Part
Two
War as an
Instrument to Impose Globalization
Chapter 5
Nationalism in the Era of Globalization
THE GLOBAL era had its origins in the early
1970s, when the U.S. administration decided to abolish the link between
the dollar and gold. With this unilateral move, the U.S. ended a more than
a quarter century in which the multilateral Bretton Woods agreement governed
international monetary issues.
The Bretton Woods agreement (negotiated in the Bretton
Woods Hotel in New Hampshire) had bound the U.S. and its allies since 1944.
Around the same time, near the close of World War II, the U.S. had initiated
the creation of the World Bank and other international financial institutions.
The Bretton Woods meeting had a double aim. It set out to prevent recurrence
of the monetary instability whose economic effects had helped provoke the
war. It also sought to use financial support and loans from the World Bank
to stop war-devastated countries from turning to Communism.
These arrangements stabilized currency exchange rates,
pegging the dollar to gold at $35 per ounce. After the war ended, the dollar
became a universal currency; commodity prices were fixed in dollars to
facilitate world trade. Because financial markets were small, speculation
on currency was negligible.
How did the international economy change so much, so fast?
In 1971 a massive deficit created by Vietnam War spending hit the American
budget. Inflation followed; at the same time, a sharp increase in the ratio
of imports to exports created a deficit in the balance of payments. Under
these economic pressures, U.S. President Nixon chose to devalue the dollar.
In January 1973 he disconnected it from the gold standard, annulling the
Bretton Woods arrangement. The replacement of fixed exchange rates with
floating currencies opened the door to speculation on currency values.
(Richard Longworth, Global Squeeze , 1998, p. 46).
The abolition of the link between the dollar and gold
was an acknowledgment that the U.S. economy had lost its hegemony; a new
stage had begun, marked by fierce competition between the U.S. and its
past enemies (and new allies), Germany and Japan. America had to share
its economic influence in the world with these partners; three main economic
blocks thus developed. The Japanese yen played a central role among the
South Asian "Tigers"; the German mark played a similar role in the European
Market; and the U.S. maintained its grip on its Latin American backyard
and the oil wells of the Middle East.
Despite this loose division of world economic regions
among the main powers, important economic ties and common interests bind
the three giants. During the seventies and the eighties, for example, Japan
exported more to the U.S. than it imported from there, building up a huge
surplus in the bilateral balance of trade. The Japanese had developed a
production system that produced high-quality goods at relatively little
expense -- especially for manpower. An invasion by Japanese electronics,
cars, and steel -- products traditionally under U.S. hegemony -- led to
the closing of many American industries.
During the presidency of Ronald Reagan (1981-1988), U.S.
industry tried to regain its lost supremacy in the world market. The attempt
to compete with Japan catalyzed radical structural changes in the U.S.
economy, severely embittering the relationship between companies and workers.
The Reagan administration placed strict new limitations on unions' ability
to defend their members. At the same time, it introduced changes to the
Social Security laws, on which the rudimentary U.S. welfare state is based.
Millions of American workers lost their jobs and their social benefits.
Despite their fierce competition for markets, the U.S.,
Germany, and Japan remained allies, solving their differences by dialogue
-- and for good reason. The three shared one primary interest: to reduce
the strength of the non capitalist world, especially the Soviet-led Socialist
Block. Europe played an important military role through NATO, while Japan
tried to contain China's influence in Southeast Asia and permitted the
U.S. to maintain military bases on its territory.
To the same end, Reagan's foreign policy reflected the
new domestic aggressiveness on behalf of U.S. business. The U.S. began
a series of military interventions against revolutionary governments in
Central American countries -- Grenada and Nicaragua, for example -- that
rejected the domination of U.S.-based corporations. It assisted the Islamic
Mujahedin's counter-revolution in Afghanistan. It supported Israel's bombing
of the Iraqi nuclear reactor in 1981, and its war against the PLO in Lebanon
in 1982. A nuclear arms race with the Soviet Union complemented this aggressive
policy towards small non capitalist states.
