The Activist - Volume 7, Number 1, 1997
By Doug Lorimer

[The general line of this report was adopted by the 17th DSP National Conference, held January 3-8, 1997.]

It is widely asserted by bourgeois economists, social scientists, management gurus, journalists and politicians of every stripe that we now live in a new historical era in which national economies, national cultures and national borders are being dissolved and superseded by a rapid and recent process of "globalisation."

Central to this fashionable discourse is the claim that a truly global economy has emerged or is emerging in which distinct national economies and state policies corresponding to them are irrelevant. The world economy is now dominated by corporations that have internationalised their activities to such an extent, that carry out production and sales in evenly across so many countries, that they have no allegiance to any particular nation-state and will locate their investments and operations wherever in the global market they can get the highest returns. Big capital is now so footloose and mobile that any attempt by national governments or the labour movement in any particular country to impose policies upon it that increase its costs will lead it withdraw from that country and relocate its operations elsewhere, that is, where costs are lower.

Within the workers' movement these arguments have also gained currency, providing union officials with a rationale for urging workers to accept reductions in wages, working conditions and social expenditures in order to preserve jobs. The concept of globalisation has also gained acceptance among many former adherents of the radical left, who argue that big capital is now so mobile and powerful, and national states are so weak in comparison, that it is pointless for the working class to struggle for state power.

Clearly, if the globalists' contentions are correct then revolutionary Marxists throughout the world would be confronted with the need to radically rethink their strategic conceptions. But are they?

According to the United Nations' World Investment Report 1993 there were 37,000 transnational corporations, which had 170,000 subsidiaries abroad. Ninety per cent of transnational corporations had their headquarters in the developed capitalist countries.

Transnational corporations

Summarising data from various sources, British academics Paul Hirst and Graham Thompson, in their recently published book Globalization in Question, note that the great bulk of the sales and assets transnational corporations were concentrated in their "home" country or region, "despite all the speculation about globalization".

For manufacturing transnational corporations with their headquarters in the USA in 1987, 70% of their sales and 67% of their assets were in the United States itself. The bulk of the rest of their sales and assets in 1987 were in Western Europe and Canada. For US-headquartered transnational corporations engaged in services, 93% of their sales and 81% of their assets were in the United States in 1987.

For transnational corporations with their headquarters in Western Europe, there was a wider geographical distribution of sales and assets, but between 70-90% of them were in their "home" country and other West European countries. For manufacturing transnational corporations with their headquarters in Japan, 75% of their sales in 1993 were in Japan, as were 97% of their assets were in Japan.

Between 1987 and 1993 there was a growing concentration by transnational corporations of their assets in their "home" country, rather than a trend toward "globalisation". Thus, British-headquartered transnational corporations engaged in manufacturing had 52% of their assets in the UK in 1987, but 62% of their assets in the UK by 1993. Japan-headquartered transnational corporations engaged in manufacturing increased the share of their assets located in Japan from 64% in 1987 to 75% in 1993, while Japan-headquartered transnational corporations engaged in services increased the share of their assets in Japan from 77% in 1987 to 92% in 1993. US-headquartered transnational corporations engaged in manufacturing increased the share of their assets located in the United States from 67% in 1987 to 73% in 1993.

From these figures we can see that far from spreading their assets and sales evenly across the globe, transnational corporations have centred both the production and sale of commodities in their "home" countries. And where they have internationalised their operations these have been highly concentrated in other developed capitalist countries. This is reflected in the highly uneven distribution of foreign direct investment and trade on a global scale.

Global distribution of investment and trade

In 1992 the total stock of foreign direct investment throughout the world was US$2 trillion. The transnational corporations controlling this stock were responsible for sales of US$5.5 trillion worldwide. The largest 100 transnational corporations accounted for a third of this stock. Sixty per cent of transnational corporation foreign direct investment stock was associated with manufacturing, 37% with services and only 3% with the output of primary products, i.e., mineral and agricultural raw materials.

The geographical distribution of this stock of foreign direct investment was highly uneven. Seventy five percent of it was located in the developed capitalist countries, principally in North America, Western Europe and Japan, which account for only 14% of the world's population. Of the remaining 25% of foreign direct investment stock, 66% of it was located in the 10 most important "developing" countries – Argentina, Brazil, China, Hong Kong, Malaysia, Mexico, South Korea, Taiwan, Thailand, and Singapore. These countries account for another 29% of the world's population. However, by including China as a whole, with its 1.2 billion people, these figures underestimate the real level of unevenness in the global distribution of foreign direct investment. Foreign direct investment flows into China have been highly concentrated in eight Chinese coastal provinces, plus Beijing. When this is factored in, it emerges that 91.5% of global foreign direct investment stock is concentrated in areas of the world inhabited by only 28% of its population.

There was also a highly geographically uneven flow of foreign direct investment. Sixty percent of international investment flowed between the imperialist "Triad" states of North America, Western Europe and Japan. Of the remaining 40% of foreign direct investment flows – some US$34 billion in 1990-93 – 56% went to East Asia and 32% went to Latin America. Not only were the imperialist states of North America, Western Europe, and Japan the originators, and chief destination of foreign direct investment, the pattern of foreign direct investment flows to the non-Triad countries also shows a highly concentrated pattern. Thus the great bulk of non-Triad foreign direct investment from the US went to Latin America. For non-Triad foreign direct investment from Japan, East Asia was the main destination. For non-Triad foreign direct investment from Western Europe, the main destination was Eastern Europe, Brazil, North and West Africa.

