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Lecture given by Takis Fotopoulos on the 9th of August 2000 in Hanover, Germany.
Introduction.
I would like to talk today about the relation between globalisation, sustainability and democracy and ask a number of questions to which I will try to give some answers.
The first question I would like to ask is what do we mean by globalisation and why is it significant? This is an important question given the present confusion on the matter. As we shall see, the meaning we attach to globalisation is directly relevant to the significance we give to this term and the political, economic, social, cultural and ecological implications we assign to it. In this context, I will have to refer briefly to the main approaches to globalisation today, so that we can develop an analytical framework within which we can meaningfully examine it. The second question I would like to ask is, assuming that globalisation is irreversible and that its effects are extremely negative, particularly with respect to labour and the environment, are there any social controls, which can be imposed on this process so that labour and the environment may be effectively protected?
The third question I would raise, which follows from the second one, concerns the present anti-globalisation movement: how effective is this movement now, or potentially in the future, to check the effects of globalisation?
Finally, I will conclude with a new approach, what I call the Inclusive Democracy approach, which sees the way out of the present multi-dimensional crisis outside the present institutional framework, which has created this crisis in the first place.
The meaning and significance of globalisation
So, let’s start first with the meaning of globalisation. Today, almost everybody talks about globalisation but few attempt to define it, so that we precisely know what we talk about. This is important because a lot of confusion on the matter, even among analysts, is created by the fact that different people attach different meanings to the term globalisation and, mind you, I am talking only about economic globalisation which of course is only one aspect, or one component if you like– though the main one– of globalisation. In other words, one may also talk about technological globalisation, in the sense of the new communications technology and the information revolution, political globalisation, in the sense of the withering away of the nation-state, at least as far as economic sovereignty is concerned and the creation of a new World Order, which is based on the ideology that human rights should come first, before national sovereignty (the new NATO and its role in Kosovo is an obvious example), cultural globalisation, in the sense of the present homogenisation of culture (everybody watches the same TV serials and videos, consumes –or aspires to consume– the same products and so on) and the related social globalisation, in the sense of homogenisation of the mode of life based on an individualist culture, consumerism and so on. Although these aspects or components of globalisation are very much interlinked, still, one may argue that it is the economic globalisation which conditions the other components of it, although this is an interacting process in which economic globalisation is facilitated by technological globalisation but also enhances it, political globalisation is the necessary complement of economic globalisation, whereas social and cultural globalisation is the inevitable effect of economic globalisation. However, if we assume that the main component or aspect of globalisation is economic globalisation, we may concentrate on it and this is what I propose to do in the rest of my talk.
At the outset, we have to draw a clear line between the case of internationalisation and that of globalisation. Internationalisation refers to the case where markets become internationalised and as a result the economic policies of national governments and the reproduction of the growth economy itself[1] are conditioned by the movement of commodities and capital across frontiers. On the other hand, globalisation refers to the case where production itself becomes internationalised, in the sense that production units become stateless bodies which operate in a borderless world with activities not primarily aiming at the country, which is their national base, and involve an integrated internal division of labour spanning many countries. If we have this distinction in mind then we can see that although globalisation in the sense I mentioned is indeed limited, this does not contradict the argument that the accelerating internationalisation of the last quarter of a century or so, in combination with the end of statism, (i.e. the period of active state control of the economy and extensive interference with the self-regulating mechanism of the market) does represent a structural change and it is not just a matter of change of economic policy, as it is sometimes argued.
Briefly, we may distinguish four theoretical approaches to globalisation. There is first the neoliberal approach according to which globalisation is the inevitable result of technological and economic changes which implied the need for the opening of markets, free trade and free movement of capital, (though not labour), as well as the need for the drastic restriction of the welfare state and the economic role of the state generally, privatisations, flexible labour markets and so on. According to this approach, supported by international organisations like the IMF, the World Bank[2] and most orthodox economists and conservative parties globalisation is beneficial to everybody, as well as to the environment, because it allows healthy competition to develop and, consequently, it leads to improvements in efficiency and the spreading not only of knowledge, but also of the benefits of growth, through what they call the ‘trickle-down effect’. However, the evidence of the past twenty-five years or so shows that the more open and flexible the markets become the greater the degree of concentration of income and wealth in a few hands. Thus, according to official UN data, the income gap between the fifth of the world’s people living in the richest countries and the fifth in the poorest was 30 to 1 in 1960, before the present globalisation began. By 1990 it has doubled to 60 to 1 and by 1997 it was 74 to 1.[3] As a result of these trends, by the late 1990s, the richest 20 percent of the world’s population had 86 percent of world GDP versus 1 percent of the poorest 20 percent! Of course, such concentration means a corresponding concentration of economic power, which is confirmed by the fact that the same fifth of rich people control today 82 percent of world export markets and 68 percent of foreign direct investment.[4]
Second, there is what we may call the ‘social-liberal’ approach, which is today adopted by all centre-left governments in Europe, the USA and Australasia. There are several versions of this approach but the common elements in all these versions are that they all adopt the thesis that globalisation is both a new and irreversible phenomenon and explore ways of making it more ‘humane’, on the explicit–or sometimes implicit– assumption that any return to some form of statism, like the one characterising advanced market economies up to the mid seventies, is impossible. Thus, one version of this approach supported by theoreticians like Anthony Giddens, the father of the ‘Third Way’,[5] talks about ‘renewing social democracy’, having abandoned in the process the basic commitments of old social democracy i.e. extensive state intervention to secure high levels of employment, social welfare and equality. However, the ‘benefits’ of the ‘Third Way’ have already started emerging in Britain, where Third Way policies have been in full force since the rise of Tony Blair’s government. Thus, according to very recent data, there has been a significant increase in the huge poverty gap which was created by conservative governments in the 1980s and early 1990s, with the incomes of the rich growing three times as rapidly as those of the poor[6] during the Blairite period. Another version of the same approach, supported by Amartya Sen, the Nobel Prize-winner for economics, talks about the absence of any basic conflict between economic globalisation on the one hand and the fostering of democracies and prosperity on the other.[7] However, given that Sen declares at the same time his concern about the inequality of power, one may wonder how exactly this extra prosperity and fostering of democracies is compatible with the fact that an important effect of the globalisation which he sees favourably is that the world’s richest people more than doubled their net worth within just five years, (i.e. from 1994 to 1999), to $1 trillion 135 bn, when the total income of the 582m people in all the developing countries is only $146bn, i.e. about 10 percent of this.[8] Obviously, this concentration of economic power has been accompanied by a corresponding concentration of political power, as it has always happened in the history of the market economy.
