Book Review by Francis Lee
Crossposted with the Saker Blog
‘’Many of us will have seen the sign on the iPhone packaging that it is ‘designed in California. Many are also aware that the phones are finally assembled by two Taiwanese companies, Foxconn and Pegatron, in their factories in China. Emphasising the global nature of production, Foxconn has already diversified some iPhone assembly into India whilst Pegatron has plans to assemble in Indonesia.’’(1)
Of course this phenomenon should come as no surprise. Outsourcing of production has taken place in one of a number of different forms. The above example is a highly complex, multi-tiered, globally extensive example of sourcing networks that have developed and greatly transformed the economic landscape. For the outsourcing firm, the process is a way of enabling it to focus on its core competencies and shed activities which do not fit.
Thus according to the conventional wisdom, globalization or at least economic interconnection seems to be a fait accompli particularly among the white-collar middle-class strata in the West who seem to have imbibed the hypothesis without reservation. Per contra it could be argued that globalization may not ceteris paribus be all that it is cracked up to be. At the present time, the theory of globalization as enunciated by the priesthood has become almost a type of religious belief – a belief system which is beyond question. In point of fact, however, globalization represents a departure of inter-state relationships to a negation of such and a substitution of global institutions of rule.
GLOBALIZATION AND NATION STATES
‘’In political praxis the globalization thesis favours technocracy over democracy and the ascendency of supra-national institutions over nation states. This follows from the blame that it heaps upon ‘’nationalism’’ for the putative barbaric catastrophes of the first half of the 20th century. It is this prescriptive rather than descriptive, element of globalization that unsurprisingly has come to the fore as the post-war order has experienced increasing strain … Yet regarding the nation state as being impotent (and indeed even destructive and outdated – FL) ‘’abandons the only effective and potentially legitimate, vehicle so far developed for the human agency. By rejecting the institution of the nation state, globalist politicians have given up on the main instrument to which people could take some control of their lives. Collaborative international problem solving is best achieved by nations acting together, not by demeaning national apparatuses and undemocratic supra-national bodies.’’ (2)
Talking of supra-national bodies the most advanced prototype of these institutions is probably the European Union (EU). Along with its military arm – NATO – this organization must be the most terminally useless, bloated, and ineffective pork-barrel and undemocratic regime in the world. The EU Commission that runs the Brussels pantomime is regarded as probably the most ‘’independent agency in the world’’ but, minor point, it is not elected by nor accountable to the European populace. Former Commissioner, Jean-Claude Juncker was reluctant to accept democratic decisions of which he disapproved arguing that those who govern in Europe had to pursue the ‘right policies’ even if many voters think that they are the ‘wrong ones’. In this manner elite policy-making was, by definition, outside of popular sovereignty, and this abandonment of national sovereignty necessarily involves the evisceration of democracy.
This has given rise to and is instanced in the falling levels of electoral politics, as electorates vote with their feet and simply stay at home. This has been a glaring neglect, failure or outright betrayal as the leadership of national political parties have sold the pass and with considerable alacrity swallowed the globalist gibberish.
As Mullan states:
‘’When the political class continues to belittle national policies on the basis that the global arena is now the only relevant one, then domestic politics appears even less consequential. Politics seems instead to revolve around careerists and self-important personalities.’’ (3)
THE EMERGENCE OF THE MULTIPOLAR WORLD
In terms of actually existing politics there exist two contemporary and overwhelming facts which are present and will increasingly dominate the world – viz: that the centre of wealth creation has moved from West to East, and secondly, that the political/economic rules and institutions which were established in 1945 are no longer fit for purpose. The recovery of Russia and the relentless rise of China and the Belt and Road Initiative has rendered the old order increasingly redundant. This situation if unattended will almost certainly give rise to increasing strains as the rules that governed the old order are no longer applicable to the rising new one.
‘’Some anticipate a ‘Thucydides moment’. In History of the Peloponnesian War 2500 years ago the Greek historian, Thucydides, wrote that ‘’What made war inevitable was the growth of Athenian power and the fear that this caused in Sparta.’’ Today we seem to be on the same path as old and new powers clash … Just as Sparta could always expect to be on top, so America, and the West in general should not expect to be always the dominant powers.’’ (4)
BREAKING THE RULES
Try telling that to the Anglo-Zionist Empire whose fleet is currently anchored in the South China Sea. This constitutes a blatant threat against Chinese sovereignty and in complete violation of a ‘rules-based order’ which the US/EU bloc seems to ignore at will. Rule -based order be damned if it conflicts with US global hegemony. But breaking the rules seems to have become common practice. A formal devotion to the rules does not apparently mean that globalist politicians necessarily adhere to them. In practice institutionalised rules express power not law when states interest clash with the rules-based order. The United States for example unilaterally removed the dollar from the gold standard in 1971, and the rest of the world would have to like it or lump it. Gold reserves which had accumulated in the surplus countries, Japan, and Europe, could no longer trade in their dollar earnings for gold, given that the gold window at the Fed was closed – temporarily at first but then permanently. From that day to this, surplus dollar countries could only buy US Treasuries with their surplus dollars thereby not only giving the US a free lunch by injecting their trade surpluses back into the US, but also providing liquidity for the US to pay for its trade and domestic imbalances.
