Deglobalization Revisited
Denmark
March 14-15, 2014
• I think when we think about the alternative at
present, we have to locate our thinking in the
context of the crisis of globalization, and of
the model of integration into the global
economy that orthodox economists proposed
as the route for developing countries.
Long-term stagnation in the United States
What is Globalization?
• If I were asked to define it, I would say that globalization
refers to the accelerated integration of production and
markets.
• Globalization has several key dimensions, the most
important of which are the following:
- It is a process marked by the reduction or elimination of
tariffs and quotas in international trade and the lifting of
barriers to capital flows and direct investment.
- Its main agents are transnational corporations whose
search for profit pushes them to bring down trade barriers,
offshore manufacturing processes, and outsource services.
- The center of gravity of the economy ceases to be the
domestic market but the international market.
- The end result is the disarticulation of the national
economy and the rearticulation of its different parts at
the global level--for instance, the production and
training of personnel is no longer determined by the
needs of the domestic economy but by global demand
so that from the perspective of the national economy
there is a massive oversupply of personnel in certain
professions.
- It is accompanied by the increasing inability of the
state to influence the workings of the economy, and
efforts by the state to intervene are viewed by
economists as bringing about serious distortions and
produces more costs than benefits.
- The state yields more and more power to systems of
global economic governance, the prime example of
which is the WTO. Such institutions as the WTO, World
Bank, and the IMF serve as the political canopy for
infrastructural economic processes of trade,
investment, and distribution of resources.
• Two periods of globalization:
• Globalization I 1815 – 1914 “Age of Free Trade” under
British hegemony
Globalization II 1980 - 2008 Neoliberal era under US
hegemony
• Between 1914 and 1980, the state became an important actor to
stabilize national and international relations disrupted by the Great
Depression triggered by untrammeled market forces. Reversal of
globalization. Keynesian state marked by government intervention
in domestic and international economy and class compromise
between labor and capital.
In the 1990’s and the first decade of this
century, Globalization II was seen as
irreversible by the establishment. The
outbreak of the global financial crisis
changed that perception.
•
"The integration of the world economy is in
retreat on almost every front," wrote the
Economist, a trenchant advocate of
globalization, in 2009. While the magazine
said that corporations continued to believe in
the efficiency of global supply chains, "like
any chain, these are only as strong as their
weakest link. A danger point will come if
firms decide that this way of organizing
production has had its day."
• In a more recent assessment, the Economist says
that “globalization has clearly paused.”
“After two decades in which people, capital and
goods were moving ever more freely across
borders, walls have been going up, albeit ones with
gates. Governments increasingly pick and choose
whom they trade with, what sort of capital they
welcome and how much freedom they allow for
doing business abroad.
• "Virtually all countries still embrace the
principles of international trade and
investment. They want to enjoy the benefits
of globalisation, but as much as possible they
now also want to insulate themselves from its
downsides, be they volatile capital flows or
surging imports."
• "Globalisation has clearly paused. A simple
measure of trade intensity, world exports as a
share of world GDP, rose steadily from 1986 to
2008 but has been flat since. Global capital
flows, which in 2007 topped $11 trillion,
amounted to barely a third of that figure last
year. Cross-border direct investment is also
well down on its 2007 peak."
• We can identify a number of schools of
thought on how countries can forge a new
strategy in the context of the global crisis. The
most influential are the Neoliberals, the
Keynesians, the Emerging Economies School,
and the End of Growth School.
The Neoliberals’ Take
• The Neoliberal School. I think there is mainly
silence in these quarters. A significant section of
this school sees deleveraging or getting out of the
debt as the key task of the US economy and other
advanced economies in the indefinite future.
With their opposition to either monetary or fiscal
stimulus programs, this school sees
unemployment and low growth as the price to
pay for the “excesses” of “artificial growth”
created by state intervention.
• The economy will adjust but possibly at a lower
level of equilibrium than the pre-crisis economy.
The neoliberals still believe that freer markets
and trade liberalization are in the best interests of
developing countries. However, unlike in the precrisis period, developing countries can no longer
rely on the developed countries to absorb most
of their exports and thus serve as the stimulus of
export-led development.
• In fact, in so far as some neoliberals think about
developing countries, it is mainly for them to
serve as markets to absorb imports from the US
and thus contribute to the revival of the US
economy. Policy-wise, this translates into
completing the negotiations in the Doha Round
of the WTO and the Trans-Pacific Partnership that
would unite nine countries in APEC into a free
trade area—that would, also, incidentally unite
them geoeconomically against China.
