The Collapse of Globalism

Posted on August 4, 2005 by Dave Pollard

John Ralston Saul’s new book The Collapse of Globalism is saying what most economists have been afraid to say: The emperor has no clothes. He painstakingly reviews the mounting evidence from the past decade that the ideology of globalization has not only failed in almost everything it has tried to do, but is in rapid retreat in the areas of the world where the economy is most robust.

Saul is an excellent student of history, and his criticism of economic theory is not limited to any one economic ideology. He shows that, throughout the past two millennia, no economic theory has proved to be right for all places and all times, and the average lifespan of such theories before they are supplanted by more appropriate ones, suited to newer economic realities, is less than two decades. The ones that have died the hardest and caused the most social damage have been those which have been elevated to the status of near-religion, and were assumed to be inevitable and perpetual. Globalization has reached this status several times before, and each time it has collapsed as nation-states realized that global solutions were suboptimal for them and have reasserted national sovereignty, often militarily. Saul excoriates economists and politicians and their ‘adoring courtiers’ in the media for their lack of awareness of the lessons of history. De Toqueville warned in 1835 about the dangers of economic ideology, of seeing society through an economic rather than a political lens, asking “Can it be believed that the democracy which has overthrown the feudal system and vanquished kings will retreat before tradesmen and capitalists?” Much of the latter 20th century was a similar retreat, Saul says, as interest in democracy was subordinated to the ideology of globalization, and that period’s greatest economic ‘success’ was the emergence of China, a brutal and repressive totalitarian regime, as a new economic superpower.

When economic theories become religions, and grow in power, there is a growing disconnect between the global system (and its measurements of ‘progress’), and the quality of people’s lives. This ‘ideology of progress’, in its globalist flavour, manifests itself in several ways. First, global economic entities inexorably consolidate and centralize and become increasingly hierarchical and narrowly-controlled, isolating, marginalizing and under-serving smaller communities and markets in the process. Second, dumping, which is taboo in well-organized markets, becomes normal process — the underpriced offloading of surplus goods, which destroys healthy competition, is pursued as the ubiquitous means to distribute product at the cheapest possible cost, which is seen as invariably a good thing. At the same time, intellectual property is given protection that allows its owners to overprice their product. This produces such enormous distortions that, for example, a Wal-Mart store in upstate New York will sell a dozen pairs of men’s underwear for $10 and a pair of Nike shoes, which costs the same to make (and may be made in the same Chinese factory), for $150. Next, a large proportion of so-called ‘trade’ (as much as half of all trade today) becomes internal — transfers between branches of multinational corporations at artificial prices that bypass the competitive market and are designed to further reduce competition and to transfer profits from high-tax to low-tax jurisdictions. The UK divisions of multinational oil companies, for example, collectively lose money by using transfer prices to shift profits to countries with low tax rates. And as a consequence of this ability of rich multinationals to avoid taxes, the gap in wealth and power between rich and poor skyrockets.

The combined effect of all these market distortions, which make perfect sense to the multinational corporations that drive a ‘globalized’ economy, is unfair competition, oligopoly, price-rigging, elimination of small entrepreneurs, devastation to local labour markets and the environment, an unfair tax burden on the middle and lower classes, inability of national governments to afford a basic social safety net for all, and endemic poverty and economic slavery for workers and for poor nations. Saul points out that there are some excellent recommendations on how to mitigate some of these consequences, such as the ILO Fair Globalization Report, but there is no motivation for the multinationals and the Davos group to act on them. Why should they? It is in their best interests to allow these distortions to continue, and mitigating their negative consequences would also mitigate their profits. So these reports are ignored.

It is therefore up to national governments to act. But these governments have been so effectively lobbied by the multinationals and the neocons that they have come to believe that globalization, and its distortions, are inevitable, and that there are no alternative economic models. Their hands have been tied by layers of ‘free’ trade agreements that preclude them from passing and enforcing their own laws to protect domestic workers, their domestic economy and the environment. So they have become cowards, apologists for the globalization agreements they have been hoodwinked into signing, and tell themselves and their citizens we have no choice.

