If you are reading this you don’t need to be told of globalization’s always greater harm to U.S. industrial workers, nor about the sweating of workers in the poorer countries or the environmental damage to their countries. Etc. Such matters are not matters for worry on the part of the giant companies that brought them about. But there is something else going on that should worry them; it very much resembles what happened to Britain — the USA of the 19th century — as that century drew to its close. As of now, the signs are only those of a rumbling undersea volcano; pretty much where Britain was in the 1880s. But things move faster these days, and go deeper.
History never does nor can it ever repeat itself in particulars; the always changing multidimensional social context makes even close repetitions impossible. But certain patterns do recur; among them is that where socioeconomic domination produces conditions leading to its own downfall.
In the capitalist era, there have been two such instances of the decline of once unchallengeable strength: the Dutch in the 18th century, and the British in the 19th. Now it is increasingly likely that the USA will be the third. The Dutch and the British did themselves in by their successes; what follows argues that, in our own ways and time, we do likewise. It goes with the capitalist territory, so to speak.
Capitalism has always been and must always be “global” in order to survive and flourish, as it needs also to have a dominating power over the globe. The “degrees” of the globality and the associated degrees of benefits and harm have been set by the technology of the time. The capitalist era was born with the Dutch in the 17th-18th centuries, the most economically advanced society. Their advanced status was dependent upon trade and finance, not industry; and, in comparison with what would come with industrial capitalist Britain, the power of the Dutch was limited: the Dutch could reach out; the British could reach out further and had to. As the Dutch spread over the world, they did so within the framework of colonialism; the British, because they were industrial, became the bearers of modern imperialism. The globalization created and dominated by the USA is imperialism in today’s dress of jazzed-up communications, production, and transportation — which, in giving us the ability to do what we have done, also give the others the ability to take us down. As happened to the Dutch and the Brits.
The differences between the three forms of global domination are enormous: Colonialism essentially stopped at the coastlines of exploited territories; imperialism could and had to penetrate deeply into the affected societies — geographically, socially, and politically. Its consequent quantitative and qualitative destruction therefore went well beyond that of colonialism. And, in the past half century, the destructive powers of globalization have once more produced a quantum leap; we have succeeded in wiping out the past and foreclosing the future of most of the peoples of the world. They are no longer citizens of their societies, but captives of capitalism; with the same capivity spreading through the peoples of the leading countries. It is commonly said now that the entire world is being “americanized”: it is more accurate to say that it is being “capitalized.” . Of which more in a moment.
First a very brief discussion of Britain’s rise and fall, as a basis for understanding capitalism’s self-destructive tendencies and, at the same, time to illustrate the differences between their past and our present. Britain’s great power in the 19th century arose from its having been the first country to industrialize. When that was well underway, Britain enhanced its strength and its wealth by massive lending abroad, most importantly to Germany and the USA . But the latter’s industrialization, able to take advantage of rapidly evolving new technologies within their more conducive (and contrasting) institutional frameworks, made Britain a second-rate industrial power already by 1900. Veblen saw this as “the penalty of taking the lead and the advantages of borrowing.” As the 20th century opened, Britain’s wealth and prosperity depended increasingly upon its financial gains from abroad, and less and less upon its once great industrial strength and its exports. Still, as of 1900, and despite that it was importing considerably more than it was exporting, Britain’s levels of average real income were high and rising. It was still exploiting the rest of the world, but in ways that would come back to haunt it. By World War I — although the Brits didn’t know it — they were on their way down. Indeed, “they didn’t know it” as late as 1926, when a leading British economist described the USA as an “agricultural economy.” .Overwhelming strength breeds not only arrogance but ignorance; everywhere.
The world over which we preside is VERY different from that of Britain’s; but along with the differences are some underlying similarities and probable consequences which, although different from the earlier period, are not likely to be less serious. Look again at the main points of the previous paragraph and the differences between then and now:
1. Britain was the world’s largest creditor; the USA is the world’s largest debtor.
2. Britain loaned to what became its main competitors; the USA has invested in and built U.S.-owned factories, abroad (where the labor is cheap and there are no environmental constraints), as levels of real income for an already substantial and always rising percentage of its once best-off workers are consigned to the garbage heap.