‘’Ironically, it is the United States, historically the leading post-war rules maker, which has been increasingly perceived as bending, breaking, or abandoning the rules. In the words of one international relations specialist, as the ‘ordering superpower’, the United States did not bind itself with the rules of the system it had earlier approved. It upended, stretched, or broke liberal rules to shape a putatively liberal order.’’ (5)
It is always remarkable how the powers-that-be (PTB) are adept at adopting a Janus-faced take on the real world of theory and practise. Despite their self-assigned preservation as the guardians of democracy, it is striking how their institutions seem to have a penchant for ignoring the basics of democratic accountability. Working with the IMF the European Commission and the European Central Bank (ECB) they formed the dreaded ‘Troika’ an alliance none of which bothered with the niceties of inclusion of the populations involved and their representatives. The Troika was to impose austere bail-out terms despite their rejection in the Greek General Election and in an ensuing referendum. During the ‘negotiations’ (if they can be described as such) the former Greek finance minister, Yanis Varoufakis, recalled how Germany’s finance minister Wolfgang Schauble brazenly told him that ‘elections cannot be changed by an economic programme of a member state.’
Such are the vagaries of globalist theory and practice. It should also be noted at this juncture that the globalists having essentially disenfranchised the Greek electorate had another trick up their sleeves.
‘’The globalist attraction to rule-following is paralleled by the propensity of modern western politicians and journalists to reduce difficult political questions into technical ones. Instead of thrashing out tough arguments before the public and then reaching and defending positions based upon sound reasoning, they take the easier route of following ‘expert’ direction on ‘’the facts’’ and technical claims which are based mostly on projections modelled by technocratic advisers and are presented as ‘non-controversial’ evidenced based truths that only idiots or people with disreputable agendas could dispute. By default, reason and politics are belittled. This really betrays a loss of confidence by many politicians and journalists in their own ability to reason and argue with the public. (6)
This glaring contrast between the globalist elevation of unchanging ‘facts’ and the rules-based model has resulted in national economies in the developed world dragging their anchor of production and innovation which has resulted in political and economic stasis. This has been identified by falling levels of output, absent innovation, and the rise of zombie economies. The driving fear of uncertainty has led politicians and journalists to settle for the status quo, even if the status quo is not delivering the goods in terms of output and upgrading. Zombie companies are kept alive by QE and low to negative interest rates. Weak businesses (zombies) are directing cash flow to cover interest on loans that cannot be repaid; investments are shelved (permanently) and banks reduce lending to productive enterprises but overwhelmingly advance lending to mortgages. Small and medium sized enterprises (SME’s) are starved of investment funds. The creative destruction of and reallocation of resources necessary to clear out the dead wood in order to restore the economy does not occur.
GLOBALIZATION AND NEO-LIBERALISM
But this apparently is all to the good, and like all crackpot theories it is merely a fig-leaf designed to exclude mass participation (i.e., democracy) from the decision-making process. After all, mummy knows best. The great counter-revolution which started circa 1980 has become the established ‘truth’ and has been on a roll ever since that date. Ex chief of the Federal Reserve, no less a personage than Alan Greenspan, enunciated this pearl of wisdom in 2007. What followed was his reply to a journalist’s question.
Namely that, ‘’The government interferes too much with the self-regulating of markets, thereby undermining prosperity and it was fortunate that globalization was rendering the government redundant … ‘’ this is the anti-state narrative. Secondly, the anti-mass politics narrative. ’’That the west has reached the exhaustion of traditional politics: politics has lost its efficacy in the face of global forces.’’ This is the anti-democracy narrative. Both globalization and neo-liberal theory, now form the two sides of the prevalent orthodoxy. Neither of which are true incidentally. To assert that the state does not or at least should not interfere in pristine market forces is frankly deranged. In the real world rather than the virtual world the situation was more like the following.