This, says Saul, is the ultimate lie of globalization’s religion of economic determinism. There is always choice. There always has been, and there must be. What is needed, he says, is:

Political leaders with the courage and foresight to act in their own people’s best interest, and while encouraging trade where it makes sense, not allowing multinational interests to hobble their ability to protect domestic interests;
Realization that the purpose of any economic system is to serve people, and that human well-being, not economic growth, should determine what actions governments should take;
Realization that simplistic ideological solutions don’t work, and that workable solutions are nuanced and evolving, not static, and certainly not ‘inevitable’;
Realization that decision-making and policy-making must start with recognition and response to local needs, which are variable and contextual — there is no one right answer for everyone and every time;
A press that thinks critically and encourages its readers to do likewise;
Self-confidence of governments and their citizens to believe that they understand what is best for their country and their people, and active involvement of governments and citizens to work to achieve that well-being, rather than deferring to international authorities that promise global solutions;
Support for NGOs, which have rushed into the social and political vacuum during the past two decades as governments have thrown up their hands and said they have no choice but to accept the inevitability of globalization and extraterritorial control over their lives — these NGOs have been doing the governments’ job while the governments have been, largely, AWOL; and
Elimination of unrepayable and crippling third world debts.

Saul quotes Nelson Mandela, who understands these needs clearly:

Massive poverty and obscene inequality are such terrible scourges of our times — times in which the world boasts breathtaking advances in science, technology, industry and wealth accumulation — they have to rank alongside slavery and apartheid as social ills. Overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right, the right to dignity and a decent life.

It is nothing short of religious delusion to believe that any monolithic economic ideology is capable of coming to grips with this or any other social or political problem. And it will take more than Live8 spectacles, evidence of what Saul calls “the decline of Davos from temple of globalization to circus, open to whatever fashion can capture fifteen minutes’ worth of attention”, to address it. Ultimately such problems must be solved locally, by courageous national leaders with grassroots solutions customized to the local context.

Saul calls this ‘positive nationalism’, which he contrasts with the negative nationalism of hate and fear:

If any confirmation of the seriousness of negative nationalism were needed, we need only go back to Samuel Huntington’s 1996 [anti-Moslem screed The Clash of Civilizations]. In large numbers, the disciples of globalization read his book and raised their voices in agreement with his argument that societies were driven and held together by shared cultures, not economies. They now understand what was happening around them, why things were not working out as expected. As for the US, its survival was dependent on “Americans reaffirming their Western identity”. The broad welcome this argument received in the West revealed how confused and obscure the vacuum [caused by the failure of globalism] is. But it also told us how people have become frightened in the growing disorder of the globalist era, how uncomfortable they are with the broad global sweeps of inevitability. After all, only a few years ago economic inevitability was on every tongue. Abruptly, the same people are insisting that exclusive culture is the key. [When you note that Huntington in his book hadn’t bothered to assign Africa a ‘civilization’] you realize how crudely racial his theoretically sophisticated argument is. The Aga Khan commented “The clash, if there is such a broad civilizational collision, is not of cultures but of ignorance“, either willful or as the product of fear.

Positive nationalism, however, is driven by altruism and knowledge, a desire for service and to see one’s fellow citizens thrive, rather than the ignorance and fear and intolerance of negative nationalism, or globalism’s blinkered self-interest. In a world in which 110 of the last 120 major conflicts were internal, rather than international, it is important to focus on bottom-up solutions and grassroots approaches to problems that are fundamentally local. This is not about values or civilizations or cultures or economies, Saul concludes, but about simply serving the public good, for which there are no easy or global answers:

The common call today is for an examination of values. I am not clear what this means. It has a slight ring of 19th century self-serving [negative] nationalism. It would be better to concentrate on something more real, such as serving the public good. Adam Smith put it that “he is certainly not a good citizen who does not wish to promote, by every means in his power, the welfare of the whole society of his fellow citizens.” If people who know each other well serve the welfare of their fellow citizens, they may learn something unexpected about each other, perhaps about how different they are. If people who do not know each other well, perhaps because they come from different cultures, serve the welfare of their fellow citizens, they may well discover how similar their values are. In both cases, this would be the process of positive nationalism.

