Commentary No. 20, July 15, 1999
"The Balance-Sheet of the World-Economy in the 1990's"
For the past decade, politicians, journalists, and scholars have been recounting a story called "globalization." It is something that is supposed to have happened recently, and to have changed almost everything. For some, it is a wonderful thing. For others, it is a terrible menace. For the pros, it is something not only wonderful but inevitable. For the antis, it is something not only terrible but reversible.
What has actually happened in the 1990's? Geopolitically, it seems a success story for the United States. The Soviet Union collapsed. The United States engaged in two major wars: against Iraq in 1991 and against Yugoslavia in 1999. NATO was reinvigorated and "extended." And economically, the U.S. stock exchange has gone crazy and showed unprecedented gains, combined with low U.S. unemployment and inflation rates.
Of course, it doesn't look too good in many other parts of the world. The economic success zone of 1970-1990, East Asia, has been in trouble. The Japanese speculative bubble burst in 1990 and the economy has been dragging ever since. In 1997, the so-called East Asian crisis led to currency collapses and economic squeezes in much of East and Southeast Asia. The Russian economy is in shambles. Let us not speak of the former Yugoslavia. Mexico, Brazil, and Argentina all went through separate mini-crises, and none of them are doing brilliantly. Africa is, by and large, a disaster zone - very little economic growth, civil wars and refugees in a large number of countries, and a continuing brain drain. As for western Europe, it has been holding its head above water economically, but unemployment rates are still high, and the European project, still controversial, is for the moment treading water.
Today, even the balladeers of the neoliberal millennium are modifying their tune. In the beginning of the decade, Francis Fukuyama assured us that we had reached the end of history. At the end of the decade, he writes more cautiously, speaking of the dangers that our scientific successes in the field of biology hold before the world. And the IMF, which could do no wrong in the beginning of the decade, is now subject to serious criticism from impeccably conservative spokesmen for neglecting the political impact of unlimited opening of the world market.
Instead of analyzing the decade of the 1990's as the beginning point of a neoliberal utopia that is unstoppable, unavoidable, and endlessly wonderful, it might be more useful to look at it as the third decade of a Kondratieff B-phase, or world economic stagnation, a phase that began circa 1970. It is a B-phase because it fits all the traditional descriptions of such a phase: profits from production have dropped considerably from the levels at which they were in 1945-1970 period; consequently, persons with capital shifted their primary locus of seeking profit from the productive sphere to the financial sphere; there was significantly increased unemployment worldwide; and lastly, there occurred significant shifts of loci of production from higher-wage areas to lower-wage areas (what used to be called the phenomenon of "runaway factories").
The 1970's was called the era of stagflation. Do we still remember the word? This was because there was high unemployment and economic slowdown, combined with high inflation. This was especially true of the U.S. It was also the period of the OPEC oil rise. For years, the media talked of nothing else. Who now remembers it? Despite all the Cassandras, it turned out not to damage the U.S. or indeed western Europe since the oil rent that the oil-producing states was routed through Western banks, which then lent it out to Third World and Communist-bloc countries who were in great balance of power difficulties because of the oil rise.
It was in the 1970's that we came to know the concept of a "triad" of core zones: North America, western Europe, Japan. That we talked of a triad was a recognition of relative U.S.economic decline. The triad negotiated their differences in such venues as the Trilateral Commission and the G-7 meetings. And they began to compete with each other strongly in the world-economy. The 1970's was Europe's decade. The U.S. did so badly that Jimmy Carter was defeated for reelection, despite the remaining legacy of the Nixon Watergate scandal.
The 1980's changed the scene. The 1980's had four buzzwords. The first was "debt crisis." Those who borrowed in the 1970's could not pay back. In 1980, this led Poland into the Solidarity crisis, which would eventually bring down the whole eastern European satellite structure. In 1982, Mexico announced it would in effect default, followed by a cascade of other Latin American states.
The world needed new borrowers to sustain the speculative needs of world capitalism. They found two. The Reagan administration, committed in theory to reversing the expansive role of government, engaged in the biggest expansion of U.S. debt in U.S. history. The "military Keynesianism" of Reagan pulled the U.S. out of the acute recession into which his initial cutbacks had plunged the U.S., but at the price of a massive U.S. government debt, financed by the Japanese.
The second set of new borrowers were the large U.S. multinationals. This was the era of "junk bonds," which made possible massive takeovers of corporations by speculators, who stripped the corporations of much of their capital and large segments of their work force. This downsizing involved downward social mobility for an important segment of the U.S. and western European middle strata.
Finally, there was the "flying geese" effect. Japan took off in the production arena, and pulled East Asia (and indeed good parts of Southeast Asia) with her - hence the flying geese formation as a metaphor. The 1980's was unquestionably Japan's decade. The U.S. was falling behind, and was worried.
Then came the 1990's. Just when the incredible U.S. national debt seemed to overwhelm U.S. legislators, Japan's bubble burst, leaving space for the now downsized U.S. corporations to start their own self-propelling speculative frenzy, combined with a momentarily good control of the new infotechnology industries. The buzz word now became "globalization," which meant that the U.S. government and the IMF joined forces to try to force open the gates of every country to allow the free entry and exit of world capital.
The very success of globalization has begun its undoing. The East Asian "crisis" and the political transformations that followed was one consequence. The return of Social-Democratic governments to power throughout western and eastern Europe (and in the U.S.) was another. To be sure, these were often governments that followed the "globalization" line, but their election was the result of popular fears concerning what was happening. Ninety percent of observers are anticipating a major downturn in the U.S. stock market. They have been falsified thus far by a self-propelling optimism of investors. For how long?
If we look at the last thirty years, what do we really see? First of all, a greatly increased polarization of the world-system. Never in modern history has the gap between what we call North and South been so great. The gap is economic, social, and demographic. The curve is straight upward. Secondly, we see a greatly increased polarization within the states of the North. Those who are doing well have never done so well, it is true. (However, as we noted, this varies amongst the triad according to decade.) But the zones of poverty are also escalating.
The balance-sheet is for you to calculate.
Immanuel Wallerstein
[Copyright by Immanuel Wallerstein. All rights reserved. Permission is granted to download, forward electronically or e-mail to others and to post this text on non-commercial community Internet sites, provided the essay remains intact and the copyright note is displayed. To translate this text, publish it in printed and/or other forms, including commercial Internet sites and excerpts, contact the author at iwaller@binghamton.edu; fax: 1-607-777-4315.
These commentaries, published twice monthly, are intended to be reflections on the contemporary world scene, as seen
from the perspective not of the immediate headlines but of the long term.]
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