3. Britain’s exports and the enormous income from its foreign loans were the source of its prosperity; the “health” of the U.S. economy has increasingly come to depend upon its service sector (especially its financial core) not its manufacturing sector, with the latter’s profits dwindling from exports and dependent upon domestic consumption; in turn, that domestic consumption is critically dependent upon dangerously bloated household debt — now well in excess of monthly household income. Equally bloated is the debt of both non-financial and financial companies, and our foreign, state and national debts — all contributing to an an ever-higher and already perilous fragility.
The great strength and powers of the USA arose first and foremost from its manufacturing industries. They were prominent already in the late 19th century and exploded in the 20th century. Now that sector is imploding..
Globalization, so essential and so beneficial for the profits of a few hundred of the top U.S. corporations, has been a disaster for manufacturing jobs in the USA: the news has finally come through to the mainstream media (see below). Those losses began to be serious in the 1980s, because of what was called “downsizing and outsourcing.” Since then, for example, the U.S. workers in steel and in autos — those with the highest wages and benefits — have gone down by about half, with worse on its way for all blue collar workers.. .
Those processes were prodded into existence by both need and possibility: the need was to cut costs in order to meet already strong competition from the other industrial powers. The latters’ strength came in critical part from the interactions of the political economy of the Cold War with our external loans and grants. The principal beneficiaries among the leading countries were Japan and Germany; they also became our principal competitors. But our attention and our carrots and sticks were also meted out to the “emerging economies,” where labor was sickeningly cheap, corruption was rampant, and the always more powerful transnational companies could have their way with the easily corruptible governments there and at home: no holds barred.
But, as in earlier epochs, something went awry. The main difficulties of 19th century imperialism arose from the conflicts between the imperializing countries competing to gain controlling power over the resources, markets, and strategic locations of weak societies; in our time, now, what once were colonies are politically independent. To make or keep them economically dependent the main powers must deal with substantially different and always changing stresses and strains with the newly-independent nations and amongst themselves.
Already in the 1950s an important group of the ex-colonies had dubbed themselves “the third world (the other two “worlds” being the capitalist/communist combatants of the Cold War). The world of the weaker countries was wildly diverse: tiny to large countries in size and populations, desperately to mildly poor, tending toward (or having achieved or thrust upon them) one degree or another of fascist, communist, or mildly socialist governments. Nor, unlike the earlier imperialist era, were the major capitalist nations the only players in the game; the USSR and Red China were also involved. For better and for worse, this required different strategies and yielded unpredictable results for the entire global system; one unexpected and usually intractable surprise after another from all quarters, none of them welcome.
Those who designed and executed the joined-at-the-hip policies of cold war and globalization had not the slightest inkling that our suppression of the Soviet Union would lead to its current “mafia capitalism,” or that our encircling of Red China would lead to — what to call it? — China’s variation on the horrors of the industrial revolution; its effectively slave labor is presided over by Communists just as devoted to the bottom line as the 19th century British “Messrs. Moneybags” (as Marx called them). Nor was it anticipated that our use of Japan and Germany as key military outposts would, given its essential economic accompaniments, create our two most potent competitors — or that our installation of the fascist Syngman Rhee in South Korea and our effectively occupying army would, taken together, lead to a modern and competitive Korean economy and, at the same time, anti-capitalist and anti-American politics. Least of all was it expected that our “outsourcing” to cheap labor places like China and India would lead them to move toward dominance in, among other unimportant and important industries, computer hardware, with more to come..
So it is that, once again, companies’ pursuit of profits through global expansion act to pull the rug out from under the very economy upon whose strength the well being of the companies ultimately depends, what is very sensible from each participating company’s point of view spits back in its face. Such short-sightedness is not a defect of the business mentality, it is a necessity for what are seen as their successes: It is capitalism’s middle name.
