GLOBALIZATION

Globalization is the latest fashionable term used to describe the all pervasive forces of a rampant capitalism. It suggests a new stage of capitalism in which multinational companies and financial institutions, attached to no particular nation state, move their capital around the world in search of the highest returns, and in so doing create a truly global market and global capital. In fact, as DAVID YAFFE argues, the degree of internationalization of capital is only now approaching the apex levels[3] since the birth of modern imperialism in the outset of 20th century. And far from being new, we are seeing a return to those unstable features of capitalism which characterized imperialism before the First World War.Globalization in its literal sense is the process of transformation of local or regional phenomena into global ones. It can be described as a process by which the people of the world are unified into a single society and function together. This process is a combination of economic, technological, socio-cultural and political forces. But this meaning cannot be accepted in the whole circle of scholars. They are varying one another in their views. Here in this paper an attempt has been made to analyze the history of the origin and development of Globalization as a contemporary episode of Imperialism. In this juncture when the world imperialism led by ‘mighty American Imperialism’, as we are witnessing, is fallen down to severe crises, it is highly necessary to understand Globalization and its exploiting nature and its failure to save the moribund Capitalism form its inevitable death for the comprehensive understanding of present world situation.DEFINITIONS OF GLOBALISATIONTom G. Palmer of Cato Institute defines "globalization" as "the diminution or elimination of state-enforced restrictions on exchanges across borders and the increasingly integrated and complex global system of production and exchange that has emerged as a result."According to Thomas L. Friedman "examines the impact of the 'flattening' of the globe", and argues that globalized trade, outsourcing, supply-chaining, and political forces have changed the world permanently, for both better and worse. He also argues that the pace of globalization is quickening and will continue to have a growing impact on business organization and practice. Noam Chomsky argues that the word globalization is also used, in a doctrinal sense, to describe the neo-liberal form of economic globalization.Herman E. Daly’s argument is that sometimes the terms internationalization and globalization are used interchangeably but there is a slight formal difference. The term "internationalization" refers to the importance of international trade, relations, treaties etc. International means between or among nations. "Globalization" means erasure of national boundaries for economic purposes; international trade (governed by comparative advantage) becomes inter-regional trade (governed by absolute advantage).BACKGROUND OF GLOBALISATIONThe term "globalization" has been used by economists since the 1980s although it was used in social sciences in the 1960s; however, its concepts did not become popular until the latter half of the 1980s and 1990s. The earliest written theoretical concepts of globalization were penned by an American entrepreneur-turned-minister Charles Taze Russell who coined the term 'corporate giants' in 1897. Globalization is viewed as a centuries long process, tracking the expansion of human population and the growth of civilization, that has accelerated dramatically in the past 50 years. Early forms of globalization existed during the Roman Empire, the Parthian empire, and the Han Dynasty, when the Silk Road started in China, reached the boundaries of the Parthian empire, and continued onwards towards Rome. The Islamic Golden Age is also an example, when Muslim traders and explorers established an early global economy across the Old World resulting in a globalization of crops, trade, knowledge and technology; and later during the Mongol Empire, when there was greater integration along the Silk Road. Globalization in a wider context began shortly before the turn of the 16th century, with two Kingdoms of the Iberian Peninsula - the Kingdom of Portugal and the Kingdom of Castile. Portugal's global explorations in the 16th century, especially, linked continents, economies and cultures to a massive extent. Portugal's exploration and trade with most of the coast of Africa, Eastern South America, and Southern and Eastern Asia, was the first major trade based form of globalization. A wave of global trade, colonization, and enculturation reached all corners of the world. Global integration continued through the expansion of European trade in the 16th and 17th centuries, when the Portuguese and Spanish Empires colonized the Americas, followed eventually by France and Britain. Globalization has had a tremendous impact on cultures, particularly indigenous cultures, around the world. In the 17th century, globalization became a business phenomenon when the British East India Company, which is often described as the first multinational corporation, was established. Because of the high risks involved with international trade, the British East India Company became the first company in the world to share risk and enable joint ownership of companies through the issuance of shares of stock: an important driver for globalization. Globalization was achieved by the British Empire (the largest empire in history) due to its sheer size and power. British ideals and culture were imposed on other nations during this period.The 19th century is sometimes called "The First Era of