Global Capitalism: Multilateral System in Crisis

By Walden Bello, BusinessWorld, 5 June 2001

Michel Camdessus was microman-aged by US Treasury Secretary Robert Rubin and his key aide, Larry Summers.

THE MULTILATERAL SYSTEM IN CRISIS

Equally important as a source of delegitimization was the spreading realization that the system could not deliver on its promise.

That the system could not create prosperity for all but only the illusion of it was something that many observers had known for sometime.

However, the realities of growing global poverty and inequality were neutralized by the high growth rates and the prosperity of a few enclaves of the world economy, like East Asia in the 1980s, which were (mistakenly) painted as paragons of market-led development.

However, when the Asian economies collapsed in 1997, the follies of neoliberal economics were brought to the fore. All talk about the Asian financial crisis being caused by crony capitalism could not obscure the fact that it had been the liberation of speculative capital from the constraints of regulation, largely on account of pressure from the IMF, that brought about Asia's collapse.

The IMF also came under severe public scrutiny for imposing draconian programs on the Asian economies in the wake of the crisis policies that merely accelerated economic contraction, saved foreign banks and speculative investors, and restructured economies along “American lines.”

The IMF's role in East Asia triggered a fresh reexamination of its role in imposing structural adjustment programs in much of Africa, South Asia, and Latin America in the 1980s, and the fact that these programs had, as they did in Asia, exacerbated stagnation, widened inequalities, and deepened poverty now became widely realized—so much so that the IMF, in a desperate effort to exorcise its record, felt compelled to change the name of the extended structural adjustment fund (ESAF) facility into the poverty reduction and growth facility prior to the World Bank-IMF annual meeting in Washington in September 1999.

The Asian financial crisis triggered the unraveling of the legitimacy of the IMF. In the case of the WTO, the situation was even more dramatic.

In the last five years of the decade, growing numbers of people and communities began to realize that in signing on to the WTO, they had signed on to a charter for corporate rule that enshrined what consumer advocate Ralph Nader called the principle of “trade uber alles,” or corporate trade above equity, justice, environment and most everything else we hold dear.

Many developing countries discovered that in signing on to the WTO, they had signed away their rights to development. The many streams of discontent and opposition converged on the streets of Seattle and in the meeting rooms of the Seattle Convention Center in December 1999 to bring down the third ministerial of the WTO and trigger a severe institutional crisis from which the organization has yet to recover.

The World Bank, under the leadership of Australian-turned-American James Wolfensohn, appeared to be charting a course that would allow it to escape the damage inflicted on its sister institutions, until it was subjected to fire in early 2000 from an unexpected quarter: the Meltzer Commission.

Ever since he took over as chief of the institution in the mid-1990s, Australian-American James Wolfensohn had managed to defuse criticism through very skilled public relations work and co-optation of nongovernmental organizations.

But when the same criticisms that had been made by people from the left were made by a commission created by the US Congress, the game was up.

Headed by a banker, Alan Meltzer, the commission concluded that the bank's performance when it came to addressing its avowed goal of eliminating global poverty was miserable and that it would be better to devolve the task to regional bodies.

THE CRISIS OF THE CORPORATION

By the end of the last decade of the 20th century, in short, the triumphalism that marked the beginning of the decade had evaporated and given way to a deep crisis of legitimacy of the multilateral order.

The crisis of the multilateral system was, moreover, translating into a deepening unease globally with the prime actor of globalization: the corporation.

Several factors came together to focus public attention on the corporation in the 1990s—the most egregious being the predatory practices of Microsoft, the environmental depredations of Shell, the irresponsibility of Monsanto and Novartis in promoting genetically modified organisms, Nike's systematic exploitation of dirt-cheap labor, and Mitsubishi, Ford and Firestone's concealment from consumers of serious product defects.

A sense of environmental emergency was also spreading by the beginning of the 21st century, and to increasing numbers of people, the rapid melting of the polar ice caps could be traced to Big Oil and the automobile giants' continuing promotion of an environmentally destabilizing petroleum civilization, and, more generally, to the process of uncontrolled growth driven by the transnational corporations.

Ironically, in the United States, it was during the apogee of the new economy that the distrust of the corporation was also at its highest in decades.

A Business Week survey said “72% of Americans say business has too much power over their lives.” And the magazine warned: “Corporate America, ignore these trends at your peril.”

Some of the more enlightened members of the global elite took such warnings seriously, and their annual meeting in Davos, Switzerland, became the venue to elaborate a response that would go beyond the bankrupt strategy of denying that corporate-driven globalization was creating tremendous problems to promote a vision of “globalization with compassion.”

Yet, the task was formidable, for it became increasingly clear that in an unregulated global market, it was even more difficult to reconcile the demands of social responsibility with the demands of profitability.