Third, there is what I call the ‘palaeolithic social democratic approach’. This is the approach supported usually by ex Marxists but also by some in the libertarian space, like Noam Chomsky. Again, there are several versions of this approach but the common elements in all these versions are that they all adopt the thesis that globalisation is not a new phenomenon but something already existing at the beginning of last century and explore ways of resisting it given that, apart from its adverse effects on labour and the environment, globalisation is also thought by this approach to be incompatible to democracy. The explicit–or sometimes implicit– assumption here is that a return to some kind of statism is still possible, since the present globalisation of markets is considered to be just the product of neoliberal policies, (if not merely an ideology to justify neoliberalism), and not a fundamental structural change. Thus, one version of it supported by Leo Panitch,[9] Noam Chomsky[10] and others is that globalisation is a kind of neoliberal conspiracy of US origin, whose aim is to promote the interests of US corporate capitalism. The conclusion drawn by this approach is that popular pressure could somehow reverse globalisation through, for instance, the election of more progressive socialdemocratic governments like the Oscar Lafontain faction of the German socialdemocratic party, or, through forcing the present centre-left governments to ‘renegotiate’ the rules governing the operation of world trade organisation, as, for instance, Samir Amin[11] suggests. One may also notice here that the demands of the anti-globalisation movement, whose manifestations we saw in Seattle, London and we are going to see next in Prague, mainly reflect the analysis and conclusions of this palaeolithic social democratic approach. However, according to the Inclusive Democracy approach, which I am going to consider next, the palaeolithic socialdemocratic approach is based on an invalid analysis, which leads to utopian proposals.
Thus, according to the ID approach, globalisation, or better, the internationalisation of the market economy, is a structural phenomenon and not just a policy change, as argued by palaeolithic socialdemocrats. This means, that internationalisation is not only –within the context of the market economy– irreversible, but it is not also amenable to the kind of effective controls to protect labour and the environment, which are proposed by the palaeolithic socialdemocrats and many in the anti-globalisation movement. According to this approach, the only kind of controls which are feasible within the framework of the market economy is either regulatory controls aiming to “regulate” the market (i.e. controls to create a stable framework for the smooth functioning of the market economy without affecting its essential self-regulating nature) or the kind of cosmetic controls recommended by the centre-left governments, like the ones discussed in the Berlin summit a few months ago, to make globalisation more humane, or at least look more humane. This is because, according to this approach, the internationalisation of the market economy is not but the highest phase in the marketization process, which is seen as a historical process that was initiated by the emergence of the system of market economy, about two centuries ago[12] and led to the transformation of the socially controlled economies of the past into the present market economy.
Of course, the ID approach does not see the internationalisation of the market economy as a phenomenon that emerged out of the blue one nice morning. Internationalisation is also a process, which was set in motion with the very emergence of the market economy itself. Thus, according to this approach, although throughout the post WWII period the internationalisation of the market economy was actively encouraged by the advanced capitalist countries, in view –in particular– of the expansion of `actually existing socialism’ and of the national liberation movements in the Third World, still, this internationalisation was basically the outcome of `objective’ factors related to the dynamics of the market economy and, in particular, to the expansion of transnational corporations’ (TNC) activity and the parallel growth of the Euro-dollar market.[13] Although this approach is based on Polanyi’s[14] work in explaining the rise of the market economy it is a radically different approach from that of social liberals like John Gray[15] who, also drawing from Karl Polanyi, sees the opening of markets as simply the effect of the presently dominant neoliberal ideology and of corresponding government policies, once neoliberal parties in the UK and USA took over in 1979/80. As I tried to show in Towards An Inclusive Democracy,[16] although it is true that the creation of a self-regulating market system in the 19th century was impossible without crucial state support in creating national markets, still, unlike Polanyi and Gray, I believe that once this system was set up it created its own irreversible dynamic which led to taday’s internationalised market economy.
This means that today’s internationalised market economy is just the outcome of this dynamic process and not the result of conspiracies, or of the policies of evil neoliberal parties in government. Neoliberals simply formalised or institutionalised the open markets, which had already started emerging informally in the 1970s, when the transactional corporations, which have grown in the post-war period, started controlling a growing part of world trade and investment. This development implied the need for corresponding institutional changes that would facilitate this process, such as:
q The full opening of commodity and capital markets, so that TNCs could move freely capital and commodities among their subsidiaries
q The institutionalisation of flexible labour markets, so that cost of production is minimised,
q The denationalising of state enterprises, so that TNCs could further expand their activities in new areas of economic activity,
q The drastic shrinking of the welfare state, so that the tax burden on the economic elites could be drastically reduced and so on.
It was therefore obvious that the kind of state intervention that characterised the statist period of marketization, which followed the liberal phase of the 19th century, was no longer compatible with the new internationalisation that emerged in the mid 1970s. Statism was at an end and this monumental event, at the political level, implied the end of the social democratic consensus which marked the early post WWII period –i.e. the consensus involving both conservative and socialdemocratic parties which were committed to active state intervention in order to determine the overall level of economic activity, so that a number of socialdemocratic objectives could be achieved—mainly, full employment, welfare state, the improvement of the distribution of income.
The statist phase was succeeded by the present neoliberal phase and the emergence of the neoliberal consensus, i.e. the consensus involving both centre-Left and centre-Right governments which are committed to follow the same policies of open commodity and capital markets, flexible labour markets, shrinking of the welfare state to its essentials, tax cut policies to reduce the tax burden of the economic elites and so on.
