The blog provides a left-wing non-partisan perspective on socio-economic issues in Russia and throughout the world. The focus is on qualitative development of national economic systems and ensuring flexibility in economic policies to meet the challenges of the 21st century. Email: leftistobserver@gmail.com

HOW CENTRIFUGAL IS GLOBALIZATION?

“It’s the rich men’s world”, sang the Swedish quartet ABBA in 1976. And they were quite right about it. As the world struggles to find a way to boost global consumption, only the lazy did say nothing about the rich getting richer and the poor getting even poorer. The globalization viewed by some as an economic model able to solve numerous economic problems started cracking in the early 2000’s and finally burst in 2007-2008. The big business, closely connected with governments throughout the world, formed a long line of bailout recipients while the rest had to tighten their belts. Those calling for the government to get off their backs in the 1980's were now running head over heels for public funds. How ironic!

So the global economic system, like any national one, is not as expandable as modern economics thought. Again, the first element of the system that got at odds with the expansionary sentiments was consumption. There are many ways to boost supply, but ways to boost solvent demand are quite few. As a result, US citizens ended up shouldering the “heavy burden” of excessive consumption stimulated by cheap credit. The military-political system, which still supports the US dollar after the collapse of the Bretton Woods arrangements, made American consumption a rather unique resource to trade on the global market. Like a trump card pulled out of a sleeve during a game, it became an undisputable argument in political talks. Those controlling it could decide fates of entire nations.

Some have even claimed that the world was experiencing a new era of economic development with open markets and globalization leading entrepreneurs throughout the world to new successes without a need to look back on their national economies as those were no longer relevant for further growth. What an arrogant opinion! Considering the current architecture of the world economy, how can anybody honestly say that national economies were no longer relevant?

In fact, globalization is possible because there are national economies to expand into. As long as local economies’ production costs remain higher than the worldwide average, outsourcing is never going out of fashion. As long as there are national economies unable to process their own raw materials into cheap and high-quality consumer products, those capable of doing it will continue making a good buck making the former economies pay through the nose for the work and their own resources they had extracted.

Globalization seems to take no notice of certain economic and social processes leaving them for local economies to worry about. This does not only include environmental issues, but also things like rising costs of living, cultural shifts, the influence of media on youth, crimes, education, reproduction of labor force, etc. In other words, globalization is only viable if local economies are willing to solve local problems. On the global scale, there is nobody else to do that. International organizations claim to be involved, but their involvement is rather limited.

As long as there are ways to externalize costs by pushing them onto the local economies, globalization works like clockwork. The primary source of what most people need (i.e. food, shelter, healthcare, education, jobs, incomes, etc.) is national economies. Those whose needs are completely covered by the global economy (if such exist at all) are in the minority and most likely belong to the super-rich. The majority of us still depends on local economic conditions, and it would be foolish to believe that the global economy is independent of them. On local markets, transnational corporations seek for what can only be obtained locally – capital, natural resources, labor, investments, etc. Although my readers may argue that some of those economic factors can come from international markets, no-one will dispute the fact that certain factors (e.g. labor) simply cannot be found anywhere else but on local markets. Even offshore companies offering various international services are all based in some local economies, whose leadership decided decades ago to turn a blind eye to their non-residents' international business activities. International business dances around local economies, figuratively speaking. In fact, is the world economy anything else but a combination of local economies working as a single mechanism? The world economy cannot isolated from local economies. In this interconnected world of ours, local economic problems sooner or later trigger global economic catastrophes.

In other words, globalization cannot be viewed outside the framework of national economies because it is in national economies that global corporations make their profits. Local economies generate the global growth, and, without it, globalization is nothing. In fact, globalization is a method of profit-extraction employed by a group of local economies at the expense of all other local economies. This goes against the popular talk of the multi-vector globalization bringing prosperity to all. In fact, its vector has a very clear direction – from the economic periphery to the economic centers. This centripetal direction is the very essence of globalization.
Boris Anisimov

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