Globalization’s Damages

Against the Current, No. 119, November/December 2005

Tony Smith

Whose Trade Organization?
A Comprehensive Guide to the WTO
by Lori Wallach and Patrick Woodall
New York: The New Press, 2004,
$19.95 paper.

Another World is Possible:
Popular Alternatives to Globalization at the World Social Forum
edited by William Fisher & Thomas Ponniah
New York, Zed Books, 2003, $22.50 paper.

Confronting Capitalism:
Dispatches from a Global Movement
edited by Eddie Yuen, Daniel Burton-Rose & George Katsiaficas
New York: Soft Skull Press, 2004,
$16.95 paper.

Obsolescent Capitalism
by Samir Amin
New York: Zed Books, 2003, $25 paper.
Another World is Possible:
globalisation and anti-capitalism
by David McNally
Winnipeg: Arbeiter Ring, 2002, $14.95.

THE MAIN ARGUMENT in favor of neoliberalism is simple enough: individuals will freely exchange whenever mutual gains result. It follows that restricting trade and investment across borders both infringes liberty and prevents people from enjoying benefits. At this point an appeal is made to historical evidence: previously poor regions have lifted more people out of poverty at a faster rate than ever before in human history by opening up to trade and investment.

Neoliberal theorists and policy makers conclude that they, and not their critics, have the better claim to speak in the name of global justice.(1)

No piece of Swiss cheese has more holes. For one thing, the (relatively few) countries proclaimed to be “success stories” since World War Two did not in fact remove trade barriers and deregulate their financial sector. Governments, in close collaboration with banks, directed cheap credit to promising industrial firms, which were then protected from competition until able to compete internationally.(2) On the other hand, countries forced to adopt neoliberal recommendations as part of IMF Structural Adjustment Programs have not prospered.

Hypocrisies abound as well; the wealthy regimes that spout free trade rhetoric the most vehemently continue to restrict imports and subsidize domestic competitors in precisely those sectors where Southern exporters are best able to compete (textiles and agriculture). The “rules of the game” are biased in other ways as well. Intellectual property rights have been greatly extended, despite the fact that all “late developers” — including the United States — caught up with more industrially advanced regions by appropriating scientific-technical knowledge produced elsewhere as a free public good.(3)

Public interest groups have proliferated in response to the intellectual and political bankruptcy of the neoliberal agenda. A recent publication of Public Citizen counts as an especially impressive contribution from one of these Non-Governmental Organizations (NGOs)

Whose Trade Organization? provides a comprehensive overview of the central role played by the World Trade Organization in the neoliberal project. WTO’s mission is to make the rights of corporations and capital investors sacrosanct in international law, ignoring both other sorts of rights (to employment, health care, basic nutrition, labor standards) and the most elementary mechanisms of democratic accountability.

The study also does a masterful job of explaining how WTO rulings tend to impose higher levels of environmental risks on communities — an inevitable result when environmental regulations are generally categorized as “trade barriers,” for which corporations are owed compensation.

These sorts of criticisms of the WTO were also made at some of the sessions of the World Social Forum. Numerous reports and presentations from these sessions are now assembled in the Fisher-Ponniah collection Another World is Possible.

In a setting of this sort the scholarly discussion of empirical data and theoretical arguments found in Whose Trade Organization? would not be appropriate. In compensation, Another World has a far broader scope, covering the debt trap and other illustrations of the pernicious role of financial capital in the global economy, the impact of neoliberalism on urban populations and indigenous peoples, the systematic restrictions of public discourse imposed by corporate media, violence against women, migration and traffic in people, and the horrors of overt and covert military interventions.

With this greater comprehensiveness comes also a greater diversity of voices. Leading intellectuals from Europe, Asia, and Africa are found alongside representatives of social movements from across the planet, including well-known figures such as Eric Toussaint, Vandana Shiva, Walden Bello and Michael Löwy. I know of no better introductory survey of the full range of issues defining movements for global justice.

While Fisher and Ponniah give center stage to leaders of NGOs and intellectuals, the voices of activists come to the fore in Confronting Capitalism: Dispatches from a Global Movement. First-person accounts of participants in major demonstrations vividly capture the exhilaration of mass social action, surely the most powerful antidote to the alienation of commodified culture.

