Sunday, October 6, 2002		Books

Nations are becoming subservient to capital
Surjit Hans

The Amoral Elephant: Globalization and the Struggle for Justice in the Twentyfirst Century
by William K. Tabb. Cornerstone Publications, Kharagpur, 2002. Pages 224. Rs 100

LAST year I reviewed Global Transformations by Davind Held et al. It was a detailed exercise on the current working of globalisation. The Amoral Elephant is a sadder and wiser book to try systemic understanding of the world economy in a historical context from the point of view of working classes.

The first thing about globalisation is its scale, mind-boggling, indeed. The measure of global excess money — money growth minus the GDP growth — is worrisome. This money finds its way into asset markets, especially property and stock markets, bidding prices up.

Finance has de-coupled itself from manufacturing. America Online (AOL) bought Time Warner when it had one-fifth of the revenues and 15 per cent of the workforce of the latter, leading to the biggest merger ever, valued at $153 billion, because the stock-to-earning ratio of Time Warner was 14 to 1, and that of AOL, 55 to 1. Since AOL was ‘worth’ nearly twice as much as Time Warner as their stock was valued in the marketplace, it could use it as currency.

Financial transactions of foreign exchange have no bearing on world trade. In the early 1970s, daily foreign exchange trading amounted to $10 to 20 billion. By 2000, this was $1.6 trillion, which is 75 times the world trade. By the early 1990s the top 25 multinational corporations all had sales of over 25 billion dollars. The world’s richest 20 per cent now receive 86 per cent of the world’s gross domestic product; the poorest 20 have 1; the middle 60, just 13. The world’s three richest people have assets greater than the combined output of the 48 poorest countries.

Globalisation has a direct bearing on independent economic development and nationalism. Be it of Japan, Germany or the USA, all successful industrialisations in the past were based on state intervention, low-cost capital, subsidies, and other market distortions. There is little awareness of the fact that in "the frontline" states of South Korea, Taiwan and Japan, America allowed statist economic development, access to US markets, policies it denied to others. The "economic miracles" of the region owe much to the Cold War.

At 1944 the Bretton Woods conference that created the IMF, England and America (i.e. J. M. Keynes and Dexter White) were adamant that liberalisation of capital account was harmful, and robbed countries of the ability to follow independent economic policies—governments had to protect their citizens.

As opposed to the national Keynesian model in which wage growth and government social spending created demand, global neo-liberalism looks for markets abroad and insists on austerity at home.

The East Asian "miracle" along with the ensuing crises is an object lesson for India.

For decades, government-sponsored development used banking as a vehicle for the statist developmental strategy complete with patronage and economic corruption, which did not seem to be a serious handicap until the external conditions changed. East Asia accounted for about a quarter of the world’s output, and half the global growth in the 1990s, and two-thirds of the world’s capital spending till 1997.

The output losses from the East Asian financial crisis from 1998 to 2000 were estimated at nearly $2 trillion, an amount double the current income of the poorest fifth of the world population.

The crisis coincided with global excess capacity, competition from China, and financial deregulation — the inflow of short-term capital was much faster than the underlying rate of growth.

Globalisation is a challenge to what kind of life we want to live. The social accountability of finance capital and transnational corporations is the most important part of the political agenda of the world as shown by the Johannesburg conference on sustainable development. The efficiency argument for financial globalisation neglects distributional costs and possible systemic disruption. It denies the priority of equitable and socially just economic policies. Neoliberal logic strikes at human rights, such as minimum wage, collective bargaining, education and health for all.

As globalisation proceeds, footloose capital realises that the nation is not a community of which it is a part but a market area among others. The revisionist onslaught on Nehruvian ideas of development, politics and secularism comes more from the mainspring of globalisation than from its mouthpieces. Unless the Congress party comes forward with its antidote to globalisation, it would never be able to score in the diurnal sound and fury of politics.

While situations differ, political elites in many countries are comfortable selling their citizens to the highest bidder and transforming their location into a low-tax jurisdiction to attract mobile transnational capital. Under such conditions, the state loses whatever moral authority it possessed as the holders of real power have moved.

Globalisation would produce a certain disjunction between national and state politics in India. The signs are there in America, too. In the globalisation process of the last decades of the twentieth century, financial capital used the power of the American state to profit from the adversity of others. The executive (the President) more forthrightly represents the interest of globalised capital, while the Congressional representatives are more responsive to local business and labour interests, and subject to traditional nationalism.

If you want to understand the world around you, you have only to order the book.