Global Policy Forum

The Eternal Return:


By Sandra Halperin

University of Sussex
December 2003

. . . .The world, even if it is no longer a God, is still supposed to be capable of the divine power of creation, the power of infinite transformations; it is supposed to consciously prevent itself from returning to any of its old forms; it is supposed to possess not only the intention but the means of avoiding any repetition....

The recently attained preponderance of the scientific s spirit over the religious, God-inventing spirit leads us to the belief that the world, as force, may not be thought of as unlimited, that the world lacks the capacity for eternal novelty. By rejecting the belief in the 'beyond', the limitless, the transcendental, we reject also the belief in the capacity for eternal novelty.

Friedrich Nietzsche, The Eternal Recurrence. [1]

If the French Revolution were to recur eternally, French historians would be less proud of Robespierre. But because they deal with something that will not return, the bloody years of the Revolution have turned into mere words, theories and discussions, have become lighter than feathers, frightening no one. There is an infinite difference between a Robespierre who occurs only once in history and a Robespierre who eternally returns, chopping off French heads.

Milan Kundera, The Unbearable Lightness of Being. [2]

‘It is one of the most widespread and characteristic beliefs among students today, that our times are so unique, so unlike anything which has been known before, that study of the past is of no value, is irrelevant' (Dumoulin 1973: vi).

The eminent historical comparativist, Karl Polanyi believed that the great transformation from free unregulated markets to welfare states represented a permanent change, both in the nature of the international system, as well as in its constituent states. But Polanyi did not live to see the beginning of the rise, once again, of the ‘unregulated' market. Had he done so, he perhaps would have seen the rise and demise of Europe's nineteenth-century system, not as a once-and-for-all occurrence, but as part of an on-going struggle over the distribution of costs and benefits of industrial capitalism. It is a struggle, this paper will argue, that continues today.

Though the free market and the laissez-faire state gave way, in varying degrees, to regulated markets and interventionist states after World War II, the liberal international order survived. The hybrid system that this created has been characterized as one of ‘embedded liberalism' (Ruggie 1982).

It was, in fact, Polanyi's analysis of Europe's nineteenth century market system (in The Great Transformation, 1944) that inspired the notion of markets as embedded and dis-embedded. Polanyi argued that, before the rise of the unregulated market system at the end of the eighteenth century, exchange relations were governed by principles of economic behavior (reciprocity, reallocation, and house-holding) that were ‘embedded' in society and politics. At the end of the eighteenth century, however, states began to institute changes that formed the basis of the disembedded capitalist development that characterized Europe's nineteenth century industrial expansion.

The collapse of the nineteenth century system and the conclusion of a ‘compromise' between capital and labor, led to the re-embedding of European economies after 1945. Welfare reforms partially de-commodified labor, and by means of market and industry regulation, investment and production were made to serve the expansion and integration of national markets. Now, however, a campaign to promote the dispersal of capital investment and production to foreign locations--the current ‘globalization' campaign--is seeking to reverse the post-World War II compromise and to dis-embed national markets, once again.

In the history of capitalism, then, there have been phases of nationally embedded and global free market capitalism--periods when capital is relatively more, and relatively less, free from national state regulation. Markets were embedded until the end of the eighteenth century; after that, and throughout the nineteenth century, they were dis-embedded; then, after the nineteenth century system collapsed in the course of the world wars, a compromise was concluded which resulted in markets being re-embedded. Today, efforts are being made to reverse this compromise and to return, once again, to the dis-embedded capitalism that characterized nineteenth-century Europe.

Globalization, then, is not, as Francis Fukuyama and others have argued, the end point of an evolutionary process (nor, as is often argued, is it one that is working to move all societies in the direction of liberal democracy). ‘Globalization' is neither a radical and absolute break with the past nor the result of an evolutionary process, but a recurring phenomenon within capitalism.

A similar campaign to free capital from restrictions imposed by local communities was launched at the end of the eighteenth century. As with the current campaign, it worked to reconfigure the structure of political power by means of a broad-based, far-reaching, and all-encompassing ideological and political assault on what was depicted, and rapidly came to be seen, as the ‘old order'. This paper endeavors to bring this history to bear on what may be the beginning of another iteration of a recurring process of accelerated capitalist globalization. In doing so, its aim is to highlight what this history can illuminate about the nature and the consequences, both at home and abroad, of imperialism today and the processes of globalisation associated with it. Only by delineating the continuities and points of contact between the present and recent past history of imperialism, can we be clear about what is new about globalisation and the ‘new imperialism', and other supposedly new constellations and mechanisms of power.

Here, globalisation is defined as a period of acceleration in the globalisation of capital—a process that has been on-going for at least four centuries, and that involves the dis-embedding of markets locally, and dependence primarily on external expansion for accumulation. This paper will argue that globalisation today resembles in important ways a previous phase of acceleration in the globalisation of capital: the globalisation that began at the end of the eighteenth century; and that the Imperium associated with this earlier globalisation is, in significant respects, similar to Imperium today. The definition of ‘Imperium' used here is the one suggested by Ronnie Lipschutz in his paper for this conference (‘The Clash of Governmentalities: the Fall of the U.N. Republic and America's Reach for Imperium'): a situation characterized, like Empire, by an integrated global network of accumulation and exchange; but one in which governmentality emanates from the center. In developing this argument, I will endeavor to show that, contrary to Martin Shaw's assertion that ‘since the Second World War, classic theories of imperialism have lost much of their purchase' (in his paper for this conference, ‘Exploring Imperia: Western global power amidst the wars of quasi-imperial states') Hobson's theory of imperialism continues to have, at least as much relevance today, as do recent efforts to theorise (re)current trends in world politics.