Globalization." It was a period characterized by rapid growth in international trade and investment between the European imperial powers, their colonies, and, later, the United States. It was in this period that areas of sub-Saharan Africa and the Island Pacific were incorporated into the world system. The "First Era of Globalization" began to break down at the beginning of the 20th century with the First World War. Said John Maynard Keynes,“The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914.”The "First Era of Globalization" later collapsed during the gold standard crisis in the late 1920s and early 1930s.GLOBALISATIONThe strongest supporters of the globalization standpoint are the neo-liberal right. A recent convert to their free market orthodoxy it is said in order to save itself from the chop[4] has been the United Nations Conference on Trade and Development (UNCTAD), an organization set up 32 years ago to provide reports on trade and development from the perspective of developing countries. World Investment Report 1995 (WIR 1995) reads like an eulogy on globalization."Enabled by increasingly liberal policy frameworks, made possible by technological advances, and driven by competition, globalization more and more shapes today's world economy. Foreign direct investment (FDI) by transnational corporations (TNCs) now plays a major role in linking many national economies, building an integrated international production system the productive core of the globalizing world economy”.[5]However its own report produces a wealth of statistical material which shows a very different picture emerging.TNCs and MNCsThroughout its report UNCTAD uses the term transnational companies. In fact transnational companies are relatively rare. Most companies are nationally based, are controlled by national shareholders, and trade and invest multinationally with the large majority of their sales and assets in their home country.A recent study of the world's 100 largest companies taken from the Fortune Global list showed that in 1993 only 18 companies maintained the majority of assets abroad. The internationalisation of shares was even more restricted. 2.1% of the board members of the top 500 US companies were foreign nationals with only 5 of the top 30 US companies listed having a foreigner on their boards. All the companies seemed to have benefited from industrial and trade policies of their own countries and at least 20 would not have survived if they had not been saved in some way by their governments.[6]UNCTAD's own index of transnationality based on shares of foreign assets, foreign sales and foreign employment shows 40 of top 100 multinational companies in 1993 have more than half of their activities abroad, with the average for the whole group at 41 per cent, falling to 34 per cent for US Multinationals, which comprise nearly onethird of the total. Even these figures are misleading as Nestle, which tops the list with 92 per cent, limits non-Swiss voting rights to 3 per cent of the total. In addition most research and development (R&D) takes place in the home country. For US multinationals, the share of research and development performed by majority owned foreign affiliates was only 12 per cent in 1992 .[7]Finally a recent study by Hirst and Thompson (H&T), based on company data for 500 MNCs in 1987 and 5000 MNCs in 1992-3, assessed the relative importance for MNCs of home and foreign sales and assets of particular countries, mainly US, UK, Germany and Japan. They found that between 70 and 75 per cent of MNC value added was produced in the home nation. They conclude that international businesses remain heavily 'nationally embedded' and continue to be MNCs rather than TNCs.[8] However, that international companies are nationally based and trade and invest multinationally tells us little about the overall strategic importance of the 25 30 per cent activity conducted abroad a point that we shall return to below.An integrated production system?Foreign direct investment is linking many national economies but, but far from this leading to an 'integrated production system', it is reinforcing the economic domination of the vast majority of the world by a small number of imperialist countries. Multinational companies have become the principle vehicle of imperialism's drive to redivide the world according to economic power.Since 1983 FDI has grown five times faster than trade and ten times faster than world output.[9] This process is being reinforced with recession and stagnation continuing to afflict the major imperialist economies. From 1991 to 1993, worldwide FDI stocks grew about twice as fast as worldwide exports and three times as fast as world GDP. MNCs FDI in 1995 was estimated at $230bn, producing a worldwide FDI stock of $2,600bn (1995) with worldwide sales of foreign affiliates at $5,200bn (1992) and up to $7,000bn, if subcontracting, franchising and licensing are taken into account.Investment stocks and flows, inwards and outwards, are concentrated in the imperialist countries and particularly in the competing power blocs, the 'Triad' of the European Union, Japan and the United States and their regional cluster of countries.