Questioning Henwood on Globalization

Richard Du Boff 

and Edward Herman


some reason Doug Henwood feels called upon to play down globalization. Others on

the left, some associated with MONTHLY REVIEW, have done the same, warning that

any acceptance of the globalization thesis will discourage leftists and breed

"defeatism." Henwood expresses no such fears; but his treatment of

globalization, his stress on the benefits of trade and

"cosmopolitanism," and his concern that globalization has been

"greeted as an evil in itself" are based on arguments that are

incomplete and unconvincing.


of Henwood’s problems is an apparent unwillingness to recognize that

globalization today is bringing about integration at the level of production

itself, through trade, investment, mergers and acquisitions, and intercorporate

alliances, rather than integration of markets by trade alone.


Henwood’s treatment of "trade penetration in general," based on

"exports as a share of GDP." He states that by that standard Britain,

Japan, and Mexico are no more globalized today than in 1913, although he grants

that "exports are just one indicator." Even by that indicator,

however, the source of his own data (Angus Maddison) shows that for the world as

a whole the export percentage of GDP was significantly higher in 1992 (13.5%)

than in 1913 (8.7%). A more recent study (by Michael Kitson and Jonathan Michie)

compares average annual growth rates of world exports and world output, with the

world economy becoming more "open" when trade grew faster than output.

By this measure, the "openness indicator" for 1913 was reached in 1968

and has since been left far behind.


constricted view of trade carries over into the service sector, where he notes,

correctly, that most of us work in services that are "largely exempt from

international competition." As a snapshot frozen in time, yes; as analysis

of a process, no. Powered by new technologies, trade in services is actually

growing more rapidly than trade in merchandise. It covers finance,

telecommunications, transportation, and a range of business services and now

accounts for around 30 percent of world trade, up from 17 percent in 1980

(percentages that are understated for several reasons, among them the less

reliable statistical coverage than for merchandise trade). The result is that

larger numbers of skilled and semiskilled workers in high-income countries are

no longer "exempt." A global "back office" data entry

industry is developing in the Caribbean, with labor costs running 25 to 40%

those in North America and Western Europe for services requiring a low level of

computer literacy. Higher levels of occupational skill can be tapped as well:

for computer software programming, a $100,000 a year circuit board designer in

California will cost less than a third as much in India, and similar

subcontracting is spreading to other areas, and other industries (film and

television among them). Henwood needs to think more seriously about the direct

and indirect effects of globalization on worldwide labor supplies, the

"20-25%" econometric impact on real wages notwithstanding. As he

himself has pointed out elsewhere, the economists’ chief explanation for real

wage stagnation at the bottom of the income scale–computer-led

"technological upgrading of skills"–is a myth.


globalization is centered in the production process itself. Again, Henwood picks

out a single tree in the forest–intrafirm trade in component parts narrowly

defined–to claim that a global "assembly line" is an

"overblown" image. True, but increasing global production and

marketing capacities of corporate capital are not. In simple trade terms, the

proportion of world trade in the form of intrafirm trade has grown from 20% in

the early 1970s to somewhere between 30 to 40% in the 1990s. In U.S.

corporations, intrafirm exports both finished and unfinished have increased

markedly as a share of total corporate exports over the past 20 years: they now

make up about 45% of the total. But U.S. data also indicate that the fastest

growing trade of all is taking place among foreign-based affiliates of parent

corporations. And all such intrafirm trade figures exclude the increasingly

important "outsourcing contracts in China" and elsewhere.


the globe multinational corporations now number around 60,000, and their 500,000

foreign affiliates by themselves had sales (of goods and services) of $11

trillion in 1998, now exceeding global exports (as they have ever since these

data were first gathered in 1984) by $4 trillion. The stock of foreign direct

investment, the prime mover of international production, is now estimated at

$4.1 trillion, equivalent to 12% of world output compared to 9% in 1913; foreign

direct investment flows have grown from 2% of world output in the early 1980s to

6% at present. And these figures do not reflect a very rapidly growing network

of nonequity arrangements among firms, like strategic partnerships and joint

technology and R&D ventures, which are not captured by usual measures of

international production and serve as leading elements of market power in a

number of key industries (telecommunications, electronics and computers,

biotechnology, instrumentation, automobiles). While most production and

distribution is still carried on within national boundaries, self-contained and

localized production networks are quickly becoming less important in the

operations and strategies of corporate capital–the Fortune 500 in the United

States and their foreign counterparts, which are both competitors and strategic

allies depending on situations prevailing in one industry or another.


steady enlargement and integration of global money and capital markets too,

where private holdings now tower over the reserves of central banks, constrain

national economic policies. Henwood agrees but stresses the fact that financial

markets were also free before 1913. In that earlier era, however, there were no

welfare states to be subverted by the mobility of money, so that even a return

to freer markets is a matter of serious concern.


treatment of the role of the state is curious. "States have been acting for

centuries . . . in the interests of capital," he says. He’s right of

course, but he uses this as a club against an argument that no serious student

of globalization would make–that the state "is withering away under a new

regime of stateless multinational[s]." The point is that, once again, the

state is helping to create new institutions for new modes of accumulation. In

the late 19th century, the state helped create and refine the legal entity known

as the corporation, and its creation of joint-stock companies goes even further

back in time. Now, nation states are working to create international

institutions to further the globalization process. So effectively is the state

serving the interests of multinational capital that it enters into international

agreements like WTO and NAFTA that actually diminish its own abilities to serve

ordinary citizens.


then asks: "And when did internationalization become something feared and

hated in itself?" Again he sets up a straw person. Many who think

globalization is a menace are "cosmopolitan" and don’t object to trade

and other exchanges in themselves. They hardly deny the potential benefits of

international trade–cheaper imports, a wider range of consumer choice, new

technologies, the spur of foreign competition. But we live in an age of trade

shaped and dominated by multinational capital, not by small, competitive

producers with little control over prices, costs, techniques of production, and

market shares. Henwood admits that "export-oriented development has offered

very little in the way of real economic and social development for the poor

countries who’ve been offered no other outlet." Then he asks, "But

does that mean trade itself is bad?" No Doug, but your question is bad. You

just conceded that export-oriented development has hurt poor countries: why

don’t you acknowledge that this is part of the globalization process? And

wouldn’t you agree that the unprecedented growth in world trade since the 1960s

has been associated with steeply rising inequalities of income and wealth, both

internationally and within nations?


Henwood also asks, "do so many people treat globalization itself as the

enemy rather than capitalist and imperialist expansion?" But why can’t you

see, Doug, that capitalist and imperialist expansion now takes the form of

globalization, a form that feeds back to crush democracy at home? You are

embarrassed that Nader echoes Pat Buchanan in describing NAFTA and GATT as a

threat to U.S. sovereignty; and you say that "Washington has been abusing

Mexican sovereignty for over a century–which is why it’s a good idea to stop

saying globalization when you mean imperialism." But you miss the point:

globalization is a major contemporary form of imperialism, and Nader is right

that it reduces U.S. sovereignty while beating up on Mexico as well, a point

that he certainly would have made without any prompting from Buchanan.


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