‘’The cataclysmic events that stunned the global economy in 2008 saw a dramatic reversal in the apparently unchallenged dominance of the free market and a revival of the view that states ‘do matter.’ The change was most apparent in the financial sector where the ‘Masters of the Universe’ had to go on bended knee’’ – or as we would now say bend the knee – ‘’to the state to be rescued, but also in such automobile industries – which included Chrysler and General Motors – into which governments around the world poured billions of dollars, pounds, and euros. In some cases (see above) this amounted to little short of nationalization a béte noire of market fundamentalists – the state is back. In fact the state never really went away. It continues to remain the most significant force in shaping the world economy, despite the hyper-globalist rhetoric. It has always played a fundamental role in economic development of allcountries and, indeed in the process of globalization itself. After all an increased facility to transcend a geographical distance made possible by transportation and communication technologies is of little use if there are political barriers to such movement. An important factor underlying globalization, therefore, has been the progressive reduction in political barriers to flows of commodities, goods, finance, and other services. In fact the more powerful states have used globalization as a means of increasing their power. (7)
As opposed to globalization it should be noted that neo-liberalism is more of a political theory than economics. The arch-proponent of neo-liberal theory and practise, Freidrich Von Hayek, was particularly instrumental in this important contribution to political and social conjecture. This was not a romantic attachment, rather it was his arguments about the dethronement of politics. The whole neo-liberal goal was a political programme which seeks to shield capitalism from democratic influences. This hostility to market forces was best summed up by Hayek in his pronouncement that ‘Personally … I prefer a liberal dictator to democratic government lacking liberalism.’’ (8) It may be of interest that Hayek was at the London School of Economics at the same time as Keynes. They were apparently good friends but although their economic opinions differed their views of democracy did not.
Mullan spends the next 4 chapters of his book on trade theory and practice. One of the key figures in this context is David Ricardo (1772-1823) mostly remembered for his trade theory and the exposition of the theory of ‘comparative advantage’ which is on the Economics syllabuses in schools and universities throughout the English- speaking world. The theory as such is taken almost as gospel. But on closer examination it is found wanting. This because its direct application is partial, and it is based on many limited and static assumptions.
The theory postulates only two countries, and two products, a single factor of production (labour) constant costs of production and static productivity. Thus hypothetically even if both countries – Ricardo chooses England and Portugal – produce the same goods, cloth and wine, and Portugal has an advantage in wine production whereas England has an advantage in cloth production. It would therefore follow that Portugal should produce wine and England should produce cloth. This means that overall, output of wine and cloth will be maximised as each country specialises in cloth or wine production. Everybody happy? Economic rationality has triumphed. Not quite. Such policies can, and often do, lead to overspecialisation particularly in one-crop economies in the global south. The diversification of an economy is a necessary strategy for developing countries which they have used in catch-up policies. Taiwan, South Korea, and China offer typical examples. Moreover the conditions for this policy need to conform to the following text-book Ricardian criteria.
- a) Factors of production must be perfectly mobile within each country and they can be instantly switched between industries without any adjustment problems. However the same factors are immobile between countries, though final goods and services can be traded.
- b) There are constant returns to scale and constant average costs of production in both industries and both countries
- c) Both commodities, wine, and cloth, are in demand in both countries.
- d) The limited resources and factors of production in each country are fully employed.
- e) Transportation and adjustment costs involved in trade are discounted
Suffice it to say that in the real world, however, none of the above assumptions hold.
Another fly in the globalist ointment is that product diversification takes place spontaneously.
‘’A company’s executives decides on what to produce. If successful, this illustrates absolute advantage. But for ‘comparative advantage’ to apply at a country-wide level states would need to intervene to prevent activity in sectors – e.g., wine – that are more productive relative to what is possible somewhere else in the world. In Ricardo’s example, the Portuguese government would have to ban cloth producers, and force them to make wine because otherwise they would be market incentivised to under-cut British cloth-makers. Not much of a free-market here.’’(9)
Trade involves the exchange of goods and services not the production of goods and services. But the preoccupation of trade as cause of the global slowdown which impacts the production of goods and services is truly putting the horse before the cart. The downturn in business investment which had already impacted on productivity levels in manufacturing was the main contributor to the deceleration of trade growth. The misdiagnosis unfortunately invited the wrong remedies.
