Capitalism in globalization Cartoon.
Editorial note: Orinoco Tribune does not generally publish articles that are over 10 days old. However, in this case an exception is being made, as the subject matter of the following piece remains as significant today as at the time of its publication.
By Prince Kapone – Mar 22, 2013
The current crisis of neoliberal capitalism has given rise to much resistance across the world, from the Occupy Wall Street movement in the U.S. to the political revolutions in the Middle East and North Africa. As capitalist regimes everywhere impose austerity measures on their populations, reducing the capitalist state to nothing more than its policing functions, even the welfare states of Western Europe are becoming the visible fists of the markets’ “invisible hand.”
This decimation of the welfare state is typically accompanied by a widening gap in wealth between the rich and the poor. Thus, in the United $tates the Occupy movement has adopted the slogan “we are the 99%,” in counter reference to the elite 1% who own a majority of the wealth in America. However, as we shall see, this equation is based on faulty arithmetic, as it overlooks or ignores the global wealth disparity between the First World and the Third World as a whole. In reality, the wealth of the First World nations is derived from the conquest, colonization, and continued exploitation of the Third World nations of Africa, Asia, and Latin America. This is the principal contradiction in the world today that must be resolved if humanity is to evolve into a higher stage of social organization.
It is taken for granted nowadays that we live in a “globalized” world, but many neglect the fact that capitalism has been a global system from its very inception. In fact, “from its origins in the 17th century, when merchants from England, Spain, Portugal and the Netherlands invested their wealth in large state-chartered trading companies, capitalism has organized production and exchange on an intercontinental scale.”1 What is crucial to understand, however, is that this process of globalization was and remains characterized by unequal development, whereby the development of some is inextricably linked to the underdevelopment of others. In other words, “the impoverishment of the peripheral capitalist countries of the Third World and the enrichment of the core capitalist countries of the First World are dialectically related processes, that is, the latter become richer insofar as the former become poorer.”2
It is also true that capitalism developed in the West, particularly in its industrial stage, by feasting on the blood, sweat and labor of its own national working-classes. Karl Marx showed long ago that it is the exploitation of labor power that produces the surplus value for capitalists to expand their capital. Marx thought at the time that an inherent tendency towards the overaccumulation of capital would eventually lead to a fall in the rate of profit, triggering a corresponding fall in wages and increased immiseration for workers which would ultimately drive them towards socialist revolution. However, Marx did not live long enough to see how colonialism and imperialism would eventually act to offset these self-destructive tendencies of capitalism, earning the support of workers and prolonging its demise.
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Already by the 1880’s, Friedrich Engels, Marx’s closest collaborator, observed that “the British working class is actually becoming more and more bourgeois, so that this most bourgeois of all nations is apparently aiming ultimately at the possession of a bourgeois aristocracy and a bourgeois proletariat as well as a bourgeoisie. Of course, this is to a certain extent justifiable for a nation which is exploiting the whole world.”3 Engels saw a connection between the national chauvinism and opportunism displayed by the British working class and the colossal profits obtained by British colonialism. As one British capitalist statesman aptly put it, “the empire, as I have always said, is a bread and butter question. If you want to avoid civil war, you must become imperialists.”4 Imperialism, then, was both a globalizing force that linked nations together, unevenly, through colonialism, and a pacifying force that improved the lives of workers in the imperialist countries, thus buying their acquiescence and loyalty to capitalism.
Far from being merely a matter of political policy, imperialism developed as a distinct stage of capitalism characterized by: the monopolization of capital; the mergence of finance and industrial capital; the division of the world into core (imperialist), peripheral (colony or neocolony) and semi-peripheral zones of production, distribution and consumption; the export of capital; and unequal exchange between core, semi-peripheral and peripheral countries, to the benefit of the first.5 It must be emphasized that these features of capitalism evolved as a response to the systems own internal contradictions. For example, the tendency towards monopoly capital is the logical result of capitalist competition. Imperialism then must be understood as an inevitable stage – the final stage – of capitalisms’ historical development. In the modern era, the two are inseparable.
Although colonialism was inextricably tied to the growth of capitalism, imperialism as a distinct stage of capitalist development did not begin to consolidate until the 1870’s, with the rise of monopolies. The establishment of monopoly capital in turn triggered a new wave of colonization, which culminated ultimately in an imperialist world system dominated by the core capitalist countries of Western Europe and its settler offshoots (the U.S., Canada, Australia, etc.). Whereas in the pre-monopoly competitive stage of capitalism (early 1800’s), Western Europe and its colonies covered 55% of the globe, by 1876 they covered 67% and in 1914 84%. Thus, the inner contradictions of capitalism compelled the core nations of Western Europe to expand their national markets to the colonies of the periphery, structuring the colonial economies in such a way that ensured the continued transfer of wealth from the colonies to the imperialist metropoles.6 The initial links of globalization were thus connected as shackles binding the exploited periphery to the imperialist core.
