy what little is left. > > This has an interesting implication for the position of the >national elites. As national markets expanded from the national >centers, and the economic cycles covered the national territory, >the local economic cycles contracted. Autonomous local >producers, distributors and consumers became cogs in machineries >fueled from the center. Local sales points were still needed, >but the center could market directly. From one end of the >country to the other consumers bought the same products, >produced and distributed by the same national companies. So, >from one end of the world to the other consumers will now buy >the same products produced and distributed by the same world >companies, and just as mail orders became common in the national >economy, e-mail orders will take over in the global economy. >That will weaken the position of the local bridgeheads in the >old multi-national structures, just as nation-building weakened >the positions of the local economic boss. They may leave for >the Center, become employees in a TNC, or join the paupers. At >any rate, the theory of imperialism will have to be >rewritten./12/ > > This, incidentally also holds for national State elites: if >a major function of the State is to facilitate or control >(depending on whether the system is capitalist or socialist) >Capital, then facilitation/control has to be done at the Center, >and the Center moved from the local to the national, and then to >the region (such as Frankfurt) and to the world (such as >Washington DC). And this throws us back to the first point >above: local and national specific competence has to yield to >regional and global general principles, making the system even >more exposed to imbalances/synchronies hard to foretell. There >will be less local/national capacity to dampen the impact. > >[2] Increasing privatization: economic cycles are reshunted so >that they do not pass through the state. State enterprises with >the state responsible for production and distribution of the >goods and services (rail road transportation, PTT communication, >health delivery, punishment delivery, schooling), are >increasingly privatized. Cycles passing through the state for >some managerial role, such as licensing, may also be reshunted. >As borders disappear so do duties for anything passing borders. >Corporations and citizens still pay taxes and receive in return >the services of l'’tat gendarme, but with the state giving less >the arguments for the state taking less/13/ are strong, >including the arguments for a flat tax, like the sales tax. The >state is increasingly deprived of utilitarian, contractual >power, the power of the carrot, and left with the power of the >stick and whatever moral persuasion the state may be able to >mobilize. > > The consequences of stripping the state naked are many. > > First, with all its inefficiency, clumsiness, even blunt >authoritarianism beyond bureaucratic arrogance, the state is the >most effective mechanism for distribution known to the modern >social formation based on the tripod of State, Capital and Civil >Society. Capital, in the modern form of the corporation, is >well suited for economic growth measured by capital accumulation >one way or the other. But left to itself it creates inequalities >and inequities, and recently seems to abolish more employment >than it creates, as evidenced by the generally rising rates of >under- and unemployment./14/ Civil Society may provide >solidarity and shelter, literally speaking, and has great >potential if local authorities (LAs) and peoples' organizations >(NGOs) could cooperate building local economies. But we are not >there, yet. > > The State has had two major mechanisms at its disposal: >- the welfare state, providing necessities through free health >and education services and insurance against unemployment, >disease and old age (and subsidized food, clothing and housing). >The welfare state was financed by customs duties, taxation (more >or less progressive), sales taxes, luxury taxes, etc. > >- countercyclical investment, keynesianism, presupposing >willingness to invest when the market was at its worst to >provide the unemployed with wages that could be spent on >necessities and normalities, keeping the economic wheels turning >(and meeting their needs for whatever dignity the work offered). > > With less state revenue available for distribution through >subsidized necessities, keynesian counter-cyclical investment >etc., we would expect the distribution to deteriorate and rising >proportions of the lower ranges to sink into the syndrome of >under/unemployment and misery, also in the MDCs (more developed >countries). There are already alarming reports about low tax >revenue, the prediction being that this is going to get >worse./15/ The MDC state can no longer afford the welfare state, >presenting increasingly poor citizens with increasingly >agonizing choices. > > One particular reason for lower revenue relates to the >interface with globalization. Products, resources, (migrant) >labor, capital and technology have always been mobile, including >across borders,/16/ what is new is the