The geographical concentration in the accumulated stock and flows of foreign direct investment is paralleled by the geographical unevenness of the global pattern of trade. In 1992, total world exports were US$3.7 trillion. Sixty-nine per cent of world exports went to the imperialist Triad members and a further 14% of world exports went to the 10 most important Third World countries in terms of foreign direct investment flows. That is, 84% of world trade was between areas of the world inhabited by only 28% of its population.

Marginalisation of underdeveloped countries

In other words, the great majority of the countries of the world, inhabited by nearly three-quarters of the world's population – some 3.8 billion people – were not only written off the map as far as foreign direct investment was concerned, they are completely marginalised as far as world trade is concerned. The main way they are "integrated" into the global capitalist economy is through the annual tribute of US$40 billion they make in debt repayments and servicing to the banks and governments of the imperialist Triad members.

But while servicing their debt places an unbearable burden upon their economic and social development, even this debt is only a marginal fraction of global debt. In 1990, the total amount of outstanding debt of central and local governments, households and nonfinancial businesses in the United States alone was US$10.6 trillion – almost 10 times the total debt of Third World countries.

Thus, for the vast majority of the world's inhabitants, their place in the globalised "market" resembles that of the backward provinces of the Roman empire during the epoch of the decline and decay of the slave-owning mode of production – pillaged and impoverished to enrich propertied magnates residing in the imperial centre.

The previously figures on the distribution of foreign direct investment, trade, assets and sales of transnational corporations demonstrate that for all intents and purposes it is the imperialist countries that constitute the membership of the "globalised" economy, if such an entity can really be said to exist.

The world capitalist economy is structured around three competing trade and investment blocs centred on the imperialist nation states of Western Europe, North America and Japan. The overwhelming majority of transnational corporations still only operate in a small number of countries – principally their "home" country and the other "high wage" countries of the imperialist Triad.

Contrary to assertions often made by proponents of the globalisation thesis, transnational corporations are not directing their investments toward areas of the world where labour costs are lowest. There is no big push by German-based transnational corporations, for example, to transfer their capital from manufacturing industries in Germany, where wage levels average $25 per hour, to non-unionised branches of Indian industry, where the average wage is 40 cents an hour. In fact, the manufacturing foreign direct investment of transnational corporations is increasingly being directed toward branches of industry with high levels of spending on fixed capital, smaller but more skilled work-forces, and thus relatively higher wage levels (such as chemicals, automobiles and electronics) and away from low-skilled, low wage, labour-intensive branches of industry such as textiles, clothing and footwear.

'Divergence', not 'convergence'

In its 1995 World Development Report, the World Bank, warned that "it would be foolish to predict that the differences between rich and poor countries will rapidly disappear through convergence, either upward (of poor countries' wages and living standards toward those in the rich countries) or downward (the reverse)".

"Convergence", the report noted, "is a notion dear to economists, who like its close fit with theory [that is, the theory of perfect competition in a level-playing field where all commodity owners are equal – DL], and abhorred by populists in rich countries, who see it as a threat to their incomes. Past experience, however, supports neither the hopes of the former nor the fears of the latter... Overall, divergence, not convergence, has been the rule... ". Indeed, it has! The average per capita income of the richest countries was 11 times that of the poorest countries in 1870, rose to 38 times as much in 1965, 58 times as much in 1985.

Of the nearly 2.5 billion-strong global labour force, 58% today are based in what the World Bank classifies as "low-income countries," 27% in "middle-income" and only 15% in the "high-income" countries. Thirty years from now, it projects that only 10% of the global labour force will live in "high-income" countries. Despite this, the World Bank report peddles the idea that an "integrated" global "free market" will eventually produce an upward convergence for the workers of the world. Here is a typical example from the report:

Stories about losing from integration often make headlines: how Joe lost his job because of competition from poor Mexicans like Maria, and how her wage is held down by cheaper exports from China. But Joe now has a better job, and the US economy has gained from expanding exports to Mexico. Maria's standard of living has improved, and her son can hope for a better future. The productivity of both workers is rising with increased investment, financed partly with increased savings of workers in other countries, and Joe's pension fund is earning higher returns through diversification and new investment opportunities.

The same report, however, matter-of-factly states that "Inequalities between men and women, between ethnic groups, and between geographic regions are particularly tenacious... Poor regions, such as the state of Chiapas in Mexico, usually stay relatively poor even when the economy as a whole expands"!

The World Bank's little story about Joe and Maria, of course, tells us nothing about the realities of life for the average "Joe" in the United States or the average "Maria" in Mexico. It is deliberately designed to obscure the fact that the purchasing power of the wages of non-supervisory wages in the US has fallen since 1973 back to the level they were in the late 1950s, and that average real wages in Mexico fell by 50% during the 1980s and the standard of living of the majority of Mexicans is now as low as it was before the Second World War.