The global village replaces the national market
The radical measures that the Reagan administration applied
in its fierce economic competition with Japan gradually worked deep changes
in the U.S. and world economies. Two such changes -- the technological
revolution and the reduction of expenses in wage work -- enabled the U.S.
to regain its economic supremacy.
Up to that point, the European-born national state had
been the common model for economic and social arrangements. While providing
tariffs to protect the development of a national capitalist economy, the
state had guaranteed citizens' rights and offered some social benefits.
As a result of long labor struggles, states adopted laws to limit exploitation.
During the nineteenth century, the working class won the right to build
unions and class-based political parties split society.
Then, in the 1980s, U.S. companies turned to a concept
that Karl Marx had developed 150 years before: that the secret of profit
making rests mainly in the surplus value that can be extracted from labor.
In order to compete with Japan's low-priced exports, U.S.-based corporations
started to transfer their facilities overseas in a worldwide search for
cheap labor. This new trend replaced the local or national market with
the "global village".
The industrial emigration in search of cheap labor
The political economy of the national state thus lost its
potency. The national market -- the original basis for the establishment
of the national state -- and the democratic constitution that guaranteed
citizens' rights no longer served the needs of the big bourgeoisie. Capitalists
no longer restricted themselves to investing mainly in their own countries;
they began moving their investments to competing developed countries.
First, Japanese capitalists turned to America. They had
accumulated an immense capital surplus and wanted new markets for it. Seeking
a dominant place in world trade, Japanese manufacturers had established
a vast market for their products in America. At the same time, Japan took
steps to reserve its national market for Japanese producers. Using a series
of laws and regulations, it rejected foreign investment -- and was the
only country to do so. This exclusionist policy aroused such bitter hostility
among the American public that several Japanese companies found it prudent
to open factories in the U.S., creating jobs for Americans. Japan's move
stimulated the emigration of capital from Europe to the U.S. and vice versa.
Factories then began to emigrate to the Under developed world in search
of cheap labor, while workers in poor countries emigrated to the industrialized
world in search of work. The "Fatherland" had lost its meaning.
The General Agreement on Tariffs and Trade (GATT), signed
in 1948 at the beginning of the Cold War, resulted in the gradual abolition
of tariffs. The removal of tariff protection aided international capitalists
at the expense of local industries in the signatory countries, exposing
the real meaning of the "global village". The owners of the multinational
companies consolidated the world into one unit, a world market open to
the free movement of people, money, and commodities.
The real meaning of the Information Revolution
Many liberal Arab intellectuals have adopted a positive approach
towards globalization, in its guise as "the Information Revolution". While
it is true that the Internet allows information to be disseminated at previously
unimaginable speed, it does not necessarily do so for the benefit of humanity
or the interest of workers.
We can compare the role of the Internet in the current
technological revolution with that of the railways in the European industrial
revolution. In the nineteenth and early twentieth centuries, colonialist
countries extended railways through their colonies, not to industrialize
the colonies, but to ease the removal of their natural resources to industrial
centers in the colonizing country. This kind of "development" increased
exploitation, multiplied profits, and helped strengthen the imperialist
grip on the colonies. In the late twentieth century, a modern net of fast
communications replaced railways, but the aim is the same: to make as high
a profit as possible for the bourgeoisie, although this bourgeoisie is
no longer national but international.
The Internet has become a functioning network for conducting
business and connecting producers directly with consumers. This innovation
reduced costs, making possible the lowering of prices. One result has been
the destruction of even more national industries and the consequent seizure
by the multinationals of an even greater share of the world market. By
losing productive capacity, the poor countries have become more dependent
than ever.