I. Nineteenth Century European Expansion Revisited

Perhaps the most crucial chapter in modern history for understanding the accelerating globalisation of capital today is the dismantling of eighteenth century Europe's systems of national welfare and regulated markets, and the social conflicts that emerged as a result. The context of these events was the attack on the regulations of the Absolutist (‘interventionist') state.

In the eighteenth century, ‘Absolutist' governments in England, [3] France, and elsewhere in western Europe were regulating local markets, as well as controlling employment, and settlement. ‘Absolutism' was attacked by its opponents for its over regulation. However, the aim of much of this regulation was to provision the local community and ensure fair practice, to protect the local population against monopoly and speculation, and against shortages and high prices. Thus, in England, marketing, licensing and forestalling legislation set maximum prices on staple foods such as meat and grain. Market officers ensured that sellers adhered to regulations and statutes governing quality and price. Magistrates surveyed corn stocks in barns and granaries, ordered quantities to be sent to market, and attended the market to ensure that the poor were provided with corn at a favorable price. Official regulations prevented middlemen merchants from bypassing or cornering the market, and ensured quality control, a ‘just price', and an adequate domestic supply of goods; and market courts enforced them (Lie 1993: 282). Those in England who demanded ‘freedom of trade' during the eighteenth century were actually demanding freedom from the requirement to trade inside open markets, by means of open transactions, and according to the rules and regulations which ensured fair practices and prices (Lie 1993: 283).

Demands to deregulate markets were accompanied by a clamour to end the state's role in the provision of welfare. In the sixteenth century, and in line with a Europe-wide movement, the government of England had begun a campaign to eliminate poverty, to push for legislation to set up new institutions for poor relief, and to establish a system of hospitals to provide medical care for paupers. By 1700, England had a national welfare system. [4] Ancien regime France established a nation-wide welfare system in the eighteenth century. By 1770, Prussia had introduced measures establishing a cradle-to-grave welfare system that guaranteed every Prussian subject adequate food, sanitation, and police protection. [5]

In eighteenth century Britain, entrepreneurs sought to escape government regulations through long-distance trade and expanded production for export. [6] As a result, competition for labour increased, and this enabled workers to bargain for wages and regulate their work time. Wages rose throughout the century and labourers were able 'to take on less work and spend more time at leisure without endangering their traditional standard of living' (Gillis 1983: 41). Economies in Europe at the time were based on local markets and face-to-face relations between seller and consumer, so workers were often able to exercise economic power as consumers, as well.

On the eve of the 'industrial revolution', then, European governments regulated markets on behalf of local people, instituting wage controls and other labour protections, and were active in providing welfare. As a result, workers could exercise power both as labourers and consumers. However, by the end of the eighteenth century these features became the target of a broad campaign to ‘dis-embed' capitalist development. Britain's most effective elites, those that shaped and directed the expansion of production, were aristocratic landowners and financiers; and its agricultural, financial, and industrial spheres reflected aristocratic interests and values. Land and industry became concentrated in fewer and fewer hands in the course of the century; methods of increasing absolute surplus value production, and traditional manufacturing, persisted; and an unprecedented degradation and intensification of labor, both within and outside of Europe, produced an increasing volume of goods and capital for circulation among a transnational network of property-owners.

Starting in England at the end of the eighteenth century, and in western continental countries around 1840, the lower classes in rural areas began to demand a larger share of the land and reduced obligations to the landlords; in the cities, they demanded higher wages and public works to provide employment, along with restrictions on the introduction of machinery. [7] As the power of organized labor grew and the strike replaced the food riot, conflicts involving labor became a continuous source of tension, leading to recurring outbreaks of violence nearly everywhere in Europe. Conflict between classes erupted for or against changes in property relations, higher wages, extension of the suffrage, redistribution of the national product; shorter hours of employment; the right to secure bread at an affordable price, to organize, and to work in safe conditions. Enfranchisement, nationalist, and imperialist conflicts were connected with these struggles.

As labor solidarity developed, action to defend and improve living standards developed in a way that was 'radically new, specifically illegal and in its practical application a direct challenge to state power' (Foster 1974: 43). Thus, as the century progressed, labor struggles increasingly overlapped with enfranchisement struggles. Nationalism, originally an outgrowth of class and social conflict, and despite the new uses that it found in the nineteenth century, remained integrally related to class conflict. Nationalism targeted foreign and minority elements. It transferred economic power to a dominant 'national' group through restrictions on land ownership and confiscation of properties owned by groups it defined as foreigners or minorities. In this and other ways, nationalism was bound up with the struggle for control of industrial capitalist development locally, as well as of markets and sources of cheap food abroad. Thus, nationalist, as well as imperialist conflicts, were related to and interconnected with the class struggles that characterized the expansion of industrial capitalism during the nineteenth century.

In order to consolidate their position in these class conflicts and maintain their control over labor, dominant classes sought to keep labor poor (political power was based on wealth, not citizenship) and in excess of demand (in 'reserve'); gradually but persistently, they worked to destroy the market position of the skilled laborers of previous centuries who were more independent and valuable, and could therefore command higher wages and regulate their own time. By pursuing a strategy of expanding production largely for export, they obviated the need to furnish laborers with sufficient means to buy what they produced and deprived them of the ability to exercise power through consumer choice or boycott, as they had in the eighteenth century. They kept peasants and rural workers poor and weak by blocking land reform; monopolized domestic industry and international trade through the creation of cartels and syndicates, and through tariffs and various other controls; instituted corporatist arrangements of a discriminatory and 'asymmetrical' nature to place further limits on competition; and obstructed rising entrepreneurs and foreign competitors. As a result, industrial expansion in Europe was shaped, not by a liberal, competitive ethos, as is emphasized in most accounts of European industrial development; but by feudal forms of organization; by monopolism, protectionism, cartellization and corporatism; and by rural, pre-industrial, and autocratic structures of power and authority.

