From New Age, a publication of the Communist Party of India.

'Globalisation' is the term under which imperialism presents itself in its current phase. The term however is a misnomer, since its implicit suggestion, that the degree of freedom of commodity and capital flows of the present epoch is something unprecedented in the history of capitalism, is not tenable. Not that the present epoch is not suigeneris, but what is unprecedented about it is something altogether different, namely an immense 'globalisation' of finance, and a communications revolution which inter alia has made such globalisation of finance possible.

Of course, global financial flows themselves are nothing new, and authors like Hilferding, Hobson and Lenin had discussed them at great length for the pre-First World War period. But the present 'finance capital' differs from that of the earlier epoch in being detached from its specifically national moorings (and hence not being part of some national capitalist strategy), in being also detached from any specific links with industrial capital, and hence representing a highly volatile force buzzing around in quest of speculative gains in a world not marked (thanks perhaps to the immense pressure of this finance capital itself) by any significant barriers to capital movement arising from inter-imperialist rivalries (Patnaik 2000). It is the emergence of this new form of international finance capital, and the 'globalisation of finance' brought about by it, which is at the core of the current phase of imperialism.

I

There are two very common misconceptions about this process of globalisation of finance. The first relates to its nature, and the second to its implications. The fact that we speak of a new form of finance capital, and of the associated 'globalisation of finance', does not mean that somehow the process of production under capitalism has ceased to be relevant, or that the multinational corporations engaged in production, which used to be so much talked about in the context of imperialism earlier, have become secondary. Lenin (1975; 114-5) had talked of 'monopoly' as constituting a 'superstructure' on old capitalism, giving rise to a 'mosaic reality'. In the same vein we can talk of the new world of finance capital as constituting a 'superstructure' erected on the earlier structure of monopoly capitalism giving rise to a 'mosaic reality'. The MNCs have not ceased to be important; they have become enmeshed with this world of finance, with the process of globalisation of finance, with the quest for speculative profits, and with the quest for the cheap acquisition of assets allover the world as a result of this 'financialisation' process. (The case of ENRON, a huge MNC whose executives, over-reached themselves in their speculative activities, underscores the point). To talk in the old vein of MNCs as the key actors in contemporary imperialism, as if nothing had changed since the decade of the sixties, would be wrong. To talk of MNCs as if they themselves had remained unchanged in their attitudes and behaviour would be equally erroneous. And not to talk of MNCs at all on the grounds that all that mattered today was purely speculative finance capital would be even more wrong. We have to talk about a new 'mosaic reality' where globalisation of finance is superimposed on the older, pre-existing capitalism, and the new form of international finance capital that presides over this process is not an entity separate from the MNCs but one with which they are enmeshed.

The second misconception lies in the belief that for any economy, especially a third world economy, opening up to this globalisation is good for growth. This belief, in the case of the third world, is sustained by the argument that the international mobility of capital in the current epoch results in a migration of capital from the 'North' to the 'South', setting up productive enterprises in the latter and overcoming, at long last, the phenomenon of uneven development in the world economy which had arisen precisely because labour, traditionally, could- not move from the South to the North while capital, traditionally, would not move from the North to the South. This earlier reluctance of capital to move from the North to the South, despite the lower wages prevailing in the latter (and hence despite the greater profitability of locating production in the latter) is apparently being overcome at last. And several pronouncements emanating from the North (including of late from Senator John Kerry the Democratic Presidential candidate in the US) buttress this feeling that globalisation is at last overcoming the North-South dichotomy historically associated with capitalism, by ushering in more rapid growth in the South.

The mistake here lies in confusing the mobility of finance for the mobility of productive capital. Notwithstanding what people like John Kerry have to say, the mobility of productive capital from the North to the South continues to be extremely limited. (Even in the case of China, the usually-cited 'success story' for productive capital inflows, the bulk of such inflows are from overseas Chinese, and not from the 'North', strictly speaking). There are no doubt individual micro instances of such mobility which is what people like Kerry seize upon, but in macro terms the magnitude of productive capital movement from the North to the South (of which Off inflows, other than in the form of takeovers or conversion of debt into equity, would be the appropriate index) is still limited. When we additionally consider the fact that not all fresh DFI inflows are necessarily growth-promoting (indeed such DFI which merely substitutes for the domestic investment that would have occurred in its absence, is likely to be growth-reducing, since it constitutes an implicit form of de-industrialisation), it is clear that the gains in terms of higher growth in the third world from opening up to the globalisation process, would, from this source at any rate, be rather meagre.