The Keynesians: Stimulate, Stimulate
• The Keynesians. In contrast to the neoliberals, the
Keynesians think deleveraging must take a backseat
to reigniting the economy and absorbing the
unemployed. For them, the problem with Obama’s
stimulus program was that while it ensured that the
situation would not get worse, it was too small to
spark sustained growth.
• Aside from a more aggressive fiscal stimulus,
the Keynesians think that the state must
engage in industrial policy, picking certain
industries to pour money into and develop,
like green energies. These industries will be
the source of future growth and employment.
• In terms of the international economy, the
Keynesians feel there ought to be strong
international regulation of capital flows, as well
as a trade regime that allows countries, especially
developing countries, to protect their industries
and allows them to use trade measures to build
up their industries, like local content policies. For
the Keynesians, development strategies for
developing countries must rely more on the
internal market than the international market
The New Engines of Global Growth?
• The “Emerging Economies School.” This school sees the
process of deleveraging as eliminating the developed
countries as sources of global growth. However, their place
will be taken by China, India, and the other so-called emerging
economies. Perhaps the most confident statement in this
regard is provided by Nobel Prize laureate Michael Spence in
his 2011 book The New Convergence.
Let me quote at length:
“The major developing economies have displayed
remarkable resilience in the crisis and its aftermath.
Growth is returning and is already approaching precrisis levels in Asia (East and South) and in Latin
America, the latter helped in no small measure by the
tailwind provided by Asian growth….[T]his growth is
sustainable even in the event of slow medium-term
growth in the developed countries. The reason is that
the size of the emerging market economies taken
together is large and growing…
• “Trade within this group is substantial and
growing, and perhaps most important, incomes
are rising, so that the composition of demand is
better matched to the productive capabilities of
these economies…The persistence of growth in
the emerging markets is a major positive for the
global economy in terms of overall growth and
because of the positive impact it will have on the
smaller, poorer developing countries. In addition,
it will lubricate the structural adjustments in the
advanced economies.”
• Contrary to Spence’s expectations, however, the BRICS
(Brazil, Russia, India, China, South Africa) were not able to
sustain their high growth rates and slipped into crisis
beginning in 2011. In 2009, China's vast stimulus plan
helped shore up commodity prices, which helped its BRICS
partners—for Russia on oil and gas, for Brazil or iron ore
and agricultural goods; and for India and South Africa on
minerals. Since 2011, China’s growth has slowed drastically,
and that of India, Brazil, Russia, and South Africa dropped
even more sharply. By 2014, it was clear that the BRICS
would no longer be the engines for global growth.
BRICS Slow Down
The End of Growth?
• The fourth perspective is offered by the “End of Growth
School.” The most cogent presentation of this perspective is
offered by Richard Heinberg in his recent book The End of
Growth. This school says that the economic crisis is not a
stand-alone crisis. What we have is a fatal intersection of
financial collapse, economic stagnation, global warming, the
steady depletion of fossil fuel reserves, continuing population
pressure, and agriculture reaching its limits.
• It represents a far more profound crisis than a
temporary setback on the road to growth. It
portends not simply the end of a boom but
paradigm of global growth driven
fundamentally by fossil-fuel expansion. As
one example of the synergistic play of
constraints, proponents point to the impact of
peak oil, or the drop in the discoveries of new
oil fields.
• Proponents of this perspective say that while
the central cause of the current economic
crisis was the gyrations of an unregulated
financial sector, the dynamics of peak oil
contributed to it. The relative scarcity of new
finds caused the price of oil to rise rapidly
during the boom of the mid-1990’s.
• However, when oil became too expensive, as it
did in 2007, when it passed the $140 dollar
mark, it became a barrier to further economic
expansion and contributed to the collapse of
2008. With oil prices falling owing to the
recession, the stage is set for another round of
economic expansion, which will be throttled
later by rising oil prices.
• Interacting constraints will mean a reversal of
growth in the now developed countries, while
making impossible the achievement of high
growth rates in the now emerging economies,
which Michael Spence sees as the new
engines of growth.
• Richard Heinberg suggests that nations which
have large populations of subsistence farmers
may have advantages in a post-growth world.
They are less integrated into the global
economy, and many maintain agricultural
sectors that have not been totally damaged by
structural adjustment and liberalization.
• These are the very traits that have prompted
the influential neoliberal economist Paul
Collier to regard them in his book The Bottom
Billion as hopeless peasant producers who
should give way to commercial farms on the
Brazilian model employing the latest genetic
technology.