Anyone reliant on corporate media for their information will be astounded by the breadth of the resistance against the present global order reflected in this book —resistance that did not begin with the street protests of Seattle in 1999 and did not end on September 11, 2001.(4)

 This anthology also does a superb job of placing contemporary anti-neoliberal struggles in a broad historical context, discussing the similarities and differences with the main struggles defining previous eras. Considerable space is devoted as well to debates regarding the lessons to be learned from the successes and failures of the direct actions that have occurred thus far.

What’s Been Won

Mainstream media treat the ultimate victory of neoliberalism as all but assured, an inevitable result of advanced information technologies.  This is hardly the case. If the number of victories won by opponents of global neoliberalism were more widely known, that knowledge alone would change the political dynamic. One particular example will have to suffice here, the institutionalization of a form of direct democracy in Porto Alegre, Brazil, the first host of the World Social Forum. (Many other examples are discussed in Confronting Capitalism).

The “participatory budget” process begins with public discussions in different areas of the city regarding the greatest social priorities in that particular area. Representatives are then selected to participate in citywide forums that prioritize the requests of particular regions into an overall city budget. Serious limitations remain. But this is clearly an extremely important attempt to institutionalize democratic planning that all activists ought to follow closely.(5)

It has often been noted that the movement against the contemporary form of globalization is a “movement of movements” rather than a homogeneous force. This is a good thing in many ways. No single group has an all-inclusive standpoint; each has much to learn from others. There are many different tasks that need to be undertaken; laws and regulations need to change, organizations need to be built, direct actions need to be made.

These goals must be pursued on many different geographical scales (local, national, regional, and global). And numerous issues must be taken up, including economic exploitation, oppression on the basis of race, gender, or sexual orientation, environmental harms, the commodification of everyday life, just for starters.

Given the immensity of these challenges, different concrete contexts will demand different strategic and tactical responses. There is little chance of developing the required strategic and tactical flexibility if individuals and groups with diverse points of view aren’t communicating. The future of the politics of resistance will depend upon forging and maintaining dynamic forms of unity in the midst of very diverse sorts of struggles.

Diversity and Limits of Reform

There is a danger here, of course: the “powers that be” are extremely well-versed in the politics of divide-and-conquer. And so there is a need to anticipate the major fault lines likely to develop among those committed to an alternative type of globalization, and to address them on our own, not the corporate rulers’ terms.

One major fault line is emphasized by various authors in Confronting Capitalism, who come from socialist and anarchist traditions with quite different views of capitalism from the more reformist perspectives adopted by many leaders of NGOs.(6) Given the overriding importance of this particular issue, it is worth discussing further.

Most reformists take “universal human rights” as their foundational category, which they define in terms of the necessary preconditions for humans to flourish. The present “regime of global governance” systematically infringes these fundamental rights, hence this regime must be reformed.

The most popular proposal is probably to establish exit taxes on short-term cross-border financial transactions to protect countries against the ravages of speculators. (These are often termed “Tobin taxes,” after the economist who first suggested them).

Other ideas include standstills on debt repayments when financial crises occur, special bankruptcy provisions that kick in when exceptional macroeconomic disturbances break out, more seats at the IMF and other international agencies for countries from poorer regions in the global economy, debt relief, an end to tariff barriers against imports from the South, an end of subsidies to Northern producers that harm otherwise competitive producers from the South, more humane international labor standards, international environmental regulations that do not penalize developing countries, and so on.

Such reforms are not to be mocked. Even partial implementation would alleviate much suffering. But would grafting a human rights charter onto global capitalism really create a global system whose ultimate end was human flourishing?

The plausibility of this assumption is forcefully called into question in Samir Amin’s Obsolescent Capitalism. Amin estimates that over 1.5 billion people in rural areas have effectively become redundant in the global agricultural economy, while another 1.5 billion urban dwellers find themselves in highly unstable labor market situations. High productivity growth and the mobile nature of investment capital are together responsible for the rise of these “precarious classes.”

A substantial majority of the world’s population can thus be categorized as a reserve army of labor of unprecedented global scale. Is it really plausible to assert that a global system so indifferent to the fate of so many people could ever have human flourishing as its goal, even in principle?

