(very modestly updated)
In an e-mail sent to its staff, the management announced:
“an expanded “People” section, increased space for world news coverage, and some exciting additions to our unrivalled team of columnists and commentators (…) The tagline “We Live in Financial Times” underlines our relevance as the globalisation of business reaches ever broader and deeper”.
Indeed, “globalisation lives”, as the newspaper’s chief economics commentator Martin Wolf put it back in September last year (walled for non-subscribers) and as the existence of this modest blog among zillions demonstrates.
This sleepy Monday mornig in the office, all this reminded me of something.
Globalisation before 1914 – Or why globalisation is so controversial
John Meynard Keynes, after the devastation of the World War One, wrote in 1920 about what globalist Jeffry A. Frieden in his book “Global Capitalism. Its Fall and Rise in the Twentieth Century” calls “The last best years of the golden age” of globalisation, i.e. “1896-1914”.
“What an extraordinary episode in the economic progress of man that age was which came to an end in August 1914!… The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighbouring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalisation of which was nearly complete in practice.”
Frieden, in his book (which I have not yet finished, it is sooo thick…) begins with a description of a “golden age” of global capitalism. What Frieden is writing is brilliant. Yet it made mentally amusingly respond to each sentence with the as classic and as mythic anti-globalising discrouse. I did my undergraduate studies in history and am very sceptical of everything that appeals to a “golden age”. What is a “golden age” for some, is the “dark age” for others.
“The global capitalism of the late nineteenth and early twentieth centuries came close to the classical ideal. International trade, investment, and migration were relatively free and tied together by a firmly established gold standard. The owners of firms, mines, farms, and plantations on every continent produced for global markets, using capital and labour from around the world”.
Just a few comments to this short paragraph:
- Indeed, a very “classic” world which didn’t know, e.g., the welfare state. Protectionist Germany, though, was introducing elements of it already.
- It was a period in which the colonial powers, and particularly the UK, had forced quite a lot of countries to open domestic markets. Financiers from London in the Middle East or from New York in Latin America were holding the strings of the purses of local rulers. In the Middle East or North Africa, this led to the set-up of protectorates.
- Investment: in railroads that were built for the sole purposes of shipping commodities out of the colonies and not to build infrastructure?
- Migration: all the paupers of Europe were not being taken care of and had to leave for better places. Worse, coolies from India, China and elsewhere in Asia were sent to work under conditions of quasi-slavery in plantations in the West Indies, Latin America or South Africa, as “unfortunately” proper Black slaves were no longer permitted to be used.
- On, “The owners of firms, mines, farms, and plantations on every continent produced for global markets, using capital and labour from around the world”: Yes, weren’t these the impersonations of the colonial system everybody abhors now?
As for the Gold Standard, was only a source of stability in so-called “core” countries. What are today’s emerging markets suffered in those years from severe financial crises. Somehow a reminder of the emerging market crisis from Mexico to Argentina in the 1990s to early 2000s, don’t you think?
Frieden also adds something that is precisely what infuriates many critics ranging from Lenin to Madame Ségolène Royal, including Dependencia theorists (p.45):
“Powerful economic, political, and social connections across borders and oceans tied together supporters of global economic integration in the golden age. Free traders and gold backers in many countries encouraged and supported each other. In trade policy, one country’s imports had a clear relationship to another’s exports. Britain’s industrial exporters wanted South American cotton and copper, while South American farmers and miners wanted British farm and mining equipment”.
Globalisation – why it continues to happen
The only problem for anti-globalisers, and the reason for the Friedens of this world to consider this perod a “golden age” is that it was probably the first in history in which the world started witnessing significant levels of economic growth. The mass misery humanity was subjected to before that was being overcome. Growth was indeed good for the London stockholding privateer of that time such as described by Keynes. But living conditions for the masses increased significantly, in Europe, and elsewhere.
The real thing, i.e., significant raising of human living standards, indeed started to happen in the age of “global capitalism” under the Gold Standard and the Pax Britannica. After World War I, general closure of the world’s national economies and the setup of “imperial preferences” coincided with a much more modest level of per capita income growth. After World War II, liberal economic principles were rehabilitated. The GATT and the Bretton Woods system reinjected liberalism into the world economic system at that time. But Bretton Woods “embedded” the international financial system in such a way as to allow for national economies to have room for “Keynesian” demand-stimulating policies. The whole system collapsed in the 1970s and has proven to be dead and gone for ever. Numerous are the nostalgics of that time, such as Dani Rodrik.
What is different about globalisation today?
The main achievement of today’s globalisation is that GDP per capita levels are still rising dramatically. The graphic above does not capture this trend, as it includes factors such as the natural slow-down of per capita growth levels in already rich countries and the lost decade of the 1980s debt crisis. Per capita GDP levels have risen again dramatically, notably in China (8.8% per annum between 1990 and 2001). See, for more details, the following link. Russia’s GDP per capita levels have doubled since 1999, according to the IMF.
The main difference of today’s globalisation with the one before 1914 is that we are in a post-colonial world (apart that there is no more gold standard). In a highly entertaining but difficult book published in 2005 on globalisaion, the highly controversial but eminently brilliant and witty German philosopher Peter Sloterdijk entitled “Im Weltinnenraum des Kapitals” (loosely translated “In the outer-inner space of capital”) looks at the history of globalisation under an interesting angle.