The best that “globalization with a conscience” could offer was, as C. Fred Bergsten, a noted pro-globalization advocate, admitted, a system of “transitional safety nets … to help the adjustment to dislocation” and “enable people to take advantage of the phenomenon [of globalization] and roll with it rather than oppose it.”

STRATEGIC POWER AND CORPORATE POWER

Corporate power is one dimension of US power. But there is, equally of consequence, the strategic power of the US state, a dimension that is explored in the third part of the book.

Strategic power cannot be reduced, as in orthodox Marxism, to simply being driven by the dynamics of corporate control. The US state cannot be reduced simply to being a servant of US capital. The Pentagon has its own dynamics, and one cannot understand the US role in the Balkans or its changing posture towards China as simply determined by the interests of US corporations.

Indeed, in Asia, it has been strategic extension, not corporate expansionism, that has been the mainspring of US policy, at least until the mid-1980s.

And, in the case of China, US capital's desire to exploit the China market has increasingly found itself in opposition to the Pentagon's definition of China as the Enemy, which must be headed off at the pass instead of being assisted by western investment to become a full-blown threat. In many instances, indeed, corporate power and state power may not be in synch.

Having said this, a primordial aim of the US transnational garrison state that is ensconced deeply in East Asia, the Middle East and Europe and projects power to the rest of the globe, is the maintenance of a global order that secures the primacy of US economic interests.

With the growing illegitimacy of corporate-driven globalization and the growing divide between a prosperous minority and an increasingly marginalized majority, military intervention to maintain the global status will become a constant feature of international relations, whether this is justified in terms of fighting drugs, fighting terrorism, containing “rogue states,” opposing “Islamic fundamentalism,” or containing China.

One cannot say, however, that the military structure of US hegemony is suffering as profound a crisis of legitimacy as that which has gripped the processes and institutions of corporate globalization.

The US military structure remains solidly rooted in both Europe and Asia, and the reason it remains so is to be found at the level of the ideological: the deep-seated fear of both European and Asian elites that without the US to serve as a “benevolent hegemon,” they would not be able to create by themselves benign regional orders that would ensure the peace among themselves.

THE CRISIS OF LIBERAL DEMOCRACY

It is not, however, corporate power or military power that is the US' strongest asset but its ideological power.

The US is a Lockean democracy, and its ability to project its mission as the extension of systems centered on free elections to choose governments devoted to promoting liberal rights and freedoms continues to be a strong fountain of legitimacy in many parts of the world.

The trend away from authoritarian regimes and toward formal democracies in the third world happened in spite of rather than because of the United States.

Yet, especially under the Clinton administration, Washington was able to skillfully jibe to catch the democratic winds, in the process reconstructing its image from being a supporter of repressive regimes to being an opponent of dictatorships.

In the last few years, however, Washington or Westminster-style democracies with their focus on formal rights and formal elections and their bias against economic equality achieved through such measures as asset and income redistribution have led to increasingly stagnant and polarized political systems, such as those in the Philippines, Brazil and Pakistan.

This stagnation of third world liberal democratic systems has been paralleled by the realization of increasing numbers of Americans that their liberal democracy has been so thoroughly corrupted by corporate money politics that it deserves being designated a plutocracy. Liberal democracy Washington-style is, in other words, entering into crisis everywhere.

It was this massive crisis of legitimacy that propelled thousands of people from both the North and the South to engage in militant protest civil disobedience in Seattle during the WTO ministerial in December 1999; in Washington during the World Bank-IMF spring meeting in April 2000; in Chiang Mai, Thailand, during the Asian Development Bank annual meeting in May 2000; in Melbourne during the World Economic Forum gathering in early September 2000; and in Prague during the World Bank-IMF annual meeting in September 2000.

These mass actions, in turn, further eroded the credibility of the institutions of globalization, despite the effort of television and mass media to portray the protesters as either uninformed critics or anarchists.

The structures of the system may appear to still be firm, but when legitimacy or consensus goes, it may only be a matter of time before the structures themselves begin to unravel.

THE CHALLENGE

Yet the crisis of the system does not necessarily result in its replacement by a more benign system of international relations. As Rosa Luxemburg so presciently pointed out before the rise of fascism in crisis-ridden Europe, the outcome may be “barbarism,” where the ideals and themes of the progressive opposition are hijacked and perverted by demagogic forces that are hostile to freedom, equality and democracy.

Which is why the articulation of an alternative order is so critical at this point in time. Creating this alternative vision and program centered on a participatory process to create the institutions that would once again subordinate the market to society, promote genuine equality across gender and color lines and within and among countries, and establish a benign relationship between human community and the biosphere remains the great challenge of the opponents of corporate-driven globalization.

On the success of this enterprise depends our future.