David McNally’s wonderful book, Another World is Possible: globalisation and anti-capitalism, answers this question with a resounding, “No!” His argument rests on a critique of what may be termed the core thesis of political economy, which holds that money tends to operate in capitalist societies as a means to further human flourishing whenever the proper background conditions are in place.

This thesis is accepted by neoliberal theorists, who hold that the proper background condition is a “rule of law” centering on the protection of investors’ rights. But reformist critics of neoliberalism implicitly or explicitly accept this same principle too. The only difference is that for them the required background conditions must include some sort of global human rights charter that states and corporations promise to obey.

The Way Capitalism Works

McNally, summarizing Marx’s critique of political economy, convincingly argues that this perspective fails to grasp the force of the valorization imperative, a force found in any and all possible variants of capitalism.(7) Units of capital that successfully valorize their initial investment (that is, attain monetary returns exceeding that investment) necessarily tend to grow over time in comparison to those that do not. This makes capitalism more than a complicated form of barter, and money something more than a mere convenience.

The core thesis of political economy asserts that money in principle can operate as a generalized means, leaving individuals and groups with the freedom to decide their ends for themselves. But this is a freedom to negotiate within a public order in which an intrinsic end is already in place: monetary accumulation on the level of total social capital. As long as capitalism is in place the satisfaction of human wants and needs will be systematically subordinated to this inhuman goal.

In generalized commodity production, labor power too is a commodity. Labor power necessarily tends to be purchased by the holders of investment capital if and only if the latter anticipate that this purchase will to contribute to the accumulation of monetary profits. For this to occur the wages workers receive must be less than the economic value those workers produce in the given period. In other words, the valorization process is identical to the reproduction of the capital/wage labor social relation, a relation based on the exploitation of one class by another.

Within this framework it is impossible even in principle to establish institutional mechanisms ensuring that those exercising authority are democratically accountable to those over whom authority is exercised.

Work forces that are not sufficiently docile are continually threatened with capital flight to regions where workers are more compliant. Governments considering legislation challenging the perceived self-interest of those holding capital will be threatened with capital flight as well. In response to such threats, capitalist states necessarily tend to grant the interests of capital priority over other social interests.(8)

Booms and Busts

Other systematic tendencies immanent in the essential social forms of capitalism reinforce the case against the core thesis of political economy. As Amin and McNally both note, there is a necessary tendency to overaccumulation crises in global capitalism.(9) When an overaccumulation crisis breaks out, unemployment necessarily tends to rise, job security declines, and pressure to intensify the labor process and extend the length of the work day increases.

Real wages tend to stagnate or decline, while states tend to shift ever-more resources from programs addressing human needs to various forms of subsidies designed to help domestic capitals avoid devaluation. These social costs are not randomly distributed; special burdens fall on women and people of color throughout the globe.(10)

Empirical evidence and theoretical arguments reveal that recurrent paroxysms of “casino capitalism” are inherent in the social relations of capital as well. An outbreak of overaccumulation crises tends to lower the rate of investment in industrial sectors, leading to massive inflows of investment into the financial sector.

The benefits of the resulting capital asset inflation necessarily tend to be disproportionately appropriated by the wealthy, while the burdens of the inevitable bursting of the speculative bubble necessarily tend to be disproportionately inflicted on the least advantaged groups.

rverse state of affairs further undermines the claim that all would be well if only a small transactions tax on short-term flows of financial capital could be put in place.

The Rigged Technology Game

A final systematic tendency that can be mentioned here is rooted in the drive to appropriate surplus profits through innovations. This drive accounts for the technological dynamism that is such a striking feature of the capitalist mode of production. But here too the game is rigged: Already wealthy regions are in the best position to mobilize the funds required for advanced research and development.

They have many advantages with respect to the commercialization of innovations as well. For one thing, the fixed capital already in place provides the framework required for the successful implementation of many new innovations. For another, successful innovations tend to be correlated with educated and trained workforces, and with consumer markets with high levels of effective demand.

It follows that wealthy regions of the global economy have opportunities to establish a “virtuous circle” in which high levels of investment in R&D lead to process and product innovations, enabling firms to enjoy higher than average rates of profit, which then allow high levels of funding for the next generation of research and development, beginning the circle anew.