Internationalisation of capital

There has undoubtedly been a strong tendency toward the internationalisation of capital in recent decades. The very emergence of transnational corporations as the dominant form of organisation of big capital under late monopoly capitalism is proof of that. But in order to understand the real dynamics of this tendency it is essential not to confuse the internationalisation of the production and sale of commodities (i.e., internationalisation of the production and realisation of surplus value) with the internationalisation of the power of command over capital (i.e., the international centralisation of capital).

The internationalisation of the realisation of surplus value, i.e., of the sale of commodities, is a tendency inherent in capitalism, but it has developed very differently in the history of this mode of production. Broadly speaking, this internationalisation increased from the early 19th century up to the eve of World War I (that is, exports grew from 3% of world industrial output in 1800 to 33% in 1913). It fell back during the long depressive wave that marked the inter-way years from 1913 to 1939. It began to climb again in the period after World War II – although the relative per capita share of exports reached before World War I was not overtaken until 1973.

Prior to World War II, there was only a marginal internationalisation of the production of surplus value, outside of the domain of raw materials. That is, very few large companies spent constant and variable capital outside their "home" country. This began to change after World War II, as large companies based in the developed capitalist countries – in the first instance, US based-companies – started to invest in manufacturing production abroad, either through the setting up of enterprises owned by their subsidiaries in foreign countries or through the buying up of foreign manufacturing companies. Since the 1960s this has become a generalised phenomenon for big capital in all the developed capitalist countries, which for the first time actually created an immediately international framework for the competition of capital.

However, the internationalisation of capital expenditure is not necessary congruent with the internationalisation of capital ownership, i.e., the fusion of capitals of different nationalities into genuinely multinational corporations, i.e., corporations owned by capitalists of different nationalities in which the power of command over the capital of these corporations is not in the hands of the capitalists of any one nation. Outside of Western Europe, there is little evidence that such an international fusion of capital has taken or is taking place.

State power and inter-imperialist competition

If there really was a process of international fusion of big capital, we would see a decline in inter-imperialist competition proper, i.e., the differences of economic interest between the capital owners of different nationalities would be tending to disappear and this would be reflected in a decline in the use of imperialist state power to defend and advance the interests of different (US, European or Japanese) groups of national capitalists against each other. Even in such a case, of course, the imperialist state power would not just "wither away". All that would vanish is its role as an instrument of inter-imperialist competition. Its role as the central weapon of the common interests of all the imperialist owners of capital in the class struggle between capital and labour would be more pronounced than ever.

Again there is no evidence of any decline in the role of the imperialist nation-states as weapons of inter-imperialist competition. To the contrary, since the end of the Cold War we have seen an intensification of the use of imperialist state power, particularly by the US capitalists, to advance their economic interests against their Japanese and West European rivals. A prime example is the conflict over the Helms-Burton Act passed by the US Congress. The act allows former owners of property expropriated by the Cuban workers' state to sue foreign companies trading with Cuba for compensation. This has led not only to a storm of protest from other imperialist governments, which have threatened to impose legal sanctions against US subsidiaries in their countries.

The Helms-Burton Act was not just aimed at tightening the US economic blockade against the Cuban socialist state. It was drafted by lawyers from the Bacardi distillery company, famous for its (non-Cuban) white rum. The key target for Bacardi was the French company Pernod-Ricard, which had done a major deal with Cuba to provide it with distilled rum for its world-wide marketing operation.

Open economic competition between US and West European transnational corporations is also at the root of D'Amato-Kennedy Act which threatens US court sanctions against companies investing and trading in the oil business with Iran and Libya. These companies include Total of France, the Italian oil and gas conglomerate Agip, Belgium's Petrofina and Veba of Germany. Another target is ENI, Italy's state energy corporation, which has US$6 billion invested in Libyan gas pipelines. In response to passage of the D'Amato-Kennedy Act by the US Congress, the European Commission adopted a "blacklist" of US companies to be targeted for retaliatory sanctions in European courts.

Conflict and rivalry between US and French imperialism were openly manifested during the recent events in Zaire. Throughout the Cold War, Washington, which had its resources tied up elsewhere, acquiesced in France's continued military, diplomatic and economic domination of its former colonies in Africa. But with the end of the Cold War, Washington is no longer willing to allow French capital to have privileged access to mineral-rich Francophone African countries like Zaire. Since the overthrow of the French-backed, Hutu-chauvinist regime in Rwanda in 1994, Washington has taken advantage of the new regime's hostility to France to strengthen its diplomatic influence in East Africa. Washington openly opposed France's attempts to put together a military force to intervene in eastern Zaire to protect its Zairean and Rwandan Hutu clients from Zairean rebel forces. Opposing the French plan, US State Department spokesperson Nick Burns declared: "Some people in Paris seem to live under the delusion that certain parts of Africa can be the preserve or domain of a certain colonial power... That is a far-fetched notion. The time has passed when... outside powers could view whole groups of states as their private domain."

When it comes to inter-imperialist competition for access to markets and spheres of investment there is no absolute dividing line between the use of judicial, diplomatic or military power. Thus the US government used both diplomatic and military power last September to block the French-initiated UN "food for oil" plan with Iraq. Under the plan, Iraq was to be allowed to sell up to $2 billion worth of oil every six months in order to buy food and medicines. The Banque Nationale de Paris was to handle the account into which the Iraqi oil revenues were to be deposited. Washington had blocked approval of this plan by the UN Security Council for more than a year. In May it reluctantly agreed. However, just when the plan was to go into operation, Washington took advantage of Baghdad's intervention in the conflict between rival Kurdish bourgeois parties in northern Iraq to proclaim that Baghdad was again threatening Kuwait and Saudi Arabia. Clinton ordered a series of US missile attacks on targets in southern Iraq and unilaterally declared the UN "food for oil" plan suspended.

