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Globalization and Neoliberalism

Often the terms ‘globalization’ and ‘neoliberalism’ are used as if they were interchangeable. That is only correct in a limited sense, for the neo-mercantilist aspects of the neoliberal ideology. I will try to clarify the perceived and actual relationship between the two – especially for the South American use of the term ‘neoliberalism’.

The neoliberal ideology sees the nation primarily as a business firm, as explained above. The nation-firm is selling itself as an investment location, rather than simply selling export goods. If no-one in government believes in this ideology, it will have no consequences. If however, a neoliberal government is in power, it will pursue policies designed to make the nation more attractive as an investment location. These policies are generally pro-business, and are perceived as such by the opponents of the policies.

But remember that the ideology is neo-mercantilist: the policies are national policies, directed ultimately at the welfare of the nation and not of the market. Paradoxically, they are a form of protectionism: if there is a global market of investment locations, then it is ‘unfair competition’ for governments to artificially increase the attractiveness of their own country. Such governments are, strictly speaking, not good market liberals. Hard-line classic market liberals would shrug their shoulders at the election of an anti-business government. “Business will go elsewhere, the country will become poor, that’s the way the global market works, leave the market alone”, they would say. They would not waste their time trying to get a pro-business government elected there. In reality few liberals are so consistent, neoliberals certainly are not. But their rhetoric of ‘national competitiveness’ is a form of economic nationalism: it is a modern version of the old nationalist insistence that the whole nation should work together. It revitalizes jingoism, chauvinism, flag-waving and foreigner-bashing: Tony Blair is probably the best example.

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[Don’t tell me that a country with our history and heritage, that today boasts six of the top ten businesses in the whole of Europe, with London the top business city in Europe, that is a world leader in technology and communication and the businesses of the future, that under us has overtaken France and Italy to become the fourth largest economy in the world, that has the language of the new economy, more brilliant artists, actors and directors than any comparable country in the world, some of the best scientists and inventors in the world, the best armed forces in the world, the best teachers and doctors and nurses, the best people any nation could wish for. Don’t tell me with all that going for us that we do not have the spirit to meet all the challenges before us.]

Blair conference speech, 26 September 2000

Now, a neoliberal government will almost certainly appeal to ‘globalization’ as a justification and legitimization of its policies – Tony Blair certainly does. By globalization they mean, more or less, that the global market of investment locations now exists, and that it is an inevitable historical development. The opponents of the neoliberal government will, in turn, oppose this ‘globalization’. However, that does not mean that the global market of nations actually exists. The existence of neoliberal governments, pursuing neoliberal policies justified by an appeal to globalization, does not mean that a new global order has superseded the order of nation states. The very fact, that it is still primarily the nation state which is being ‘marketed’ in this way, shows that the nation has not disappeared.

Before considering the reality of the global order, it is also necessary to consider the beliefs of the opponents of such a neoliberal government. Again paradoxically, many of them accept without question the neoliberal claim that there is a long-term historical process of ‘globalization’, transforming the nation into a business firm on a global market of nation-firms. Worse, if the nation is a business then it is often clearly weak – everyone can see that Argentina is economically worse off than the United States. A neoliberal government will therefore try to convert a nation such as Argentina into a ‘strong player’, which means worsening the living conditions of much of the population. Now here is the next paradox: the response of the opponents is also an economic nationalism, this time with the emphasis on protectionism. The opposition perception of globalization differs in one respect: for them it is a historical but not spontaneous development. For them it is a policy imposed by a non-national global elite, directed against the individual nations.

In their view, the international financial institutions are equivalent to an imperial power, which has de facto colonized countries such as Argentina. In caricature form: they believe that a new and powerful empire has come into existence, the Empire of IMF-ia, at an indeterminate location. The neoliberal government, in this view, is a traitorous elite acting as a colonial Viceroy for the IMF-ian Empire. The opposition wants to replace it with a government which will ‘liberate’ the nation from the global market, from its colonial status. That ‘liberation’ is generally understood as: withdrawal of the nation-firm from the global market of nation-firms, protectionism, economic nationalism, and self-sufficiency instead of trade. Here too there is a paradox: the oppositional movements are not anti-business: they generally see national business as a victim of global business. (Local business in South America is in the comfortable position that both neoliberals and anti-neoliberals want to help it, for different reasons).

The ‘IMF-ia model’ is partly correct: the global financial institutions are indeed a bastion of neoliberal ideology, and they can bully some poor countries into adopting neoliberal policies. But they can’t do that to the rich western powers; in fact they would not exist without the support of these powers. They are not a force outside nations; they are not an imperial power. The global financial institutions are, in the simplest terms, an instrument of US policy – and if there is a quasi-imperial power, it is the United States.

The point is, once again, that the truth of beliefs about globalization is itself irrelevant. If the government and people all believe that a country is being attacked by fire-breathing dragons, then the government might distribute asbestos suits to the population, and the opposition might complain that there were not enough of them. Ideologies and politics can operate on a completely fictive basis. Millions of Europeans died to ‘resolve’ theological issues such as the Virgin Birth of Mary, Mother of God.

