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End of the Second Global Era?

by afew Fri Aug 15th, 2008 at 05:18:48 AM EST

Paul Krugman reminds us, in his NYT Op-ed, that globalization is not a new phenomenon: there was a previous era of world free trade from the late nineteenth century to World War One.

Op-Ed Columnist - The Great Illusion - Op-Ed - NYTimes.com

If you’re wondering what I’m talking about, here’s what you need to know: our grandfathers lived in a world of largely self-sufficient, inward-looking national economies — but our great-great grandfathers lived, as we do, in a world of large-scale international trade and investment, a world destroyed by nationalism.

Writing in 1919, the great British economist John Maynard Keynes described the world economy as it was on the eve of World War I. “The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth ... 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 Keynes’s Londoner “regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement ... The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion ... appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.”

Then came war, depression, more war. Krugman highlights recent food market problems and "protectionist" reactions to them as one possible sign of a crumbling of current globalization (he doesn't mention, though he could, the recent collapse of the Doha Round at the WTO). Then he says:

And now comes “militarism and imperialism.” By itself, as I said, the war in Georgia isn’t that big a deal economically. But it does mark the end of the Pax Americana — the era in which the United States more or less maintained a monopoly on the use of military force. And that raises some real questions about the future of globalization.

Right, wrong? Good thing, bad thing?

The end of the Pax Americana -- or America as sole super-power -- is striking enough. And though there are US gesticulations (Rice and humanitarian troops), isn't that just what they are?
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Aug 15th, 2008 at 05:27:23 AM EST
I think that the Globalization 2.0 is dead as the dodo.

I've been under the impression that this was the case for a while now, and I think that the appropriate reference isn't Keynes it's Polanyi.  It's about the market turning every into commodities and sucking the sacred out of life, and societies and people clutching for anything that offers even a passing hope of reconnecting with a world in which daily life operated on relations between people instead of have money being the universal medium of the human experience.

I think that economist and the political scientist of the current era need to through out the models of the post war world culminating in the economic takeover of the social sciences, and look back to look forward.

To look back to what happened the first time that globalization collapsed, and take the lessons from that time so that they don't have to be learned again.

Capitalism has to be tamed before it sucks the last bits of what's human, what has a soul, out of life.  Because when capitalism is allowed to turn life into a matter of so many units of utility, the resulting emptiness drives people to look for anything that can give their life meaning.  That can reconnect with the sacred and the human.  

The story of globalization has been that there are individuals and there is the sum total of all individuals everywhere.

But there is to be no such thing as society.  There is to be no connection between individuals that occurs outside the context of the market.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Aug 15th, 2008 at 06:07:37 AM EST
the resulting emptiness drives people to look for anything that can give their life meaning.  That can reconnect with the sacred and the human.

They can also reconnect with the passionate and for anything which gives them a sense of belonging and purpose.

This isn't always benign. For many people it can take the form of nationalism and war.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Aug 15th, 2008 at 06:55:54 AM EST
[ Parent ]

Look what happened the last time around.

Yet, all the same the capitalist crowd keeps telling us that the reason that the Nazis came to power wasn't because of the alienation produced by capitalism, but becuase capitalism hadn't gone far enough.......

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Aug 15th, 2008 at 11:50:02 AM EST
[ Parent ]
Your sig has never been more apt. I was thinking of it as I posted a BBC news  item about a landmark ruling for Open Source over in the Salon.

"This opinion demonstrates a strong understanding of a basic economic principle of the internet; that even though money doesn't change hands, attribution is a valuable economic right in the information economy."

We all bleed the same color.
by budr on Fri Aug 15th, 2008 at 07:02:13 AM EST
[ Parent ]
I think that the Globalization 2.0 is dead as the dodo.

I agree.

My analysis, in case you didn't know, is:

Globalization 1.0 - Decentralised but Disconnected, with "market presence" being physical;

Globalization 2.0 - Centralised but Connected, with market presence through intermediaries;

Globalization 3.0 - Decentralised but Connected - with market presence being a "network presence".

But there is to be no such thing as society.

Nope. It's as our Conservative leader "Dave" said, contradicting Thatcher:

"There is such a thing as Society; but it is not the State".

There is to be no connection between individuals that occurs outside the context of the market.


But "Peer to Peer" markets - without intermediaries extracting value, but with service providers adding value - will not be Markets as we know them, Jim.

Imagine a Market without Profit - because within a consensually agreed Partnership framework there is no Profit and No Loss.

Imagine a Market where it is in participants' interests to be transparent, and to cooperate, because they know that they will thereby create more value for themselves while also creating more for others.