• But they are in fact advantaged by their being far
behind in the institutionalization of the highgrowth-dependent western consumption model.
If they can combine successful redistribution
initiatives, technologies that innovatively blend
traditional and organic methods, and economic
strategies emphasizing improvement in the
quality of life, they may well pioneer the forging
of a post-growth, post-globalization development
strategy.
Globalization in Crisis?
• My own thinking stems from my sense that since
the mid-1990’s the contradictions of globalization
have become sharper, globalization has failed to
deliver on its promise of bringing about both
growth and prosperity, and, as a result, it has
triggered more and more resistance among
nations and communities. The global financial
crisis is, from this point of view, the climax of a
crisis that has been building up for nearly 30
years.
• In 2009, the Economist wrote,
“The economic meltdown has
popularised a new term:
deglobalisation. Some critics of
capitalism seem happy about it—
like Walden Bello, a Philippine
economist, who can perhaps
claim to have coined the word
with his book, “Deglobalisation,
Ideas for a New World Economy.”
This was not meant as a
compliment.
• Indeed, my colleagues and I at Focus on the
Global South first forwarded deglobalization as a
comprehensive paradigm to replace neoliberal
globalization almost a decade ago, when the
stresses, strains, and contradictions brought
about by the latter had become painfully evident
though not yet cataclysmic. Elaborated as an
alternative mainly for developing countries, the
deglobalization paradigm is not without
relevance to the central capitalist economies.
• Indeed, my colleagues and I at Focus on the
Global South first forwarded deglobalization as a
comprehensive paradigm to replace neoliberal
globalization almost a decade ago, when the
stresses, strains, and contradictions brought
about by the latter had become painfully evident
though not yet cataclysmic. Elaborated as an
alternative mainly for developing countries, the
deglobalization paradigm is not without
relevance to the central capitalist economies.
• There are points of convergence with the Keynesian,
Developmentalist, End of Growth, and other
alternative perspectives. In fact, Focus and I do not
claim originality for the different elements or
propositions of Deglobalization since there has already
been rich thinking on alternative paradigms over the
last 25 years, some of it contributions by many of the
people in this conference. Probably, the only
distinctive feature of our approach is our effort to bring
into a coherent whole some key elements of different
alternative paradigms.
11 Pillars of Deglobalization
There are 11 key prongs of the deglobalization
paradigm:
• Production for the domestic market must again
become the center of gravity of the economy rather
than production for export markets.
• The principle of subsidiarity should be enshrined in
economic life by encouraging production of goods at
the level of the community and at the national level if
this can be done at reasonable cost in order to
preserve community.
• Trade policy — that is, quotas and tariffs —
should be used to protect the local economy
from destruction by corporate-subsidized
commodities with artificially low prices.
• Industrial policy — including subsidies, tariffs,
and trade — should be used to revitalize and
strengthen the manufacturing sector.
• Long-postponed measures of equitable income
redistribution and land redistribution (including urban land
reform) can create a vibrant internal market that would
serve as the anchor of the economy and produce local
financial resources for investment.
• Deemphasizing growth, emphasizing upgrading the quality
of life, focusing on the reproductive economy, and
maximizing equity will reduce environmental
disequilibrium.
• The development and diffusion of environmentally
congenial technology in both agriculture and industry
should be encouraged.
• Strategic economic decisions cannot be left to the
market or to technocrats. Instead, the scope of
democratic decision-making in the economy should
be expanded so that all vital questions — such as
which industries to develop or phase out, what
proportion of the government budget to devote to
agriculture, etc. — become subject to democratic
discussion and choice.
• The binary market-state approach is obsolete. Civil
society must constantly monitor, check, and
supervise the private sector and the state, a process
that should be institutionalized.
• The property complex should be transformed into a "mixed
economy" that includes the commons, community
cooperatives, private enterprises, and state enterprises,
and excludes transnational corporations.
• Centralized global institutions like the IMF and the World
Bank should be replaced with regional institutions built not
on free trade and capital mobility but on principles of
cooperation that, to use the words of the late Hugo Chavez
in describing the Bolivarian Alternative for the Americas
(ALBA), "transcend the logic of capitalism."
Similarities and Contrasts
• Two points must be made at this point:
• First, the deglobalization paradigm has key
points of intersection with the Food
Sovereignty Paradigm proposed by Via
Campesina and other peasant groups, as well
as with the “End of Growth School.”
• Second, deglobalization is not a return to the
old developmental economics of sttructural
economics.
