Walden Bello: Globalization in Retreat


Richard Moore

        Many in progressive circles still think that the task at
        hand is to ³humanize² globalization. Globalization, however,
        is a spent force. Today¹s multiplying economic and political
        conflicts resemble, if anything, the period following the
        end of what historians refer to as the first era of
        globalization, which extended from 1815 to the eruption of
        World War I in 1914. The urgent task is not to steer
        corporate-driven globalization in a ³social democratic²
        direction but to manage its retreat so that it does not
        bring about the same chaos and runaway conflicts that marked
        its demise in that earlier era.

Original source URL:

Globalization in Retreat
Walden Bello | December 27, 2006
Editor: John Feffer, IRC

Foreign Policy In Focus

When it first became part of the English vocabulary in the early 1990s, 
globalization was supposed to be the wave of the future. Fifteen years ago, the 
writings of globalist thinkers such as Kenichi Ohmae and Robert Reich celebrated
the advent of the emergence of the so-called borderless world. The process by 
which relatively autonomous national economies become functionally integrated 
into one global economy was touted as ³irreversible. ² And the people who 
opposed globalization were disdainfully dismissed as modern day incarnations of 
the Luddites that destroyed machines during the Industrial Revolution.

Fifteen years later, despite runaway shops and outsourcing, what passes for an 
international economy remains a collection of national economies. These 
economies are interdependent no doubt, but domestic factors still largely 
determine their dynamics.

Globalization, in fact, has reached its high water mark and is receding.

Bright Predictions, Dismal Outcomes

During globalization¹s heyday, we were told that state policies no longer 
mattered and that corporations would soon dwarf states. In fact, states still do
matter. The European Union, the U.S. government, and the Chinese state are 
stronger economic actors today than they were a decade ago. In China, for 
instance, transnational corporations (TNCs) march to the tune of the state 
rather than the other way around.

Moreover, state policies that interfere with the market in order to build up 
industrial structures or protect employment still make a difference. Indeed, 
over the last ten years, interventionist government policies have spelled the 
difference between development and underdevelopment, prosperity and poverty. 
Malaysia¹s imposition of capital controls during the Asian financial crisis in 
1997-98 prevented it from unraveling like Thailand or Indonesia. Strict capital 
controls also insulated China from the economic collapse engulfing its 

Fifteen years ago, we were told to expect the emergence of a transnational 
capitalist elite that would manage the world economy. Indeed, globalization 
became the ³grand strategy² of the Clinton administration, which envisioned the 
U.S. elite being the primus inter pares -- first among equals -- of a global 
coalition leading the way to the new, benign world order. Today, this project 
lies in shambles. During the reign of George W. Bush, the nationalist faction 
has overwhelmed the transnational faction of the economic elite. These 
nationalism-inflected states are now competing sharply with one another, seeking
to beggar one another¹s economies.

A decade ago, the World Trade Organization (WTO) was born, joining the World 
Bank and the International Monetary Fund (IMF) as the pillars of the system of 
international economic governance in the era of globalization. With a 
triumphalist air, officials of the three organizations meeting in Singapore 
during the first ministerial gathering of the WTO in December 1996 saw the 
remaining task of ³global governance² as the achievement of ³coherence,² that 
is, the coordination of the neoliberal policies of the three institutions in 
order to ensure the smooth, technocratic integration of the global economy.

But now Sebastian Mallaby, the influential pro-globalization commentator of the 
Washington Post, complains that ³trade liberalization has stalled, aid is less 
coherent than it should be, and the next financial conflagration will be managed
by an injured fireman.² In fact, the situation is worse than he describes. The 
IMF is practically defunct. Knowing how the Fund precipitated and worsened the 
Asian financial crisis, more and more of the advanced developing countries are 
refusing to borrow from it or are paying ahead of schedule, with some declaring 
their intention never to borrow again. These include Thailand, Indonesia, 
Brazil, and Argentina. Since the Fund¹s budget greatly depends on debt 
repayments from these big borrowers, this boycott is translating into what one 
expert describes as ³a huge squeeze on the budget of the organization.²

The World Bank may seem to be in better health than the Fund. But having been 
central to the debacle of structural adjustment policies that left most 
developing and transitional economies that implemented them in greater poverty, 
with greater inequality, and in a state of stagnation, the Bank is also 
suffering a crisis of legitimacy.

