What is Global Capitalism?

Global capitalism affects individuals in all nations irrespective of their participation or awareness of the system.


BY HEIGRUJAM PREMKUMAR

The concept of global capitalism suggests that capitalism is now organised on a global basis. It has been stated that globalisation of capitalism has proceeded to the extent that national boundaries are no longer relevant, that the economy is one seamless global market economy where all nations and their governments are equal players. Global capitalism affects individuals in all nations irrespective of their participation or awareness of the system.

Myth and Reality of Global Capitalism

There are many myths associated with the notion of global capitalism. The first myth is that global capitalism is something that is of a recent trend. This is not true. Global capitalism has deep historical roots. The coming of East India companies in Asia, particularly in India, the old practices we heard of like imperialism and colonialism in most parts of Africa and Asia are good examples of capitalism reaching global.

However, it is true that the industrial revolution and the communications revolutions of the 19th century, the invention of steam engine, the telegraph extended the global reach of capitalism.

The second myth is that capital circulates globally, while in reality most of it moves between a small groups of rich countries.

The third myth is that capitalism is now organised globally rather than nationally. However, international differences are as important as ever and nation-states continue to play a key role in the activities of transnational corporations.

The fourth myth is that global capitalism integrates the world, while in reality since the more global capitalism has become, the more divided the world has become by international inequalities of wealth.

Various Dimensions of Global Capitalism

Global capitalism may not have been new but it was certainly transformed and it entered a new phase of exceptional dynamism. While the  notion is still associated with many myths, there are various dimensions which would help in understanding the realities of global capitalism. Some of the important dimensions are discussed below:

Global Manufacturing

Global manufacturing is one of the most important manifestations of global capitalism. The availability of cheap labour in plenty in the developing countries has geared up the transnational corporations, especially of industrialised developed countries of West, to invest in these countries. The main vehicle of the spread of capitalist production has been the transnational corporations which have been growing enormously. They have been investing hugely in the developing countries since 1990s.

One of the best examples of this process is the growth of manufacturing plants, known as maquiladoras in Mexico. After the NAFTA (North Atlantic Free Trade Agreement), many American, European and eventually Japanese capitals have moved in to exploit the cheap labour available in Mexico. The Mexican Government had turned a blind eye to the problems faced by Mexican workers since the maquiladoras make a major contribution to the Mexican economy by providing huge employment and making the second largest contribution, after oil, to foreign exchange earnings.

Asia has recently provided an even bigger attraction to capital, especially Japanese capital, which has moved in a series of waves into the countries of the Far East. 1970s and 1980s witnessed Japanese capital moving in search of cheaper labour into the “tiger economies” of Hong Kong, Taiwan, Singapore and South Korea, and then into Indonesia, Malaysia and Thailand. More recently, a third wave of investment has gone into China and Vietnam.

Thus, today, manufacturing has moved out of the old industrial societies and is operating on a global basis.

Global Telework

Global teleworking is another important manifestation of global capitalism. Advances in technology and information have made it easily transferable for transnational corporations to cheaper localities abroad where wages and office costs are much lower.

Call-centres have been Britain’s fastest growing source of employment, however now these jobs are being moved overseas. Banks, insurance companies, travel agencies, telecom and rail companies are transferring call-centre operations from Britain to China, India, Malaysia etc. Similarly, French companies are moving jobs of this kind to Francophone countries in Africa; and American companies to the Caribbean. In India, Bangalore city is a major attraction of these jobs.

The fact that telework operations can be set up anywhere means that there are few limits to the spread of capitalism globally.

Global Tourism

International tourism and its growth is one  of the most striking manifestations of the increasing economic connections between countries and the global spread of capitalism. Tourism has become the main earner of foreign exchange in many of the world’s poorest countries.

International tourism spreads capitalist practices into parts of the world that had been little touched historically by the growth of capitalism. It can penetrate into areas that have little capacity to produce goods or other services for the world market. Tourism then creates employment in paid labour in bar and hotel work. It generates a greater demand for food production and transport, and may well provide the basis for the local manufacturing of souvenirs and faking of relics. The earnings from tourism can increase the circulation of money, leading to the import of manufactured goods, and establish new consumption patterns.