In this analytical framework, the rise of neoliberalism, as well as internationalisation itself, are not a kind of a conjunctural phenomenon, as palaeolithic socialdemocrats believe, but represents the completion of the marketization process which was merely interrupted by the rise of statism. The main aim of the economic elites which control today’s market economy is, and has always been, the maximisation of the role of the market and the minimisation of any effective social controls over it for the protection of labour or the environment, so that maximum ‘efficiency’ (defined in narrow techno-economic terms) and profitability may be secured. Of course, this does not mean the abolition of all kind of social controls over markets since some of them, like the regulatory controls, are needed for the very efficient functioning of the markets, while others (including a minimal level of social protection and welfare) are needed in order to provide a level of protection to human labour and the environment which would secure their reproduction. So, the neoliberal phase represents in fact a new synthesis between, on the one hand, the old liberal phase and, on the other, the statist phase—a synthesis in which the essentially liberal self-regulated market is integrated into a system of statist controls to secure a minimum level of protection for human life. An obvious example is the various security nets introduced at the moment, which aim at specific population categories, like the very poor, replacing in the process the universal welfare state, which aimed at the population at large.
Therefore, although a significant degree of internationalisation of the market economy was already evident at the beginning of the twentieth century, still, the present internationalisation is both quantitatively and qualitatively different from that earlier internationalisation.
It is quantitatively different because there has never been a similar degree of trade and financial openness. Thus, trade openness, as measured by the ratio of merchandise trade, (i.e. exports and imports combined) to GDP at current prices has increased significantly in all advanced market economies (apart from Japan) throughout the post-war period. As a result, the average index of openness increased from 43.6 percent in 1913 to 48.3 percent in 1996. Furthermore, trade openness in 1996 was significantly higher in the major trading countries[17] compared to 1913. It is therefore obvious that the claim by supporters of social democracy[18] that there was a greater international openness in 1913 than today is hardly supported by the facts.
Also, as regards financial openness, although the usual statistical measure used to estimate it does not show an increase with respect to the earlier internationalisation, still, this measure is completely inadequate, as it is shown by the fact that in the case of the country with the major reserve currency, the USA, it yields nonsensical results.[19] But, there are other significant indicators pointing to a drastic increase in financial openness. Thus, not only there has been a significant rise in foreign direct investment which, as a proportion of the advanced capitalist countries’ GDP, has nearly doubled within the first 20 years of the new internationalisation that started in the early seventies[20] but, also, huge short-term capital movements have taken place lately with something like one trillion dollars changing hands on the world’s foreign exchange every day. Furthermore, the short-term capital movements of the late internationalisation differ not only quantitatively but also qualitatively from those of the earlier one. Thus, whereas in the early 1970s about 90 percent of capital movements were linked to investment and trade and only 10 percent were speculative, today, the situation has been reversed and only around 5% of the deals struck are linked with foreign trade, whereas the rest are purely speculative.[21]
The same applies to internationalisation as a whole, which is qualitatively different from the earlier one. This is because the earlier internationalisation was based on nation-states rather than on transnational corporations, given that commodity and financial markets were in the past much more closed than today. This allowed nation-states to exercise a significant degree of control over the level of economic activity (before the WWII, mainly, through monetary and exchange rate policies and after the war, up to the mid 1970s, through fiscal policies). On the other hand, in today’s framework of institutionalised internationalisation, nation-states have lost a significant part of their economic sovereignty. Thus, aggressive fiscal policies to control economic activity are no longer possible in a framework of open commodity and capital markets, whereas the present degree of integration of market economies makes equally impossible any really divergent monetary policies.
The increasing loss of economic sovereignty that the nation-state faces today is also reflected in the creation of huge economic blocks, within the context of which the economic role of the individual nation-state is being progressively downgraded in favour of supra-national institutions. This applies, in particular, with respect to the EU, where the relevant process has already begun. But it also applies to some extent with respect to the North American Free Trade Agreement (NAFTA). Furthermore, significant moves take place at the moment for the formation of new economic blocks out of existing regional associations. One could mention the Association of Southeast Asian Nations (ASEAN), the Southern Cone Common Market in Latin America (MERCOSUR) and the Asia-Pacific Economic Co-operation (APEC), which plans an enormous trans-Pacific free trade zone by the year 2020.
The movement towards the formation of economic blocks, each with its own currency (dollar, Euro, yen), expresses the need of the economic elites to improve the competitiveness of the sections of capital which are based on each block. This improvement is expected to come about mainly on account of the enlargement of the size of the commodities’ market and in particular on account of the fact that the larger size makes improvements in productivity much easier, because of the possibility of pooling resources on research and development. However, once the integration has transcended the commodities market to include the capital and labour markets, as in the case of the European Union, the advantages of forming economic blocks become even more significant. Thus, an economic block creates additional opportunities to squeeze the cost of production, especially the labour cost, because of the possibility of greater movement of labour and capital. This is so because—contrary to what orthodox economic theory suggests—neither free trade nor capital and labour mobility eliminate wage differentials. For instance, within the EU, despite conditions of free trade, full capital mobility and relative free movement of labour, the average gross hourly earnings of industrial workers (in purchasing power terms) in the periphery (Greece, Portugal) are still half of those at the centre.[22] At the same time, mobility of capital creates opportunities to invest in areas of low cost, whereas mobility of labour puts pressure on the wages of high-income countries. Indeed, if integration within the tight framework of the nation-state has proved unable to eliminate strong regional differences, which still persist after decades of statehood, one could easily imagine the likely effect of integration within the loose framework of a supra-national block.
