Global Capitalism:
From triumph to crisis

by Walden Bello

International Socialist Review, Aug/Sep 2001


The historical context of the July 2001 meeting of the G8 in Genoa, Italy, is that in a little over a decade, the system of global capitalism has passed from triumph to crisis. As the world stands on the brink of a deep recession, it would be useful to reflect on some of the key dimensions of this historic transition.

The last decade of the twentieth century began with the resounding collapse of the socialist economies of Eastern Europe and a lot of triumphalist talk about the genesis of a new market-driven global economy that rendered borders obsolete and rode on the advances of information technology. The key agents of the new global economy were the transnational corporations, which were depicted as the supreme incarnation of market freedom owing to their superior ability to bring about the most efficient mix of land, labor, capital, and technology.

Midway in the decade was born the World Trade Organization (WTO), which was painted by partisans of globalization as providing the legal and institutional scaffolding for the new global economy. By creating a rules-based global system based on the primordial principle of freer trade, the WTO would serve as the catalyst of an economic process that would bring about the greatest good for the greatest number. It was the third pillar of a holy trinity that would serve as the guardian of the new economic order, the other two being the International Monetary Fund (IMF), which promoted ever freer global capital flows, and the World Bank, which would supervise the transformation of developing countries along free-market lines and manage their integration into the new world economy.

U.S. corporations and globalization

Yet even as the prophets of globalization talked about the increasing obsolescence of the nation-state and the growing irrelevance of national interests, the main beneficiaries of the new global order were U.S. transnational corporations. Supposedly an agent of free trade, the WTO's most important agreements promoted monopoly for U.S. firms: The Agreement on Trade-Related Aspects of Intellectual Property Rights consolidated the hold over high-tech innovations by U.S. corporations like Intel and Microsoft, while the Agriculture Agreement institutionalized a system of monopolistic competition for third-country markets between the agribusiness interests of the United States and the European Union.

When the Asian financial crisis engulfed countries that had been seen by many in the U.S. business and political elites as America's most formidable competitors, Washington did not try to save the Asian economies by promoting expansionary policies. Instead, it used the IMF to dismantle the structures of state-assisted Asian capitalism that had been regarded as formidable barriers to the entry of goods and investments from U.S. transnationals that had been clamoring vociferously for years to get their piece of the "Asian miracle." It was less the belief in spreading the alleged benefits of free trade than maximizing geoeconomic and geostrategic advantage that lay behind U.S. support for the policies of the IMF, the World Bank, and the WTO. As Chalmers Johnson [of the Japan Policy Research Institute] has noted, a good case can be made that Washington's opportunistic behavior during the Asian financial crisis reflected the fact that "having defeated the fascists and the communists, the United States now sought to defeat its last remaining rivals for global dominance: the nations of East Asia that had used the conditions of the Cold War to enrich themselves."

The increasingly brazen employment of the global multilateral system to serve the interests of the United States was one of the causes of the crisis that gripped the system at the end of decade. "Hegemonic leadership," in short, was giving way to direct control-a reality that was underlined by wry jokes from European and Japanese technocrats that during the Asian financial crisis, the IMF managing director Michel Camdessus was micromanaged by U.S. treasury secretary Robert Rubin and his key aide, Larry Summers.

The multilateral system in crisis

Equally important as a source of de-legitimization was the spreading realization that the system could not deliver on its promise. That the system could not create prosperity for all but only the illusion of it was something that many observers had known for sometime. However, the realities of growing global poverty and inequality were neutralized by the high growth rates and prosperity of a few enclaves of the world economy, like East Asia in the 1980s, which were (mistakenly) painted as paragons of market-led development. However, when the Asian economies collapsed in 1997, the follies of neoliberal economics were brought to the fore. All of the talk about the Asian financial crisis being caused by crony capitalism could not obscure the fact that it had been the liberation of speculative capital from the constraints of regulation, largely on account of pressure from the IMF, that brought about Asia's collapse. The IMF also came under severe public scrutiny for imposing draconian programs on the Asian economies in the wake of the crisis-policies that merely accelerated economic contraction, saved foreign banks and speculative investors, and restructured economies along "American lines."

The IMF's role in East Asia triggered a fresh reexamination of its role in imposing structural adjustment programs in much of Africa, South Asia, and Latin America in the 1980s. The fact that these programs had, as they did in Asia, exacerbated stagnation, widened inequalities, and deepened poverty now became widely recognized-so much so that the IMF, in a desperate effort to exorcise its record, felt compelled to change the name of the extended structural adjustment fund facility into the poverty reduction and growth facility prior to the World Bank-IMF annual meeting in Washington in September 1999.