A Pipe Dream?

I don't think so: I believe the basis of a new Globalization 3.0 is already emerging, because it is in fact "What Works", and those enterprises - whether "Public" = "State" or "Private" = conventional Corporate - who do not use these methods and frameworks are at a disadvantage to those who do.

When it comes down to it, I think the truth is that "Ethical is Optimal".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Aug 15th, 2008 at 10:19:31 AM EST
[ Parent ]
I don't know if Globalisation was ever decentralised - it was always directed from Imperial, Colonial, Neo-colonial or corporate centres.

And there were always intermediaries - be they traders, local puppet regimes doing their imperial master's bidding but also extracting "value", banks etc. - wherever there were large scale or remote transactions where it was not easy for parties with complementary interests to do direct business with each other and have that business guaranteed in some enforceable way.

That is perhaps what the internet HAS changed - the ability to cut out the middleman by enabling greater access to information and greater direct connectivity - although some kind of enforceable contract law is still required where these direct relationships break down.

There have also always been social/family/local relationships that were not mediated by money or zero sum calculations of self-interest.  These were generally on a smaller, less organised scale, and could be subordinated/destroyed by the use/abuse of power.  Thus Thatcher had to get rid of the unions because they were often based on social, political and ideological relationships and "distorted" the market.

However it could be argued that the EU is an attempt to express such relationships on a larger scale in an attempt to avoid total domination by the economic.  What is so corrosive about the US political culture is that even politics has been subverted by the primacy of the private profit motive.

It's time I got out of this game....

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Aug 16th, 2008 at 08:11:45 AM EST
[ Parent ]
The Great Transformation of which Polyani wrote, for most traditional societies to which it has come through the mechanism of 'a market based international economy,' has been the sort of transformation which occurs when a tree is cut down, sawed into pieces and run through a chipper/shredder. A dying organism goes in; small, relatively uniform chips come out.  Those chips may then serve as labor units and provide a small measure of consumption in the context of a new cold, dead world view which is provided in place of what has been shredded.  

Small wonder that people do not appreciate the "benefits" of the "global economy."  The "beneficiaries" are now cultural orphans, bereft of the social context within which they can even understand their world.  Should we be surprised at simmering rage amongst these "beneficiaries?"  Or should we be more surprised at how "normal" this seems to most of us, a few generations after our own "transformations?"  

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Aug 15th, 2008 at 11:21:00 AM EST
[ Parent ]
" ... the end of the Pax Americana -- the era in which the United States more or less maintained a monopoly on the use of military force."

Now that multinational corporations can rent military forces (Blackwater) equal or better than the US, things could get really interesting.  These corporations now have all of the assets of countries without home populations which have to be appeased/enslaved.

Ordinary people are screwed.  And deserve it.  My generation had a chance to produce a better world and we settled for a comfortable middle class existence with an RV parked in the driveway.  The kids are REALLY fucked.  Glad I don't have any.

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Fri Aug 15th, 2008 at 07:45:11 AM EST
From what I've read here and there, the Blackwater forces are a bunch of overpaid incompetents.  This is not because the people are bad, as many of them are ex-military types looking to cash in, but because the structure and organization of the force renders it ineffective as a proper fighting unit, and because they are not backed up by heavy weaponry.  It may seem passe, but grenades, mortars, and heavy artillery make a huge difference, to say nothing of armor and air support.
by Zwackus on Sat Aug 16th, 2008 at 01:11:34 AM EST
[ Parent ]
Yup, that's today but any grade C force today can be beefed up if the money is there.  And corporations/oil countries etc. have bucks to burn.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Sat Aug 16th, 2008 at 07:11:34 AM EST
[ Parent ]
Well it seems Blackwater is considering getting some heavier weaponry, including ground attck airplanes...

Blackwater beefs up air power, using name of obscure company

An Embraer Super Tucano was placed on the U.S. civil aircraft registry on February 21, 2008 under the name of EP Aviation LLC. Additionally, 28 other aircraft have been registered to this company, most over the past few months. The list includes 14 Bell 412 helicopters, as well as a number of fixed wing aircraft.

While Blackwater hasn't advertised this news, neither is it keeping it a state secret (EP Aviation isn't the sneakiest way to hide connections to Blackwater owner Erik Prince). A spokesperson for Blackwater, in fact, confirmed to Danger Room that EP Aviation is an affiliate of Blackwater.