mobility of the whole >factory, including (much of) the management. The decision is, >of course, based not only on the distance to natural resources >and markets, on the Q/P (quality over price) of labor, but also >on taxation. Today not only low or zero taxes, but negative >taxes, incentives, are demanded - and offered. Why not >relocate? > >[3] Increasing stock-holder power: shifting profit away from the >workers and towards the stock-holders. This is "privatization >within the privatization". A company rests on five pillars: > >- the customers, exchanging money for company products; > >- the workers, exchanging labor for money (wages)/products; > >- the managers, divided into administrative and technical. > >- the capital-holders (stock-holders), investing in the company; > >In the background is nature, depleted, polluted, unrepresented. > > Much of the theory and practice of the company can be seen >in terms of shifting alliances. Strengthen the bond between >workers and management and we get the Japanese company, sharing >the ups and downs of the company, fortified through life-long >employment and seniority promotion. The workers take out more >(as bonus) the more time and work they put in, so do managers. >Rotate workers and management and we get one of the Chinese >experiments during the cultural revolution. Abolish managers, >substitute the State, and we get the Soviet model. Strengthen >the tie to the customers and we get the cooperative, with the >customers taking out more (as bonus) the more money they put in. >Workers strike, or customers boycott, and that may spell the end > > In the hyper-capitalist era capital is the major input and >output, so capital-holders feel entitled to take out more money >as dividends the more they put in buying stock. The ratio/17/ >earning/price should be high and increasing, the company should >offer products high on Q/P, the only thing to cut are employee >wages. What they want is downsizing of workers and upsizing of >earnings; what they get can get as a class is under/unemployed >people craving for necessities, and not for profitable luxuries >and normalities. Sawing off the branch they sit on? > >[4] Increasing labor productivity: substituting automation for >routine work, an example being computers for secretaries. At the >root of this is a simple equation, true by definition: > >Production = Productivity x No. of employees x No. of hours > >(dividing we get the definition of labor productivity). If now >labor productivity increases we get the following possibilities >if overproduction, relative to demand, is to be avoided: > >I. Production/output/supply can be increased, because of > >- elimination of competition (fusion, oligopoly, monopoly) > >- increasing demand (increasing purchasing power, because of >more consumers and/or more money available per consumer). > >II. Production/output/supply cannot be increased, leading to > >- decreasing no. of employees, downsizing, unemployment, > >- decreasing no. of hours, shorter days/weeks/months/years/lives >(more study, more retirement), contract work, underemployment. >Reality is, of course, a mix of all of this, depending on time, >space, circumstances, branches. Given the preceding factor, more >money to the capital-holders, there would be readiness to choose >[II] in order to engage in [I]: fusing companies, down-sizing, >farming out contract work with no social costs to pay. The net >result is less purchasing power, even for necessities. What is >rational for one company is irrational for the company class. > > If the supply goes where the demand is, then we would >expect a general shift in production away from necessities to >normalities and luxuries. Ocean fishing and fish farming will >switch toward the expensive varieties (salmon, lobsters, etc.), >away from the common consumer's simple seafood, and the same >will probably happen in agriculture (less factor input for >staples, more for luxury outputs like tropical fruits.) > > There is one obvious road out of the problem, the road not >travelled: decrease the (labor) productivity. In principle this >could open for more employment, more wages to more people, more >purchasing power, more sales, more revenue. But it would >obviously run against the interests of the technology-holders, >whose task it is to substitute capital for labor via technology. >They have more power in the average company after the staying >power of employees through strikes decreased with increasing >tendency to lay them off anyhow (exception: employees who are >"indispensable", like flight leaders, pilots, energy operators, >ambulance drivers). Moreover, technology is more in harmony with >the Zeitgeist and its idea of progress; not more low-skill work, >but progress defined as automation/robotization and high-skill >work. The typical response of the system would be retraining of >adults and encouragement to acquire higher level of education. >As higher education is transformed from luxury for the leisured >classes via normality to necessity, the demand for eduction will >become increasingly inelastic, and the fees will go up for >something the state cannot