Sloterdijk writes: full of an antique image of perfection and “roundness” such as represented in the Sphere, Europeans set out on their sailing ships in the late Middle Ages to “go round” the world by conquering it, driven essentially by the profit-motive. That was the time of “History”, and that was the time of European unquestioned “unilateralism” – i.e. brutal harming of others. With the European empires in the 19th century, the process of “roundification”, and of “closure” of the world was achieved. After 1945, we entered “post-history”. A world “known”, perfectly spheric, conquered with no white blanks left on the world’s maps. A world made of “Simultaneity” (not History), and a “Multilateralism” (democracy, anticolonialism, global economic interdependence, multilateral organizations) in which it is all about stopping each other from doing each other harm. The US’ invasion in Iraq is an echo of previous European “unilateralist” times, but does not reverse the current trend for good.
We are also in a world where globalisation-induced economic convergence is happening full-steam. Yet economic convergence does not occur democratically, but in the form of successive “convergence clubs”. I’ll explain myself. In my websearch for this post I fell upon Brad de Long’s periodification of the “clubs” of countries which have successively caught up with Western Europe since the 19th century.
The African continent is, notoriously, not member of any for De Long’s “convergence clubs”. However, this Monday, while cleaning up my desk at my workplace, I fell upon a booklet compiled by the international ratings agency Standard and Poor’s in early 2006 which included Sub-Saharan sovereign ratings finalised in collaboration with the United Nations Development Programme. Ratings agencies are probably one of the most potent symbols of financial globalisation. They decide which country is “creditworthy”, and which is not. They “map” the world of financiers. They do this from financial centres such as New York, and London. Rating is a business, though, and those countries which are outside the globalisation mainstream – such as most Sub-Saharan countries – and who can’t pay a ratings agency will simply be bypassed by global financial markets. Africa. The colonial playground. The subject continent per se: enslaved, “scrambled” by European powers, “underdeveloped” by local post-colonial rulers propped up by cold war Powers, increasingly marginalised from world economic flows, exporter of migrants to the former colonial metropolises with a high death toll on Europe’s Mediterranean shores. Even excluded Africa is timidly entering the “globosphere”. It could be cynically said that with these ratings, the white blanks in the maps of discoverers, conquerors and Africa scramblers are definitively filled now. Africa is showing signs that it could ultimately enter the “globosphere”, as its recent trade figures show:
In 2006, the WTO writes: “Africa’s merchandise exports rose by 21%, again faster than imports, which are estimated to have increased by nearly 16%. The share of Africa in world merchandise exports reached its highest level since 1990. Although most of Africa’s export growth can be attributed to the rise in oil exports, it is a noticeable development that non-oil exporting African countries increased their exports by about 16%.”
London. Like before 1914, it is the world’s financial centre (the least that can be said is that it is tightly competing with New York). London: in a sense the “coolest” place on this planet. Globalised, marketised, rich, dynamic, multicultural, diverse, ever-changing, stimulating, open. Managed by a leftist former punk Mayor who nevertheless keeps business going. London, where Karl Marx is buried. London, its North, like the Finsbury Park area, where I live. The former colonies broadly all represented here. Today’s Wretched-of-the-Earth stranded here, keeping unskilled wages down and rendering the local white underclass aggressive, resentful, racist. London, where the Financial Times is produced, and from where Standard and Poor’s rates the world.
Globalisation, today, as in the past, breeds resentment though. Globalisation is the advance of capitalism across borders. Capitalism is probably the most revolutionary force in history. Its transformative, disruptive, “creative destructive” capacity deeply displeases, disturbs. It constantly results in winners and losers. Nobody can ever take any situation – political, social, financial, employment-related, for granted. Globalisation benefits the world’s poorest when they are well plugged into the system. China’s and India’s current achievements are breath-taking. But it also very much benefits the rich. Those rich people for whom the Financial Times publishes a decadent week-end consumer supplement “How to spend it”. Spend what? The Money of course. Big Money.
The French sociologist of the 19th Century Alexis De Tocqueville identified two basic social instincts, or passions. The passion for equality, and the passion for freedom. The passion for equality is often stronger, and societies can chose to forego freedom for the sake of equality. The passion for equality – so respectable and noble in its roots – is at the heart of today’s anti-globalisers and protesters at WTO gatherings. But this passion created the Soviet system, this passion created a murderous Mao, and perversely, also Hitler and the fascists. Indeed total equality leads to the necessary elimination of non-compliant equality-disturbers – Capitalists, Jews, Immigrants, Global Financiers. Proponents of equality say they pursue “true” liberation, but have yet to deliver.
Alexis De Tocqueville also argued that France tended to have a stronger passion for equality than for freedom, when it comes to choosing. About 170 years after he wrote his books on l’Ancien Regime et la Revolution, or De La Democratie en Amerique, the current French elections appear under a very interesting light. French presidential candidate’s Ségolène Royal, in her speech on Sunday evening following her election into the second round to be fought against staunch right-winger Sarkozy said: “[J]e suis une femme libre comme vous êtes un peuple libre. Je ne suis l’otage d’aucun clan, d’aucun groupe de pression, d’aucune puissance financière”. Roughly translated by me : “I am a free woman, like you are a free people. I am not hostage to an clan, to any pressure group, to any financial power”. Ségolène Royal, who wants to impose on everybody to sing the national anthem La Marseillaise, and to hang out the French flag on France’s July National Holiday. Equality-possessed “socialist”, who wants to keep Polish plumbers out of the country, who wants to impose military discipline on delinquent youth. That’s the “true face” of “equality” when it has nothing more to propose than to preserve the status quo [the even deeper ugliness of the other candidates and especially Ms Royal’s main contender will not be broached upon here].
Yes, we are, indeed, living in financial times.