Embraer EMB 314 Super Tucano

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Aug 16th, 2008 at 08:39:45 AM EST
[ Parent ]
I don't really agree about the "Pax Americana" stuff at this moment. I don't think you can say the Georgia situation is really more destabilising (yet) than various other Cold War conflicts.

I do think Globalisation is under a lot of pressure, but mostly because it's been a vehicle of making the rich richer and the rest of us poorer.

by Metatone (metatone [a|t] gmail (dot) com) on Fri Aug 15th, 2008 at 08:17:20 AM EST
I took the Pax Americana to refer to the post-fall of the Soviet Union situation. Pappy Bush's New World Order, pretty much (that in fact meant a one-hyperpower world.)

Whether Georgia is the end of that is questionable, though it may stand out as a symbolic turning-point.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Aug 15th, 2008 at 09:04:37 AM EST
[ Parent ]
I kinda think the Cold War talk (and the wannabee Cold Warriors) are all missing the point. The Cold War was a bipolar era (to which the snarkista within begs leave to add, "...and politically as well") and we can never go back there: China and India have emerged as powers that lay claim to their own spheres of influence, and other possible contenders (Iran, Brazil,...) look like they want to climb into the ring as well. In that context the Georgia conflict seems more a canine leg-lifting exercise than anything else.

I'm also not sure the rich/poor antagonism can really endanger globalization - after all, the model was constructed specifically to bear that kind of stress. The greater weakness of globalization (which Georgia also illustrates) is that the basic assumption - that material gain is the root motivation of all human activity - is patently untrue.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Fri Aug 15th, 2008 at 09:27:39 AM EST
[ Parent ]
Op-Ed Columnist - The Great Illusion - Op-Ed - NYTimes.com
Europe's dependence on Russian energy, especially natural gas, now looks very dangerous -- more dangerous, arguably, than its dependence on Middle Eastern oil. After all, Russia has already used gas as a weapon: in 2006, it cut off supplies to Ukraine amid a dispute over prices.

Jerome a Paris:

infrastructure bottlenecks

work both ways: existing pipelines mean that Russia can only send its gas to where the pipelines go, ie to Europe (or nowhere at all).

The gas relationship is a co-dependency, and the "energy weapon" goes both ways, as the Poles and Ukrainians have amply demonstrated by holding the transit gas hostage.

Cynicism is intellectual treason.
by marco on Fri Aug 15th, 2008 at 09:48:36 AM EST
It's annoying to see Krugman use the narrative of the "gas weapon" too. Russia cut off the gas to Ukraine because Ukraine was not paying for its gas. How has that anything to do with "weapons"?

If anything, it is Ukraine, which chose to cut Russia's exports to Europe (to take gas for itself) that used gas as a weapon.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Aug 15th, 2008 at 11:28:53 AM EST
[ Parent ]
Looking at the history of trade, the economic elite have usually lived in a "Global Economy" through the transportation of high-value goods.  The Silk Road was the means by which luxury goods were transported across Eurasia.  The Viking trade routes across northern Europe and down the Russian river to Byzantium.  The Spice Trade of the 16th century.  

As the trade routes became better known and technology improved, compare the knorr of the Vikings to the clipper ships on the tea run, it became profitable to ship 'down market' goods and eventually mass-market goods.  One decided benefit to this process was a local crop failure no longer meant local starvation as was common previously.

Today, of course, everything is shipped everywhere.

I argue the economic hardship of the 1930s created a hiccup in a long standing trend.  We're not at the end of an Era but, rather, entering a period when the international trade system is being subjected to feedback shocks such as rising fuel costs, relocation of product points of origination, and systematic financial shocks such as the fall in the US dollar.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Aug 15th, 2008 at 10:02:31 AM EST
The early trade systems were much more limited in scope as the market for "high value" items was, at first, limited largely to ruling elites. This market expanded and differentiated during the early modern era to merchants, tradesmen and an expanding group who buttressed the newly  more complex societies, such as lawyers, clerks, sea captains and army officers.  But this remained a small portion of the total population.

It has only been in the 20th century that a large portion of the population could earn enough to be able to purchase high value items such as automobiles.  In the USA, post-WWII prosperity was built on higher wages for the working population.  That is what is changing in the USA.  The distribution of wealth has reverted back to levels not seen since 1929.  Real income is declining for the great majority of families.

In their greed, political and economic elites in the USA have adopted policies which treat the entire USA as a disposable item of consumption from which they can extract the maximum wealth in the short term.  They see their wealth as mobile, owing no national allegiance.  But power is not so context free.  Kuwait could not liberate itself from Saddam with its "Fund for the Future" alone.  That required the military forces of the USA and Europe.