On the other hand however opening up to globalised finance has a distinctly growth- retarding effect, since it invariably brings in its train a process of deflation of the economy via reduced State expenditures (U. Patnaik 2002). Finance capital is always opposed to an 'activist State' in matters of employment and welfare promotion. But when finance capital is globalised and the State continues to be a nation-State, its opposition acquires a spontaneous effectiveness: any State that dares to be activist, overriding the opposition of finance capital, would find itself confronting a capital flight, with adverse consequences for the economy. To avoid these consequences and hence to prevent possible capital flight, the States make every attempt to ensure that the 'confidence of the investors' in the economy, which basically is a euphemism for the 'confidence of the speculators', is not undermined. And they do so by eschewing any activist role in employment promotion, and subjecting the economy to a deflationary process which reduces the growth rate.

The opposition of finance capital to State activism in employment promotion cannot be explained by any legitimate economic fears. True, at high levels of employment and activity, the prospects of inflation loom large, as do the prospects of a significant widening of the current account deficit of the balance of payments. Both these factors give rise to fears of an exchange rate depreciation which has adverse consequences for the profitability of globalised finance. But such fears do not constitute an adequate explanation. The opposition of finance capital to employment stimulation by the State becomes manifest even when the economy operates at a level of activity which is so low as to rule out any genuine fears about inflation and exchange rate depreciation. (In the late twenties for instance, the British Treasury, under the influence of the City of London which was a major financial centre of the capitalist world, had rejected Lloyd George’s proposal for a Public Works programme to overcome unemployment, even though the level of unemployment, at 10 percent at that time, was already so high that an increase in activity at that juncture could not conceivably cause inflation or depreciation).

The source of the opposition of finance capital to State activism in matters of employment lies elsewhere. Writing in 1943, Michael Kalecki had said that the fact that employment, in the absence of State intervention, depended on the so-called 'state of confidence' of the capitalists, gave the latter a 'powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness (Kalecki 1971; 139).' State activism on employment in other words undermines the social power, and with it the social legitimacy, of the capitalist class. And if this true of capitalists engaged in production, then how much more true must this be of the rentier class, whom Keynes (1946) had characterised as the 'functionless investor' and which is typified by finance capital?

There is an additional factor. Deflation is typically associated with the selling off of public enterprises at throwaway prices of which the capitalist class in general, and finance capital in particular, are the beneficiaries. Deflation in other words acts as a mechanism of primitive accumulation of capital. When enterprises built out of the savings of the people at large are handed over virtually gratis to a few members of the international financial oligarchy, the effect is exactly the same as the direct expropriation of many petty producers by a few capitalists that Marx had captured under the rubric of primitive accumulation. It is instructive that this process of primitive accumulation is sought to be justified by a piece of utterly bogus theorizing (based on a complete confusion between stocks and flows) which holds that 'disinvestment' is a perfectly legitimate means of closing a fiscal deficit.

Of course, the benefits of deflation for finance capital are not exhausted with this. Since deflation, via the recession it generates, drives several small producers out of business, their assets, or at the very least the space occupied by them, become available to large capitalists, and in particular to finance capital. Needless to say, when assets change hands, they do so usually at throwaway prices.

Deflation enforced by finance capital restricts domestic demand and hence contributes adversely to the pace of economic growth via this channel. It does so in another way as well. Since in the era of globalised finance deflation is a pervasive phenomenon afflicting not just third world countries but those of the advanced capitalist world as well, the entire world capitalist economy experiences relative stagnation, which in turn gets imported into the domestic economies of the third world under the regime of trade liberalisation. For both these reasons third world economies when they open up to 'globalisation' in the current epoch experience a retardation of growth rather than an acceleration.

The protracted stagnation and double-digit unemployment which the advanced capitalist world has been experiencing, in the decades following the post-war boom aided by Keynesian demand management, the absolute decline in per capita incomes over much of Latin America and Africa over the last two decades, and even the slowing down of the dramatic growth rates, achieved earlier by the East and South East Asian countries, since the beginning of the nineties when they opened themselves up to global financial flows, are all indicative of this profound tendency towards stagnation which characterises the current epoch of 'globalisation'.

Of course it may be argued that India and China illustrate the opposite of this claim, since they apparently have witnessed higher growth since opening themselves up to 'globalisation'. But in the case of China, it is questionable if she has opened herself up to 'globalisation', since she is insulated from global financial flows and retains a degree of (implicit if not always explicit) trade restrictions.