The Home Front: Disembedded Markets and Dualistic Development

While it is generally assumed that foreign trade was the primary engine of economic growth in England in the eighteenth century and the major cause of its industrial revolution, the verdict of more recent scholarship, is that it was the home market that gave the impetus to industrial growth in England between 1750 1780 (See, e.g. McKendrick, Brewer, and Plumb 1982: 29; Thirsk 1978).

England's breakthrough in production was equaled by one of home consumption. Britain's industrial output quadrupled during the century, and the bulk of this output was mass consumption goods (Eversley 1967: 221; also, Mathias 1983: 16, 94). However, despite the growth of the domestic market in the eighteenth century and the fact that, at the end of the Napoleonic Wars, abundant opportunities remained for investment and the expansion of production for home consumption, in the nineteenth century, the home market ceased to play a major role in Britain's industrialization.

For Polanyi, it was the commodification of land and labor that was the substance of the ‘dis-embedded' economic relations in the nineteenth century. But, European economies were dis-embedded in another sense, as well. Throughout the nineteenth century, European economies grew through the expansion and integration of external markets while home markets remained underdeveloped. This dualism was evident everywhere in Europe. Even in the most protectionist and interventionist states, external markets were developed in lieu of internal ones; capital was largely invested either abroad or in home production that was chiefly for export. It was chiefly in this sense that economic relations were ‘dis-embedded' in the nineteenth century; and it is in this sense, too that, today through ‘globalisation', they are becoming dis-embedded, once again.

With the ‘industrial revolution,' elites in Europe used the wealth and privileges that they had acquired in the past to ensure that processes of industrialization would not adversely affect their interests.

Throughout the nineteenth and early twentieth centuries, various forms of economic protection and monopoly, as well as restrictions on labor organization and on political participation, enabled Europe's small elite of landowners and wealthy industrialists to monopolize land as well as the entire field of industry and trade. This produced a ‘dual' pattern of development that, in all aspects, resembles the dual economies described by theories of contemporary Third World development. [8]

Most perspectives on development converge on the assertion that, while industrializing countries in the West had leading sectors that were essentially indigenous and closely interwoven with the other sectors of the economy (e.g., cotton textiles in the British `take-off' from 1783 to 1803, railroads in France from 1830 to 1860), the dynamic sectors found in contemporary developing countries are imposed by external agents and remain largely alien to the other sectors. The foreign-oriented sector in these countries encompasses all capital-intensive enterprise, reproducible capital, and financial profit. Profits are either reinvested there or exported; improvements in technology do not diffuse outward to agriculture or to cottage industry. Thus, the economy as a whole is characterized by a lack of internal structural integration, and dependency on outside capital, labor, and markets.

Dual economies, and all the structures we associate with "dependent" development, were as common to Europe before the world wars as they are to the contemporary Third World. [9] European countries were also characterized by a lack of internal structural integration, and dependency on outside capital, labour and/or markets. Great Britain, France, Italy, Germany, Spain, Portugal, the Austro-Hungarian Empire, Russia, Belgium, and much of the Balkans all had dynamic, foreign-oriented economic sectors that failed to transform the rest of their economies and societies. Some European countries experienced widely-spread growth, though less wide-spread and much later than is usually supposed; but in most, modern industrial sectors oriented to and dependent on international markets, formed enclaves within non-industrial, mainly agricultural and backward hinterlands linked, not to other sectors of the domestic economy, but to similar industrial enclaves in other countries. Production was largely for external markets; trade was external; capital was invested abroad.

This is not the conventional view of Europe's nineteenth century industrial development. In fact, only one feature of Europe's dualistic development has attracted substantial scholarly attention: the flow of foreign investment funds from Britain during the nineteenth and early twentieth centuries. However, in 1913, one third of Britain's net wealth was invested overseas, as a result of annual flows of foreign investment; one third of everything owned by Britons was in a foreign country (Floud 1997: 164). 'Never before or since has one nation committed so much of its national income and savings to capital formation abroad'. [10] As a result, the City of London, where more fortunes were made than in the whole of industry, depended 'only slightly' on Britain's economic performance (Boyce 1987: 18-19).

The usual explanation for the nineteenth century trend in Britain, as well as in France and elsewhere in Europe, is that the domestic market was not yet developed enough to absorb the output of expanded production and to provide profitable investment opportunities for surplus capital. As a result, capitalists were forced to seek for larger markets and more profitable fields of investment abroad.

This was the view of Lenin and of John Hobson who, like many have since, contended that Britain's foreign investment and that of other advanced countries was a result of the super-abundance of capital that had accumulated in them and the consequent pressure of capital for new fields of investment. This view and, particularly the notion that advanced countries had capital-saturated economies, was current at the time when Lenin and Hobson wrote and has since been embraced by a wide variety of theorists and historians. While both Lenin and Hobson were, to varying degrees, concerned with the blockages that tended to produce the appearance of ‘saturation', the language of ‘saturation' and ‘pressure of surplus capital', both in the conventional historiography of nineteenth and early twentieth century Europe and in analyses of the contemporary international economy, tends to obscure the fact that capital exporters did not then, and tend not to have now, capital saturated domestic economies.

The view of economies as suffering from ‘over production', ‘saturation', the ‘pressure of surplus capital', and the need for new markets is misleading, as Hobson makes clear. Hobson argued that the market that was ‘saturated' in Britain, in 1902 and before, was the one constituted solely by the wealthy classes. In fact, the discourse of ‘saturation', generally, implicitly assumes that the domestic market consists solely of owners of capital, and that the mass of the population is irrelevant to demand and consumption of any goods other than those necessary for their own physical reproduction.