In Europe, in particular, the complete liberalisation of the commodities markets within the EU block, combined with the liberalisation of labour and money markets, creates a vast economic area where a fixed exchange rates system, similar to the Gold Standard system of the earlier internationalisation, could now function successfully. Indeed, this is the main aim behind the European Monetary Union (EMU). If we substitute the Euro for gold, Europe will operate under a contemporary Gold Standard system when the EMU is completed. The reason why such a system is now in a better position to function more successfully than in the past is that the basic factor that led to the collapse of the Gold Standard system has been eliminated, that is, the various restrictions on the markets for goods, labour and capital which have introduced various degrees of ‘inflexibility’ into them. Such restrictions represented society’s self-protection mechanisms against its marketization and led to the near collapse of the market economy itself. Since the neoliberal consensus has eliminated most of these restrictions, a historic opportunity has been created for the marketization process to be completed. Therefore, the present neoliberal phase has much better chances of success than the first liberal phase that was associated with the early internationalisation. Of course, there is a price to be paid. The acceleration of marketization in countries like Thatcher’s Britain has led to a dramatic increase in inequality and one could expect that exactly the same will happen at the block level, as several studies confirm,[23] when advanced capitalist countries would share with semi-peripheral ones a common currency and a common central bank.
In turn, the establishment of the Euro might be expected to induce, initially, movements for the establishment of some kind of fixed parities between the three major international currencies (Euro, US dollar and yen), which, at the end, would logically result in some sort of an international version of the Gold Standard system, i.e. a global monetary system based on a single currency linking together the richest parts of the world, whereas the rest of the world, particularly Africa, but also the poor parts of Asia, Latin America and the ex-communist countries to which I include China, would play the role of the periphery to this new expanded centre.
In concluding, it is obvious that the rise of neoliberalism is not a conjunctural phenomenon, as palaeolithic social democrats present it, but that it represents the completion of the marketization process that was interrupted by the historically brief interlude of statism. Furthermore, the breakdown of `actually existing socialism’ in the East[24] and the collapse of social democracy in the West[25] have created the political conditions for the completion of the marketization process. So, the fact that neoliberal policies are supported today, with minor variations, by both centre-right and centre-left parties, in government or in opposition, and that the basic elements of neoliberalism have been incorporated into the strategies of the international institutions which control the world economy (IMF, World Bank), as well as in the treaties that have reformed the EU (Single Market Act, Maastricht and Amsterdam Treaties), makes it plainly evident that we are faced with a new consensus founded on the neoliberal phase of marketization. This consensus has replaced the defunct social-democratic consensus and reflects the radical structural changes brought about by the development of the internationalised market economy .
So, it should be clear that if the internationalised market economy of today is seen in its historical perspective, as I tried to do in my book Towards An Inclusive Democracy,[26] then, the present degree of openness is surely not a new phenomenon but merely the latest stage in a historical process, which started two centuries ago. To put it simply, it is not neoliberalism that created globalisation in the sense of open markets etc but the other way round: it was the dynamic of the market economy and the needs of globalisation which led to the rise of neoliberalism—a rise that was made electorally possible by the effects of technological globalisation on the structure of employment and, consequently, the electorate.
Therefore, the crucial issue today is not whether the present neoliberal internationalised economy is more or less open and integrated than the old liberal one but whether it has higher chances of success in creating a self-regulating internationalised market economy than the first unsuccessful attempt. In my opinion, today, and for the first time in the history of the market economy, the chances are high that the new attempt to create a self-regulating internationalised market economy would be successful. This is for several reasons having to do with the basic fact that the four major institutions on which according to Polanyi a social system based on a self-regulating market relies, are today being restored. These institutions are:
q First, a self-regulating market, an institution which today is more advanced than ever before in History, as a result of the present degree of freedom that capital and commodity markets enjoy, the retreat of statism everywhere and the universal enhancement of flexible markets for commodities, labour and capital,
q Second, the liberal state, an institution which is intrinsically connected to a self-regulated market and which today is universal,
q Third, the balance-of-power system, which today, after the collapse of ‘existing socialism’ and the internationalisation of the market economy has taken the form of a new World Order that is absolutely compatible with the New Economic Order, which the internationalised market economy represents
q And, finally, the new international monetary system, which has been established with the launching of Euro and parallel movements in North and South America to create a pan-American dollar. One could reasonably expect that once the Euro is finally established as a major world currency, such movements are bound to get momentum and lead to initially to tripartite system of international currencies and eventually a new world currency and a new planetary international monetary system.
Are effective social controls possible today?
So, let’s come now to the second question I raised, i.e. if we assume that the present internationalisation of the market economy is irreversible and given the negative effects of it on labour and the environment, which are obvious by the growing concentration of income and wealth and the worsening ecological crisis, are effective social controls possible today?
As it should be obvious from what I said before, the present degree of market openness implies that social controls on the market economies have to be homogenised, since each of those economies is now an integral part of the new internationalised market economy Since this homogenisation, in a competitive framework, is based on the principle of the ‘least common denominator” and given the present disparity of social controls, particularly among the Triad countries, (i.e. EU, NAFTA and the Far East), I think that the notion that effective social controls (initiated by the state or the “civil society”) are still feasible today is untenable. This does not mean of course that the present world economy is not ‘governable’, as some argue. There is no doubt that the market economy is governable, if by ‘governance’ we mean regulation. But, this is not the issue. The real issue is whether nation-states are still capable, in an internationalised market economy , of imposing effective social controls to protect labour and nature, or whether instead such controls are not feasible anymore, either at the level of the nation-state, or at the level of the economic block (EU or NAFTA), or even at the world level.
As regards the state level, or the economic block level, it cannot be disputed that the huge expansion of capital movements resulted by the present financial openness makes it impossible for any nation-state, or even an economic block acting alone, to introduce any effective social controls on the markets.
Thus, as regards the state first, If we take into account the significant increase in foreign penetration of stock exchange and bond markets[27] that has taken place in the last quarter of a century or so, it becomes obvious that no national government today may follow economic policies that are disapproved of by the capital markets, which have the power to create an intolerable economic pressure on the respective country’s borrowing ability, currency value and investment flows. If we assume, for instance, that a social-democratic party adopts, against the trend, policies to reverse the flexibility of labour markets or, alternatively, more aggressive policies to slow down the greenhouse effect, it may easily be shown that under conditions of free capital mobility, this would lead to a capital flight and a pressure on the respective currency and stock exchange prices, i.e to developments which could easily lead to a recessionary situation, if not to a full blown economic crisis. It is for these reasons that Mitteran and Jospin had to abandon any idea of introducing palaeolithic social democratic policies, while Lafontaine had to be ousted from the German government.