In contrast, poorer regions are far less able to engage in cutting edge R&D, and thereby miss out on the innovations that enable surplus profits to be appropriated. This systematically reduces the likelihood that they will be able to participate in the next generation of advanced R&D. The circle here is vicious.(11)

Like all laws of the social world, these are tendency laws. There are no guarantees that a virtuous circle can be reproduced indefinitely in any given region under any given set of historical circumstances. And if certain exceptional and contingent conditions are met, previously poor regions can grow rapidly, as we see in certain regions of China today.

But the fact that the place of particular regional economies is somewhat fluid in the hierarchy of the world system does not imply that the hierarchical structure is itself fluid. There is a structural tendency in the global economy to uneven development; wealthy regions of the global economy are generally able to reproduce their advantages over time. This tendency is rooted in the “rules of the game” defining global capitalism.(12)

If the core thesis of political economy were granted, if money were in principle no more than a generalized means, it would be plausible to hold that there are no limits to the reforms possible within the production and property relations defining capitalism. But this thesis does not hold, and there are such limits.

It is not possible even in principle for a global order based on capitalist social relations to make human flourishing its immanent end. Nor is it possible to abolish the systematic tendencies to overaccumulation crises, “casino capitalism,” or uneven development, given the social forms defining global capitalism.

These tendencies rule out even in principle a global order in which all individuals have a roughly comparable opportunity to develop their essential capacities.

Moving Forward

Where do we go from here? A first point, vigorously expressed by McNally, is that all those who reject the core thesis of political economy need to stand together. As he points out, anarchists and revolutionary Marxists both agree that the tyranny of the valorization imperative must be overthrown, and that this requires the eradication of the capital/wage labor relation.

Only these measures will abolish the structural tendencies to overaccumulation crises, casino capitalism, and uneven development.(13) Only these measures will allow decisions regarding how to best meet the most pressing social needs to be made by democratically accountable agents.

Unfortunately, abolishing the valorization imperative and the capital/wage labor relation is most likely not around the corner. In the short-to-medium term, ways must be found to unite with reformist critics of neoliberalism whenever possible, sometimes in common organizations, sometimes not.

There is no magic recipe to follow here. But Confronting Capitalism and McNally’s Another World is Possible do suggest some important general guidelines to be kept in mind.(14)

First, many of the more mainstream critics of neoliberalism will wish to grant powerful participants in the existing system a de facto veto power when defining what counts as an acceptable reform. The historical overviews found in the books reviewed here give a powerful reason for refusing to accede to this demand: all major advances in the institutionalization of human rights have been bitterly resisted by the economic and political elites of the day.

Advances have occurred primarily as a direct result of struggles “from below” that forced ruling elites to acquiesce to reforms they would have otherwise rejected. If we consider the proposed reforms of the global order mentioned above, few if any items on this list are likely to be supported today or in the foreseeable future by political and economic elites unless forced to do so.

The task is therefore to form massive global movements from below dedicated to substantial reforms in the face of predictable and fierce opposition from above. Letting the latter define the acceptable limits of reform does not further this task.

A second difficulty has to do with the rhetoric used in appeals for reforms.  Many NGOs, and many academic proponents of global justice, call on individuals in wealthy regions to fulfill their moral duty to aid those in poor regions of the global economy.

Appeals to moral obligation can have considerable motivating force in certain circumstances. But those in wealthy regions who do not own or control significant amounts of capital themselves profoundly suffer from a global order in which capital accumulation is the immanent end of social life. They too are subjected to the structural coercion and exploitation that define the capital/wage labor relation, and they too are vulnerable to overaccumulation crises, casino capitalism, and uneven development.

In this context political appeals should not be based solely on moral imperatives addressed to individuals in abstraction from their concrete class position. An appeal to material class interests is entirely in order as well.  Alliances with reformist critics of neoliberalism shouldn’t come at the cost of restricting our speech to moralistic rhetoric.

Who Defends Human Rights?

Third, many reformist critics of neoliberalism still consider states in wealthy regions as great defenders of human rights.

No one should deny that there are autocratic regimes of the South with abysmal human rights records. But that is not sufficient to overcome the incoherence of the above claim. The U.S. and other hegemonic states play an absolutely crucial role in reproducing a global order that is thoroughly incompatible with the principle that everyone everywhere has a right to the material preconditions for human flourishing.