A few weeks ago, the US administration allowed the UN plan to be put into operation, but with one not insignificant change – now the revenue from Iraq's oil sales will not be deposited with a bank in Paris, but instead will be deposit with a bank in New York!

During the Cold War, the US capitalists used their state power, particularly their massive military apparatus, to defend the interests of all the imperialist owners of capital against the collectively perceived threat posed by the power of non-imperialist, particularly workers', states. With that threat greatly diminished, the US capitalists have begun to use their enormous military power to advance their own economic interests against their imperialist rivals.

The "New World Order" arising out of the collapse of the Soviet bloc will thus tend to look more like the classical imperialist order of Lenin's day, though with some important modifications. The major one is that the possession of nuclear weapons by the major imperialist powers or, in the case of Germany and Japan, the technological basis to rapidly acquire them, makes global inter-imperialist wars extremely unlikely. This does not, of course, exclude localised inter-imperialist wars fought by non-imperialist proxies.

Those who argue that transnational corporations have become sovereign colossi overriding the power of the bourgeois nation-state or have become indifferent to the question of national state power, make two fundamental errors.

Firstly, they fail to recognise that as competition between transnational corporations intensifies, these corporations increasingly need the power of a strong state power to defend their interests against their capitalist competitors. In this context, any "state-indifferent" company will become increasingly threatened by those corporations that enjoy the support of a powerful national state apparatus.

Secondly, they fail to distinguish between weak, semi-colonial bourgeois states and the imperialist nation-states. The colossal economic power of transnational corporations over the former in fact rests on the support they receive from the imperialist state power of their "home" base in such crucial areas as state subsidised research and development, economic infrastructure, export subsidies, etc.

International organisations

But aren't governments "ceding" sovereignty increasingly to "international organisations" that act for the interests of transnational corporations like the IMF, the World Bank and the World Trade Organisation? Here again we need to distinguish between semi-colonial states and imperialist nation-states. The governments of the imperialist states are nothing but the executive committees for managing the common interests of their national capitalists, the dominant fraction of which is organised into transnational corporations. And it is the governments of the imperialist states who control the IMF, the World Bank and the WTO, just as they also control the UN Security Council. Within the IMF, for example, votes are in proportion to shares of financial resources contributed to the fund. In 1990 the 23 imperialist states had 62.7% of the votes as against 35.2% for the other 123 members. The five permanent directors of the IMF's Executive Board are nominated by the five biggest subscribers – the USA, Britain, France, Germany and Japan.

The essential function of the IMF, the World Bank, and the WTO is to impose upon the rest of the countries of the world economic policies that are agreed upon among the major imperialist states. These policies are decided at the yearly summits of the governments of the seven richest imperialist states – the G7. At their 1976 summit, for example, the G7 leaders agreed on a plan for the reorganising the economies of the Third World through: opening to the world market (i.e., to imports from the imperialist states), prioritising exports rather than the internal market, privatisation of state enterprises and utilities and opening to foreign (i.e., imperialist) investment, and the reduction of "unproductive" budget items like education and health. In the years after 1976 these have been the policies imposed on Third World debtor countries by the IMF and the World Bank.

The aim of these policies has been to roll back the leverage to extract political and economic concessions from the imperialist states and the transnational corporation which de-colonisation and formal political independence gave the bourgeoisies of these countries. Thus the application of the same pro-export recipe to all Third World debtor countries meant the intensification of competition between them, with a disastrous effect on the prices of their exports, which consist overwhelmingly of raw materials. By 1989, the average price for these products, excluding oil, was less than 33% of what they were in 1980.

Reconquering the internal markets of the semi-colonial countries is also the fundamental purpose behind the push by the imperialist powers for "free-trade" associations like NAFTA and APEC. The elimination of tariffs on imports by all members of these associations removes the only form of protection that semi-colonial countries have to the penetration of their internal markets by the imperialist powers. But the imperialist states are able to limit the penetration of their internal markets by exports from the semi-colonial countries through retaining a range of powerful non-tariff barriers.

'Integration' of ex-Soviet bloc societies

The same policies have been applied to the former socialist states of Eastern Europe and the ex-USSR. Their supposed "integration" into the world capitalist market is often cited by the globalists to support their claim that we have enter a new historical era where capitalism is now a truly global system. However, there is one small flaw in this argument, namely, these countries still do not have capitalist economies. The widespread legal privatisation in all of these countries, hides the fact that their economies are still regulated by the state and state-owned institutions rather than by competing private capitals.

While there was an extensive "small privatisation," with the rapid creation of millions of small shops, service companies and small workshops, the major industrial enterprises in all of these countries still face one central difficulty – the newly-forming bourgeoisie, with its roots in the bureaucracy and the middle classes, has very little real capital at its disposition. In the old Stalinist system of bureaucratically centralised planning, money was an income, i.e., it could buy consumer goods, but it was never capital, i.e., it could not be used to gain control of means of production, nor could it accumulate into money-capital. The partial market mechanisms which existed did not impose any budget discipline on enterprises. In the USSR, which was the most extreme case, most enterprise managers did not even know the balance sheet of their enterprise's "profits and losses."