For similar reasons, if a block, like the EU attempts to introduce the kind of policies that were dominant during the social democratic consensus, (e.g. policies to expand the welfare state irrespective of the impact of such policies on inflation) or, alternatively, if it attempts to introduce strict environmental controls irrespective of their impact on profitability, then, this block faces the immediate risk of a serious capital flight towards the other blocks with severe repercussions on its currency, the Euro, versus the other block currencies. Therefore, the ideas currently adopted by some in the Left that globalisation could be seen as a US attempt to impose its own version of free-market capitalism, which could be resisted by a EU based on a social market,[28] or, even worse by a new kind of ‘good’ nationalism,[29] simply express the present demoralisation of the Left and its inclination to believe utopian myths.
However, one may ask at this point, what about the possibility of an international agreement by the Triad countries (the G7 for instance) to impose such effective controls? But, as anyone with a rudimentary knowledge of the historical dynamic of the market economy and the political and economic power structures which resulted from this dynamic can assure you, this is just a theoretical possibility. This is because such controls would violently contravene the logic and dynamic of the internationalised market economy and as such would come under the direct and indirect attack of the huge transnational corporations which control not only the market economies but also the mass media, on which the political career of professional politicians crucially depends, as well as the financing of their hugely expensive electoral campaigns. Therefore, to demand today to impose effective social controls on the economic elites beyond the regulatory controls that they themselves desire in favour of labour and the environment is as if to demand to restrict the very dynamic of the system of the market economy itself—a dynamic which crucially depends on the economic health of the economic elites and particularly that of the transnational corporations. On this, liberal and neoliberal economists have always been right. Any effective social controls on markets to protect labour and the environment would necessarily encroach upon economic efficiency, as presently defined, and therefore on profitability and the incomes and wealth of the economic elites.
The reasons therefore that the old socioaldemocratic parties in Europe have been converted into today’s social-liberal ones and have adopted the policies of massive privatisations, drastic reduction of the welfare state, flexible labour markets etc have nothing to do with some sort of betrayal of socialist ideals, or even of a defeat of the Left, as it is usually argued by palaeolithic socialdemocrats. The reasons for their conversion have to do with two basic facts:
a. The opening up of the commodity and capital markets, which made the statist policies of the socialdemocratic consensus incompatible with the growth requirements of the market economy and
b. The drastic change in the employment structure, as a result of technological and economic changes, that created the electoral majority in advanced market economies to support the New World Order.
The inevitable conclusion is that globalisation and its main effects, i.e. the present concentration of power and the continuous worsening of the ecological crisis, will persist for as long as the present institutional framework that secures the concentration of political and economic power reproduces itself, in other words, for as long as the market economy system and representative democracy are not replaced by an institutional framework securing the equal distribution of political and economic power among all citizens, in the form of an inclusive democracy. Furthermore, even if pressure from below, for instance through the present anti-globalisation movement, leads to some kind of social reforms aiming to provide a minimal degree of protection to labour and the environment, such reforms would not only have to be compatible with the requirements of the internationalised market economy but they would also be as irreversible as social democracy was in the past.
What are the chances of the anti-globalisation movement?
But, let us now come to the third question I raised at the beginning, which concerns the present anti-globalisation movement and in particular its chances to check the effects of globalisation.
To answer this question we have to examine first the nature of this movement. As it is well known, the anti-globalisation movement consists of heterogeneous elements with a huge diversity of goals ranging from reformist demands proposed by NGOs, mainstream Greens, trade unions and others to revolutionary demands of a systemic nature supported by eco-anarchists, revolutionary socialists and others. This heterogeneous nature of the movement has a number of very serious implications.
First, one may raise serious reservations as to whether the title ’movement’ is appropriate in this case in order to describe the forms of direct action which have marked the anti-globalisation activity in the last couple of years in London, Seattle and next in Prague.
Second, similar reservations could be raised against the supposed ‘anti-systemic’ nature of this movement.
Starting with the reservations about the nature of the anti-globalisation movement, the heterogeneous nature of the various groups participating in these actions makes it doubtful-to say the least- whether those participating in these activities may be considered as constituting a kind of ‘movement’. A movement presupposes a common analysis of the present situation or, at least, common goals and means to achieve the shared goals. But, the activists involved in these activities not only differ significantly with respect to the means used, which range from violent direct action to passive resistance or peaceful demonstrations, but they also differ on the goals themselves, not to mention the analysis of the present situation. Thus, as regards the analysis used by the activists involved in the anti-globalisation movement:
q Some of the activists involved–at present a minority—blame the structures of the present system of concentration of power, i.e. capitalism, for the present crisis;
q Others just blame the prevailing values of consumerism, growth etc, –as if these values were independent of the existing structures and could go away, even without a parallel movement to change these structures;
q Still others, the vast majority, blame the malfunctioning of the system, not the system itself, adopting most of the demands of a palaeolithic socialdemocracy.
Also, are regards the goals of the activists involved in the anti-globalisation movement?
q Some demand the overthrow of the present system of concentration of power without proposing any viable alternative;
q Others assume that all is a matter of persuading people about the evils of globalisation and do not even attempt to base their conclusions on any sort of class analysis of today’s societies, or on an analysis of the sort of power structures that have developed in these societies, as well as of the differential effects of globalisation on the various social classes;[30]
q Still others believe that popular pressure from below will persuade, or force, the elites to take appropriate action to protect labour and the environment.