afford to offer free anyhow. > > In the meantime increasing labor productivity will probably >proceed at a higher pace than the production of high-skill labor >that can be gainfully employed; in other words, more people will >be defined as redundant than those who will find employment. > > Behind this another factor is lurking: the "dangerous >classes", meaning the working classes. By tying wages to labor >productivity, offering wage increase if productivity increases, >the working classes have been paid to abolish themselves. It >does not take much empathy to understand how demoralizing this >has been for the last generation or so. We are still there. > >[5] Increasing production of mainstream economists: making the >blind spots of their economistic discourse private and public >policy. If we have the economics we deserve, compatible with our >(Western) deep culture, then we would expect the usual tendency >toward abstraction of "the economic" away from other factors, >generalization in time and space, and reification. We would >expect a paradigm built around the key measurable variable: >capital, and its equivalents./18/ We would expect blindness to >all other spaces, defining what happens there as >"externalities":/19/ - Nature is seen as resources for humans, >not as sui generis > >- Self is seen as somatic/material pain/pleasure, not spiritual > >- Society is seen as a market for egoistic cost-benefit action > >- World is seen as a market for national cost-benefit interest > >- Culture is seen as irrelevant, economics is space-invariant > >- Time is seen as irrelevant, economics is time-invariant > > What remains is a pyramidal, axiomatic paradigm with the >primacy of economic growth as Axiom No. 1, to be achieved >through industrialism (at the expense of Nature), individual >materialism (at the expense of spiritual qualities), egoistic >competition (at the expense of solidarity), comparative >advantages (at the expense of freezing the division of labor), >endless growth (at the expense of a finite world), >mathematization (at the expense of subtleness, ambiguity) and >GNP/GGP as the new God (at the expense of all the others). > > The costs of giving power to economists as discourse- >holders, the tremendous mistakes and lack of foresight, are >compensated by the benefits: a clear, cosmic goal in a chaotic >world, at the same time compatible with elite interests. Die >herrschende Ideologie is die Ideologie der herrschenden Klasse. > >[6] Increasing synergy among these factors due to the IMF, >together with the World Bank and other US-steered, WDC-based >Bretton Woods institutions, nominally of the United Nations./20/ >The IMF,/21/ like the smaller members of the family, has taken >upon itself the D,P,T role of coming up with the diagnosis, >prognosis and therapy for ailing economies. However, in the >medicine chest there is only one medicine (a good reason for >being skeptical): removal of all constraints on capital-holders: > >- globalization, the removal of tariff and non-tariff barriers, >crowned by a Multilateral Agreement on Investment, possibly the >last document to be signed by states before they wither away/22/ >(before revolution in capitalist countries, after in socialist): > >- privatization, removing the state as an economic actor, by/23/ > >- eliminating subsidies for necessities and taxes on luxuries, > >- privatizing state companies, eliminating keynesian measures, > >- lowering taxes > >- repatriation of profits from investments > >- devaluation of the national currency > >- more power to stock-holders, less to trade unions > >- higher labor productivity through automation/robotization > >- primacy of economism as discourse > > No doubt there is a logic behind this scheme, the logic of >hyper-capitalism. The point is that the IMF is in the same >position as Gosplan/24/ in the Soviet Union to implement their >reductionist, highly ideological schemes, as public policy. >They do not create synergies, they are that synergy, capable, >with the World Bank, of sapping Third World countries for any >promising young economists, making them parts of the synergy. >They are also among the most global of organizations, but >curiously intergovernmental as an instrument of privatization. >There are some contradictions there that probably will mature. > >4. The intervening crisis variable: asymmetric purchasing power > > The basic facts are known from the latest Human Development >Report published for the United Nations Development >Programme,/25/ very much focussed both on basic needs and on >distribution:/26/ > >- Three individuals have as much as the 48% poorest countries > >- 1.3 billion make less than $1 per day (Indonesia 30 cents). > >- the 20/20 ratio: 30 in 1960, 78 in 1991, 82 in 1994. >- especially bad in LDCs with similar tendencies in MDCs. > > If we use the first two figures for the widening 20/20 gap >we get a 3.13% growth rate for the gap. This is higher than the >growth rate for GGP/capita: there is growth, but the top and >bottom fifths pull away from each other at an even greater rate. > > What we badly need would be data on world purchasing power. >The total purchasing