In order to overcome this lack of real capital, to "capitalise without capitalists," and to legitimise the transfer of public property to the private sector the Czech Republic pioneered the mass distribution of virtually free privatisation coupons to the population, enabling it to purchase shares in companies through bank-managed privatisation investment funds. The "coupon privastisation" allowed Czech Premier Vaclav Klaus to declare that privatisation of the Czech economy had been completed, since more than half the country's GDP is now produced by enterprises owned by these funds. However, it is the state, through state-owned banks, which dominates the management of these funds.

In Poland, which was the first of the ex-socialist states to embark upon a rapid process of privatisation, the majority of serious economists have concluded that capitalism is still a long way off. The basis of their assessment is that the Polish economy is still not defined, controlled and regulated by private capital. The basic regulator is still the state, which continues to redistribute upwards of 80% of GDP. As in the rest of the former Soviet bloc, the nominally private sector in Poland is utterly dependent upon the state-sector. As Jan Sylwestrowicz observed in the Autumn 1995 issue of the magazine Labour Focus on Eastern Europe:

Privatisation has fundamentally been financed by the state. It is the state, and the state sector of the economy, which is materially supporting privatisation, functioning as a gigantic life support mechanism for the emergent private sector. Despite the primitive accumulation it has been engaged in, the private sector still could not even survive without its present tax breaks, the subordination of its needs to state-owned industry, the cheap lease of state-owned plant and machinery, preferential credit from state-owned banks, the direct and indirect subsidy of the whole private banking/financial sector, privileged access to export/import licences, state guarantees for trade operations, etc. Moreover, various regulatory moves by the government (particularly interest and exchange rates) have been geared to allowing the private sector to make a quick killing by simple speculative operations... In effect, the Polish state is operating like an enormous heat pump, pumping resources out of the public sector and into the private sector. Moreover, through various regulatory mechanisms and even direct intermediation, the state in fact often administers the working part of the new private economy.

In fact, as Sylwestrowicz notes, the only part of the private sector that is able to operate independently of state support is the Polish mafia, which has become a major player in Poland's "foreign trade," specialising in stealing cars in Western Europe for resale in both the West and the East. The number of cars passing through the hands of the Polish mafia in 1993 was estimated at 300,000 – roughly equivalent to the annual output of Poland's domestic car industry.

While privatisation has led to the enrichment of sections of the old bureaucracy in the former Soviet bloc states the money they have accumulated as a result of the theft and embezzlement of state resources has not been transformed into real capital. Instead, it has been squandered upon the consumption of Western consumer goods, or channeled into speculative activities on Western financial markets.

Nor has privatisation brought about a fundamental change in the old relations between workers and the enterprise. This is particularly so in Russia.

Russian 'capitalism'

In 1994 over 39,000 Russian privatised enterprises were in chronic debt and the level of inter-enterprise debt indebtedness reached over 100 trillion rubles. Nevertheless, widespread closures, bankruptcies and consequent mass redundancies of workers has not occurred or even begun. Inter-enterprise relations have not been monetised in any meaningful sense if enterprises simply build up mutual debt with no expectation of the dent being paid. A recent ILO survey, based on a sample of 400 Russian enterprises, estimated that of those currently employed 35% could be dismissed without any impact on the level of production. But as Bob Arnot observed in a survey of the Russian economy in the Summer 1995 issue of Labour Focus on Eastern Europe:

The reform process and privatisation have not broken the dependency relationship between the worker and the enterprise. The relationship has changed its form and privatisation, in some respects, has actually heightened the dependency relationship. Workers are tied to their enterprise because the non-money wage they still provide (privatised or not) is still immensely important for consumption. Enterprises still provide, although to differing degrees, subsidised canteens, transport, foodstuffs, consumer goods, housing, education and childcare facilities. Payments in kind... are increasing and the link to the enterprise is essential even if the worker is temporarily no t working...

Labour may have been impoverished, the differentiation of income may be increasing, and there may be widescale financial speculation, but labour power is still not a commodity. Labour is still not "free" in Marx's dual sense. The reform process may have changed the form and nature of the dependency relationship (at the enterprise level) but it has not been broken, neither has a reserve army of labour been created that can funct- ion to discipline the employed workforce. The continued decline in production and consequential collapse in productivity illustrates that this has not been achieved. Privatisation, in its cosmetic form, has not been followed by restructuring, and widescale closures have not resulted, hence the old industrial/production structure remains largely intact. The reform process has not led to domestic capital accumulation and an acceleration in the exploitation of labour but to the rundown of past accumulated wealth, accompanied by capital flight, led by the former ruling group, the new entrepreneurs and criminal elements...

Arnot's concluding comments on the Russian situation are equally applicable to the other former Soviet bloc states:

The negative strength of the working population has impeded the reform process from the outset. The fact that there is no class of owners nor a social structure that provides clear and unambiguous supp- ort for the marketisation process only exacerbates the problem. Institutionalists would argue that with the right institutional framework a functioning market econ- omy can be created. But institutions reflect the underlying political economy and class interests and if these are only in the process of coming into existence, the artificially created institutions are merely a shell.