It is obvious, however, that the latter view, which is at the moment the dominant one, is ignorant of the parameters set by the institutional framework. Given that, as I attempted to show, the neoliberal consensus is not just a policy change but a structural change imposed by the internationalisation of the market economy, the basic elements of the neoliberal consensus and, in particular, the elements of flexible markets and minimum social controls on markets, will never go away within an internationalised market economy. But, a market economy today can only be an internationalised one, given that the growth (and therefore profitability) of the TNCs, which control the world market economy, depends on the continuous expansion of world markets. However, as long as the market economy has to be an internationalised one, markets have to be as open and as flexible as possible.
This means that, as long as the system of the market economy and representative democracy reproduces itself, all that reforms (‘from above’, or ‘from below’) can achieve today is temporary victories and reversible social conquests like, for instance, those made during the period of the social democratic consensus which are now being systematically dismantled by the neoliberal consensus.[31]
As regards the anti-systemic nature of the anti-globalisation ‘movement’, the fact that most of the activists involved do not have any clear anti-systemic goals makes it hard to classify it as an anti-systemic movement, similar, for instance, to some versions of the radical Green movement. It is obvious that the aim of most participants in the anti-globalisation movement is not to advance a systemic change but rather to ‘resist’ globalisation in the (vain) hope of forcing the introduction of effective social controls over the internationalised market economy for the protection of the environment and labour. One could therefore say that the dominant trend within this ‘movement’ at present simply aspires to function as a kind of ‘resistance movement’ to globalisation with the hope of bringing about some sort of reforms rather than a systemic change.
However, a resistance movement can never create the anti-systemic consciousness required for systemic change since, by its nature, it has to work on a consensus platform, which would necessarily express the lowest common denominator of the demands of the various activists taking part in it. This means that it is more than likely, given the present structure of this movement, that its political platform will be a reformist one. Therefore, the activities of the anti-globalisation activists, as well as those of the activists involved in building alternative forms of economic and social organisation with no clear goals and strategies (alternative media, credit unions, LETS schemes etc) have no chance of functioning as catalysts for systemic change, or even as elements of a transitional strategy for the same purpose. This is not only because the actions of anti-globalisers by themselves cannot hope to achieve anything more than a few reversible reforms which, mostly, will have to be compatible with the requirements of the internationalised market economy, but also because such actions, by themselves, if they do not constitute an integral part of a programmatic political mass movement for systemic change, are hardly useful in the creation of the anti-systemic consciousness needed for anti-systemic change.
A new World Order based on Inclusive Democracy
So, let us examine finally the Inclusive Democracy proposal as a way out of the present crisis and also as a way of building a New World Order based on real democratic structures. Starting point in this approach is that the world, at the beginning of the new millennium, faces a multi-dimensional crisis (economic, ecological, social, cultural and political) which is caused by the concentration of power in the hands of various elites, as a result of the establishment, in the last few centuries, of the system of market economy, representative democracy and the related forms of hierarchical structure. If we accept this premise, then, an inclusive democracy, which involves the equal distribution of power at all levels, is seen not as a utopia (in the negative sense of the word) but as perhaps the only way out of the present crisis.
Inclusive democracy is a new conception of democracy, which, using as a starting point the classical definition of it, expresses democracy in terms of direct political democracy, economic democracy (beyond the confines of the market economy and state planning), as well as democracy in the social realm and ecological democracy. In short, inclusive democracy is a form of social organisation which re-integrates society with economy, polity and nature. The concept of inclusive democracy is derived from a synthesis of two major historical traditions, the classical democratic and the socialist, although it also encompasses radical green, feminist, and liberation movements in the South.
We may distinguish between four main constituent elements of an inclusive democracy: the political, the economic, the ecological and ‘democracy in the social realm’. The first three elements constitute the institutional framework, which aims at the equal distribution of political, economic and social power respectively; in other words, the system which aims at the effective elimination of the domination of human being over human being. Similarly, ecological democracy is defined as the institutional framework, which aims at the elimination of any human attempt to dominate the natural world, in other words, the system, which aims to reintegrate humans and nature.
Political democracy is the form of social organisation in which political power is shared equally among all citizens. Political democracy is, therefore, founded on the equal distribution of political power among all citizens, the self-instituting of society. It is grounded on the conscious choice of its citizens for individual and collective autonomy and not on any divine or mystical dogmas and preconceptions, or any closed theoretical systems involving natural or economic ‘laws’, or tendencies determining social change. It is based on processes securing that all political decisions (including those relating to the formation and execution of laws) are taken by the citizen body collectively and without representation and on structures instutionalising the equal distribution of political power. It presupposes that all residents of a particular geographical area (which today can only take the form of a geographical community), beyond a certain age of maturity (to be defined by the citizen body itself) and irrespective of gender, race, ethnic or cultural identity, are members of the citizen body and are directly involved in the decision-taking process. Citizens’ assemblies starting at the community level could federate at the regional and national level and confederate at the continental or planetary level in a New World Order based on the equal distribution of political power among the citizens of each nation and the nations of the world. Of course, the institutionalisation of direct democracy is only the necessary condition for the establishment of democracy. The sufficient condition refers to the citizens’ level of democratic consciousness, in which a crucial role is played by paedeia –involving not simply education but character development and a well-rounded education in knowledge and skills, i.e. the education of the individual as citizen. In this context, it is obvious that today’s parliamentary democracy (as it functions in the West), soviet democracy (as it functioned in the East) and the various fundamentalist or semi-military regimes in the South have never been democracies but just forms of political oligarchy, in which political power is concentrated in the hands of various elites (professional politicians, party bureaucrats, priests, military and so on).