But the crisis of multilateralism is perhaps most acute at the WTO. Last July, 
the Doha Round of global negotiations for more trade liberalization unraveled 
abruptly when talks among the so-called Group of Six broke down in acrimony over
the U.S. refusal to budge on its enormous subsidies for agriculture. The 
pro-free trade American economist Fred Bergsten once compared trade 
liberalization and the WTO to a bicycle: they collapse when they are not moving 
forward. The collapse of an organization that one of its director generals once 
described as the ³jewel in the crown of multilateralism² may be nearer than it 

Why Globalization Stalled

Why did globalization run aground? First of all, the case for globalization was 
oversold. The bulk of the production and sales of most TNCs continues to take 
place within the country or region of origin. There are only a handful of truly 
global corporations whose production and sales are dispersed relatively equally 
across regions.

Second, rather than forge a common, cooperative response to the global crises of
overproduction, stagnation, and environmental ruin, national capitalist elites 
have competed with each other to shift the burden of adjustment. The Bush 
administration, for instance, has pushed a weak-dollar policy to promote U.S. 
economic recovery and growth at the expense of Europe and Japan. It has also 
refused to sign the Kyoto Protocol in order to push Europe and Japan to absorb 
most of the costs of global environmental adjustment and thus make U.S. industry
comparatively more competitive. While cooperation may be the rational strategic 
choice from the point of view of the global capitalist system, national 
capitalist interests are mainly concerned with not losing out to their rivals in
the short term.

A third factor has been the corrosive effect of the double standards brazenly 
displayed by the hegemonic power, the United States. While the Clinton 
administration did try to move the United States toward free trade, the Bush 
administration has hypocritically preached free trade while practicing 
protectionism. Indeed, the trade policy of the Bush administration seems to be 
free trade for the rest of the world and protectionism for the United States.

Fourth, there has been too much dissonance between the promise of globalization 
and free trade and the actual results of neoliberal policies, which have been 
more poverty, inequality, and stagnation. One of the very few places where 
poverty diminished over the last 15 years is China. But interventionist state 
policies that managed market forces, not neoliberal prescriptions, were 
responsible for lifting 120 million Chinese out of poverty. Moreover, the 
advocates of eliminating capital controls have had to face the actual collapse 
of the economies that took this policy to heart. The globalization of finance 
proceeded much faster than the globalization of production. But it proved to be 
the cutting edge not of prosperity but of chaos. The Asian financial crisis and 
the collapse of the economy of Argentina, which had been among the most 
doctrinaire practitioners of capital account liberalization, were two decisive 
moments in reality¹s revolt against theory.

Another factor unraveling the globalist project is its obsession with economic 
growth. Indeed, unending growth is the centerpiece of globalization, the 
mainspring of its legitimacy. While a recent World Bank report continues to 
extol rapid growth as the key to expanding the global middle class, global 
warming, peak oil, and other environmental events are making it clear to people 
that the rates and patterns of growth that come with globalization are a 
surefire prescription for ecological Armageddon.

The final factor, not to be underestimated, has been popular resistance to 
globalization. The battles of Seattle in 1999, Prague in 2000, and Genoa in 
2001; the massive global anti-war march on February 15, 2003, when the 
anti-globalization movement morphed into the global anti-war movement; the 
collapse of the WTO ministerial meeting in Cancun in 2003 and its near collapse 
in Hong Kong in 2005; the French and Dutch peoples¹ rejection of the neoliberal,
pro-globalization European Constitution in 2005 -- these were all critical 
junctures in a decade-long global struggle that has rolled back the neoliberal 
project. But these high-profile events were merely the tip of the iceberg, the 
summation of thousands of anti-neoliberal, anti-globalization struggles in 
thousands of communities throughout the world involving millions of peasants, 
workers, students, indigenous people, and many sectors of the middle class.

