Written by Laura Ebneter, Dominik Gross, Kristina Lanz and Andreas Missbach
The difficulty of talking about globalization stems from the fact that the concept is used to mean very different things. The German “global historian” Juergen Osterhammel writes: “Everyone talks about ‘globalization’, tacitly assuming that its meaning is clear. An unrealistic assumption.” He therefore suggests that it would be better to speak of “globalizations”. As such, globalization would no longer signify the “single, all-embracing, worldwide process that encompasses all of humanity”, but a number of different processes in the world, whether concurrent or not, which may somehow be interconnected – or perhaps not.
Roughly speaking, there are two perspectives in the discourse on globalization, which are rarely distinguished well enough from each another, and which explain why there is so much talking at cross purposes on this subject. On the one hand, globalization means economic policy prescriptions that are based on an economic theory, or better yet, an ideology. That was how the “critics of globalization” of the noughties understood the concept. This ideology and the (often unpalatable) prescriptions were garnished with tales about the promises of globalization. On the other hand, the “globalization” label is given to real processes, e.g., the growth of international trade, the expansion of cross-border capital flows, or the weight of multinational enterprises – and the list could go on.
This is often premised on the assumption that the ideologically-inspired prescriptions constitute a linear path to the real and measurable processes such as the dismantling of trade barriers and capital controls that brought about the rapid expansion of global trade. It is not that simple, however, as a substantial part of the growth in world trade goes back directly or indirectly to the fact that China has become the “workshop of the world”. But China has been highly selective in its dismantling of trade barriers, it has never liberalized capital flows, and has also retained state control in other sectors.
The truth is that there is a complex mix of ideology, prescriptions, and real developments, which may be summed up as follows. Since the 1970s, the restructuring of global capitalism has been driven by an economic ideology that was eagerly embraced by multinational enterprises and Western governments. The economic policy prescriptions derived from it and applied by governments favoured the rise of global corporations and unleashed four key global processes: the rapid expansion of international trade, the relocation of industrial production to less “developed” countries (including China), the surge in South-North migration (more pronounced in the USA and in Europe, including from east to west) and – most critically – since the 1970s, the exponential growth of the financial sector and its significance for the economy and financial policy within countries and across borders.
The economic ideology is commonly referred to as neoliberalism, and with “neoliberalism”, the situation is exactly the same as with “globalization” – two people in a room have three different interpretations of it. But help is at hand from the US historian Quinn Slobodian. In the book titled “Globalists – the End of Empire and the Birth of Neoliberalism” (2018), he distinguishes between two neoliberal concepts, the better-known one being from Chicago, and the other from Geneva. The first stands for more “laissez-faire” and less and less state (national) boundaries, i.e., it favours self-regulating markets, which increasingly replace smaller government in the role of structuring a society. Or, to paraphrase the Swiss FDP of the 1970s: more markets, less State. Neoliberal economists of the Chicago school associated with US economist Milton Friedman dreamt of a single, all-encompassing world market. In their view, politicians should retain a role only where this market fails to function. For Friedman and his followers, this ought never really to be the case, except in matters of security (army and police).
Slobodian establishes a contrast between this notion of neoliberal globalization as a worldwide process in which free market forces by themselves can deploy their full potential, and the Geneva group of neoliberal forward thinkers. This latter group came together in the 1930s at the University of Geneva – precisely where the UN also has its second home. Unlike the Chicago School, these members of the Geneva School, coalescing around the German economists Willhelm Röpke, Ludwig von Mises or Michael Heilperin, did not wish to liberate “the market” from “the State”, but instead to place the State at the service of the market, with the uppermost goal of securing the right to private ownership not only in a particular nation-state, but all around the world. Slobodian writes that what the “Geneva boys” wanted was for the State to provide the market with a global (private) law framework, thereby elevating to a supranational level the mechanisms that serve to encourage more private ownership – without also having to take on board the onerous, restrictive rules of a redistributive welfare state.
In 1989, the prescriptions inspired by the economic ideology of neoliberals of varying hues was labelled the “Washington Consensus”, because it was embraced by the International Monetary Fund, World Bank, and the US Department of the Treasury, all institutions located in that city. In reality, “Consensus of Washington, Geneva (WTO – trade), Paris, (OECD – fiscal policy) and Brussels (EU)” would have been more appropriate. Emerging initially as a reaction to the Latin American debt crisis, the core of this programme consisted of competition (above all, the dismantling of the welfare state), deregulation (trade and capital flows), and privatization. In the 1980s, and in exchange for new loans, this “consensus” was imposed on debt-ridden Latin American and African countries through so-called structural adjustment programmes – a period that was later to be often called “the lost decade”, as poverty had increased substantially in many countries.