As numerous scholars have since argued, the funds used for British foreign investment could have found productive uses at home and that, had they remained at home, they could have ‘helped to augment the stock of domestic housing and other urban social overhead projects that would have expanded the domestic market for the expanded output of the British economy.' [11] Moreover, after 1880, the rates of profits on Britain's colonial investments fell below comparable returns from Britain itself. During the next 34 years, returns from overseas investment were a good deal less than what might have been earned through investment in the expansion of domestic industry (Davis and Huttenback 1988). In general, these investments were also exposed to more risk than domestic investments.

Hobson noted in 1902 that ‘Every advanced industrial nation has been tending to place a larger share of its capital outside the limits of its own political area, in foreign countries, or in colonies, and to draw a growing income from this source'. The reason, he argued, was that there was a strong tendency for these countries to generate too little consumption and too much savings. Too little of the national income was allocated to wage earners who did most of the nation's consumption and too much income was allocated to property owners who did most of the nation's saving (1902: 51). He wrote that, if the mass public ‘raised its standard of consumption to keep pace with every rise of productive powers, there could be no excess of goods or capital. . .. Foreign trade would indeed exist, but there would be no difficulty in exchanging a small surplus of our manufactures for the food and raw material we annually absorbed, and all the savings that we made could find employment, if we chose, in home industries' (Hobson 1902: 81; my emphasis).

Thus, ‘It is not industrial progress that demands the opening up of new markets and areas of investment, but mal-distribution of consuming power which prevents the absorption of commodities and capital within the country' (Hobson 1902: 85). While Hobson saw this as a typical consequence of capitalism, he argued it was not a necessary one. ‘Home markets,' he argued, ‘are capable of indefinite expansion' given ‘a constantly rising standard of national comfort . . . . Whatever is produced in England can be consumed in England, provided that the "income" or power to demand commodities, is properly distributed' (1902: 88). If the industrial revolution had taken place ‘in an England founded upon equal access by all classes to land, education and legislation', then foreign trade would have been less important…the standard of life for all portions of the population would have been high, and the present rate of national consumption would probably have given full, constant, remunerative employment to a far larger quantity of private and public capital than is now employed.

Instead, more than a quarter of the population of British towns ‘is living at a standard that is below bare physical efficiency' (1902: 86). While agreeing with Hobson that the colonial trade was not necessary as a means of securing markets for surplus goods and capital, world systems and dependency theorists argue that colonialism was, nonetheless, necessary to the industrialization of Europe as a means both of acquiring raw materials and of accumulating capital (see, e.g. Wallerstein 1974a: 38, 51, 93-95, 237, 269, 349).

This contention has become the focus of considerable dispute. According to P.K. O'Brien (1982), England's trade with the periphery, and the profits from it, were still too small a percentage of its total economy to explain its expansion through the eighteenth century. Paul Bairoch has argued that the ‘core' countries had an abundance of the minerals of the Industrial Revolution (iron ore and coal); they were almost totally self-sufficient in raw materials and, in fact, exported energy to the Third World. [12] Colonialism, Bairoch argues was, therefore, not a necessity for industrial growth in Europe; in fact, it may have hampered national economic growth and development there: If one compares the rate of growth during the nineteenth century it appears that non-colonial countries had, as a rule, a more rapid economic development than colonial ones. There is an almost perfect correlation. Thus colonial countries like Britain, France, the Netherlands, Portugal, and Spain have been characterized by a slower rate of economic growth and industrialization than Belgium, Germany, Sweden, Switzerland and the United States. The 'rule' is, to a certain extent, also valid for the twentieth century. Thus Belgium, by joining the colonial 'club' in the first years of the twentieth century, also became a member of the group characterized by slow growth. The loss of the Netherlands' colonial Empire after World War II coincided with a rapid acceleration in its economic development (1993: 77).

Britain's decline, when it came, was heralded by its relative absence in the "new" industries that emerged at the end of the nineteenth century; and this may have been due, in part, Bairoch suggests, because its "ability to sell easily non-sophisticated manufactured goods to its colonies forestalled the need for modernization" (1993: 167). Why, then, didn't investors take advantage of unexploited fields of investment at home? Why did they neglect opportunities for profitable home investment, leaving British industry, throughout the nineteenth century and relative to that of its nearest competitors, slow to mechanize and to introduce new technologies? Why, instead, did they pursue investments overseas that were riskier, more difficult and costly to acquire and, in some cases, not as lucrative?

Decisions about whether and how to increase or restructure production are based on calculations about the conditions necessary for the realisation of profit. Disadvantageous social externalities produced by the introduction of new production methods and by an expansion of output would be part of those calculations. Had the ‘democratisation of consumption ‘ of the eighteenth century continued, and had a broad-based industrial growth developed, along with the mass purchasing power and internal market needed to support it, the class, land, and income structures on which the existing structure of social power in Britain rested would have been destroyed.

