ISJ 121: Myths of globalisation and the new economy: Bill Dunn: Review

Bill Dunn in ISJ 121 “Myths of globalisation and the new economy”, is the latest ISJ writer to attempt to explain away the myths or rather the reality of globalisation....writes Bill Jefferies....

He attempts to refute what he calls the two central claims of its contemporary adherents that “First, geographical shifts are said to have undermined local and national strategies of resistance” and that “Second, it is claimed that a “disorganised capitalism” means widening social differences.” Dunn objects to the idea that profound changes in the objective situation require a reorientation of socialist strategy and tactics; “This article contests the need for such a radical strategic reorientation by evaluating claims of capital mobility and relocation…”

The trouble is when the reader checks the author’s footnotes they discover that there really is no contemporary debate along the lines described by Dunn. The sources that Dunn refers to as evidence for this debate were written years ago, of the first 38 articles he cites 30 were published in the 1990s/1980s and some are over 20 years old.

Dunn has invented this debate to suit the conservative needs of the ISJ bureaucracy. They want theoretical credence for their assertion that nothing substantive has changed with globalisation and that therefore, nothing substantive needs to change with them.

That the Cliffites should attempt to deny the qualitative impact of the restoration of capitalism in the former centrally planned Stalinist states in the early 1990s is no surprise. Their world view rests on the notion that the former Stalinist centrally planned economies were in fact “state capitalist”, hence the restoration of capitalism was really not the restoration of capitalism at all, but rather a move “sideways” from capitalism to capitalism.[1] The theory of state capitalism therefore, precludes the ISJ from assessing the economic impact of the collapse of Stalinism.

The restoration of capitalism and the expansion of the world market

The transformation of the formerly non-capitalist bureaucratic planned economies into capitalist ones between 1989-95 doubled the size of the world working class that could be exploited by capitalist, consolidated the defeat of “socialism”, and opened up the previously relatively independent semi-colonies like India and Brazil to unlimited exploitation by finance capital. It also for a period removed the only serious rival to US hegemony the former USSR.

After nearly two decades of these developments and at a time when world capitalism is experiencing its deepest financial crisis since the Great Depression, it is an excellent moment to assess the impact of that process on capitalist restoration on the world system and examine how the surplus profits exported from China from around the turn of the millennium onwards spurred the US sub-prime lending boom that caused the present crash. Does indeed the scale of this crisis, with since October 2008 a slump in world trade and industrial production, signal the end of the upward long wave that prevailed from 1990 onwards, or is this simply a re-balancing, albeit brutal, of the world economy away from US and European consumption, towards the BRIC economies and notably China?

Dunn spurns this opportunity to address an argument that no one is really making any more.

But let’s look at Dunns myths and see how far they really are myths and how much of a refutation he really provides.

Limits to capital relocation

Dunn claims that;

“For many, globalisation involves a “manic logic” as firms “race to the base” in search of cheap labour.11 Firms go “hopping and skipping and jumping”12 to wherever they can find competitive labour markets, laying waste to jobs in the rich countries.”

Dunn cites two articles, one from 1997 and another from 1991. Dunn’s “many” it appears haven’t written too much that recently. Dunn claims that “capitalism is a social relation not reducible to physical things” as if commodities - workers, cars, steel do not have a physical existence - before pointing out that there has been a massive increase in the mobility of capital to levels not attained since the “belle epoque” of the period just prior to the First World War;

“By 1914 outward foreign direct investment (FDI) from Britain amounted to 53 percent of GDP, a level comparable to today’s.17 Levels from other rich countries were lower but still not exceeded until the 1980s or 1990s.”

While he points out that FDI remains predominantly in the “rich” countries, a nebulous category presumably akin to the imperialist core nations most of that FDI is nothing more than the shuffling of cards on the financiers table, of mergers and acquisitions; “In 2006 67 percent of all FDI involved buying existing assets and 30 percent involved reinvesting the earnings of the already operating foreign plants. So less than 3 percent was new or “greenfield” investment.”

This is important as previously the SWP have used the predominance of FDI within the imperialist core to argue that FDI outside of that core is marginal to it and that therefore, an idea of Leninist imperialist exploitation does not really exist. Dunn’s theory is a development of this, an improvement inasmuch as he concedes that most of the FDI within the imperialist heartland is not investment at all but simply a transfer of ownership, but a regression inasmuch as he produces an absurdly low figure of just 3% for greenfield investment, i.e. investment in new productive capacity in the emerging markets, i.e. imperialised nations.

The trouble is it is just as wrong. In 2007 according to the Economist, China and India were the two biggest destinations by far for “greenfield” investments. Dunn has failed to realise that reinvested earnings can be invested in “greenfield” investments” i.e. new productive capacity in the host country. Dunn’s assertion that greenfield investment amounts to just 3% of the total is a gross underestimate.