So the perceptions have themselves generated a political reality: on the basis of a belief in ‘globalization’ some governments pursue neoliberal policies, which are neo-mercantilist in their logic and aims. In such circumstances opposition to globalization and neoliberalism coincides, rather than neoliberalism being identical or synonymous with globalization. Both sides share a common fallacy: that trade and sovereignty are opposites, a zero-sum pair. The neoliberals believe that national success – “in today’s global market” – requires the abandonment of national economic autonomy and sovereignty. Their opponents believe that national welfare requires minimization of trade and external links: they believe that trade and invasion are equivalent, although no-one will say that outright. Once again, the equivalences and perceptions on both sides are false. Most of the Gross Global Product is tied to individual nation states for technical, climatic, logistical, and cultural reasons. For most investment decisions, there is no global market of locations. And sovereignty is not necessarily inverse to trade volume and trade regime. A powerful country such as the United States can have a high trade volume relative to GNP. Many colonies – by definition not sovereign – had a low trade volume relative to GNP, because the bulk of ‘GNP’ consisted of peasant agriculture. But even a fallacious belief can apparently support not just one, but two competing forms of economic nationalism.

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So what is the reality behind the perceived globalization? One reality is that nation states still dominate global social and economic structures. However these nation states themselves form a specific arrangement of a specific type of state. Globalization claims appear logical if you see nation states as isolated islands, but that is not the historical reality. The very existence of a world of nation states indicates some form of global order of nation states. What these nation states do – trade or no trade, capital flows or no capital flows – is irrelevant to that issue. What is already global cannot logically be globalized: therefore there is no globalization, in the widely used sense. There is no transition underway, or recently completed, to a fundamentally different global structure. Because the existing order of nation states is already global, intensification of global flows, or global trade, or global communication does not undermine it, or fundamentally alter it. If some part of the world were to break with this global order – for instance a future autarkic caliphate – that would be a radical change. When nations trade with each other, this simply indicates that the global order of nations is functioning as expected.

The false premise in the globalization thesis is in fact the standard nationalist claim, that each nation is a separate and particular entity. In reality nations collectively are a global and Universalist structure: the functional equivalent of a nationalist world state. The world functions as if a nationalist world government had seized power in the 19th century, led by Mazzini and Garibaldi and friends. Most existing states were indeed established by nationalist groups. Nationalists co-operate to maintain one (nationalist) world order and exclude others. The nation state is not a particularity, existing by itself in isolation, but part of a global design. Supporters of the globalization thesis claim, that a world of isolated nation states existed in the recent past – before 1989, or more approximately before 1950. They claim that these isolated nation states are now being eroded in a global process: it includes the formation of the neoliberals claimed ‘market of nations’.

[Economic globalization represents a major transformation in the territorial organization of economic activity and politico-economic power….The sovereignty of the modern state was concentrated in mutually exclusive territories and the concentration of sovereignty in nations…economic globalization has contributed to a denationalizing of national territory…] Saskia Sassen. Losing Control: Sovereignty in an Age of globalization (1996).

But is the global order of nation states disappearing, anywhere? In reality, there is no collapse of the nation state to be seen. Nation states have not suffered anything comparable to the dissolution of the Austro-Hungarian or Ottoman empires. All that remains of those empires are oversized palaces in Vienna and Istanbul. The rest of their institutions have completely disappeared: there is not a square meter of Habsburg or Ottoman territory left in Europe. There is no longer an Austro-Hungarian imperial army, or police, or courts, or parliament. The nation states succeeded the multi-ethnic empires, seized all their territory, and remodeled all society on that territory. The replacement was total. Where is the equivalent ‘collapse’ of the nation state? There are few places on earth without the institutions of a nation state – perhaps Somalia, but that is not the result of globalization. If the world was truly ‘globalized’ then it would be full of disused national parliament buildings – and not a national army in sight. The world is not like that, and will not be like that in the immediate future.

In other words, ‘globalization’ remains a belief rather than a reality. It is an instrumental belief with great political influence and effect. It is appealed to by both neo-mercantilist neoliberals and their economic-nationalist opponents. Nationalists have a tradition of appealing to external threats to enforce national unity. The nation must unite and work together, they said – to defeat the Hun, or the Bolshevik threat, or the Yellow Peril, or the enemy within the gates, or Osama bin Laden. The instrumental use of ‘globalization’ is in the same dishonorable category.

Summarizing Neoliberalism
To conclude, here are summaries of Neoliberalism in two forms. First a list of key points in Neoliberalism:

1- Transaction maximalization
2- Maximalization of volume of transactions (‘global flows’)
3- Contract maximalization

4- Supplier/contractor maximalization
5- Conversion of most social acts into market transactions
6- Artificial maximalization of competition and stress

7- Creation of quasi-markets
8- Reduction of inter-transaction interval
9- Maximalisation of parties to each transaction

10- Maximalisation of reach and effect of each transaction
11- Maximalisation of hire/fire transactions in the labor market (nominal turnover)
12- Maximalisation of assessment factors, by which compliance with a contract is measured

13- Reduction of the inter-assessment interval
14- Creation of exaggerated or artificial assessment norms (‘audit society’)

A final summary definition of Neoliberalism as a philosophy is this:

Neoliberalism is a philosophy in which the existence and operation of a market are valued in themselves, separately from any previous relationship with the production of goods and services, and without any attempt to justify them in terms of their effect on the production of goods and services; and where the operation of a market or market-like structure is seen as an ethic in itself, capable of acting as a guide for all human action, and substituting for all previously existing ethical beliefs.

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