The consumer revolution and the expansion of production in the eighteenth century had important implications for the structure of British society. Mass consumption is associated with democracy, and elites were certainly aware of its corrosive effects. That these were widely recognized is evident in the laws regulating consumption that were everywhere evident throughout history, in Europe and elsewhere, and persist in many places throughout the world, today. [13] Sumptuary laws restricted the personal consumption of goods based on class and income and were enacted in Europe between the fifteenth and eighteenth centuries, and they were retained by many states well into the nineteenth century (see Hunt 1996). The emergence of a domestic market for mass produced consumer goods, because it worked to undermine class distinctions and increase social mobility, was politically threatening and, thus, was not encouraged. The commitment to limiting the expansion of industry and consumption at home was reflected in the continued allegiance of influential elites to mercantilist notions: the notion that domestic trade does not make people rich, that low wages and restricted consumption were necessary to economic prosperity, [14] that foreign trade was the sole source of surplus and, thus, accumulation; that domestic trade was a means only of transferring wealth among individuals (rather than increasing the surplus). Mercantilist policies promoting overseas trade had provided governments with a source of tax revenues and loan capital that had fewer negative domestic consequences than other available sources and enabled them to gain a certain degree of ‘autonomy' from the local nobility. Those mercantilist policies that had offered states a means of gaining autonomy from local elites had become a target of aristocratic wrath. But after aristocratic landholding and financial interests succeeded in gaining control of the state, these very same policies became useful to them, and probably for the very same reason: as a means of acquiring autonomy from local social forces. Thus, while a mass of government rules and restrictions on economic activity ‘were swept out of the statute books' between 1760 and 1850 (Deane 1979: 220), many mercantilist policies and doctrines were retained. Promoting overseas, rather than domestic, commerce as a means of generating income was among these. And it is reasonable to assume that it was for the same reasons—i.e., that it had fewer negative domestic consequences for those who were promoting it. By the twentieth century, a full-blown restoration of mercantilist thought was evident in the policies and doctrines associated with the various forms of fascism that emerged following World War I.

Mass production also had serious implications for the existing structure of social power in Britain. A fully industrialized economy requires mass mobilization. Mass mobilization for industry (as for war) creates, out of the relatively disadvantaged majority of the population, a compact and potentially dangerous force; thus, elites showed little interest in the expansion of industry at home. Marx, as in much of his writing, was here perhaps only reflecting a general perception of his times when he wrote that The advance of industry . . . replaces the isolation of the labourers . . . by their revolutionary combination, due to association. The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products (Marx 1967: 93-4).

It might be argued that owners of wealth were not conscious of the social externalities associated with the application of large masses of labor to production. This seems hardly plausible. The problems of setting to work and controlling masses of labor are not so substantially different in capitalist production as to have made all prior problems and their solutions irrelevant. For centuries landlords had been confronted with the ‘great fear' of mass peasant uprisings, and had organized production in ways that reinforced the existing relations of power and authority. The difference in capitalist production, and it is crucial, is not the strategic power that workers have—peasants had that too; but that for industry to grow and remain competitive, a sizeable portion of the labour force must be educated, skilled, and mobile. If property owners were not conscious of the dangers of mass mobilization for industry, would they not have been after Marx spelled it out for them in the widely read and cited Communist Manifesto?

Concerned to consolidate and maintain their control of labour while, at the same time, mobilizing it for the expansion of production, elites sought to increase profits through a dualistic system of internal restriction and external expansion. Europe's economic expansion was based on the use of production methods that deskilled labor and kept it fragmented and impoverished. Profits increased, not through increasing the productivity of labor in wage goods industries, but by applying large quantities of unskilled or semi-skilled labor to production, as is typical of primary export production in the contemporary Third World. In Britain, whole families (women and children) were put to work to earn, together, the same wage that once had been paid to a single "head of household." By making it necessary for the whole family to contribute to its reproduction rather than a single "head of household," the employer got more workers for no additional cost. Profits increased also by increasing the duration or the normal intensity of labor, by making workers work longer and with fewer and shorter breaks, and faster. Cheap food was imported from abroad to further decrease the cost of labor. Workers were also forced to consume poorer quality food, either by dismantling regulations prohibiting the adulteration of basic foodstuffs or, as in Ireland, making them dependent on the potato crop for sustenance. [15]

Because the work force was, by these means, rendered too poor to function as a factor of consumption, the dynamic sectors of European economies were dependent on the development of exogenous demand and consumption. The export of British goods and capital played a leading role in creating an international circuit of investment and exchange for this purpose.

Britain increased its industrial production by expanding its shipbuilding, boiler making, gun and ammunition industries. This enabled it to penetrate and defend markets overseas. British exports of capital provided purchasing power among foreign governments and elites for British built railways, canals, and other public works; banks, telegraphs, and other public services; factories, and mines. All of this helped to fund the development and transport of food and raw materials exports to Britain, thus creating additional foreign purchasing power and demand for British goods, and also decreasing the price of food, and thereby the value of labor, in Britain. [16]

At the same time that British investors were investing abroad, British industry was, relative to that of its nearest competitors, slow to mechanize and to introduce new technologies. As a result, Britain's ‘Industrial Revolution' was both sectorally and geographically limited. [17] Its industrial breakthrough in the 1780s and 1790s involved the mechanization of only one branch (spinning) of one industry (cotton). The other branch, weaving, remained un-mechanized for forty years. [18] There was no mechanization outside the cotton industry. By 1850, the total number of factory workers amounted to not much more than 5% in England (Lis and Soly 1979: 159). Before World War II, less than a third of those employed in the transport sector were employed by the railways (28% in 1931). Despite the British origins of the machines and machine tools industry, it was not until the 1890s that automatic machine¬-tools production was introduced in Britain. The impetus came from the U.S., and the desire on the part of employers "to break down the hold of the skilled craftsmen in the industry" (Hobsbawm 1968: 181). The building industries grew by expanding employment, rather than by introducing innovations either in organization or technology. [19] Though Britain had pioneered electro technics, by 1913 the output of the British electrical industry was little more than a third of Germany's (Hobsbawm 1968: 180). Gas manufacture was mechanized late, and as a result of pressure from trade unions. Even Britain's export industries were slow to adopt new techniques or improvements, not only in textiles, but in coal, iron, steel, railways and shipbuilding. The supply of coal increased, not by the introduction of labor saving techniques, but by increasing the numbers of coalminers. [20] In the 1930s, "more than 40% of British coal was cut, and practically 50% conveyed, without the aid of machinery" (Benson 1989: 16).

As is typical throughout the contemporary Third World today, in Britain during the nineteenth century, the structure of landholding and the low productivity of the labor force engaged in growing food for home consumption limited industrial production for the home market.