But whatever the actual proportion the total has exploded with globalisation;

“Real structural changes do give substance to recent claims of globalisation. World trade jumped from $519 billion to nearly $12 trillion between 1973 and 2007, and within this the share of what are classified as “developing countries” rose from 24 percent to 39 percent.23 Similarly, stocks of FDI increased from $560 billion to $12 trillion between 1980 and 2006, or from 5.3 percent to almost 25 percent of world GDP. The poorer country share went back over 30 percent.24 Along with, but not reducible to, foreign investment, the level of manufacturing in developing countries shot up. It rose by 75 percent and from 19 percent to 30 percent of the world total between 1990 and 2005.25 However, these aggregates have to be interpreted quite cautiously.”

The growth of the proportion of manufacturing in these emerging economies demonstrates in practice how wrong Dunn’s figures for FDI are. But these figures need to be treated with even more caution than Dunn suggests. Before 1990 many of these developing countries were not capitalist ones, most notably of course China, but also Vietnam, the central Asian republics etc. and some of the so called “developed” economies were in fact non-capitalist ones before 1990 like Poland, Czechoslovakia etc.

Hence these figures grossly understate the increase in the proportion of capitalist manufacturing originating outside of the “rich” countries and ignore the growth of capitalist manufacturing as a whole with the transformation of non-capitalist into capitalist economies.

Dunn doesn’t even mention this point – the decisive reason for the rise of globalisation - the restoration of capitalism in China, Eastern Europe and the former USSR - is not something he even considers.

Uneven growth

Dunn points out that this growth has been hugely uneven, the rich countries continue to dominate manufacturing, albeit at a fast falling rate, while “Just five countries, China and the “Asian tigers”, accounted for 62 percent of the poorer country growth from 1980 to 2005.”

He points out that “If productivity grows quicker in manufacturing than services (as it normally does), then even if consumption patterns stand still, manufacturing’s share of employment shrinks.”[2]

But then goes onto claim that “Indeed, industrial employment was falling in China, even before the 2008 economic crisis hit.”

This is pretty funny considering that China’s urban population has increased by around 175 million since 2000. What does Dunn think those people do? China’s government statistics for industrial employment do not include the approximately 200 million migrant labourers who form the bulk of its manufacturing work force but rather measure the decline of employment in the state owned enterprises. Once you take that into account it gives the numbers a rather different look. Indeed the crisis in Chinese manufacturing since November has hit precisely these migrant workers, that is why Chinese official statistics for unemployment have barely budged even with the closure of swathes of China’s export industry.

Dunn points out that “Two thirds of the world’s automobiles were made in just seven countries: Japan, Germany, France, the US, Korea, Spain and China.”

While neglecting to explain that China is now the second largest car manufacturer in the world from being nowhere two decades ago, its rise alongside that of Korea is hardly evidence of capital’s lack of mobility. Elsewhere he claims that “employment in the car industry in rich countries actually increased between 1970 and 2001.” What about after 2001, during the period when China’s car manufacturing exploded and when all of the major “rich” country manufacturers outsourced increasingly large proportions of their output to the “emerging” markets?

Dunn’s conclusion that “Capital can flee—and has fled—high wages and labour militancy but to a much lesser extent than its supporters suggest.” Is unsustainable based on the evidence he provides; he fails to account for the restoration of capitalism across a third of the world’s surface, grossly understates the level of greenfield investment and underestimates the growth of the Chinese working class by hundreds of millions, to name but three.

And given that his critics also ignore the restoration of capitalism, neo-classical economics treated the collapse of the central plan during the 1990s as a collapse of capitalism rather than the creation of it - it is fair to assert that capital has fled, not really the right word perhaps spread or grown or expanded would be, not less but more, much more, than “its supporters”, whatever that means, have said.

That does not mean of course that the class struggle is over, far from it, but what it does mean is that the rising working class in the newly emerging market economies and the integration of capitalist production must cause the left to re-evaluate their strategies rather than pretending nothing much has changed.

The state and globalisation

Dunn claims that “For many writers, labour’s decline is an indirect result of declining state powers. Reforms won at the national level are eroded as capital mobility overwhelms states.”

Once again Dunn cites one source from 1999, its pretty hard to swallow the idea that the state has few powers after the experience of the last 12 months, when the US government has used around $12 trillion to reflate its financial system and the UK have taken controlling states in most of its largest banks. Dunn’s claim that;

“However, state power is not simply reducible to the interests of capital and even a limited autonomy can be important, making it possible to win some reforms at the national level, however inherently insecure they might be.”

Is pretty hard to take too, after the various national ruling committees of the bourgeoisie have intervened so dramatically in their attempts to stave off the threat of depression. Reforms can be won, but nonetheless the state is in essence simply reducible to the interests of capital, as this year more than many has repeatedly shown. Dunn points out that levels of state spending remain high, while ignoring how that spending has changed over the last two decades, now it is directed to productive out sourced privately provided services, before it was spent in unproductive nationalised state industries. Not an unimportant development.