Imperialism injected lifeblood into capitalism, counteracting the stagnation that is endemic to monopoly capital and increasing the prosperity of the imperialist nation as a whole. It allowed capitalists to make superprofits (profits over and above those they would make from exploiting the workers of their “own” country), which in turn enabled capitalists to pay superwages to “their” workers (wages over and above those they would make absent imperialism).7 As W.E.B. Du Bois remarked at the height of the imperialist era, “the white workingman has been asked to share the spoil of exploiting ‘chinks and niggers.’ It is no loner simply the merchant prince, or the aristocratic monopoly, or even the employing class, that is exploiting the world: it is the nation; a new democratic nation composed of united capital and labor.”8 In effect, imperialism renders the contradiction between metropolitan capital and metropolitan labor non-antagonistic.
The Great Depression of the 1930’s was largely the result of monopoly capitals’ inherent tendencies toward overaccumulation and stagnation. This economic crisis led the weakest capitalist powers (Germany, Italy and Japan) to seek a new round of colonial partitioning in order to reclaim and expand “their” colonial territories. Within the core imperialist nations, the economic depression strangled the working classes and ignited a fresh wave of militant class wars. The weakest imperialist powers responded to this crisis with national socialism or fascism, while the stronger imperialist states (the U.S., Britain, France) negotiated a “new deal” between capital and labor, with the government assuming a more active role in the economy. This fundamental shift in policy ushered in a new era of Keynesian capitalism, or Social Democracy as its known in Western Europe, with the state stimulating aggregate demand (in public works and welfare programs) in the economy through government spending, based on debt.
In the U.S., these measures did very little to alleviate the economic crisis until America entered the war. The American working-class, even the communists, enthusiastically supported the war effort as part of the united front against fascism. Class war against the capitalist state very quickly degenerated into loyalty to the empire. In exchange, Roosevelts’ New Deal gave workers union rights, a minimum wage, and a social security net to protect them in future times of crisis. Despite all their militancy and talk of “labor solidarity,” the American working-class failed to make a definitive break with capitalism, instead opting for the petty privileges given by imperialism.
Europe was in shambles after WWII, leaving the U.S. as the de facto hegemon of the capitalist world. In 1945, the U.S. alone accounted for 49% of global manufactures, reflecting its utter industrial and economic dominance. As the last standing capitalist superpower, the United States was charged with redesigning the imperial landscape after WWII. The former colonial empires of Western Europe were in shambles and no longer had the ability to manage their colonies. The United States adopted a comprehensive aid program to help rebuild Europe and Japan, investing some of its capital surplus into the devastated economies of the capitalist world. The Marshall Plan, as it was called, was no altruistic gesture stemming from America’s noble spirit, but rather a way for American capital and products to penetrate European markets. In the end, the Marshall Plan pumped $13 billion into the reconstruction of Europe, reviving capitalism on a world scale.
At the same time, the war demolished the colonial system that had defined the imperialist era up until that point, giving rise to a new stage of imperialism called neo-colonialism, whereby the colonies were granted political independence, but their economies’ remained dominated and structured by the demands of monopoly capital. In conjunction with this shift from colonialism to neo-colonialism, another shift occurred from intra-imperialist rivalry to intra-imperialist unity, as the former colonial empires joined together under the leadership of the United States into one imperialist world system, which I have labeled Trilateral Imperialism (in reference to the Triad: the U.S., Western Europe and Japan). To be sure, there were still contradictions among imperialist nations, but these were non-antagonistic and could be resolved without war. No longer would Western Europe devour itself in barbaric conflicts over colonial possessions; now, they would merge together and plunder the Third World as one.
The Keynesian New Deal in the U.S. and Social Democracy in Western Europe had managed to revive the capitalist economy and establish a great compromise between capital and labor in the imperialist nations. This compromise entailed, firstly, “Keynesian demand management in the form of the provision of high wages to core workers.”9 Of course, wages had always been higher for most imperialist nation workers, but after WWII superwages were extended to all metropolitan workers and enshrined in minimum wage laws. This consolidation of superwages in effect limited the extraction of surplus value in the First World and necessitated the increase of superexploitation in the Third World to compensate.10 Thus, while in 1950 per capita income in America was 10 times that of the Third World, by 1960 it was 17 times greater.11 Superwages, combined with increased access to consumer credit, allowed imperialist nation workers to attain a middle class lifestyle on a massive scale, thus definitively detaching the core working-classes from the international proletariat, making them labor aristocracies.
Aside from superwages, the labor aristocracy obtained various direct and indirect benefits from imperialism, such as expanded access to consumer credit, government-insured home loans, improved and expanded infrastructure, and, in more recent times, access to cheap consumer products imported from the Third World. All of these benefits were derived from the increased exploitation of the periphery “by means of debt servicing, unequal exchange, price-fixing, transfer pricing, repatriation of profits by transnational corporations and royalties from monopoly of intellectual property rights.”12 Keynesianism ensured that capitalists would have to expend a portion of their superprofits to the core working classes in order to stimulate aggregate demand and consumption. But by the 1970’s new contradictions emerged in the capitalist world system that led to the gradual dismantlement of the welfare state and the triumph of neoliberalism.