Throughout the nineteenth century, the larger landowners continued to enlarge and consolidate their holdings. In 1897, 175,000 people owned ten-elevenths of the land of England, and forty million people the remaining one-eleventh. [21] The majority of farms in England and Wales did not possess either a tractor or a milking machine until World War II, despite their having been available for some thirty years or more. As late as 1935 18 % of all agricultural holdings comprised less than 5 acres, and a further 45 % less than 50 acres (Benson 1989: 19). On the eve of World War I, more than 60 % of the adult agricultural laborers of the kingdom received less than the amount necessary for the maintenance of a laborer and his family on workhouse. [22]

Like its agriculture, Britain's financial and industrial sectors were bound by monopoly and restriction. The regulative, protective system of mercantilism was only selectively dismantled; and by the end of the nineteenth century, there was a full blown return to monopoly and regulation. The City of London, in which greater fortunes were made than in the whole of industry, remained "enmeshed in a pseudo¬ baronial network of gentlemanly non competition" (Hobsbawm 1968: 169). In the industrial sphere, traditional corporatist structures—guilds, patronage and clientelist networks—survived in some places and grew stronger; elsewhere, new corporatist structures were created. As the nineteenth century progressed, industry became increasingly penetrated by monopoly and protection. The modern cartel movement began to develop in the crisis of 1873 and during the subsequent depression years. In Britain and France industry maintained tacit limits on competition that were about as effective as formal contracts. However, despite the strong tendency in Britain to the kind of gentleman's agreement that makes cartels unnecessary, cartels did appear there in metallurgy, milling, chemicals, and glass making. In what David Landes aptly calls "a commercial version of the enclosure movement" (1969: 247). Britain's answered the cartel movement with the "combine," which, like cartels, were designed to control the market by eliminating competition, fixing prices, sharing out supplies, buying raw materials en bloc, and cutting out middlemen. By 1914, cartelization pervaded industry everywhere in Europe. [23]

The development of exogenous demand and consumption through the export of capital and goods, together with the continued use of methods of increasing absolute surplus value at home, ensured that the benefits of expanding production would be retained solely by the property-owning classes. In 1914, British industrialization was still sectorally and geographically limited in the way that dualistic colonial and post-colonial economies have been described. Landed and industrial property had become increasingly concentrated. Only in sectors producing for export was there mechanization, skilled labor, and. rising productivity and real wages. These sectors did not have a profound impact on the rest of the economy. Revenues from these sectors were not invested in the expansion of production for the home market. There was little attempt to expand or mechanize industries producing goods for domestic household consumption. Instead, production expanded through the development of a circuit of capital that operated among a transnational aggregate of elites and governments. We now turn to a consideration of this circuit.

The Circuit Of Capital

Europe's economic expansion before World War II was based on the development of external markets for heavy industry and high-cost consumption goods, and through both cooperation with, or imperialist exploitation of, other states and territories, both within and outside of Europe.

The dynamic sectors of European economies grew by means of an international circuit of investment and exchange. The City of London was at the center of this circuit of capital. The bulk of British investment between 1880 and 1913 went to the Dominions, Europe, and the U.S. (over 55%) (Barratt Brown 1970: xiv). Almost 70 percent of this went into social overhead capital (railways, docks, tramways, telegraphs and telephones, gas and electric works, etc.). The bulk of it went into the enormously capital-absorbing railways (as did the bulk of French and Belgian foreign investment). [24] Increasing blocs of territory throughout the world became covered with networks of British built and financed railroads, provisioned by British steamships and defended by British warships.

The circuit developed originally through colonialism and imperialism. Britain established colonies in the Americas and the tropics that, later, became sources of raw materials and markets for British exports. By 1797, Britain's North American colonies and the West Indies accounted for 32% of British imports and 57% of exports (McCloskey 1981). But markets abroad could be created either by bringing more countries into the world market or by squeezing other countries out of their markets.

Britain and France both launched military crusades aimed at usurping existing markets for textiles: British military operations forced open the Indian sub-continent and usurped India's international market for British cotton textiles; France, through its ‘Continental System' and colonial expansion in Europe, attempted to turn Italy into a source of raw materials for French textiles and to usurp Italy's domination of international markets for high-quality textiles. Ottoman vulnerability, revealed during the Napoleonic Wars, provided a new field for exploitation. Britain developed Egypt and the Sudan as sources of cotton for its textile industry; while a French claim to Lebanon (by virtue of its Catholic Maronite community) ensured a nearby (relative to China) source of raw silk for the French silk industry. Britain added territories to its colonial empire for strategical/commercial purposes (e.g., Singapore, Aden, the Falkland Islands, Hong Kong, Lagos), and as a result of the movement and activities of land-hungry British emigrants (e.g. in South Africa, Canada, Australia). Colonies also provided labor that was even cheaper than that which was available at home and, in any case, was an alternative to mobilizing labor at home.

European countries enslaved and forced 11-12 million Africans to work in their colonies in North and South America between 1600 and 1900. More than half (over 6 million) of these were forcibly exported from Africa during the eighteenth century, principally to British- and French-owned centers of production in the Caribbean (Jamaica and St. Domingue, or what later became Haiti). This trans-Atlantic slave trade did not come to an end until the 1870s. Though Britain declared the slave trade illegal in 1807 (but actually abolished slavery in 1832), the slave trade continued illegally: almost 2 million more slaves were transported from Africa between 1810 and 1870, most to the major Caribbean sugar producer in the nineteenth century, Cuba.