[10] 70 per cent of the outflows from the imperialist countries (60-65 per cent of total world flows) come from only five countries, France, Germany, Japan, UK and US. Continual repositioning has taken place among them and in the recent period the US has reasserted its lead accounting for one quarter of the world's stock and one fifth of world flows (see Tables 1 and 2).The relative change in the balance of economic power since the end of the postwar boom is highlighted by US share of the world outward stock of FDI falling from 52.0 per cent in 1971 to 25.6 per cent in 1994, while Japan's share rose from 2.7 per cent to 11.7 per cent. The European Union is the dominant imperialist bloc and Britain, a rapidly declining industrial power, still retains a formidable imperialist presence.Over the last 10 years FDI outflows from Third World countries have more than doubled growing from 5 per cent of world FDI outflows in 1980-84 to 10 per cent in 1990-94, reaching 15 per cent in 1994. However this does not represent a significant step towards a more integrated system since most of the capital flow comes from a small number of the socalled newly industrialising countries (NICs), mainly in Asia, with Hong Kong alone contributing 64 per cent of the total. Hong Kong outflows seriously distort the overall figures. A lot of the other outward investment results from companies in NICs forced by rising wages to move labourintensive FDI to lower wage countries in the same region. Of real significance is the fact that only 6 per cent of FDI outward stock is accounted for by Third World countries. It is a great deal lower than their share of exports in world exports, and GDP in world GDP, at 23 per cent and 21 per cent respectively.The recession which hit most imperialist countries in 199092 and the stagnant economic growth of the following years, while reducing overall FDI outflows from the imperialist nations, saw a much greater share of them go into the Third World, and, in particular, China. FDI inflows into Third World countries increased from $35bn (17 per cent of the total) in 1990 to $84bn (37 per cent) in 1994, and is estimated to reach $90bn in 1995, nearly 40 per cent of total FDI outflows (Table 3).The flows into the Third World were however very concentrated. 79 per cent of FDI inflows into Third World countries in 1993 went to only ten countries including China. With nearly $28bn, China was the second largest recipient of FDI (after the United States) taking 37 per cent of the total going to Third World countries. FDI outward stock was likewise highly concentrated with 67 per cent of Third World stock in just ten countries in 1993. Asia accounted for 70 per cent of total flows into Third World countries in 1994. Latin America and the Caribbean received 24 per cent with two countries, Mexico and Venezuela, accounting for 71 per cent of the region FDI inflows. On the other hand FDI into Africa has declined from 11 per cent of Third World inflows in 1986-90 to 6 per cent in 1991-93 and to 4 per cent in 1994. Finally privatization was the main reason for the $6.3bn flows into the ex-socialist countries of central and eastern Europe in 1994, turning former domestic companies into foreign affiliates of multinational companies.Our argument can be further substantiated by looking at FDI in terms of its distribution among the worlds population. The Triad countries comprising 14 per cent of the world's population attracted some 75 per cent of FDI flows. If we add to this the population of the ten highest recipients of FDI in the Third World, then 43 per cent of the world's population received 91.5 per cent of FDI between 1981-91. This includes all of China with a population of 1.2bn. If we only include China's population in the coastal regions where most FDI is concentrated then only 28 per cent of the world's population receive 91.5 per cent of FDI. On this basis between 57 and 72 per cent of the world's population receive only 8.5 per cent of total world FDI.[11] This is hardly a picture of an integrated production system but one that is highly concentrated and very unequal.Highly concentrated and very unequal'...a fall in the rate of profit connected with accumulation necessarily calls forth the competitive struggle. Compensation of a fall in the rate of profit by a rise in the mass of profits applies only to the total social capital and to the big, firmly placed capitalists.'--K MarxUNCTAD's support for countries opening up their economies to FDI shows quite brazenly its neoliberal sympathies:'In today's increasingly open and competitive global economic environment, the performance of countries best measured in terms of per capita income (as a proxy measure for welfare) and growth depends significantly on the links they establish with the world economy'.Unusually, we are provided with a definition of a competitiveness as the ability of firms 'to survive and grow while obtaining their ultimate objective of maximising profits'[12] which helps to explain today's increasingly unequal and monopolistic global environment.Growing competition for profits creates an inexorable tendency towards monopolisation as it is only the 'big firmly placed' companies which can survive in a world where capital accumulation is stagnating. Growing monopolisation of markets for goods, investment, technology and raw materials, through mergers, acquisitions and FDI, are the result of multinational companies relentless search for ever greater profits to compensate for a general fall in the rate of profit. This creates a very different 'global environment' than that promoted by the UNCTAD report.We have already showed how FDI by predominantly nationally based multinational companies is concentrated within a number of competing power blocs. It is also controlled by a small number of multinational companies within those blocs. There are in the region of 40,000 multinational companies having some 250,000 foreign affiliates. However the largest 100 multinational corporations (excluding those in banking and finance) had an estimated $3.7 trillion worth of global assets with $1.3 trillion outside their respective home countries. This accounted for a third