Down but not out

While corporate-driven globalization may be down, it is not out. Though 
discredited, many pro-globalization neoliberal policies remain in place in many 
economies, for lack of credible alternative policies in the eyes of technocrats.
With talks dead-ended at the WTO, the big trading powers are emphasizing free 
trade agreements (FTAs) and economic partnership agreements (EPAs) with 
developing countries. These agreements are in many ways more dangerous than the 
multilateral negotiations at the WTO since they often require greater 
concessions in terms of market access and tighter enforcement of intellectual 
property rights.

However, things are no longer that easy for the corporations and trading powers.
Doctrinaire neoliberals are being eased out of key positions, giving way to 
pragmatic technocrats who often subvert neoliberal policies in practice owing to
popular pressure. When it comes to FTAs, the global south is becoming aware of 
the dangers and is beginning to resist. Key South American governments under 
pressure from their citizenries derailed the Free Trade of the Americas (FTAA) 
-- the grand plan of George W. Bush for the Western hemisphere -- during the Mar
del Plata conference in November 2005.

Also, one of the reasons many people resisted Prime Minister Thaksin Shinawatra 
in the months before the recent coup in Thailand was his rush to conclude a free
trade agreement with the United States. Indeed, in January this year, some 
10,000 protesters tried to storm the building in Chiang Mai, Thailand, where 
U.S. and Thai officials were negotiating. The government that succeeded 
Thaksin¹s has put the U.S.-Thai FTA on hold, and movements seeking to stop FTAs 
elsewhere have been inspired by the success of the Thai efforts.

The retreat from neoliberal globalization is most marked in Latin America. Long 
exploited by foreign energy giants, Bolivia under President Evo Morales has 
nationalized its energy resources. Nestor Kirchner of Argentina gave an example 
of how developing country governments can face down finance capital when he 
forced northern bondholders to accept only 25 cents of every dollar Argentina 
owed them. Hugo Chavez has launched an ambitious plan for regional integration, 
the Bolivarian Alternative for the Americas (ALBA), based on genuine economic 
cooperation instead of free trade, with little or no participation by northern 
TNCs, and driven by what Chavez himself describes as a ³logic beyond 

Globalization in Perspective

From today¹s vantage point, globalization appears to have been not a new, higher
phase in the development of capitalism but a response to the underlying 
structural crisis of this system of production. Fifteen years since it was 
trumpeted as the wave of the future, globalization seems to have been less a 
³brave new phase² of the capitalist adventure than a desperate effort by global 
capital to escape the stagnation and disequilibria overtaking the global economy
in the 1970s and 1980s. The collapse of the centralized socialist regimes in 
Central and Eastern Europe deflected people¹s attention from this reality in the
early 1990s.

Many in progressive circles still think that the task at hand is to ³humanize² 
globalization. Globalization, however, is a spent force. Today¹s multiplying 
economic and political conflicts resemble, if anything, the period following the
end of what historians refer to as the first era of globalization, which 
extended from 1815 to the eruption of World War I in 1914. The urgent task is 
not to steer corporate-driven globalization in a ³social democratic² direction 
but to manage its retreat so that it does not bring about the same chaos and 
runaway conflicts that marked its demise in that earlier era.

Walden Bello is professor of sociology at the University of the Philippines and 
executive director of the Bangkok-based research and advocvacy institute Focus 
on the Global South. An extended version of this piece titled "The Capitalist 
Conjuncture: Overaccumulation, Financial Crises, and the Retreat from 
Globalization," appears in the latest issue of Third World Quarterly (Vol. 27, 
No. 8, 2006).

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