Economic Democracy is the form of social organisation in which economic power is shared equally among all citizens. Economic democracy therefore relates to every social system, which institutionalises the integration of society and the economy. This means that, in the last instance, it is the demos, which controls the economic process, within an institutional framework of demotic ownership of the means of production. In a more narrow sense, economic democracy relates also to every social system which institutionalises the minimisation of socio-economic differences, particularly those arising out of the unequal distribution of private property and the consequent unequal distribution of income and wealth. Historically, it is in this narrow sense that attempts were made by socialists to introduce economic democracy. Therefore, in contrast to political democracy, forms of which have been institutionalised in the past, even for long periods as in classical Athens, or, usually, for shorter periods, during almost every revolutionary period in the last two centuries, there has never been a corresponding example of an institutionalised economic democracy in the broad sense defined above. In other words, even when socialist attempts to reduce the degree of inequality in the distribution of income and wealth were successful, they were never associated with meaningful attempts to establish a system of equal distribution of economic power. Today, any talk about democracy, which does not also refer to the question of economic power rings hollow. In other words, to talk today about the equal sharing of political power, without conditioning it on the equal sharing of economic power, is meaningless. Economic democracy presupposes the absence of institutionalised economic processes of an oligarchic nature. This means that all ‘macro’ economic decisions, namely, decisions concerning the running of the economy as a whole (overall level of production, consumption and investment, amounts of work and leisure implied, technologies to be used, etc.) have to be taken by the citizen body collectively and without representation, although “micro” economic decisions at the workplace or the household levels should still be taken by the individual production or consumption unit. Also, economic democracy presupposes the absence of institutionalised economic structures embodying unequal economic power relations. This implies that the means of production and distribution are collectively owned and controlled by the demos, the citizen body directly. Thus, demotic ownership of the economy provides the economic structure for democratic ownership, whereas direct citizen participation in economic decisions provides the framework for a comprehensively democratic control process of the economy. The community, therefore, becomes the authentic unit of economic life, particularly so since economic democracy is not feasible today unless both the ownership and control of productive resources are organised at the community level.
Democracy in the social realm. However, political and economic power is not the only forms of power and, therefore, political and economic democracy do not, by themselves, secure an inclusive democracy. In other words, an inclusive democracy is inconceivable unless it extends to the broader social realm to embrace the workplace, the household, the educational institution and indeed any economic or cultural institution, which constitutes an element of this realm. Historically, various forms of democracy in the social realm have been introduced in the past, particularly during this century, usually in periods of revolutionary activity. However, these forms of democracy were not only short-lived but seldom extended beyond the workplace (as, for instance, was the case with the Hungarian workers’ councils in 1956), or the education institution, (as, for example was the case with the Paris student assemblies in 1968). Therefore, the issue today is how to extend democracy to other forms of social organisation, given that an effective democracy is inconceivable unless all forms of power (including the power to control free time) are equally distributed among all citizens, and this condition can never be satisfied as long as the present hierarchical structures in the household, the workplace and elsewhere continue to be reproduced.
Ecological Democracy, finally, is an essential component of inclusive democracy. Of course, there are no guarantees that an inclusive democracy would secure an ecological democracy in the sense defined above or even sustainability. Therefore, the replacement of the market economy by a new institutional framework of inclusive democracy constitutes only the necessary condition for a harmonious relationship between the natural and social worlds. The sufficient condition refers to the citizens’ level of ecological consciousness. Still, the radical change in the dominant social paradigm[32] which will follow the institution of an inclusive democracy, combined with the decisive role that paedeia will play in an environmentally-friendly institutional framework, could reasonably be expected to lead to a radical change in the human attitude towards Nature. In other words, there are strong grounds for believing that the relationship between an inclusive democracy and Nature would be much more harmonious than could ever be achieved in a market economy, or one based on state socialism. The factors supporting this view refer to all the main elements of an inclusive democracy, i.e. the political democracy component, as well as the economic democracy and democracy in the social realm components and its confederal character of it.
q At the political level, there are grounds for believing that the creation of a public space will in itself have a very significant effect on reducing the appeal of materialism. This is because the public space will provide a new meaning of life to fill the existential void that the present consumer society creates. The realisation of what it means to be human could reasonably be expected to throw us back toward Nature.
q At the economic level, it is not accidental that, historically, the process of destroying the environment en masse has coincided with the process of marketization of the economy. In other words, the emergence of the market economy and of the consequent growth economy had crucial repercussions on the society-Nature relationship and led to the rise of the ideology of growth as the dominant social paradigm. Thus, an ‘instrumentalist’ view of Nature became dominant, in which Nature was seen as an instrument for economic growth, within a process of endless concentration of power. If we assume that only a confederal society could secure an inclusive democracy today, it would be reasonable to assume further that once the market economy is replaced by a democratically run confederal economy, the grow-or-die dynamics of the former will be replaced by the new social dynamic of the latter, i.e. a dynamic aiming at the satisfaction of the community needs and not at growth per se. If the satisfaction of community needs does not depend, as at present, on the continuous expansion of production to cover the ‘needs’, which are largely created by the market itself, and if the link between economy and society is restored, then there is no reason, why the present instrumentalist view of Nature should continue to condition human behaviour.
q At the social level, democracy in the broader social realm could also be reasonably expected to be environmentally friendly. The phasing out of patriarchal relations in the household and hierarchical relations in general should create a new ethos of non-domination, which would embrace both Nature and Society. In other words, the creation of democratic conditions in the social realm should be a decisive step in the creation of the sufficient condition for a harmonious nature-society relationship.
q Finally, the fact that the basic unit of social, economic and political life in a confederal democracy would be the community might also be expected to enhance its environmentally friendly character. It is reasonable to assume—and the evidence of the remarkable success of local communities in safeguarding their environments is overwhelming—that when people rely directly on their natural surroundings for their livelihood, they will develop an intimate knowledge of those surroundings, which will necessarily affect positively their behaviour towards them. However, the precondition for local control of the environment to be successful is that the community depends on its natural surroundings for its long-term livelihood and that it, therefore, has a direct interest in protecting it—another reason why an ecological society is impossible without economic democracy.
In concluding, I think that humanity faces a crucial choice in the new millennium. Either we continue our present patterns of life within the present institutions which secure today’s huge and growing concentration of power at all levels, i.e. either we continue the present process of deterioration of the present multi-dimensional crisis –a process which would not and could not be significantly affected by the reforms which are feasible in today’s internationalised market economy, or, alternatively, we start building a new political movement that would involve the creation of institutions for a sustainable Inclusive Democracy, in other words, we embark on a process which would create the preconditions for the establishment, for the first time in History, of a new and truly democratic World Order.