of the combined FDI stock of their countries of origin. The world's 500 largest industrial corporations employ 0.05 per cent of the world's population and control 25 per cent of the world's economic output; and a mere one per cent of all multinationals own half the global stock of FDI. Twothirds of world trade is controlled by multinational companies with half of this trade, or $1.3 trillion exports, intrafirm trade between multinational companies and their affiliates. In the case of US multinationals, $4 out of $5 received for goods and services sold abroad by US multinationals are actually earned from goods and services produced by their foreign affiliates or sold to them.The concentration for a certain range of products is even greater. In the case of consumer durables the top five firms control nearly 70 per cent of the world market in their industry. In automotive, airline, aerospace, electrical components, electrical and electronics and steel industries, five firms control more than 50 per cent of output. In oil, personal computer and media industries the top five firms have more than 40 per cent of sales. [13]The total sales by foreign affiliates of 23 multinational companies accounted for 80 per cent of the total world sales in electronics. 70-80 per cent of global R&D expenditure and 80-90 per cent of technology payments are within MNC systems. Far from this presenting a picture of an 'open and competitive' environment we have one that is increasingly controlled and increasingly monopolistic.The same principles which lead to the concentration of capital in the hands of a few large corporation determine the extent and direction of FDI. The forces of monopoly consolidate at a global level. Most FDI going into the imperialist nations is 'ownershipswitching' for mergers, acquisitions and privatizations as opposed to new establishment or 'greenfield' investment. In the case of FDI going into the United States in 1993, 90 per cent in value was for acquisitions of existing companies. For US outward FDI the ratio of the number (data on values are not available) of new establishments to acquisitions was 0.96 in other imperialist countries compared to 1.8 in Third World countries.In a classic piece of understatement UNCTAD informs us 'FDI is not a panacea to break from the vicious circle of underdevelopment' in the Third World. That is certainly true. For the strategic importance for MNCs lies in its ability to generate adequate profits through the access it provides to essential markets and productive resources throughout the world.MNCs FDI inflows to Third World countries accounted for only 7 per cent of Third World domestic investment in 1993. As we have discussed earlier, it is mainly is concentrated in only 10 countries. These countries have an average GDP per capita of $6,610 and come into the top sector of middle income countries. MNCs are looking for high, guaranteed profits, relatively large domestic markets or easy access to such markets, good social and industrial infrastructure, a skilled workforce at low cost, political and economic stability, open economies and easy repatriation of profits. Africa, for example, is now of limited importance, in spite of high rates of return, because of widespread poverty and political and economic instability. Not surprisingly, FDI in Africa is concentrated in countries with important raw materials, particularly oil.Official rates of return to US FDI in Third World countries in 1993 at 16.8 per cent were nearly twice the level in imperialist countries at 8.7 per cent. The rate of return in the primary sector in Africa was a massive 28.8 per cent. Actual rates in Third World countries are probably even higher once transfer pricing and other tax avoidance devices are taken into account.MNCs use Third World countries as a low cost, profitable location for export-oriented industries. In the late 1980s and early 1990s the shares of foreign affiliates in exports were as high as 57 per cent in Malaysia (all industries), 91 per cent in Singapore (nonoil manufacturing). In 1990, 44 per cent of total manufactured exports in Brazil and 58 per cent in Mexico were by foreign affiliates of MNCs.The trend is accelerating for many MNCs to move manufacturing and services industries out of high labor cost countries to ever cheaper ones in the Third World as competition for markets and demands on profits from shareholders intensifies. Morgan Crucible, the UK specialty materials group, is typical. It is shifting production to low wage economies in Eastern Europe and Asia. Average labor costs are $1.50 an hour in eastern Europe compared to $26 an hour in Germany. At its new Shanghai plant workers were paid $1 a day compared with $31 an hour in Japan. It was doing this despite a 20 per cent increase in profits. Similarly British Polythene industries (BPI), Europe's largest polythene film producer, reported an increase of pretax profits from £8.61m to £11.5m. It closed its plant in the Midlands where workers were paid £15,000 a year, to move to China where workers are paid $1,000 (£670) a year. BPI chairman said that: 'We had to go there or see our business disappear'.[14] Such trends will reinforce and extend existing inequalities in all countries concerned.UNCTAD ignores such realities when in promoting FDI, it highlights the rapid increase of inflows into India as a result of its governments recent neoliberal economic policies. 