In the case of India, which is more open to financial and trade flows, despite not having full capital account convertibility, the growth rate of the material commodity producing sectors has come down since the introduction of economic 'liberalisation', and particularly so in the last quinquennium neo-liberal policies had gathered momentum. The high growth claims are based entirely on the performance of the service sector and hence are quite dubious, given the theoretical and statistical problems associated with the growth rate figures of this sector. (Even in the case of China the growth rate figures are likely to represent an exaggeration). Besides, the adverse impact of the openness to globalisation on a range of material indicators impinging on welfare, is quite indubitable in the case of India, as we see below.

II

The impact on employment of this global stagnation, arising from the globalisation of finance, is scarcely ever recognized, especially in the advanced capitalist world, where the accent instead is on the 'export of jobs' to the third world. This works to the advantage of international finance capital: while one section of workers, those of the third world, is pitted against another section, those belonging to the first world, the role of international finance capital, the significance of its hegemony, goes completely unnoticed. Both these stances, viz. the promotion of a rift between the workers, and the silence on the hegemony of finance, contribute to a perpetuation of this hegemony.

The view that highlights the 'export of jobs' as the primary cause of unemployment would have some credibility if the total number of jobs was incapable of being augmented. This, however, is far from the case. State intervention of an appropriate kind can counter the current deflation and enlarge the level of activity in the world economy as a whole. True, no individual nation-State caught in the vortex of globalised finance, with the exception perhaps of the US., can pursue employment-augmenting policies (it can do so only if it ceases to be a part of globalised financial flows by putting restrictions on such flows, for which however it would have to pay a certain price, on which more later, arising from imperialist hostility). The exceptional position of the US arises from the fact that its currency (notwithstanding the recent strength of the Euro) is looked upon wealth-holders everywhere as a stable medium of holding wealth, almost ‘’as good as gold'. A capital flight from the US, even if its government pursues an expansionary policy, remains an unlikely event (as is being demonstrated now with the widening fiscal deficit under the Bush administration). The US therefore has the capacity to act as a 'locomotive' pulling the entire world capitalist economy out of stagnation through the expansionary fiscal policy of its own State. But, from its national perspective, the US has little to gain by acting as such a 'locomotive', since that would entail a larger national debt of the US for the purpose of expanding employment elsewhere in the world. Since the US State cannot rise above its national perspective, it cannot, despite its exceptional position, pursue employment-promoting policies for the capitalist world as a whole.

But even though an expansionary policy by the US alone for promoting employment in the capitalist world is not likely, a concerted expansion by several capitalist States is both possible and can achieve the same end. Indeed even during the great Depression of the 1930s, there were many plans, e.g., the Kindersley, Francqui, ILO and Keynes Plans, which had suggested precisely this, namely a co-ordinated expansion among a group of leading capitalist countries. The real hurdle to this plan today, as it was during the 1930s, is the opposition of finance capital, expressed above all as an objection to fiscal deficits which a large number of academic economists, journalists and pamphleteers are made to articulate in an ethos where finance capital has ideological hegemony. Thus the hurdle to employment promotion, and hence the factor underlying persistent and large- scale unemployment, is the hegemony of finance; the argument about 'export of jobs' is a convenient camouflage.

We can look at the issue in the following way. There are two very distinct hurdles to the pursuit of employment -promoting policies by States in the current epoch. The first is the fact that finance capital opposes such policies; and the second is the fact that while the States are nation- States, finance capital in today’s world is international finance capital. If instead of nation-States there was a global State then the second of these reasons would have ceased to be operative. Since there is no actual global State it would have to be a surrogate global. State that can at all contemplate pursuing employment-promoting policies for the world economy as a whole. The State of the leading capitalist country, the US, though it is capable of acting as such a surrogate global State, and does play this role in certain respect, is nonetheless too much of a nation-State to take on the employment-promoting role of a possible global-State. It would therefore have to be a whole group of nation-States acting in concert that can act as a surrogate global State for purposes of employment-promotion. But even if such a group of nation-States could be persuaded to act in concert to promote global employment, it would still have to confront the opposition of globalised finance capital, i.e. the first hurdle mentioned above. It is not surprising therefore that globalised finance capital uses a whole gamut of weapons to prevent employment-promoting policies, by an entire group of nation-States acting in concert, from taking effect. And one important weapon is to shift the focus to the so-called 'export of jobs' to the third world.



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