We are thus still a long way from a situation where the market economy, the capitalist mode of production, has become a globalised phenomenon.

Global mobility of money-capital

Perhaps the major argument raised in support of the globalisation thesis is the enormous amount of money capital that is involved in international stock, bond and currency transactions. Electronic communications technology means that huge amounts of this money capital can be transferred around the world at a moments notice. The combined turnover of the major stock markets in a single day is equivalent to the turnover in international trade in a year. The same is true of transactions on the major currency exchange markets. But this very fact indicates that more than 90% of these transactions are based on movements of "floating" paper money, that is, they are essentially speculative. The same is true of the large amounts of money capital invested in the world's stock markets.

Since the stock market "crash" of October 1987, the amount of paper money invested in company shares has risen by over 25% in Italy and Canada, more than 50% in the USA, Germany and Britain and over 100% in France. This has resulted in an unprecedented increase in stock prices. Obviously, the higher the price of a company's stocks are, the lower the relative value of the dividend – the share of profits from production distributed to each shareholder. At the end of December last year, the ratio of US stock prices to dividends is at its highest level since recordkeeping began in 1871. In reality, few investors nowadays buy shares in order to share in the profits a company generates through its production and sale of commodities. The point of dealing on the stock market is speculation, buying and selling shares in companies – any companies – in the hope of making a quick profit by predicting the way everybody else will be buying and selling tomorrow, or in five minutes.

The great bulk of this "floating" paper money consists of what Marx called "fictitious" or "imaginary" capital in contrast to real, that is productive and commodity, capital. Government bonds, for example, represent legal titles to a share of future state revenues, i.e., of taxation. The money-capital that was used to purchase them has already been spent by the state, i.e., it has become a debt to the bond holders. But since the bond holders receive interest on these debts, and can sell them to as commodities, they are treated as capital. As Marx pointed out in Chapter 30 of Volume 3 of Capital, "[t]here promissory notes which were issued for a capital originally vorrowed but long since spent, these paper duplicates of annihiliated capital, function for their owners as capital in so far as they are saleable commodities and can therefore be transformed into capital." [K. Marx, Capital, Penguin, London, 1991 edn, p. 608.]

Shares in joint-stock companies are ownership titles to real capital. But as Marx pointed out, "they giive no control over this capital" because the "capital cannot be withdrawn" since it is tied up in productive enterprises.

But [Marx added] these titles similarly become paper duplicates of the real capital, as if a bill of lading simultaneously acquired a value alongside the cargo it refers to. They become nominal representatives of non-existent capital. For the actual capital exists as well, and in no way changes hands when these dupl- icates are bought and sold. They become forms of in- terest-bearing capital because not only do they assure certain revenues but the capital values invested in them can also be repaid by their sale. Insofar as the accumulation of these securities expresses an expan- sion of railways, mines, steamships, etc., it expresses an expansion of the actual reproduction process... But as duplicates that themselves be exchanged as com- modities, and hence circulate as capital values, they are illusory, and their values can rise and fall quite independently of the movement in value of the actual capital to which they are titles...

Profits and losses that result from fluctuations in the price of these ownership titles... are by the nature of the case more and more the result of gambling... [ibid., pp. 608-09.]

Just how enormous this mountain of illusory capital has become is revealed by one figure. According to the London Financial Times of March 21, 1994, the notional value of futures contracts (i.e., of contractual hedges against and bets on the future movement of agricultural commodity prices, stock market indices, interest rate numbers and currency exchange rates) traded on all world exchanges had reached a total of US$14 trillion a year. Of course, the same speculators may well use the same advances in several successive operations, so that the actual annual outlay in futures trading may be a fifth or a tenth of this amount. But even that is a staggering figure when it is compared to the total amount of capital, excluding real estate, that is privately-owned worldwide which was calculated by the Chase Manhattan Bank to be US$10 trillion in 1993.

The monstrous growth of "floating" paper money has been fueled by the enormous expansion of state, corporate and household debt financed by bank credits that has occurred since the beginning of the long depressive wave in the early 1970s. The fundamental cause of this bloated speculative system is the enormous excess productive capacity (i.e., actual or potential overproduction of commodities) burdening most industries throughout the world. The new capital that is steadily formed by the profits realised every year no longer finds investment opportunities sufficient to secure at least the average rate of profit, which itself remains depressed in comparison to its level during the preceding "long wave of expansion" from the late 1940s until end of the 1960s. The fact that this capital is no longer being productively invested feeds the long depressive wave (especially the decline in employment), which in turn feeds the over-accumulation of capital, the growing transformation of this capital into interest bearing paper and, therefore, speculation in this paper. This speculative activity is not only carried out by professional "speculators." It is increasingly dominated by the major private banks and transnational corporations.

But the enormous mass of interest the speculators receive is subtracted from the total of currently produced surplus value. Therefore, the fraction of surplus-value, of real capital, that is available for current productive investment continues to decline. Thus the world is awash with illusory capital because of a relative, and increasing, shortage of real capital.

While huge amounts of this "floating" paper money constantly transverse the globe, shifting from one financial market to another every 24 hours, its owners are not indifferent to the policies of the states in which these markets are based. Because so much of this speculative activity is carried out on money-credit, the players are extremely sensitive to rises in interest rates and therefore any developments in the "real" economy that the speculators may fear will lead the central banks of the major imperialist states, above all the US Federal Reserve Bank, raising the interest rate on government bonds.