'By the turn of the century it is estimated that India's middle class will include over 9.4m households earning over $9,000 per annum.' This is in a country with a population of over 800m people, the vast majority of whom live in dire poverty. Similarly Asia is seen as an area with a growing and potentially high spending middle class. If present day growth rates continue, 'the middle class in Asia could top 700m by the year 2010, having $9 trillion spending power 50 per cent more than the size of the US economy today.' This in an area where 180m urban dwellers and 690m rural people lack safe drinking water and access to proper sanitation and overall 675m people live in absolute poverty.Finally, FDI inflows into the Third World have been used by imperialist countries to export environmentally polluting industries and factories. Japan, in what UNCTAD refers to as 'housecleaning' its domestic industrial structure, has financed and constructed a copper smelting plant run by PASAR in the Philippines. Gas and water emissions from the plant contain high concentrations of boron, arsenic, heavy metals, and sulphur compounds that have contaminated water supplies, reduced fishing and rice yields, damaged forests and increased the occurrence of respiratory diseases among local residents.[15] It is not just the low wages $1.64 an hour compared to an average $16.17 in the United States which make the Mexican maquiladora zones attractive to MNCs but also their loose environmental regulations. Studies have shown evidence of massive toxic dumping polluting rivers, groundwater and soils and causing severe health problems among workers and deformities among babies born to young women working in the zone. The workers are housed in dwellings in shanty towns that stretch for miles with no sewer systems and mostly without running water.[16]The specter of 1914The rapid internationalization of capital since the mid-1970s has, to a significant extent, brought the capitalist system closer to pre-First World War conditions. The openness of capitalist economies today is no greater than before 1914. The main players are the same but the balance of economic power between them has changed. Merchandise trade (exports plus imports) as a percentage of GDP is close to the levels of 1913 (Table 4). FDI stock has been estimated at 9 per cent of world output in 1913 compared to 8.5 per cent in 1991. But there are differences which in fact add to the growing instability of the capitalist system.$1,230bn a day flows through the foreign exchange system as financial institutions and multinational corporations hedge, gamble and speculate on the movement of national currencies. The financial system has now an unprecedented autonomy from real production and represents an ever present threat to economic stability as it rapidly redistributes 'success and failure' throughout the system. Third World debt at a record $1,714bn in 1994, continues to grow despite massive debt repayments which bleed those countries dry. Labour migration is far more restricted than in before the First World War leaving whole populations imprisoned in untenable social conditions. Inequalities between rich and poor countries and between the rich and poor in all countries have reached unprecedented levels and are still growing.CONCLUSIONThe globalization as a new modus operandi of Imperialism, first of all, intensifies the internationalization of capital. Now a day the imperialist forces cry aloud “global village”. This is nothing but the division of the world, as Lenin envisaged, among the big imperialist monopolies, contemporarily, represented by TNCs and MNCs for the un-hindered penetration of their capital for squeezing the wealth of the commonwealth (popularly known as 3rd world) countries. They are imposing several tariffs on the trade of these peripheral countries.Far from being a beacon of capitalist progress 'globalization' is a sign of economic decay and increasing instability in a world of obscene and growing inequality. The present crises proves the Marxist theory of capitalism, inevitable collapse of capitalism, as Karl Marx scientifically prophesied. It remembers us about the scientific conclusion of Lenin that Imperialism.1. Globalization of Capital, An Outline of Recent Changes in the Modus Operandi of Imperialism, Lal Parcham – Lok Dasta Publication, 1997.2. MICHEL BEAUD, A History of Capitalism, 1500-2000, Aakar books, Delhi,2004.3. V.I.LENIN, Against Imperialist War, Progress Pub. Moscow, 1978.4. V.I.LENIN, Imperialism, the Highest Stage of Capitalism, Selected works, Vol. I, Progress Pub. Moscow, 1976.5. World Investment Report 1995: Transnational Corporations and Competitiveness, United Nations, New York and Geneva, 1995. Most of the statistics are taken from this and earlier reports unless otherwise indicated.6. Paul Hirst and Grahame Thompson Globalisation in Question, Polity Press 1996.7. David C Korten When Corporations Rule the World, Earthscan Publications Ltd, London, 1995.8. Globalization and its Limits: The Continuing Economic Importance of Nations and Regions IDS, Sussex University, May 95.NOTES[2] KITTY MENON, “Imperialism and Export of Capital in the Contemporary Period”, Social Scientist, Vol. 10, No. 3, Mar. 1982, p. 19.[3]“GLOBALISATION A Re-division of the World by Imperialism ”, http://www.rcgfrfi.easynet.co.uk/marxism/articles/glob131.htm[4] The Guardian, 20 May 1996.[5] The Guardian 20 May 1996[6] Financial Times 5 January 1996, The Economist 24 June 1995.[7] WIR 1995 pp xxvi-xxx, and Wade p19.[8] Paul Hirst and Grahame Thompson, Globalisation in Question, Polity Press 1996, pp. 76-9.[9] The Economist, 24 June 1995[10] see FRFI 111 p7[11] Paul Hirst and Grahame Thompson, Op. cit., p67-68.[12] WIR, pp. x-xvii, p. 150.[13] David C Korten, When Corporations Rule the World, Earthscan Publications Ltd, London, 1995, p. 223.[14] Financial Times, 12 September 1995.[15] David C Korten, Op.cit., p. 31.[16] Ibid. p. 131-2.