It is against that background that current economic processes must be placed if they are to be judged intelligently. Financial columnists, mainstream economists and the White House do what they can to spin each and every economic factoid to show that — as the saying went — prosperity is just around the corner. We are expected to give at least two cheers when we are told that productivity in manufacturing is climbing the heights; however, in the small print we find that a good chunk of that advance is due to fewer workers putting in more hours without overtime pay (while paying a higher percentage of their health care benefits. Rarely is it noted that the increased revenues from that productivity — naturally — go mostly to profits and dividends (as with Bush’s tax cuts); nor is it often noted that in addition to not paying overtime manufacturers are also not investing in equipment for expansion. For two years we have been told that recovery is underway, but that it is a “jobless recovery”; in fact it has been a “jobloss” non-recovery: almost 3 million jobs have been lost since 2001. Moreover, the new jobs are almost entirely in the service sector at much lower levels of skill and wages, with no benefits;
Since the 1950s union membership has gone down by two-thirds; their political clout has gone down even more. In partial consequence, social reforms have been crushed or reduced. The average family continues to increase its household indebtedness, is less and less for buying manufactured goods and more and more to pay for education, higher rents and indirect taxes, and higher health care and prescriptions prices — while workers’ coverage declines and co-payments go up: As a headline in the financial news put it recently, “Necessities, not luxuries, are driving Americans into debt.” (NY Times, 9-4-03) From the point of view of a particular company, business is business; from the standpoint of the economy and the demand for its manufactures, it is a disaster waiting to heppen..
Meanwhile, what is happening around the globe is also sending warning signals. If there is any truly “emerging economy” in the world today it is China’s: It will surely be among the top 2-3 economies in aggregate strength within 10 years; as things go with the Top Three these days (USA, Japan, Germany, in that order), China could damn well be Number One; and as for Japan, the present Number Two, what would be better for the USA (remembering that Japan holds the largest part of our debt), to have Japan regain its strength, or lose more of it? Add to that the growing uneasiness of “Europe” with the USA: As U.S. arrogance and non-cooperation have risen (Kyoto on the environment, WTO on tariffs, and World Court and UN defiance), it is not only France and Germany that have been nay-saying, and not only about Iraq; no less than the Romano Prodi, Commssioner of the European Union, has been openly pressing for Europe to distance itself from the USA, make itself less dependent. Of such dilemmas hath the mighty fallen.
Another part of the larger picture has to do with the impact of ongoing U.S. domestic policies as they interact with the world economy. The combination of extraordinary tax cuts for the rich (and peanuts for two-thirds of us) and rapidly rising expenditures on the Middle East and on weaponry, not only mean that social expenditures at the federal, state, and local levels are decreasing (and do so as their federal grants go down), but that the taxes of the lowest 90 percent will rise while at the same time social programs (in education, housing, medical care, especially) decline. There’s lots wrong with that; making it wronger is that it will further weaken our manufacturing sector: the beating heart of the U.S. economy, remember. But we must remember this, too: Since the 1980s, the USA has become “the consumer of last resort”; all the countries in the rest of the world economy have been dependent upon the USA importing more than we export. In the old expression, “when the USA gets a cold, the rest of the world gets pneumonia.”
That old expression was coined before we were running our enormous trade deficit (now at a rate of half a trillion dollars a year). You don’t have to know economics — in fact you’re better off not knowing it — to understand that as we continue along present paths, the rest of the world will be dragged along with us. As they begin their roll over the cliff, not only will they buy even less from us, it might occur to them to try to get back some of those trillions we owe them. U.S.A. could make Argentina’s defaults look like kid stuff.
Ominous as all of that seems, and even though it leaves out a lot that would also feed that volcano, does it signify anything in particular around any corner soon to be reached? Who knows? Predictability on such matters is impossible, whether for next year or the next decade. All that can be said is that present tendencies point to an already serious and a continuing decline in U.S. manufacturing strength and therefore in its overall economic strength. To the degree that is so, the future of the entire globe becomes even rockier than it would otherwise be; and it portends all too much of that even with continuing U.S. strength. It needs repeating that whatever its defects, a global capitalist economy must have a controlling or guiding central power; we are losing our ability to be that power. It is more likely that chaos than that any other identifiable power will take our place — for better or for worse.
To which it needs adding that — as the politics of the U.S. stand today and for the foreseeable future — if and when we loose the market power to dominate economically, we will remain the dominating military power until — to put it bluntly — death do us part. We are unbeatable militaryily, if and when we use all of our “weapons of mass destruction.”
The conclusion to all this is that we had better get our political act together, fast and well. Many might think, hey! great, the biggies are gonna get their asses kicked, finally! Maybe so; what is absolutely certain is that most of the people, in and out of the USA, will take the greatest hit economically and, maybe, all of us, “nuclearly.” We may have as much a decade to get going effectively, maybe much less. No matter; the time to get off our political asses is NOW.