Is a Global Economic Crash Inevitable? Part 1

The first point to ask is ‘Does a truly global economy actually exist’?  Gorbachev argued in 1988 that “the world’s economy is becoming a single organism and no state, whatever its social system or economic status, can develop normally outside it”, just before the so-called Communist attempt at an alternative economic system collapsed – clearly supporting the validity of his claim?

Since at least the mid-16th century there has been in existence an internationalized economy and within it fairly isolated and autonomous economies carried out relatively low-level amounts of long-distance trade.  Such economic interaction tended to be bilateral in character and formed only a small part of the overall national economy. Yet by the mid-19th century, it has been argued, this concept of an international economy was becoming flawed in its inability to describe the nature of the existing economy.  It was possible to see a gradual drawing together of countries into a set of multilateral international economic relationships, which endured over time, establishing a structure within which existed a world division of labour where some economies tended to produce raw materials whilst others specialised in the manufacture of finished products. Such a system depended upon an increased level of inter-dependence and coordination.

A question we might ask is how does such an economy differ from the concept of what, today, we call the ‘global economy’? Some political economists argue if the mercantile world economy consists of a range of countries, coupled with other actors who are also involved in international relations, then the ‘global economy’ is simply a deepening of these interactions! This view sees a ‘global economy’ as simply being a qualitative change rather than a quantitative one.  For in a world economy it is still the national economies that dominate!  Others argue that this misses the point, for if a true ‘global economy’ exists, then it – the ‘global economy’ – dominates the national economies, which simply exist within it.

How does this ‘global economy’ differ from what has gone before?  What has actually been globalised?  History shows us that the progress of industrialisation has brought a major change in the scale of economic activity and economic power, which in turn has stimulated trade and brought increased international specialisation and a new international division of labour based, according to some, on the differential factors endowments and embedded comparative advantages, that have resulted in a set of linked, interdependent economies with a global ‘reach’. Thus, it could be argued that it is economic activity, production and exchange, that is globalised and in the contemporary world system this is overlaid by a technological and military interdependence as well!

Realists believe that the nature of the global economy reflects the lack of overarching authority and is, at base, conflictual! Yet states, being rational actors, cooperate in order to maximise their national interests. Much cooperation takes place within a hegemonic framework, where the hegemon creates a particular form of order in the international/global economy.  This order, however universal it may seem, is formed to serve the interests of the hegemon and as soon as circumstances alter, so will it! Possible examples to ‘prove’ this position are the emergence of populist politicians and policies in the advanced developed economies (Trump, Farage/Brexit) that strive to ‘restore’ the perceived losses of their national interests.

What is certain to Realists is that the undoubted goal of economic activity within a global economy should be the maximization of ‘national’ wealth! This means that the global economy, and the benefits that it might bring, must be managed in order to achieve the maximum economic benefit consistent with the maintenance of national autonomy – the arguments of Trump and Farage plus many in the nationalist right of the Republican Party (US) and the Tories (UK).  For these the relationship between the global economy and politics is clear: politics determines economics! This view has been relatively dominant since the so-called ‘End of History’ where the argument was posited that the Markets had won and we would see an inevitable and unending as suggested by Gorbachev!

Yet, even as the Berlin World brought down the so-called communist ‘alternative’, some argued that the reality would be far more complex.  They saw the world as being increasingly dominated by nation-states rather than the emergence of a ‘Central Marketeer’.  For these neo-realists powerful states still had a great deal of autonomy – they envisaged the move from a bi-polar power system to a multi-polar one with the emergence of the BRIC nations.  This school of thought saw state action and the broad distribution of power in the world as having largely determined the character of the global economy. Some, such as Gilpin, saw the structure of the global economy as being determined by state power and the way in which such power is ‘externalized’ through ‘hard’ and ‘soft’ hegemony.  Thus changes in the relative power position of the hegemon(s) have an impact on every member of the hegemonic system.  The question this raises is ‘does the system have flexibility to change or is it rigid?  Are states fastened into their relative positions within the system?  It is possible to recognise the disparities between national economic wealth and political power in the modern world; such disparities can be viewed in a specific historical context – ‘modernisation’ ! The achievement of the advanced developed economic states was a historical accident!  They had simply ‘got there first’ because they had set out down the path of development earlier than the rest – the path had been open to all others, including the so-call ‘socialist’ states and the developing world!

Neo-marxists, and Marxians in general, acknowledge that the global economy is inherently conflictual, but this conflict is structural in nature caused by the framework within which inter-state economic relations take place.  This framework, they argue, one of dominance-dependence constituted by the emergence of global capitalism, which is the logical and historical culmination of capitalism as an economic system, and the global level simply reproduces the conditions of capitalist production. The key actors are classes and economic relations in the global economy are structured for the benefits of class interests.  For individuals, groups and states wealth and economic growth are determined by their position within the structure of global capitalism, not only as members of a ‘national’ economy but as actual and potential members of the capitalist class.  This produces not only a ‘vertical’ structure of dominance-dependence/core/periphery, but also a ‘horizontal’ one of the class relations whereby groups in the periphery are co-opted into the system the more their national economy is structured by and is dependent on global capitalism.

This brings us to the arguments of Wallerstein who, I would argue, sees the global economy as not so much a set of economic relations managed by states, but rather as the obverse – an increasingly globalised system of economic relations which shape and constrain the possible freedom of action by states!  His ‘World Systems Approach’ argued that individual states exist and operate largely as a consequence of their place (core, semi-periphery, or periphery) in a single world market.  We, followers of this view, see the world market as being a capitalist (i.e. it is driven by endless accumulation) market. The role of the state is to distort the market by directing surplus and hence distribution unequally. The crucial factor in this view is the existence of a capitalist world market: international trade determines the character of economic activity in all parts of the globe.  By implication, individual states are largely irrelevant, for their power to affect the economy or the social relations it generates are, at best, circumscribed.  Even those states that claimed to based on quite different economic activities and social relations – so-called ‘socialist’ states – were in fact forced by the power of the capitalist world market to preside over nothing more than a special type of capitalist society.

Running parallel to Wallerstein’s argument was another neo-Marxist paradigm – Dependencia Theory – that argued that economies on the ‘periphery’ of the global economic system are ‘dependent’ upon those at the ‘core’ of the system! This view, highly prevalent in Latin America during the 1980s and, some would argue, quite pertinent to events in Venezuela in 2017, places considerable importance on the historical context within which states develop; they do not develop in an economic vacuum, but in a world dominated by the advanced industrial nations.  Such a historical context both constrains and reduces their opportunity for autonomous development, since these less developed economies have become increasingly tied to a world market over which they have no control.  Furthermore, massive investment by foreign capital has meant that such economies are not only tied to producing for foreign markets, but are also heavily reliant upon transnational corporations to sustain the economic growth and expansion that is essential for international political stability and development.  As a consequence their political and economic development has become ‘distorted’ because it is shaped more by external forces than by internal ones!  Development has become ‘dependent’ development….

The question that arises, for both camps – Realism and Marxism – is are we entering an ‘end game’, where states either awaken from their stupor and see that their position in this global market is under threat both externally and/or internally. Has the advent of the internet altered the dynamics of global power?  Is the Internet a weapon by which global capitalism can bypass the state or is it the ‘people’s weapon’ to challenge the hegemonic power of the OnePerCent? This will be discussed in a further submission due in October.

 

 

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