The Asian financial crisis triggered the unraveling of the legitimacy of the IMF. In the case of the WTO, the situation was even more dramatic. In the last five years of the decade growing numbers of people and communities began to realize that in signing on to the WTO, they had signed on to a charter for corporate rule that enshrined what consumer advocate Ralph Nader called the principle of "trade uber alles," or corporate trade above equity, justice, environment, and most everything else we hold dear. Many developing countries discovered that in signing on to the WTO, they had signed away their rights to development. The many streams of discontent and opposition converged in the streets of Seattle and in the meeting rooms of the Seattle Convention Center in December 1999 to bring down the third ministerial of the WTO and to trigger a severe institutional crisis from which the organization has yet to recover.

The World Bank, under the leadership of Australian-turned-American James Wolfensohn, appeared to be charting a course that would allow it to escape the damage inflicted on its sister institutions, until it was subjected to fire in early 2000 from an unexpected quarter: the Meltzer Commission. Ever since he took over as chief of the institution in the mid-1990s, Wolfensohn had managed to defuse criticism through very skilled public relations work and co-optation of nongovernmental organizations. But when a commission created by the U.S. Congress made the same criticisms that had been made by people from the left, the game was up. Headed by a banker Alan Meltzer, the commission concluded that the Bank's performance when it came to addressing its avowed goal of eliminating global poverty was miserable and that it would be better to devolve the task to regional bodies.

The crisis of the corporation

By the end of the last decade of the twentieth century, in short, the triumphalism that marked the beginning of the decade had evaporated and given way to a deep crisis of legitimacy of the multilateral order. The crisis of the multilateral system was, moreover, translating into a deepening unease globally with the prime actor of globalization: the corporation. Several factors came together to focus public attention on the corporation in the 1990s-the most egregious being the predatory practices of Microsoft; the environmental depredations of Shell; the irresponsibility of Monsanto and Novartis in promoting genetically modified organisms; Nike's systematic exploitation of dirt-cheap labor; and Mitsubishi, Ford, and Firestone's concealment from consumers of serious product defects. A sense of environmental emergency was also spreading by the beginning of the 21st century. To increasing numbers of people, the rapid melting of the polar ice caps could be traced to Big Oil and the automobile giants' continuing promotion of an environmentally destabilizing petroleum civilization and, more generally, to the process of uncontrolled growth driven by the transnational corporations.

Ironically, in the United States, it was during the apogee of the New Economy that the distrust of the corporation was also at its highest in decades. According to a Business Week survey, "72 percent of Americans say business has too much power over their lives." And the magazine warned: "Corporate America, ignore these trends at your peril."

Some of the more enlightened members of the global elite took such warnings seriously, and their annual meeting in Davos, Switzerland, became the venue to elaborate a response that would go beyond the bankrupt strategy of denying that corporate-driven globalization was creating tremendous problems to promote a vision of "globalization with compassion." Yet, the task was formidable, for it became increasingly clear that, in an unregulated global market, it was even more difficult to reconcile the demands of social responsibility with the demands of profitability. The best that "globalization with a conscience" could offer was, as C. Fred Bergsten-a noted proglobalization advocate-admitted, a system of "transitional safety help the adjustment to dislocation" and "enable people to take advantage of the phenomenon [of globalization] and roll with it rather than oppose it."

Strategic power and corporate power

Corporate power is one dimension of U.S. power. But there is, equally of consequence, the strategic power of the U.S. state. Strategic power cannot be reduced, as in orthodox Marxism, to simply being driven by the dynamics of corporate control. The U.S. state cannot be reduced simply to being a servant of U.S. capital. The Pentagon has its own dynamics, and one cannot understand the U.S. role in the Balkans or its changing posture toward China as simply determined by the interests of U.S. corporations. Indeed, in Asia, it has been strategic extension, not corporate expansionism, that has been the mainspring of U.S. policy, at least until the mid-1980s. And, in the case of China, U.S. capital's desire to exploit the Chinese market has increasingly found itself in opposition to the Pentagon's definition of China as the Enemy that must be headed off at the pass instead of assisted by Western investment to become a full-blown threat. In many instances, indeed, corporate power and state power may not be in sync.

Having said this, a primordial aim of the U.S. transnational garrison state that is ensconced deeply in East Asia, the Middle East, and Europe and projects power to the rest of the globe is the maintenance of a global order that secures the primacy of U.S. economic interests. With the growing illegitimacy of corporate-driven globalization and the growing divide between a prosperous minority and an increasingly marginalized majority, military intervention to maintain the global status quo will become a constant feature of international relations, whether this is justified in terms of fighting drugs, fighting terrorism, containing "rogue states," opposing "Islamic fundamentalism," or containing China.