The military and financial power of leading capitalist states has been (and can be rationally expected to continue to be) devoted predominantly to the maintenance of a system in which the ends of capital trump human ends, substantive equality of opportunity and political equality are systematically ruled out, and inherent tendencies to overaccumulation crises, casino capitalism and uneven development continue to generate economic insecurity and material deprivation throughout the planet.(15)

No alliance with reformist critics of the worst abuses of neoliberalism should come at the cost of forgetting that the moral authority of these states must be challenged, not enhanced.

Finally, it can never be forgotten that the reforms mentioned above are only transitional demands. They are made now because they address some of the worst abuses of the present order in a way that will appeal to people who have not yet come to reject the core thesis of political economy. But they can be met only partially and precariously within the dominant economic and political forms of the present global order.(16)

 The inevitable failure of attempts to institutionalize these reforms adequately can lead to opportunism, cynicism or hopelessness. Or it can lead to renewed commitments to critique and to struggle, based on a deeper understanding of where the root of the problem lies. Anyone choosing the latter path would benefit from reading the books discussed above, McNally’s especially.


  1. A recent version of this oft-told story can be found in Martin Wolf’s Why Globalization Works, New Haven: Yale University Press, 2004.
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  2. Needless to say, this is hardly the entire story, and the concept of “success” is not politically neutral. See Paul Burkett and Martin Hart-Landsberg’s Development, Crises and Class Struggle: Learning from Japan and East Asia, New York: St. Martin’s Press, 2002.
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  3. See Ha-Joong Chang’s Pulling Up the Ladder? Policies and Institutions for Development in Historical Perspective, London: Anthem, 2002.
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  4. A stunning visual depiction of this point is found in the “map of resistance” drdawn by James Davis and Paul Rowley (Confronting Capitalism, xxxii-xxxiii). A comprehensive list of actions across the globe between 1993 and 2003 is provided in Thatcher Collin’s “A Protestography,” in the same collection.
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  5. See The Porto Alegre Alternative: Direct Democracy in Action, edited by Iain Bruce (Ann Arbor: Pluto Press, 2004).” href=”#N5. See The Porto Alegre Alternative: Direct Democracy in Action, edited by Iain Bruce (Ann Arbor: Pluto Press, 2004).”>(5. See The Porto Alegre Alternative: Direct Democracy in Action, edited by Iain Bruce (Ann Arbor: Pluto Press, 2004).)
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  6. See, for example, James Davis’ “This is What Bureaucracy Looks Like: NGOs and Anti-Capitalism.”
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  7. The following discussion develops points introduced in McNally, 82-7.
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  8. See Amin’s discussion of “low-intensity democracy,” 34 passim, and McNally, Chapter 6 (“Democracy Against Capitalism”).
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  9. Amin’s account, greatly influenced by Paul Sweezy, is found on pages 30 and 45, and can be contrasted by McNally, 88, which is closer to Marx’s standpoint.
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  10. See McNally, Chapter 4 (“The Color of Money: Race, Gender, and the many Oppression of Global Capital”) for a comprehensive historical over.
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  11. See Amin, 63.
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  12. “The ratio measuring inequalities in the capitalist world rose from 20:1 around the year 1900 through 30:1 in 1945-48 and up to 60:1 at the end of the period of post-war growth; the richest twenty per cent of individuals on early increased their share of the global product from 60 per cent to 80 per cent during the last two decades of the century.” Amin, 15.
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  13. Amin, 93 ff.
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  14. Amin, 140-47 offers a very interesting general discussion of “building convergence within diversity.” His own emphasis is on “the construction of a national popular society and the associated construction of a self-reliant national economy” including pro-capitalist forces for the foreseeable future (159ff.). McNally, in contrast, grants priority here and now to “constructing the rudiments of democratically run, participatory, anti-capitalist organizations” (266). The articles in Part III of Confronting Capitalism (“We are Everyone? Organization and Representation within the Movement”) are far closer to McNally’s standpoint. See especially James O’Connor’s “On Populism and the Aniglobalization Movement.”
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  15. See Amin, Chapter Five (“The militarization of the new collective imperialism”), and McNally, Chapter 5 (“The Marines Have Landed: War and Imperialism in the Age of Globalization”).
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  16. Leon Trotsky’s Transitional Program for Socialist Revolution (New York: Pathfinder Press, 1977) remains an indispensable discussion of these issues.
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ATC 119, November-December 2005