[1] By ‘growth economy’ I mean the offspring of the system of the market economy which was established some two hundred years ago and whose dynamic has led to its present internationalised form (see for further expansion Takis Fotopoulos, Towards An Inclusive Democracy, (London: Cassell, 1997) ch 2 (also in Italian :Per Una Democrazia Globale, Milan: Eleuthera 1999, Greek: Periektiki Dimokratia, Athens: Kastaniotis, 1999 and forthcoming German and Spanish editions
[2] See for instance the latest attempt by World bank theoreticians David Dollar and Aart
Kraay, Growth is good for the poor , (Washington: World Bank, March 2000)
[3] UN, Human Development Report 1999 (NY: Oxford University Press, 1999)
[4] UN, Human Development Report 1999
[5] A. Giddens, The Third Way, (Oxford: Polity Press), 1998,
[6] Larry Elliott et. Al. The Guardian, 14/7/2000
[7] A. Sen, ‘Freedom’s market’, The Observer, 25/6/00
[8] UN, Human Development Report 2000 (NY: Oxford University Press, 2000)
[9] L. Panich, ‘The New Imperial State’ New Left Review, March-April 2000
[10] N. Chomsky, ‘Power in the Global Arena’, New Left Review, July-August 1998
[11] Samir Amin in the Milan ‘World Forum of alternative solutions’ Il Manifesto/Epohi, 16/4/2000
[12] See Takis Fotopoulos, Towards An Inclusive Democracy, ch 1
[13] The Euro-dollar market provided a regulation-free environment where US dollars (and later other strong currencies like the yen, mark etc.) could be borrowed and lent free of any US regulatory and tax requirements. The growth of this new market, which simply reflected the growing needs of transactional corporations, was instrumental in the later lifting of exchange and capital controls. This is because the exchange controls of nation-states, particularly those in Britain where the Euro-dollar market originated, were put under severe strain, throughout the 1970s. [For a description of the gradual lifting of capital controls in UK under market pressure see Will Hutton, The State We’re In (London:Jonathan Cape, 1995) ch 3].
[14] Karl Polanyi, The Great Transformation, (Boston:Beacon Press, 1944)
[15] John Gray, False Dawn: the Delusions of Global Capitalism (London: Granta books, 1998)
[16] Takis Fotopoulos, Towards An Inclusive Democracy, ch 1
[17] Thus, in four major trading countries (US, Germany, UK and France), which account for about three quarters of the total trade in the six countries listed in the Table, trade openness in 1996 was significantly higher than in 1913
Source: Paul Hirst and Grahame Thompson, Globalisation in Question, Table 2.5 (for the years 1913, 1950 and 1973) and estimates based on the World Bank’s World Development Report 1998/99, Table 20.
[18] Paul Hirst and Grahame Thompson, Globalisation in Question (Cambridge:Polity Press, 1996), p. 27
[19] The statistical measure used by Hirst and Thompson (currrent account balance to GDP) is shown to be an obviously inappropriate measure of financial openess in the US case. The US current account surplus was reduced drastically from $32.3 billion in 1960-67 to less than $5 billion in 1968-81 [Phillip Armstrong et al Capitalism Since World War II (London:Fontana, 1984), Tables 10.7, 12.2 & 16.6 This should mean a corresponding decrease in US’s capital outflow and degree of financial openess. Yet, the outflow of direct investment from the USA to other advanced capitalist countries increased from 3.4 percent of US total investment in the period 1960-69 to 4.4 percent in 1970-79 (Grazia letto-Gillies, “Some Indicators of Multinational Domination of National Economies,” International Review of Applied Economics, Vol. 3, No. 1, 1989, Table 1) indicating exactly the opposite! The reason is obvious. The US, as a country with a major reserve currency, does not depend on current account surpluses to finance its invetment abroad—as non-reserve countries have to do. Therefore, the current account balance to GDP ratio cannot be used as a measure of financial openess in the case of a reserve-currency country like the USA, despite the country’s enormous financial significance.
[20] UN-TCMD, World Investment Report, 1993.
[21] The Guardian (7 March 1995).
[22] Eurostat, A Social Portrait of Europe (Luxembourg: Statistical Office of the European Communities, 1991), Table 6.13, p 72. Also, a comparison of the labour costs for producing a standard basket of goods with $100 showed that the labout cost in peripheral countries like Greece and Portugal was still $50 in the mid 1990s versus $85 in Germany and Denmark; OECD/ The Observer (10/9/95).
[23] See, for instance, Mica Panic, European Monetary Union (London: St. Martin’s Press, 1993).
[24] Takis Fotopoulos, ‘The catastrophe of Marketization’ Democracy & Nature, vol 5 no 2 (July 1999) pp. 275-310
[25] T. Fotopoulos, ‘Welfare state or economic democracy? Democracy & Nature, vol 5 no 3 (November 1999) pp. 433-468
[26] Takis Fotopoulos, Towards An Inclusive Democracy, ch 1
[27] Foreign penetration of national central government bond markets in advanced capitalist countries has increased by 50 percent in the last decade (from 10 percent in 1983 to 15 percent in 1989); Hirst and Thompson, Globalization in Question, Table 2.11.
[28] John Gray, False Dawn
[29] See Fredric Jameson, ‘Globalisation and strategy’, New Left Revew, July-Augusat 2000
[30] See T. Fotopoulos, ‘Class Divisions Today–The Inclusive Democracy approach’ Democracy & Nature, vol 6 no 2, (July 2000)
[31] T. Fotopoulos, ‘Welfare state or economic democracy?
[32] The dominant social paradigm is defined as the system of beliefs, ideas and the corresponding values, which is associated with the political, economic and social institutions (see for further analysis of the dominant social paradigm in relation to culture, T. Fotopoulos, ‘Mass media, culture and democracy’, Democracy & Nature, vol 5 no 1 (March 1999), pp. 33-64)