One cannot say, however, that the military structure of U.S. hegemony is suffering as profound a crisis of legitimacy as that which has gripped the processes and institutions of corporate globalization. The U.S. military structure remains solidly rooted in both Europe and Asia. The reason it remains so is to be found at the level of the ideological: the deep-seated fear of both European and Asian elites that, without the U.S. to serve as a "benevolent hegemon," they would not be able to create by themselves benign regional orders that would ensure the peace among themselves.

The crisis of liberal democracy

It is not, however, corporate power or military power that is the strongest asset of the United States, but, following the thinking of Antonio Gramsci, its ideological power-what one may call its "soft power."

The United States is a Lockean democracy, and its ability to project its mission as the extension of systems centered on free elections to choose governments devoted to promoting liberal rights and freedoms continues to be a strong fountain of legitimacy in many parts of the world. Now, the trend away from authoritarian regimes and toward formal democracies in the Third World happened in spite of, rather than because of, the United States. Yet, especially under the Clinton administration, Washington was able to skillfully jibe to catch the democratic winds, in the process reconstructing its image from being a supporter of repressive regimes to being an opponent of dictatorships.

In the last few years, however, Washington or Westminster-style democracies, with their focus on formal rights and formal elections and their bias against economic equality achieved through such measures as asset and income redistribution, have degenerated into increasingly stagnant and polarized political systems, such as those in the Philippines, Brazil, and Pakistan. This stagnation of Third World liberal democratic systems has been paralleled by the realization of increasing numbers of Americans that their liberal democracy has been so thoroughly corrupted by corporate money politics that it deserves to be designated a plutocracy. The fact that a man who lost the popular vote-and, according to some studies, the electoral vote as well-ended up president of the world's most powerful liberal democracy has not helped in shoring up the legitimacy of the political system in a country that has been described by many observers as being in a state of "cultural civil war."

The new protest movement

In light of the deepening crisis of legitimacy of the key institutions of the global system, Seattle was a cataclysm that was waiting to happen. The force of pent-up global rage went on to manifest itself in Washington, D.C., during the World Bank-IMF spring meeting in April 2000; in Chiang Mai, Thailand, during the Asian Development Bank annual meeting in May 2000; in Melbourne, Australia, during the World Economic Forum gathering in early September 2000; and in Prague, during the World Bank-IMF annual meeting in late September 2000.

While the global elite assembled in Davos in late January 2001 to ponder the meaning of the burgeoning "antiglobalization movement," some 12,000 representatives of civil society organizations and political movements met in Porto Alegre, Brazil, to declare that "another world is possible." The World Economic Forum had found its political and ideological nemesis in the World Social Forum. Celebration of the power of the movement was one aspect of Porto Alegre; the other was the gathering of energies for the next move. That move was directed at the Summit of the Americas in Quebec City, Canada, in late April 2001, which had been called to push forward a key project of the U.S. corporate elite, the Free Trade Area of the Americas. Despite the effort of some of the established media to portray the protesters as either uninformed or anarchists, the confrontation in Quebec, as in Seattle, was a major setback, in terms of legitimacy, for the system of corporate-driven globalization.

Now, the G8 meeting in Genoa has provoked a greater intensity of protest than did Quebec.

One must not, of course, overestimate the impact of these protests so far, nor gloss over their weaknesses in terms of shared agendas or decision making. However, neither must one underestimate their consequences. Bergsten, one of the most ardent promoters of the Washington Consensus, admits that "the antiglobalization forces are now in the ascendancy." Bergsten is haunted by a Gramscian fear: The structures of the system may still appear to be solid, but when legitimacy or consensus goes, it may only be a matter of time before the structures themselves begin to unravel, especially when one factors in the crisis of overproduction that has hit the global economic system with the recession, unemployment, and increases in poverty and inequality that will come with it.

The challenge

Yet the crisis of the system does not necessarily result in its replacement by a more benign system of international relations. As Rosa Luxemburg so presciently pointed out before the rise of fascism in crisis-ridden Europe, the outcome may be "barbarism," where the ideals and themes of the progressive opposition are hijacked and perverted by demagogic forces that are hostile to freedom, equality, and democracy. This is why the articulation of an alternative is so critical at this point in time. Creating this alternative vision and program centered on a participatory process to create the institutions that would once again subordinate the market to society, promote genuine equality across gender and color lines and within and among countries, and establish a benign relationship between human community and the biosphere remains the great challenge of the opponents of corporate-driven globalization.

On the success of this enterprise depends our future.


Walden Bello is executive director of Focus on the Global South, a research and advocacy program of the Chulalongkora University, Bangkok. He is also professor of sociology and public administration at the University of the Philippines and the chairperson of the Akbayan Citizens' Action Party of the Philippines.

This article is adapted from the introduction to The Future in the Balance, published by Food First Books in May 2001.

Globalization watch

Index of Website

Home Page