In addition, to the stream of slave labor from Africa to the Americas, another stream of migration developed, consisting of contract laborers. This was fed, in particular, by large numbers of Indian and Chinese contract laborers who went to the tropics and to Africa to work in the mines and on the plantations. Thus, despite the slow the progress of labor legislation was in European countries during the nineteenth century, conditions overseas generally facilitated a lower level of wages, a longer working day, a greater exploitation of the labor of women and children, the absence or non application of social legislation, and the use of forced labor or labor paid in kind.

Throughout the circuit, in Europe and among the extra-regional states and territories brought within its ambit, the same overall pattern of dualistic growth was repeated though with variations according to each country's place in the circuit and the type of goods it produced for sale.

France, whose empire was second only to Britain's, exported high-cost textiles and luxury goods and built and financed railroads in Russia. Germany's dualistic industrial expansion took off with its ‘marriage', not of iron and finance' as in Britain, but of ‘iron and rye', in 1879. In Italy and Austria-Hungary, industrial development focused on expanding heavy industry and gaining railway concessions in the Balkans.

Other states—Russia, the United States, Canada, Australia--were incorporated into the circuit as raw material producers. These increased their production of agricultural and other raw materials exports to pay for railways, iron and steel, armaments and other foreign manufactures. Russia paid for these imports and its interest on its enormous foreign debt, by steadily increasing agricultural exports even during famines (e.g., in 1891. Colonial territories that became independent states—as, for instance, states in the Balkans and in Latin America-- remained within the circuit. Local elites, whether in colonies, former colonies, or states that had never been colonies, imported British capital and goods, developed mines and raw materials exports, and built railways and ports, in order to extend, consolidate and maintain their power and become wealthy.

By 1870, the imperialist practices through which these interactions operated had, together, assumed the character of an international regime. Puchala and Hopkins (1983) describes the distinctive pattern of activity that characterized European imperialism at that time:

‘extracted raw materials flowed from colonies to European imperial centers, light manufactures flowed back; investment capital flowed outward from European centers, profits and returns flowed back; administrators, soldiers, entrepreneurs, and missionaries went abroad to rule new lands, make new fortunes, and win new converts to their political, economic or religious causes ‘ (Puchala and Hopkins 1983: 68).

Then, they point to the regulation of this activity by a regime which ‘prescribed certain modes of behavior for imperial powers vis-a-vis each other and toward their respective colonial subjects.' The managers of the regime were the ministries and ministers of major states. These ‘made the rules of the colonial game,' and ‘diplomats, soldiers, businessmen, and settlers played accordingly.' Other sub-national actors were involved, as well: ‘church societies, militarist lobbies, and bankers' and, in some countries, these 'exercised substantial influence over the formulation of colonial policy' (1983: 67). While ‘there were conflicts, frictions, and collisions at points were empires came geographically together and occasional armed skirmishes outside of Europe,' there were also 'periodic conferences called to settle colonial issues, and countless bilateral treaties and agreements between colonial powers that defined borders on distant continents, transferred territories or populations, and codified the privileges and obligations of each colonial power with respect to the domains of others' (Puchala and Hopkins 1983: 68).

By the eve of World War I, the extremes of wealth and poverty created by dualistic economic expansion were generating more or less continual conflicts. In 1913, less than 5 percent of Britain's population over 25 years of age possessed over 60 percent of the wealth of the country (Clough 1940: 672-3). ‘Up to a third of the population in 1914 had incomes which did not provide them with sufficient food to sustain health throughout the year' (Floud 1997: 3, 15), and ‘perhaps a further 40% or even more lived so close to the margin that they could be, and often were, forced below it by a variety of life events'. [25] Britain, in 1914, ‘was a divided country, in which extremes of wealth and poverty coexisted, often in a state of mutual fear and incomprehension' (Floud 1997: 7). On the eve of World War I, tensions were rising not only within European states, but among them, as well. Overseas expansion had helped to maintain the balance of power system in Europe by providing a compensatory mechanism. And in spite of the heavily militarized and competitive character o Europe's overseas expansion, diplomatic instruments were found to regulate it such that conflicts over territory were prevented from escalating to war.

However, as more and more countries began to pursue dualistic, externally- oriented economic expansion, conflict over still unexploited territories in Africa and Asia increasingly threatened to lead to war. At the same time that overseas tensions were increasing, Europe, itself became the focus of expansionist aims. Networks of British built and financed railroads already covered overseas territories; but, after 1870, an upsurge in European railway construction began: France built railroads in Russia, German steel and capital built the Baghdad Railway; Italy and Austria-Hungary competed for railroad concessions in southeast Europe so that, as 1914 approached, ‘there was something of a railroad war between Italy and Austria-Hungary in the Balkans' (Kurth 1979: 21). Rivalry and rising tensions in Europe led to the dissolution of the ‘Bismarckian System'; and this, along with the antagonism created by German naval building, led to the reconfiguration and increasing polarization of interstate relations in Europe. The European balance of power and imperialist regimes began to dissolve. By 1914, war appeared to be the only means by which ‘national' capitals could improve the terms on which they were integrated into the world circuit of capital.

Just as the use of massive and expensive professional or mercenary armies in the seventeenth century worked to increase the power of wealthy classes (by draining state revenues and making the British monarchy reliant on London merchants and the commercialized gentry and aristocracy allied with them), the use of mass ‘citizen' armies in the world wars of the twentieth century, and the consequent reliance of states on working class cooperation, increased the power of labor in European societies. It was the shift in the balance of class power that, after World War II, brought about a transformation of European societies.

Two factors, in particular, helped to bring about an increase of working-class political power relative to that of capital. First, World War I forced governments and ruling groups to mobilize the masses for war for the first time since the Napoleonic wars. This was decisive in increasing the organizational strength, unity, and political power of labor. Second, was the participation of labor in broad-based social movements in which struggles for democracy, for workers' and minority rights, and for protection against the market merged. Today the role of unions in these struggles in various parts of the world is seen as representing a new form of labor politics, and is called ‘social movement unionism'.