‘’Governments should have been devoting effort to addressing the underlying problem of productive decay at home, and not evade this responsibility by blaming trade wars and other frictions inhibiting trade flows.’’ (10)
Thus the investment slump, particularly in the developed world, gave rise to a productivity collapse, which impacted negatively on world trade. Comparisons may be made with the interwar period, starting with the Wall Street Crash of 1929. From this point onwards in June of that year the United States responded to the economic downturn by passing the Smoot-Hawley Act – a piece of legislation that substantially increased US tariffs on over 20000 imported goods. Other countries predictably retaliated imposing a beggar-thy-neighbour pattern on their trading partners/rivals. Even Adam Smith had warned about these destructive policies some 150 years earlier. The curtain then went up on the full-blown depression that lasted to the end of the 1930s.
But the question then arises as to what exactly caused the Great Depression in the first place? Well here, I am going to take off my Schumpeterian hat and put on my Marxist hat. The Marxist view is that capitalist crises are in general due to a fall in the rate of profit. This is a long-run supply-side process and leads to a slowdown as investors see their profitability declining. This is consistent with Mullan’s economic theories, as stated below.
‘’Marx discovered that falling profitability derives from additional capital investments that are necessary to raise productivity. Labour productivity as a result of more and better productive capital being employed for each worker. Technically this takes the form of mechanisation of work though it is generally as greater amount of capital stock employed for each worker. Productivity enhancing investments tend to grow the value of the capital invested relative to the amount spent on wages. The consequence is that the accumulated cost of investing in plant and equipment, added to the spending on raw materials and semi-components rises inexorably to the cost of labour … The tendential fall in profitability is an inevitable accompaniment to the increasing productivity that is positively associated with periods of investment and economic expansion. The rate of profit exhibits a downward trend not because productivity decreases but because it increases in consequences of innovative capital investment. Falling productivity then becomes a constraint on future investment reducing productivity growth.’’(11)
Far from being a boon, trade is giving rise to an increasing standoff between the West and the China East Asian bloc. US trade sanctions against China, paralleled by the European ones are symptomatic of the changing pattern and imbalances which are upsetting the Western-created international order … the West is lagging behind and this is giving rise to a sense of insecurity. Instead of addressing their own economic problems and begin to restructure their economies in order to make them more productive and competitive they will not be able to keep up with East Asian development. Mullan explains:
‘’A faster momentum of technological progress in China and other parts of Asia should be a wake-up call to the Western nations to sort out their own zombie economies. Instead their own home-grown problems of productive atrophy are almost ignored, even worse, they prompt protectionist China-bashing.’’ (12)
What is protectionism? Protectionism denotes the protection of domestic economic interests and the privileging of these over foreign competitors. Trade barriers are erected to keep out imports from states with higher levels of productivity. The growth and reach of state intervention in order to shelter domestic industry and grant assistance to ailing economies, becomes imperative: nonetheless this becomes a drag on internal growth and development.
At this stage tariffs and quotas make their appearance and enable home-based growth to compete with the more efficient and productive economies, albeit in a declining productivity trajectory. Turning once again to the political and economic ‘policies’ of the EU, this bloc in fact exemplifies the most extreme illiberal trade policies currently practised within its domain. In describing itself as a ‘free-trade-area’ it arrogates to itself as being the (rather unlikely) world champion against protectionism. In practice, however, the EU operates as the world’s most protectionist trade bloc. Such free trade as exists is limited to the internal Single Market rules imposed on its own members, but these same rules taxes import upon members, and these same rules preclude import barriers for the rest of the world’s exports.
‘’It is true that the European Customs Union established in 1958 permits tariff free-trade between members states, but even for tariffs, this represents a freedom to trade for only a small proportion of the world’s countries. The Customs Union’s ‘Common External Tariff’ regulates and taxes imports from non-members resulting in no less than 13000 different taxes, including quotas, imposed by the EU on goods from outside. Its constraint on selected protectionist practice between member countries came at the expense of its extending bloc protectionism with respect to most of the rest of the world. (13)
The current rise of protectionist theory and practices and the increasing decline of the post 1945 of world free-trade multilateralism is a function of an ongoing decline in investment, productivity, and innovation in the West. But the western bloc seems unable to come to terms with its own failure. Apparently, it is all the fault of China and other emerging economies in the East. This myopia is solidifying into an impenetrable barrier of an absence of willingness to face facts. At the present time there is no sign of this recognition.