The neoliberal onslaught began first in the Third World, as the IMF, World Bank and WTO forced indebted peripheral nations to implement structural adjustment programs (SAPs) that cut government social spending, privatized state assets, eradicated trade barriers, lowered wages, and opened the economy up to foreign capital.13 These measures were meant to reverse the Import Substitution Industrialization (ISI) policies that Third World nations adopted following decolonization in the 1950’s and 60’s. SAPs, in effect, allowed monopoly capital to regain its absolute hold over the economies of the Third World.
At the same time, within imperialist nations there was a growing crisis of capital accumulation caused by the oil crisis of 1973, the growth of unemployment, the rise of inflation, trade deficits, and massive government debt. All of these factors combined to create a fall in the rate of profit for monopoly capital, causing the U.S. to unilaterally abandon the gold standard in 1971 and the Federal Reserve to lower interest rates in 1979, ushering in the neoliberal era.
Neoliberalism in the First World surely entailed an attack on the core working classes, gradually reducing some of the benefits of imperialism that they were accustomed to receiving. Wealth disparities began to skyrocket, particularly in the 1990s, as surplus capital was rechanneled to the capitalist class at the expense of the labor aristocracy and petty bourgeoisie. However, what is completely ignored by analysts “is the extent to which First World consumption is a drain on Third World labor.”14 As part of the neoliberal restructuring of the capitalist world system, production processes were fundamentally transformed and globalized so that industries in the First World were increasingly outsourced to the Third World where labor was much cheaper.
This development had a profound impact on imperialism and global inequality, negatively impacting the labor aristocracy in some ways and benefiting it in others. For example, the outsourcing of production has displaced many industrial workers in the First World, but the expansion of service sector jobs has absorbed many of these displaced workers. In fact, “as superexploitation has become central to the operation of the global capitalist economy, the size of the productive workforce in the core nations has diminished and the consumer and service sectors of the economy have expanded,”15 with consumption making up 80% of all U.S. economic activity and the service sector accounting for 66% of all employment. Despite neoliberalism in the core imperialist nations, mass consumerism still flourishes at levels way above Third World levels, indicating that neoliberalism has done little to reduce the higher living standards of the labor aristocracy.
For the Third World however, this shift in global production has accelerated the proletarianization of peripheral countries, with industry growing rapidly as a percentage of overall economic activity. The degree of exploitation in these nations is extreme and actually provides the surplus capital necessary to maintain the mass consumerism and unproductive economic activities of the First World as a whole. All of this confirms Marx’s thesis that capitalism leads to growing proletarianization, immiseration, and class conflict, but on a global scale and in a way unforeseen by Marx. Imperialism has allowed for the promotion of the First World working classes into a labor aristocracy that is a substratum of the petty-bourgeoisie. The proletariat proper is heavily concentrated in the Third World, where workers are engaged in militant class struggles against the bourgeoisie and imperialism. Whereas core nation workers have abandoned the class struggle over and over again in favor of petty privileges, the Third World proletariat has been active in the struggle for socialism.
Capitalism is a system that is inherently based on exploitation, and from its beginnings in Western Europe it has been forcefully expanded to cover the entire world. In this process of capitalist globalization, which should be understood as imperialism, the core nations have became wealthy and developed by exploiting and underdeveloping the peripheral countries of the Third World. The superprofits derived from this relationship have enabled imperialism to buy off First World workers through superwages and various other mechanisms, making the core nation working-classes a global labor aristocracy. Globalization has created great inequalities between the rich and poor within nations, but more decisively, it has created greater inequalities between nations which allow all citizens of the wealthy nations to enjoy living standards way above what they would without imperialism.
End notes
1.- Cope, Zak. Divided World, Divided Class: Global Political Economy and the Stratification of Labour Under Capitalism, Montreal: Kersplebedeb (2012), 25.
2.- Ibid, 27.
3.- Lenin, V.I. Selected Works In One Volume, New York: International Publishers (1971), 247.
4.- Cope, 31.
5.- Lenin, 175-232.
6.- Amin, Samir. Maldevelopment: The Anatomy of Global Failure, London: Zed Books (1990), 10-11.
7.- Edwards, H.W. Labor Aristocracy: Mass Base for Social Democracy, Stockholm: Aurora (1978), 17-18.
8,- Du Bois, W.E.B. “The African Roots of War,” www.webdubois.org/dbAfricanRWar.html Retrieved online 03/11/2013.
9.- Cope, 118.
10.- Ibid, 118.
11.- Ibid, 119.
12.- Cope, 119.
13.- Harvey, David. “Neoliberalism as Creative Destruction,” The ANNALS of the American Academy of Political and Social Science (2007) 610:21, 35-40.
14.- Cope, 124
15.- Ibid, 130.
Featured image: Capitalism in globalization Cartoon.