'Globalisation' and neo-liberalism

If, as has been demonstrated, the arguments in support of the "globalisation" thesis do not stand up to scrutiny, why has this concept become so fashionable? Hirst and Thompson offer the following explanation:

This new political rhetoric is based on an anti- political liberalism. Set free from politics, the new globalized economy allows companies and markets to allocate the factors of production to greatest advantage, and without the distortions of state intervent- ion. Free trade, transnational companies and world capital markets have liberated business from the constraints of politics, and are able to provide the world's consumers with the cheapest and most efficient producers. Globalization realizes the ideals of mid-nineteenth century free-trade liberals like Cobden and Bright: that is, a demilitarized world in which business activity is primary and political power has no other task than the protection of the world free-trading system.

For the right in the advanced industrial countries the rhetoric of globalization is a godsend. It provides a new lease of life after the disastrous failure of their mon- etarist and radical individualist policy experiments in the 1980s. Labour rights and social welfare of the kind practised in the era of national economic man- agement will render Western societies uncompetitive in relation to the newly industria1ing economies of Asia and must be drastically reduced.

That is, the rhetoric of "globalisation" is needed to give ideological legitimacy for continuing with neo-liberal economic policies after they failed to deliver their original promises of sustained economic growth and rising living standards. It is certainly not coincidental that the rhetoric of "globalisation" became fashionable among bourgeois economic, social and political commentators with the onset of the 1990-93 international capitalist recession.

After the 1980-82 recession there was an upturn in all the developed capitalist economies. Neo-liberal recipes seemed to have worked. Public acceptance of these recipes was all the greater because the stockmarket crash of 1987 did not immediately result in the recession everyone expected. The developed capitalist economies continued to grow and unemployment declined a little everywhere.

But then came the 1990-93 recession. Unemployment rose sharply, reaching an official average of 8% across the imperialist countries. A new upturn began with great dynamism in 1994, but within 18 months it ran out of steam. In the period since the end of the recession, unemployment has only declined to an official average of 7.8% across the imperialist countries.

The old arguments for neo-liberal economic policies have lost their credibility. Instead, a new argument is being peddled to legitimise these policies: If we, the workers of the developed industrial countries, do not accept more cutbacks in our wages, working conditions, social welfare entitlements, and individually pay more for health care, education, and our retirement pensions, then "our" countries will become uncompetitive in the eyes of the now globally mobile forces of big business, which will then shift its investments out of "our" countries and into the lower-cost economies of the newly industrialising countries. In the 1980s, neo-liberal austerity measures were justified with the claim that a little sacrifice now would be rewarded with new jobs and prosperity in the future. In the 1990s, when it's clear that high levels of unemployment are a permanent feature of life in the "free market" economy, we're told that if we don't continue to accept cutbacks and austerity, we'll be much worse off in the future. In the increasingly competitive globalised market, those who don't work "harder" and accept a reduction in their incomes will find themselves without any work at all.

Neo-liberalism and the capitalist austerity drive

Of course, the capitalist rulers of the imperialist countries are not committed to implementing neo-liberal economic policies because they have been seduced by the myths of "globalisation." These policies accord with the class-struggle priorities of the ruling class.

During the long expansive wave from the late 1940s until the late 1960s, under conditions of rapid capital accumulation, and given a basic deterioration in the international relationship of forces at the expense of the imperialist powers (i.e., overturn of capitalist rule in Eastern Europe and China, rise of anti-colonial struggle, growth of pro-communist sentimentws among the workers of Western Europe and Japan), the priority for the capitalist class in the imperialist countries was to buy social peace at home and support for imperialist foreign policy through social reforms, among which relatively full employment and social security policies played a key role.

The economic expansion itself created the material conditions in which, by and large, the system could deliver these goods. Within the framework of above-average long-term economic growth (for monopoly capitalism), the Keynesian policy of assuring full employment during cyclical downturns through stimulating the economy by increasing the purchasing power of the masses, although being moderately inflationary, would not threaten capitalist profits. The most class-conscious ideologues of the capitalist class are quite open about this. Thus, Pennant Rhea, the editor of the British business weekly The Economist recently stated that the post-war "welfare" system was an import from Marxism forced upon the rich by the Cold War.

By the late 1970s, however, it had become clear to the imperialist rulers that the long expansive wave had given way to a long depressive wave and that it was no longer possible to assure full employment, to maintain social security, and grant a steady if modest increase in real income for wage earners without threatening capitalist profits. At that point the drive to restore the rate of profit through a strong upswing in the rate of exploitation of the working class became the imperialist rulers' top priority.

The neo-liberal "anti-Keynesian counter-revolution" in the realm of bourgeois economic and social science is nothing but the ideological expression of this changed priority. Without the long-term restoration of a chronic structural unemployment (i.e., a large permanent reserve army of unemployed and underemployed workers to enforce "discipline" on the employed workers), without the restoration of the "sense of individual and family responsibility" for health, education and welfare (i.e., without severe cutbacks in social security and other components of the socialised portion of wages), and without generalised austerity (i.e., decline in real incomes for the wage-earning class), there can be no restoration of the rate of profit in the sphere of productive investment.