Another result of the new technologies is share trading
on an international scale, involving astronomical amounts of money -- many
times the amounts invested in real production. Global trading has become
the most important branch of investment; traders use computer technologies
to move their money from one market to another day and night, looking for
profit opportunities. "The daily trading of national currencies expands
ferociously and now exceeds $1.2 trillion a day -- foreign exchange trading
that in four or five days equals the annual output of the U.S. economy."
(William Greider, One World, Ready or Not, 1997. p. 234)
Moving money from one stock market into another is now
the easiest way of making fast profits; speculation on currency and equities
has therefore become a central characteristics of globalization. This trade
has caused serious economic crises in countries that had opened their markets
to speculation: large amounts of money enter and exit according to the
profit considerations of private investors who feel no responsibility for
their actions' effect on local economies. Government gives way to corporate
rule.
Privatization and the restriction of government spending
were the main slogans of the capitalists during the twin governments of
U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher.
After the Soviet Union collapsed, the other capitalist countries adopted
the policies of Thatcher and Reagan. Governments sold public assets and
services to private companies while cutting expenditures -- especially
for social services. International institutions like the World Bank and
the International Monetary Fund severely restricted the deficits in borrowers'
national budgets, allowing shortfalls of no more than 2 percent of a country's
Gross Domestic Product.
In less than twenty years, this policy brought about a
qualitative change in the balance of forces between governments and big
corporations. Some multinationals and investment companies own more money
than the central banks of the main capitalist countries -- including the
U.S., Britain, and France. "The global markets are already unimaginably
vast. Liquid financial assets by the year 2000 are expected to be about
$81 trillion, or three times as large as the total GDP of the world's twenty
nine richest nations, the members of the Organization for Economic Cooperation
and Development. These markets already have the power to override governments
and their policies, and they are growing daily, almost hourly." (Longworth,
p. 59).
Privatization and the reduction of taxes on big companies
led to a sharp decline in the national revenues. States nevertheless continued
to finance military expenses and provide for some basic public services.
Offering bonds to fund their expenses, governments became indebted to private
lenders.
In the past, the state had an important role to play in
mitigating the danger of total economic collapse through regulation. Today,
through the new concept of the free market, the state has lost this ability
to prevent the economy from failing. The state today has far less power
to apply fiscal and monetary policies for the public and national interest,
for it is hostage to a small group of capitalists.
The U.S. is an outstanding example of these changes. "Before
War World II, corporations paid one-third of all U.S. federal taxes; now
they pay only 12 percent, as the government cuts corporate taxes to keep
companies from fleeing abroad. In Europe, the same pressures have cut the
average tax rate on income from capital investments from 50 percent in
1981 to only 35 percent now. Taxes on wages -- that is, taxes on workers
-- have taken up the slack. Income taxes account now for nearly 50 percent
of all U.S. federal revenue, four times as much as corporate taxes." (Longworth,
p. 61.)
The meaning of an independent state in the New World Order
The creation of an independent national state, a real possibility
before the collapse of the Soviet Union, is almost impossible under present
conditions. Today's political and economic conditions exacerbate the difficulties.
When a superpower like the U.S. has lost its economic
role and submitted to the rules of the global economy, it is difficult
to imagine the creation of a Palestinian state with full political and
economic independence.
Indeed, without the economic and social role that guaranteed
the welfare of its citizens, the main residual function of the state is
to preserve the property and interests of the bourgeoisie. In the USA,
for example, as people struggled to get a living under the new system,
the crime rate rose sharply. The American government did not respond by
creating job opportunities; its only answer has been to increase the number
of prisons and repress the poor, who are disproportionately black and Latino.
(Edward Luttwak, Turbo Capitalism, 1999, pp. 2 and 99.)
The PA, similarly, is following the path of other countries
that have submitted to the New World Order. In exchange for privileges
for a thin layer of greedy individuals, the PA gave up the aspiration of
the Palestinian people for political independence and assumed a repressive
role in the service of the foreign companies and the local bourgeoisie.
Return to top of page Previous
chapter Next chapter