The last 3 chapters of Mullan’s book is given over to a defence of nationalism and the nation state. This state of affairs becomes all the more disturbing since it is not just an East-West conflict, but it is interacting with chronic Intra-West and even North-South interests. Different power blocs at any given time may find themselves in opposition to each other as alliances change and shift. This is hardly news, for like the man said: ‘’We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.’’ (14)
The increasingly dangerous drift towards open conflict Mullan suggests that:
‘’The underlying economic drive toward conflict can only be ameliorated durably, not simply by diplomacy alone, nor by additional rules, but by reviving the national engines of prosperity. Given that the long depression has prompted aggressive state protectionist policies, generating economic renaissance at home and will directly lower the political temperature.’’(15)
True enough, but such policies as these will run into the brick wall of globalist and protectionist strategies and it seems extremely unlikely that effective solutions to the crisis of production will emerge from the political/media/monopoly elites which are currently setting the agenda in the West. They are totally committed to the status quo which they believe is somehow a law of nature and is escape-proof. Mullan therefore proposes that economic renewal requires political renewal from the bottom-up, not additional top-down measures which have primarily been about coping with slower growth.
As things stand the present zombie economies of the West must be considered to be a ‘market failure’. The model cannot deliver growth; it cannot deliver full employment; it is prone to deep cyclical movements of boom and bust which become increasingly violent, widespread, and damaging; it is giving rise to massive income and wealth inequalities; it is destroying the productive economy on the altar of financialization, neo-liberalism and globalization. Given what is in effect an apocalyptic scenario and an economic system that simply doesn’t work, a complete make-over (if not total abolition) of this economic model is a minimum requirement. In fact the social, political, and economic policies which were operationalised in WW2 come close to a programme which would form an alternative to the present fiasco. Not that Mullen, nor anyone else for that matter, is suggesting a war. However such policies are quite feasible in peacetime provided the political will is present.
‘’National developmental strategies are likely to take different forms in different countries reflecting the different economic structures, possibilities, and constraints. They would also need to reflect different and flexible policies to ensure good jobs for people in all parts of the country.’’
This is one (of a number) of Mullen’s proposals which are eminently feasible but given my rather limited space I would advise prospective readers to read the book, but I will end on a following note.
‘’The reason why globalization is the antithesis of internationalism is that it is grounded in formally rejecting everything to do with the nation. Yet without the nation there cannot be any internationalism and no rightful international – as well as national action. Globalists renounce nationalism as being regressive and barbaric. The nation state is denigrated as no longer potent or relevant. National sovereignty – the ability of a country to make decisions about the lives of its people without having these imposed from the outside – is disparaged as an outdated illusion that we should be glad to see the back of … the globalist rejection of national entities represents an abdication of making change because the supra-national bodies have neither the means nor the legitimacy to replace the transformative capability of nation states. Today only nation states have the proven potential for democratic accountability. When it comes to practical power, as we have examined earlier, nation states have been intervening in their societies including, increasingly, propping up their own capitals. They have the resources to do so from having long achieved their authority to levy taxes and to borrow, invest and grow.’’ (16)
La Lotta Continua.
(1) Mullen – op.cit. – p.xviii
(2) Mullan – op.cit – p.xxi
(3) Mullan – op.cit. – p.xxiv
(4) Mullan – op.cit. – p.xxv
(5) Porter – A World Imagined: Nostalgia and the liberal order – June 2018
(6) Mullan – Ibid., – p.29
(7)Peter Dicken – Global Shift – pp.174/75
(8) F.Hayek – El Mercurio – April 12, 1981
(9) Mullan – Ibid, – p.80
(10) Mullan – Op.cit. – p.81
(11) Mullan P. – Creative Destruction: How to Start and Economic Renaissance -pp.123/124. For fuller explanation see, Karl Marx – Capital Volume 3, Part , Chapter XIII – The Law as Such – pages 211/281
(12) Mullan – Ibid, – p.98
(13) Mullan – Ibid. – p.111. Quoted by (Scharpf – 1988, p.241)
(14) Henry Temple Third Viscount Palmerston(1784 – 1865) British Statesman
(15) Mullan – Ibid. – p.152
(16) Mullan – Ibid. – pp.167, 169
- Nationalism would appear to have had a bad press. Hitler, Mussolini, Franco were bad nationalists. However the NLF in Indochina, the FLN in Algeria were nationalists in a progressive sense that they sought to free their countries from imperial bondage whatever the cost.
^3000US citizens have no real political representation.
We don't live in a democracy. And our freedom is disappearing fast.
I don't want to be ruled by hypocrites, whores, and war criminals.
What about you? Time to push back against the corporate oligarchy.
And its multitude of minions and lackeys.
The views expressed are solely those of the author and may or may not reflect those of The Greanville Post
YOU ARE FREE TO REPRODUCE THIS ARTICLE PROVIDED YOU GIVE PROPER CREDIT TO THE GREANVILLE POST
VIA A BACK LIVE LINK.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License