Photo from McMaster U. prof William Coleman’s globalization clippings collection (from a Scandinavian newspaper)

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15 Responses to The Collapse of Globalism

Al Tepper says:

August 4, 2005 at 14:19

Thanks for that excellent review…I have to get that book now!I have only ever read one of JRS’s books: Voltaire’s Bastards : The Dictatorship of Reason in the WestI imagine you have read it. If not I totally recommend it. He is a superb and clear writer tackling the most immense and relevant of topics.I lived in Nova Scotia for 6 years in the 90s and whilst studying PoliSci at St FX University (#1 in Canada according to Macleans wahoo!) had the pleasure of reading that superb book. Changed my life to be honest. Made me realise the addiction to comfort we get from ‘reason’. Thanks for stirring up the memory of that book and for a superb review of his latest contribution to human advancement.NamasteCH
Dave Pollard says:

August 4, 2005 at 15:18

Thanks — I actually like The Unconscious Civilization best of his books. More personal passion, more novel ideas. Now that he’s the spouse of the GovGen maybe he figures he has to be more decorous in his writing ;-)
Mike says:

August 5, 2005 at 09:49

These days I often feel that humanity is reorganizing itself from the bottom up.I keep in mind one of the better G’Kar speeches in the TV series Babylong 5:’The future is all around us, waiting in moments of transition, to be born in moments of revelation.No one knows the shape of that future, or where it will take us. We know only that it is always born in pain.’The cool and also dangerous thing is: there are triggers that, when activated, could nearly instantaneously transition us to a whole different way of life. One such trigger would be freeing up all intellectual property.
sampo says:

August 5, 2005 at 15:11

what a strange coincidence…kunstler is commenting on this very topic today as well.http://www.commondreams.org/views05/0804-26.htmYou’re both right of course…as for me, i’m just terrified as to what the next steps are. how nasty will the long emergency be as we slide down the other side of globalism…
David Locke says:

August 7, 2005 at 14:49

The IT recession continues. Welcome to the zero-sum game. Economists tell us that we would be using the freed up money from all those layoffs to provide higher value services. Well, where is the economnist that will tell me where? And, for whom? Oh, right, that was just a theory!
Jon Husband says:

August 8, 2005 at 13:28

Thanks for the strong and analytic review, dave. Makes me wantto read the book, if only as encouragement to continue believing that the ideological and economic systems in which we currently live are beginning to demonstrate the painful aspects of unintended consequences.
Dave Pollard says:

August 8, 2005 at 22:07

Mike: One such trigger would be ‘freeing’ up all property, period. Sampo: Thanks for reminding me to get JK’s “Long Emergency”. It’s amazing how the Friedmans and the Greenspans and Lomborgs of the world just can’t get past denial, even when the evidence is overwhelming and staring them in the face. It’s groupthink, and I’ve seen it in many different situations — it’s a deadly disease.
anonymous says:

August 21, 2005 at 22:31

I write this to try to understand. The title of the article says “Collapse of Globalization”. However all the problems listed are much smaller (I think) than the advantages of better life, education, health care and general wealth of billions of people. So what if greedy capitalists will make obscene amounts of money from it. The rise of China is presented as a disaster. HOwever, I don’t there is many Chinese who prefer the poor and incredibly represive regime of the past to the current system. Yes there are those that are left behind, there still is no democratic representation, and gross abuse of human rights and general economic injustice. Does that make it better to go back to Maoist China? The immense improvements in human rights in China over the last two decades seem linked to its economic progress. In any case, if globalization is the free flow of capital, goods and services across the globe, I don’t think China is the biggest success of Globalization. It must be the entire south east asia, and earlier western europe and japan. There has been no comparable growth in real human wealth from different models of economic growth. Unfrotunately, I may not be understanding the book’s (and this article’s) points well. I will not have the opportunity to read the book, since I live, well, in Africa! But the view from here is that globalization, if and when it arrives here, will be on the balance, a blessing. Fine, many of the points in the linked ILO report make a lot of sense, and will make the benefits globalization more markedly better. But still, even without the safeguards, it seems to offer a better life for the world’s 2 billion desparately poor than the life they currently have.Sorry did not plan to rant so long. But I would be interested in understanding your views of why globalization is/should be collapsing. The only legitimate problem I have seen is in slightly reducing the wealth of workers in rich countries, which although regrettable, does not compare to the great tragedy that is life of the world’s poor and dispossessed.
Clinton Bills says:

August 27, 2005 at 20:46

anonymous, it’s very refreshing to hear a supporter of Globalization that has a sense of curiosity. Forgive me for sounding patronising but I suspect one day you’ll see the error of your thinking. Globalization HAS hit Africa. It’s been there a long time. The majority of Africans are the poor that allow us ‘Westerners’ to live like kings. The US and other ‘advanced’ countries need to keep third world countries down, they need to keep their currency low relative to the rich nations’ so the products we in the West want are cheap enough for us to buy. In simple terms our reliance on slavery has never been abandoned, we just don’t have to look at our slaves anymore, they are housed overseas! It’s quite beautiful in its simplicity and deniability (after all they are free men and women aren’t they? I like to think of them as almost ‘free’ as they only cost about $1 week!). You list the advantages of Globalization as though you were Dubya’s or my Johnies’ mouthpiece. All the things you list; education, health care and wealth of the masses are in crises in most parts of the world in my opinion. Many governments have sold off public assets and/or dropped costly responsibilities in recent years, creating a temporary pool of spending money and they constantly change the statistics used to support arguments of a better life under Globalization. Or to put it another way, there is no such thing as an ‘economy’ in the way people think of it, it’s an abstract concept. You can’t improve an economy and suddenly have all your citizens better off. Some people work for others, others have people work for them. All you can change is the mix, not the overall amount of ‘wealth’. Or you can have everyone do more work, they’ll have more stuff or stuff buying ability and less time to enjoy it. It’s a tradeoff and something that stays in balance naturally anyway. As long as corrupt governments and unservicable debts are maintained in Africa and other Third World countries, the West will continue to prosper and Western governments cynically bemoan the ‘problems’ that they actively support. Note that charmers like Mugabe can’t be removed from power by the West but Saddam is not only removed and prosecuted but his people have to welcome an army for what will probably be the better part of a decade. What a time to be an Iraqi Sunni! Poor bastards. Cheers, ClintFootnote: Any modern economist or politician could poke a hundred holes in the above but only with pedantry and sophistry.
anonymous says:

August 30, 2005 at 06:56

Clint, if I understand, you suggest some sort of global conspirace by the US to keep Africa down, so they make money, and this is the real globalization. However, you don’t offer any evidence. As far as Africa, you seem to be too far removed from the reality: Those lucky to work in industries involved in “Globalization”, be it a call-center in Kenya, Nickel mine in Congo or Cocoa farm in Ghana, are much much better off than those living within a few kilometers away from them, but live as subsistence farmers with NO TRADE out of their very poor village, not even to the trading centre 10 kms away let alone be touched by globalization. These are the vast majority of Africans. Globalization, that is global trade in goods and global flow of capital, it is reasonable to expect will benefit them. If you say no it won’t, you have to give actual reasons why, or at least give anecdotal evidence. The situation here is very different from blue collar workers or IT workers in rich countries.
Dave Pollard says:

August 30, 2005 at 09:45

Clint: I agree with you (and what you say about Africa applies equally to Latin America and much of Asia), but to counter Anonymous’ argument properly would be beyond the scope of what an online discussion thread could do. Anonymous should read not only Saul’s book but Herman Daly’s economic analyses as well. And there’s no conspiracy here — Globalization is neither well-intentioned nor ill-intentioned, it is just the manifestation of how an ‘ideal’ concept actually manifests itself in the real world faced with political corruption, horrific inequality, lack of education, a motivation to exploit the weak, and dozens of market distortions (like the massive agricultural subsidies that allow ConAgra to sell Iowa corn cheaper in Mexico than Mexican farmers can — and which has nothing to do with ‘efficiencies’).
Clinton Bills says:

August 31, 2005 at 10:22

Thanks anonymous and Dave. I posted my comments above during a 12 hour shift at work after 2 hours sleep. I got home and realised that I’d been going on about my feelings of where Globalization is going when you were interested in industry and trade, the very basis of Globalisation I suppose. I felt quite stupid and want to apologize to Africans for any implication that trade and industry is unsuitable to them. I do think that an increased export of manufactured goods from African countries would be a great thing. You would think there would have to be something you could make and sell to richer countries. I have no idea of the history of such attempts but I bet there’s obstacles. The China model seems great but it is dominated by China! China has a different relationship with the US and different things to offer than Africa does. It would be a simple enough thing to raise some cash, build an shoe factory in Africa, export to the States with US marketers and compete with Nike. It would make profits. But Nike wouldn’t like that. China sells socks and other low end goods to the US which probably doesn’t offend the big end of town. I know at this point the argument gets fuzzy as there are many examples of high end goods such as cars from Asia being sold in the US. But it is not open slather, ‘free trade’ is very carefully managed and one could argue that any opening of US markets has been to get access to foreign resources and labour and further strengthen intellectual property rights enforcement. I suspect the US really believed at one stage that opening up global trade would suit all players, make evryone wealthy. It certainly suits corporates and people in govt have an unfortunate tendency to believe the crap the corporates spew out. The US must be realising their mistake now, foreign debt to Asia is huge and growing and the $US is arguably set to crash. Economic rationalists have set us up for a big fall. Maybe after the crash Africa can come onto a more level playing field. Maybe we can respect people more than companies at some stage in the future.
anonymous says:

September 2, 2005 at 13:22

Clint, thank you very much for your thoughts. I believe that the processes of globalization are both a blessing and a curse. For example, large farms allow peasants here wealth unheard of by their neighbours: access to a small clinic, malaria medicine etc as well as the trivial joys of the consumerist: TVs, flashy shoes etc. The Faustian bargain they have made is, of course, less human dignity (which means a lot to us in most African cultures), much less economic independence as when they had their own land, etc. Would it have been better for the small farmers instead to pool their resources together into a cooperative and compete on the global market, rather than sell their land to the multinationals and work for them? Of course, in theory. The reality of life in Africa however, is that social organization is frighteningly fragile (traditional systems are for all purposes dead, and the european ones did not really take hold: legacy mainly of the colonial past). Corruption is basically unchecked, and is systemic to the economic reality rather than just due to bad unscrupulous people that happen to hold power. So yes, globalization could well be a blessing and a curse, and if it is done with checks and balances it probably will benefit the most, but even without those, the jury is out on its relative merits. David, I can’t read those books. I still would like to interact and understand other perspectives. Sometimes from reading the news, usually of some anti-globalization riot or another, it is bewildering to understand why they riot at these G8 meetings. Add to that the slant/propaganda the news people themselves no doubt sprinkle in, and you have a totally undecipherable situation.
Clinton Bills says:

September 5, 2005 at 10:39

Yep, a blessing and a curse. As for the protests, I too find them bewildering. The protesters never get any message across (except that Globalization is bad!), the media have no interest in any message and just like to show scenes of unrest or violance without attempting to do any background. It seems also that any large protest these days gets the unwanted attention of what I can only think of as anarchists, or simply troublemakers. You mention the effects of the colonial past. I find it interesting that here in Australia where we have a high standard of living that many of the original Australians still struggle to ‘fit in’ to the European way of life. We ex-europeans think that our way of life is the only logical one and that by simply showing it to someone with another way of life, they’ll see the sense in it and immediately embrace it! We forget how much we rely on our parents as role models, and the difficulty of getting an education when your family are poor, possibly live many miles from a school and perhaps don’t fully understand the need. (I find that schooling is used like a class system barrier, I went to Uni but when I started work it was all on the job training, only needed arithmetic and reading/writing!. A poor person could be doing my job but he/she will have to go to Uni first.) Well I seem to be going on a bit and getting off topic. If you would like to chat more anonymous you can email me at cbills1@bigpond.net Cheers!
Clinton Bills says:

September 5, 2005 at 10:41

Sorry that should be cbills1@bigpond.net.au