New rise of working-class resistance

Throughout the 1980s and early '90s the imperialist rulers appeared to have made considerable headway in weakening working-class resistance to the implementation of these policies. But events over the last 14 months have indicated that the capitalist class has by no means succeeded in destroying the working class's ability to regain the self-confidence, combativity and organisation needed to mount successful defensive battles against the rulers' austerity drive.

Beginning with strike of public transport and postal workers in France in December 1995, there has been an new rise of working-class combativity in a series of industrial and semi-industrialised countries.

The December 1995 French strike wave was led by railway workers and was called in response to an attempt by the government to cut the social wage of rail workers. But the government's attack was widely understood to be ultimately directed at all French workers and even the lower strata of the middle class. The strikes were backed by weekly marches and demonstrations that brought a halt to economic activity in virtually all important French cities. Upwards of two million people took part in these protest actions each weekend in large and small cities across the country during the 24-day strike wave.

Then on October 16, a reported 1.6 million French public sector workers staged a one-day strike, paralysing transportation and other public services, in protest against proposals, which were being debated in the French parliament at the time, to freeze public sector salaries and to cut 5500 public sector jobs by the end of this year in order to meet the budget targets for the creation of a single European currency by January 1999. Four days later, 300,000 people marched through Brussels in protest against suspected protection by Belgian politicians of a child pornography ring that kidnapped and murdered children. A week later the social-democratic-led General Federation of Belgian Workers organised a 24-hour general strike to demand the introduction of a shorter workweek with no reduction in pay to combat rising unemployment.

On October 24, 400,000 steelworkers, shipbuilders and other manufacturing industry workers In Germany struck against cuts in sick pay. This action was only the largest of many similar protests in Germany that month. A day later, workers shut down Canada's largest city, Toronto, in a city-wide general strike to protest budget cuts to welfare, education and health care by the Ontario provincial government. The strike was followed on October 26 by a march and rally of 300,000 demonstrators. The Toronto general strike was only the most recent of five city-wide strikes in Ontario province.

On November 1, some 1.5 million German metalworkers took part in demonstrations and strikes in the state of Bavaria to protest cuts in sick pay and other austerity measures being pushed through by the federal government in Bonn.

On November 28, three million workers participated in a general strike in Greece to protest the newly elected social-democratic PASOK government's announcement of sweeping austerity measures. The same day thousands of Greek farmers set up roadblocks that cut the country in two. The farmers were demanding higher prices for their products to guarantee them a living income, cheaper fuel, rescheduling of US$1.3 billion in debts to banks, and lower taxes on farm machinery.

On December 13, seven million workers staged a 24-hour strike in all the major cities of Italy in protest at the austerity measures of the newly elected government of Romano Prodi's Olive Tree coalition, a major component of which is social-democratic Party of the Democratic Left, formerly called the Communist Party.

These, and similar actions by workers in Argentina, Russia, and, now, South Korea, are symptomatic of the beginning of a response by workers to the intensification of capital's attack on the living standards of our class, particularly the capitalists' escalating attack on social security entitlements.

From defensive to offensive battles

However, perhaps the most significant of all these labour actions was the strike by 50,000 French truck drivers that began on November 17 and ended 12 days later. This strike was particularly significant because it was not a successful defensive battle, as the December 1995 strike had been, but a successful offensive battle. The truck drivers won their central demands – for shorter working hours without loss of pay and for the reduction of the retirement age from 60 to 55 after 25 years of work. The final settlement also included a government promise for an extra five days annual sick pay.

Key to the truck drivers' victory was the mass solidarity they received from other French workers. In fact, they enjoyed sympathy and support of virtually the entire French working class. As the London Times reported: "According to opinion polls, 87% of [those interviewed] regard the drivers' demands for higher wages, shorter hours and retirement at 55 as fairly justified." The London daily also reported that despite gridlocked roads, petrol stations without petrol, and other inconveniences for the mass of the population, sympathetic onlookers gave active support to the strikers. This included restaurant owners and other small businesspeople who provided the blockading strikers with hot food, coffee baguettes and croissants.

The November 30 New York Times summed up the reasons for the overwhelming public support:

Though the government was not a direct party to the dispute, it has been weakened by it. Widespread public sympathy for the truckers reflected mounting discontent with the state of the economy and deepening dissatisfaction with the 17-month-old conservative government of President Jacques Chirac.

The settlement also was another blow to the government's policy of holding the line on workers' benefits and changes in work rules...

In a further sign of weakness, Prime Minister Alain Juppe avoided threatening to use force to clear the barricades, apparently fearful of provoking a larger strike.

What is especially disturbing to the capitalist rulers is that what started out in France at the end of 1995 as a well-fought defensive struggle by workers against the intensifying global capitalist assault on mass living standards – the only thing that is truly globalised in today's world – has led to a successive struggle with a clearly offensive character. The French truck drivers' struggle demonstrates that as the bourgeois social and ideological assault loses its credibility and workers regain the confidence to wage successful defensive battles, they will soon recover the confidence to mount a determined counter-offensive.

The key lesson of the French truck drivers' strike is that through militant mass action and class-struggle solidarity, our class can not only block the capitalists' assault on our living standards but force them to into retreat. On the eve of the 21st century that is a concept that is truly worthy of globalisation.