The New economy – or not

Dunn contests the idea that “a new era of disorganised, flexible, post_Fordist capitalism.” Has “reinvigorated the economy” claiming that “Suffice it to say that, although there were real rises in productivity in the US from the mid-1990s, these did not return to levels seen in the 1970s, let alone those of the long post-war boom. Elsewhere, in Japan and continental Europe, similar technological innovation coincided with falling productivity gains and extremely sluggish overall economic performance.”

But as he explained previously, manufacturing has a higher level of productivity than services and that there has been a very significant degree of the relocation of manufacturing industry away from the imperialist core “rich” nations alongside globalisation. This relocation explains the relatively slow productivity growth, the “sluggish” performance of Japan and continental Europe – not the stagnation of the world economy.

Dunn’s assertion is common to other stagnation theorists[3], all these leftist commentators have used the relatively slow growth of productivity in Europe and Japan over the last two decades to assert the stagnation of world capitalism. In fact they claim that between 2003-2007, in what the Economist magazine called the fastest period of growth in capitalisms history, stagnation actually deepened compared with the 1980s!

The relocation of manufacturing production out of the “rich” nations, means the proportion of manufacturing in their domestic economies falls. As it does so the total productivity of the economy also falls. But the impact of this proportionate decline – the thing that seems to imply stagnation – is in fact simply the increase in the proportion of services with a generally lower level of productivity in the overall economy. It says nothing about the dynamism of the world capitalist economy as a whole.

It considers these economies without reference to the re-location of capitalist production to the emerging markets with capitalist restoration. Hence it turns the world on its head.

Although paradoxically Dunn also points out that; “This breaking up of once connected processes thus reflects the growing, not declining, scale of production.” As globalisation has created vertically and horizontally integrated manufacturing processes not constrained within national borders to anything like the previous degree. What’s more “This is not confined to “new economy” sectors.” But includes auto-assembly amongst others. Indeed the rising service sector is impacted by the same trends as those that effect manufacturing. “The rise of service sector jobs does not fundamentally change things. Services are susceptible to similar processes to manufacturing but also to labour organisation.”

True, but the growth of services does impact productivity figures, which needs to be accounted for when assessing the total growth of productivity across the world economy as a whole!

And its true of course that services are subordinated to the same process of capital accumulation as manufacturing, but Dunn wants to use this evident truth to claim that “Finally, and perhaps most significantly, the simple fact is that class polarisation among workers has not really happened.”

Class stratification

Dunn wants to deny the growing income inequality between workers. The existence of a highly stratified modern day working class is a blow to the ISJ’s assertion that the labour aristocracy – the relatively privileged layer of skilled workers described most famously by Lenin in his pamphlet ‘Imperialism’ does not actually exist.

The fact that it does exist is another inconvenient “myth”.

There is a wealth of data to show that educated higher skilled workers have seen relatively larger wage rises over the period of globalisation, while the mass of workers at least in the “rich” countries have seen their wages stagnate, while beneath them a new layer of unskilled or even semi-legal workers including many immigrants and migrants face the daily struggle of “precarite”.

Indeed after assessing some of the evidence Dunn is forced to conclude; “So polarisation within the working class was, at least, much less than is usually claimed. It occurred among people with similar skills and had little to do with any particular technological transformation.”

The stratification of the working class has happened, it is an important trend, that Marxists would do well not to ignore.

Dunn concludes that if we are to understand the marginalisation of the left and weakness of labour movement today, we really need to understand its basically a subjective failing – our fault – rather than anything about how the world has changed, objective circumstances, the economy and all that.

“Recent failures may be at least as much about the failures of left politics as about any objectively increasing spatial or economic heterogeneity. Indeed, Richard Walker reasonably argued that we should understand the contemporary period more in terms of labour’s political defeats than capital’s economic successes.”

Although typically Richard Walker was writing ten years ago in 1999, so its not really the contemporary then.

If Marxists are to overcome their subjective failings, their marginalisation and isolation they need to stop burying their heads in the sand - you choke, your throat gets very dry and you can’t see a damn thing.

[1] The irony is of course that the inventor of this theory Tony Cliff in his 1948 book, State Capitalism in Russia, denied that capitalism existed in the economy of the USSR, stating that the law of value, and therefore, profits, surplus value, commodity exchange and capital itself were not to be found in it. It was “capitalist” due to its existence in a capitalist world, i.e. the world outside of it was capitalist – it was not capitalist itself. But nonetheless it was capitalist even though it wasn’t.

Think of a rabbit sat in a field of carrots. The rabbit is surrounded by carrots. It is in competition with them - the rabbit wants to eat the carrots - the carrots do not want to be eaten by the rabbit - but the rabbit is not a carrot. Then the rabbit dies. Its body rots. It becomes fertiliser. It nourishes a carrot. Now the rabbit is a carrot. Because it is no longer a rabbit. Simple huh?

[3] E.g. Robert Brenner, Chris Harman, Richard Brenner (no relation), John Bellamy Foster, Harry Magdoff etc.

Wed 28, January 2009 @ 16:18

Bookmark with:

What are these?