power is probably increasing in the sense >that there is a growing amount of free capital available for >buying consumer goods. But distribution is of the essence. > > Imagine the same amount of money available in two countries >A and B with the same size of the population. In country A 10% >of the population has 90% of the capital, in country B the >capital is evenly distributed. In A the productive economy >would focus on luxuries; in B on an equal mix of necessities, >normalities and luxuries. Imagine you can make 5% profit on >necessities, 50% on normalities and 500% on luxuries. Does that >not mean more profit in country A? > > The problem with that reasoning is seen from this equation: > >Consumption = Consumptivity x No. of consumers x No. of hours > >There is an upper limit, even for the RRR, on what they can >consume, even with very high consumptivity, the "propensity to >consume". The task of advertising is to increase consumptivity. >But the number of consumer-hours available is a limiting factor, >a strong argument for a more egalitarian distribution. >------------------------------------------- > >NOTES > >* The author would like to acknowledge the valuable comments by >participants in seminars where this paper has been presented, >particularly at Ritsumeikan University 4 November 1998 and at >Universit“t Witten/Herdecke 9 December 1998; particularly >Akifumi Fujita. I am also as always very grateful for comments >by Dietrich Fischer, and for comments by Ash Amin. The paper was >written when the author was Fellow at the Swedish College for >Advanced Studies in the Social Sciences, Uppsala, Spring 1999. >------------------------------------------- > > > >12. For a theory of what could be called "bridgehead >imperialism", see Johan Galtung, "A Structural Theory of >Imperialism", Essays in Peace Research, Vol. IV, Chapter 13, >Copenhagen: Ejlers, 1974. The ease of communicative long >distance control in real time makes the "center in the >Periphery" dispensable, the local plantation overseers, the >colonial rulers, the local bourgeoisie, the daughter company >CEO. The "center in the Center" could base its rule on a very >high level of fragmentation, very many small producers, and >direct information control. > >13. To paraphrase the Bible: The State giveth, the State >taketh, the name of the State be praised. But there has to be >a balance between in and out. > >14. In an article summarizing the increase 1983-95 in the >percentage of temporary workers (may work a full week but move >from company to company) and part-time workers (less than 35 >hours a week, but may be permanent employees) the conclusion is: >"Temporary workers typically receive benefits and pay comparable >to those of full-time workers, but they do not have the job >security. Parti-time workers tend to be paid less and receive >fewer benefits". The problem is that the term "job" covers all >categories, giving a false picture of the situation. > >15. Susan George, in "Pour la reforme du systeme financier >international: A la racine du mal", Le Monde Diplomatique, >January 1999, quotes Institute for Business Research and Tax >Watch for an estimate of $12-50 billion the loss of revenue >because TNCs declare income in other countries. In Die Woche, >2 October 1998, p. 17 we read the following: "So ist im Laufe >der vergangenen Jahre das Steueraufkommen der deutschen >Grossindustrie auf den niedrigsten Stand der Nachkriegszeit >gesunken". > >16. For a view of globalization as [1] very old and [2] not >brought about by the West after the "discoveries", see Andre >Gunder Frank, ReORIENT, Berkely/Los Angeles/London: University >of California Press, 1998. > >17. This ratio is usually given the other way round, as the >price/earning ratio but makes better sense as earning/price >ratio. > >18. The equivalents would be anything monetized, reducing "what >is" to capital in one form or the other. Physics, the model for >economics as a science, has at least four: space, time, mass and >an electric dimension. And yet, what happened to "this stone is >so nice to look at, and, when held, gives a good feeling the >hand"? Answer: to some extent recovered by the arts. Is that a >good answer, or would it have been better to enrich physics? >What is the corresponding answer to economistic reductionism? > >19. Known to medical science as "side-effects", and it has >taken centuries to have them ecognized as part of the >discourse. They are still with a few exceptions suppressed in >economics. > >20. Nothing of any significance would happen to or in the >Bretton-Woods institutions against the will of the US Congress; >hence an obvious wish to have these institutions cover much of >the activity of he United Nations Specialized Agencies as a >whole. > >21. In South Korea these initials are interpreted as "I'M >Fired". > >22. This, is of course not so obvious if we adopt a dialectic, >probably more correct view of history: the reinvention and a new >beginning for the State will come, if for no other reason >because of its distributive roles. > >23. These are, with some variations, the conditions or >"conditionalities" for credit. >