Besides, in an increasingly capitalist world, the only way of ensuring the survival of cultural practices and natural sights is to find ways of making profit out of them.

However, though the locals receiving the tourists receive some economic rewards, much of the profit is expatriated by the foreign-owned companies- airlines, hotel chains, and travel companies that dominate this trade.

Global Agriculture

Global agriculture is nothing new and has long flourished in the tea plantations of India, Sri Lanka, or the fruit plantations of Central America. The international division of labour established in the 19th century created new markets in the industrial societies for the agricultural products of the rest of the world and Western corporations invested capital in their large-scale production.

In agriculture, there has been growing international competition and capitalist production has widely spread.

On the other hand, small producers have found themselves driven in other ways towards capitalist agriculture. Vandana Shiva has argued that agriculture is becoming increasingly dominated by highly concentrated “life science corporations,” which cut across agribusiness, biotechnology,  and the chemical and pharmaceutical industries. These corporations sell genetically engineered seed which can produce large crops, but it requires the extensive use of pesticides and herbicides also sold by these corporations. Farmers become dependent on the corporations. Thus, small-scale agriculture loses its viability and large capital-intensive units take over.

Global Money

The spread of the capitalist practices inevitably generated an increasing circulation of money, but the truly astonishing rise in its international circulation during the last quarter of the 20th century was mainly the result of speculative money movements.

The new financial instruments and products as well as communications equipment generated the flow of money across borders. The trading in foreign currencies and international investment also increased the flow of money across borders.

On the other hand, currency trading increased because of the greater opportunities that “floating” rates provided for speculation. “Floating” means that currency values are determined not by official rates but by the market, rising and falling according to the supply of a currency and the demand for it creating uncertainties.

Overview

Capitalist institutions and practices have been spreading across the world, yet it is still questionable how global “global capitalism” is.

Even though new financial centres have emerged in developing countries and investment in emerging markets become fashionable, most of the money flows between North America, Europe, and Japan- the highly developed industrialised countries.

The same argument applies to global tourism as well. Much of the international circulation of tourists is between already developed countries of Europe, North America and Japan. In 2001, the world’s top four earners from international tourism were the United States, Spain, France and Italy, though significantly China came fifth.

Capitalist production has spread, and much more investment went into poor countries in the  1990s than the 1980s, however it was still heavily concentrated in a small number of countries, notably China, Brazil and Mexico.

While it is often claimed that global capitalism is integrating the world, international differences are actually increasing. In 1820, the five richest countries in the world were three times as rich as the five poorest. By 1950, they were 35 times as rich; by 1970, 44 times; and by 1992, 72 times. The world has become steadily more divided by international differences in wealth.

There are certainly many transnational corporations, in the sense that corporations operate in different countries and across national boundaries, but most of them operate in only a few countries and are hardly global in character.

Besides, the flow of money and investment is so unevenly spread across the globe that it is more than a little misleading to describe it as ‘global’, while commonly used global terms such as ‘global capitalism’, ‘global economy’, and ‘global society’ gloss over widening international differences and the continuing importance of national units and national governments.

Global Capitalist Dominance

Despite the above observations, in one respect, capitalism has gone global, i. e., in the elimination of alternative systems.

The year 1989 saw the main global alternative to capitalism, state socialism begin to collapse. The collapse of socialism was attributed to its inability to compete with the more dynamic capitalist economies of the West. Today, Russia, the successor to the erstwhile Soviet Union, has become integrated into the world capitalist economy.

While the collapse of state socialism removed the main alternative model, developing societies were forced by financial pressures and international institutions to conform to the dominant American model of capitalism.

The US-dominated financial institutions, the World Bank and the International Monetary Fund, promoted the free market ideologies and policies  that increasingly held sway in the US and other leading  industrial societies. The policies of privatisation and liberalisation were advocated. Loans were given on the condition of following these policies. The high dependence of developing societies on loans meant that they were in a very weak position  to resist such policies, however inappropriate they might be. Thus, with no alternative to challenge, capitalism has become globally dominant economic system.


NOTE: I wrote this as an assignment for the subject, Political Economy and Society, taught during my undergraduate in Ramjas College, University of Delhi.
The question for the assignment:
The concept of Global Capitalism.
You can see the original assignment towards the end of this post.

The Original Assignment

 

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