The driving force and the beneficiaries of this agenda were the multinational corporations and, more particularly, the banks and other financial players. In the year 2000, ABB Chief Percy Barnevik summed up the corporation’s programme as follows: “I define globalization as the freedom of our group of companies to invest wherever and whenever it wants, to produce what it wants, to buy and sell wherever it wants, and to keep all restrictions emanating from labour laws or other social regulations as minimal as possible.”
The collapse of the Soviet Union in December 1991 marked a major turning point. The end of the “East Bloc” left just one superpower, and the prescriptions could then be applied across the world. After the Global South, other prominent victims of these prescriptions were the countries of the former Soviet Union. US economic advisers persuaded their governments to apply the Washington Consensus as a shock therapy. The outcome was that domestic industry all but disappeared, and a handful of people were able to help themselves to some of the national wealth and to the commodities that had survived as the dominant sector of the economy. There would have been no oligarchs without the Washington Consensus.
The promises of globalization
The ideologies of globalization and its prescriptions went hand-in-hand with a series of narratives and promises, which – despite evidence to the contrary – are still to some extent being upheld to this day. They include, for example, assertions to the effect that the world economy will bring lasting prosperity to all countries that fully and consistently embrace free trade and the free movement of capital. Economic development driven by globalization is leading to the spread of Western values and ultimately to a world of democratic States cooperating peacefully with one another. Or, that “global governance” will raise the power of governments to the next level, and solve the world’s common problems.
It is now becoming increasingly evident that none of these promises has materialized. Whereas poverty has indeed fallen in some, mostly Asian countries (which embraced the Washington Consensus only partially, if at all), global inequality has been worsening in parallel. The economist Thomas Picketty points out that between 1980 and 2014, the incomes of the bottom 50 per cent of the world’s population rose by 21 per cent, while the incomes of the top 0.1 per cent of the world’s population rose 617 per cent over the same period. And even as trade liberalization and the emergence of global supply chains massively boosted the market power of individual enterprises, trade unions the world over were being weakened, social benefits were being curtailed, and many places witnessed the start of a race to the bottom with respect to wages.
And rather than peace, democracy and human rights as in the narrative, the reality is that ever more people today are facing oppression and repression. The Freedom House NGO, for example, finds that all across the world, democracy is currently under attack from populist leaders and groups, often accompanied by the repression of minorities and other contrived “enemies”. At the same time, autocratic regimes have been able, over the past two decades, to extend their influence ever further beyond their own national borders, in an endeavour to silence critics, overthrow democratic governments and reshape international norms and institutions to suit their own interests. This is also rendering cooperation in global bodies such as the UN ever more difficult.
End, what end?
Even if none of the promises of globalization has come true, the war in Ukraine is hardly likely to mark the “end of globalization” as an ideology and its associated policy prescriptions. On the one hand, even before the war, none of the institutions of the Washington, Geneva, Paris and Brussels consensus any longer represented, without differentiation, the same prescriptions as before the 2007 financial crisis. On the other hand, the still Western-dominated international financial institutions are just as happy to continue propagating aspects of this ideology, even though the ever worsening climate crisis, constantly recurring economic and food crises, and the fast deteriorating debt crises have in fact long demonstrated the unsuitability of these prescriptions. Regrettably, it cannot be assumed that the war will change this.
Is the war on Ukraine bringing real world economic integration to a standstill or even reversing it? This too is highly unlikely, even though some supply chains will be altered or truncated. The prospect of a Russia under sanctions coming together with China and a few vassal States to form an insulated Eurasian economic area can be ruled out. The West (including Japan) is economically much too important to China.
There is now an ever greater need to justify the ideology of globalization. The various crises clearly demonstrate that the present world economic model is not one that can bring about peace, freedom, health and well-being for all. That it is destroying the planet is glaringly obvious anyway. So where do we go from here?
First, we need a new ideology which, instead of relying on “perpetual” economic growth, profit maximization and short-term self-interest, focuses on our inter-dependencies, our integration into the natural environment and our shared, long-term interests.
Next, we need an economic and development policy aimed at realizing the universal human rights for all people on earth, and which promotes rather than hampers their achievement around the globe. Second, this new development policy must be able to demonstrate how it can achieve the latter in harmony with the planet’s natural limits. The UN Sustainable Development Goals enunciated in the 2030 Agenda should provide guidance in this respect.
There is no blueprint or roadmap for the major transformation required, it will take countless experiments, search processes, projects and policy debates, from the grassroots all the way to international global governance forums. Like the anti-globalization movement of the noughties in their response to former British Prime Minister Margaret Thatcher’s assertion that “There is no alternative”, we say, “There are thousands of alternatives.”