In what context will those elites represented by the Bush Administration enjoy the benefits of their wealth when they have succeeded in extracting all portable wealth from the USA and left a hollow shell behind?  How will they protect that wealth?  

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Aug 15th, 2008 at 12:14:56 PM EST
[ Parent ]
Krugman ends his column with an interesting assertion:

... war among the nations of Western Europe really does seem inconceivable now, not so much because of economic ties as because of shared democratic values.

Much of the world, however, including nations that play a key role in the global economy, doesn't share those values. Most of us have proceeded on the belief that, at least as far as economics goes, this doesn't matter -- that we can count on world trade continuing to flow freely simply because it's so profitable. But that's not a safe assumption. ...

I think Krugman is warm, but does not quite nail it.

First, he is not talking about "shared democratic values", but "shared identity" -- even if that identity, as "Western European", is not explicitly stated or precisely delineated, and even if it is in large part based on those shared democratic values (as well as shared culture, religion, I would even say race).

Second, war in Western Europe seems inconceivable now not only because of shared Western European identity, but also because of shared economic security.  Take away the latter, and shared identity would not be enough to rule out war in Western Europe.

Although there is both a lack of shared identity (e.g. as "human beings" or as "creatures of the Earth") as well as a lack of shared economic security among the peoples of the world, at this point the more likely reason for a major war to ruin Pax Americana is the latter, not the former.

Cynicism is intellectual treason.

by marco on Fri Aug 15th, 2008 at 10:36:20 AM EST
The state of affairs at the end of the 19th century was the scrabble for empire.  The stability enjoyed by wealthy Englishmen who rang round the empire before WWI is overstated.  There were any number of imperial conflicts and skirmishes before and after the war between the European powers-think of the Great Game in the Middle East- and with the never-quite-tame locals- the Irish were a real problem.  The ease of those years was quite one-sided.  Were Indians contemplating the glories of world trade in 1915?  The radical critic Hannah Arendt following John Hobson trances nationalism, and more particularly totalitarianism, back to the megalomania of European capitalist expansionism.  She argues that capitalists at the end of the 19th century came to the limits of economic expansion within the borders of their own countries and turned to foreign markets for investments and resources.  To create the access they needed, and the stability for their investments they would need afterward, they turned to the military power of the state.  They preferred above all to run the accumulation of markets and resources without the "consciousness" of the home nation-state which would try to meter out justice where economic interests were to reign supreme.  In essence the capitalists and their sympathizers in government wanted to privatize the power monopoly of the nation-state.  They convinced the nation that their class interest was the interest of the all.  Jingoism and the patina of liberal goals for the conquered peoples (they were of course called "liberated") were necessary to cover the private and illegitimate nature of the imperial project.  How else can the brutality of invasion and occupation be legitimized to a nation whose own liberal laws prohibited such arbitrary and exploitative violence?  In any event the nationalism of jingoism and the noble cause of the White Man's Burden tends to awaken nationalism in the conquered people.

For Arendt the endless accumulation of wealth is followed logically and necessarily by the endless accumulation of power.  A society based on power accumulation, as opposed to say natural rights and human capacity, is one in which each member is degraded in a power accumulating-machine.  Nationalism results when identity with the in-group, and the leader, and the national cause, comes to fill the void of belonging created by rootlessness.  Power, which is survival, for the nation, in which the individual disappears, is all that there is in life.

If we accept Arendt's thesis the abandonment of the nation by the capitalist class for the highest profits to be found should result when imperial control gives way to organized and secure flow of capital across the world.  Contempt for the nation is evident when whole cities or whole regions of a given country are called natural failures in the winner take all world of Manchester Capitalism.  Parliament should not reflect the interests of the nation, which does not exist in Darwinian struggle, instead it should reflect in interests of the elite winners in the global game.  Unfortunately the flow of capital is secured by agreements between states.  A system of prosperity that only benefits a super-national minority living within the borders of the state will result in the national conscience taking control of the policy making apparatus.  

by bellumregio on Fri Aug 15th, 2008 at 01:17:21 PM EST
Fascinating comment!  I am familiar with Arendt primarily  due to The Origins of Totalitarianism, which was one of the favorite works of two of my most conservative professors in grad school.  I only read excerpts they provided.  They, of course, would not have been likely to highlight the connections to Hobson, by whom I was greatly impressed and who I consider to be greatly, but sadly, underrated.  Is the thesis you describe set forth in Origins?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Aug 15th, 2008 at 09:32:01 PM EST
[ Parent ]

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