• As regards similarities with other approaches, the
food sovereignty paradigm, the goal of
agricultural policy should be food self sufficiency,
wherein the country’s farmers produce most of
the food consumed domestically—a condition
not covered by the concept of “food security,”
which US corporate representatives have defined
as the capacity of fill a country’s food needs
through either domestic production or imports.
• The radical implications of this premise are
noted by Jennifer Clapp: “By removing farmers
from the global trading system altogether, the
food sovereignty movement focuses on local
needs and local food markets, thus freeing
smallholders from the unfair and unbalanced
trade rules that are upheld by the WTO
Agreement on Agriculture.”
• Deglobalization intersects with the “End of
Growth” School on the refocusing of
increasing amounts economic activity from
the production of goods to the reproductive
economy, the production and maintenance of
quality relations, quality relations, and quality
care. This could mean a decline in Gross
Domestic Product as traditionally conceived.
As regards key points of difference between
deglobalization and the old structural economics:
- It puts equality or equity at the center of the paradigm.
- It deemphasizes growth as a measure of social well
being.
- It brings in civil society as an important check as well as
partner of the state and the private sector.
- It favors democratic decisionmaking over technocratic
development from above.
From the Cult of Efficiency to Effective
Economics
• The aim of the deglobalization paradigm is to move
beyond the economics of narrow efficiency, in which
the key criterion is the reduction of unit cost, never
mind the social and ecological destabilization this
process brings about. It is to espouse effective
economics—one that strengthens social solidarity by
subordinating the operations of the market to the
values of equity, justice, and community, and by
enlarging the sphere of democratic decision making.
• To use the language of the great Hungarian thinker Karl
Polanyi in his book The Great Transformation,
deglobalization is about "re-embedding" the economy in
society, instead of having society driven by the economy.
Now for those of us who grew up in capitalist societies, this
may be a profound exciting insight. But for those from
indigenous, native communities this is the way their
societies have been organized, and this is what capitalism
has been trying to break down. This is not to say we must
return to pre-capitalist modes of social integration but to
say we must move forward to to post-capitalist modes of
social integration.
• The deglobalization paradigm also
asserts that a "one size fits all" model like
neoliberalism or centralized bureaucratic
socialism is dysfunctional and
destabilizing. Instead, diversity should be
expected and encouraged, as it is in
nature.
• Shared principles of alternative economics do
exist, and they have already substantially
emerged in the struggle against and critical
reflection over the failure of centralized socialism
and capitalism. However, how these principles —
the most important of which have been sketched
out above — are concretely articulated will
depend on the values, rhythms, and strategic
choices of each society.
A Difficult Journey
• The move towards deglobalization will not come about
in a linear fashion, nor will it be easy, both in economic
terms or politically.
• There will be uneven progress, with advances and
retreats, and over a long period.
• For some time, the default paradigm will be neoliberal
globalization.
• Conservatives may even come to power during this
long period of stagnation, and populist right wingers,
as in France may appropriate some elements of the
deglobalization paradigm, mixing it with reactionary
politics in a monstrous fashion.
L
Left, Right
appropriate
Deglobalization
• “Arnaud de Montebourg is no
radical spokesman. With him, the
cry for deglobalization has moved
towards mainstream politics.
Today, Montebourg finds himself
in an informal coalition of
supporters of deglobalization,
including Melenchon's Front de
Gauche, or Left-Wing
Frontformer Defense Minister
Jean-Pierre Chevènement,
another PS defector;
and much to his dislike, extremeright-wing candidate Marine Le
Pen, the daughter of National Front
historical leader Jean-Marie Le
Pen…The utopia of
démondialisation is all the more
appealing as Montebourg points
out that it's not a rich-man's dream
of keeping the poor at bay,
crediting Walden Bello, the
Princeton-educated Filipino writer,
politician and a man of the
South for the concept.”
Pierre Haski, July 21, 2011
Deglobalization's Pedigree
• A few words in conclusion. Though it may
sound radical, deglobalization isn't really new.
Its pedigree includes the economist Keynes
who, at the height of the Depression of the
1930’s, bluntly stated: "We do not wish…to be
at the mercy of world forces working out, or
trying to work out, some uniform equilibrium,
according to the principles of laissez faire
capitalism."
•
And with words that have a very
contemporary ring, Keynes concluded:
"I sympathize…with those who would
minimize rather than with those who
would maximize economic
entanglement between nations. Ideas,
knowledge, art, hospitality, travel —
these are the things which should of
their nature be international. But let
goods be homespun whenever it is
reasonably and conveniently possible;
and, above all, let finance be primarily
national."