But working-class activism in nineteenth and early twentieth century Europe was always part of a broad social movement Labor struggles were waged both in the marketplace and in the political arena; and, because those who participated in them were embedded in ethnic, national, and other communities and identities, class and minority (ethnic and religious) issues and conflicts were often thoroughly intertwined. Mass mobilization for war and the increasing strength of social movement unionism in national arenas were both products of a system of dualistic industrial expansion that generated social conflicts at home and rivalries and tensions among the advanced capitalist countries.

Some attribute these changes to a shift in the balance of power, not of labor and capital, but among different fractions of capital. They argue that the political and military costs of developing and defending foreign markets made Keynesianism attractive, not only to labor, but to productive capital, as well; and, they argue, it was the increase in the power of this fraction of capital which resulted in the post-war changes. But, given the resistance to state planning and comprehensive welfare reform before World War II, and the vigorous resistance of the U.S. to ‘national capitalism' after the war, it is unlikely that a massive capitulation to social democratic reforms and the expansion and consolidation of nationally embedded capital formations would have occurred in Europe had not the wars vastly increased the power of labor. Moreover, this increase occurred in the context of a war against socialism. Thus capitalists needing, not only to create an army of consumers but also to ‘keep workers away from Communism' (Lipietz 1992: 10), were willing to commit some portion of their profits to wage increases and home investment.

The post-World War II class compromise reinstated the state welfare and regulatory functions that had been relinquished in the nineteenth century. [26] Throughout Europe, labor was partially de-commodified through state provided health care and education, housing subsidies and childcare allowances. States expanded domestic markets by increasing and regulating domestic investment and this, in turn, increased production and raised the level of earnings and of welfare of the working class. The re-embedding of European economies led to a more balanced and internally oriented development, and to an era of unprecedented growth and of relative peace and stability. Although there was a strong growth of the volume of exports after the war, the expansion of domestic markets for domestic goods and services ensured that the proportion of resources devoted to experts (measured by the current price ratio of exports to GDP) declined. Thus, 'It was not until the end of the 1960s that production for international trade absorbed an increasing proportion of labor within the advanced countries--in this sense [Europe's post-war] golden age growth could be regarded as primarily domestically based' (Marglin and Schor 1990: 51).

The territorial coincidence of production and consumption and the resulting expansion of domestic markets brought to an end, for a time, intense social conflicts and the great movements of colonialism and imperialism. The integration of workers and minorities into the political process and changes in their status and level of welfare ended the labor and minority conflicts that had recurred throughout the nineteenth and early twentieth centuries. The reduction of protection and monopoly increased domestic investment, and the rising real wages of the workforce altered the structure of demand for domestic goods and services. The resulting expansion of domestic markets ended, for a time, the pursuit of profit through colonialism and imperialism.

II. Globalisation and Imperium redux?

For a time, governments of advanced industrial countries pursued more internally oriented policies that centered production and services on local and national needs. In the U.S., however, things began to change in the 1960s, as the competitive advantage US industry had enjoyed began to erode. As international competition from Europe and Japan intensified, profit margins in the U.S. began to narrow. Business blamed the narrowing profitability on wage increases. Wage increases had previously been paid for by higher prices; but when international competition began to act as a constraint on pricing, capitalists were caught in a profit squeeze: at the same time that foreign competitors were holding prices, reducing wages at home was precluded by labor militancy and by the political radicalism engendered by mass conscription for the Viet Nam war.

By the 1970s, business was engaged in concerted political action to get states to relax capital controls, deregulate industry and markets, privatize their assets, and curtail their welfare functions. In 1978, the U.S. introduced far reaching measures of deregulation; the following year a series of measures began moving the UK in the same direction. [27] The shift in the other OECD countries and the European Community began in the early to mid 1980s.

In the U.S., the increase in capital mobility and foreign investment, and the ability to move production to low-wage areas, have brought about a return to methods of absolute surplus value production at home, and the expansion of export-oriented growth. With a reduction in the bargaining power of labor relative to capital, not only in industries experiencing capital outflow, but in related industries, as well (Crotty and Epstein 1996: 131), methods of absolute surplus value production have returned: intensifying work regimes, reducing real wages, and restructuring employment away from full-time and secure employment into part-time and insecure work.

There has also been a return to the export-oriented expansion. As Herman Schwartz notes, U.S. capital exports before the 1970s had been relatively small: at their peak, barely as much as 2 percent of GDP. Moreover, these capital flows had supported an overall system of welfare, income equality, and higher wages at home. ‘While firms fought for market share overseas, they did so in ways that boosted workers' incomes and domestic demand rather than suppressing those incomes (Schwartz 2001: 8). In contrast, the U.S. capital exports that began in the late 1970s, are part of an overall shift that involves downsizing workforces and re-setting corporate activity ‘at ever lower levels of output and employment' (Williams et al 1989: 292).

In fact, despite the tendency to refer to current trends collectively as ‘neo-liberal' globalization, the expansion underpinning ‘globalization' has been essentially anti liberal in nature. Like Europe's nineteenth century expansion, it is characterized by increasing concentration and monopoly. As Jonathan Nitzan point out, large firms are tending increasingly to buy existing assets through mergers and acquisitions rather than to build new ones. The purpose of these, Nitzan argues, is to avoid creating new capacity so as to avoid glut and falling profit, and to augment the power of dominant capital. (2001: 241). Nitzan predicts that ‘far from contributing to growth,' this wave of mergers ‘is likely to further exacerbate stagnation and unemployment' (2001: 261).

Increasing productive capacity can be achieved either by expansion--a simply multiplication of the capacity at a given moment--or by intensification, i.e. an improvement in production techniques. Before World War II, economic development in Europe proceeded principally by means of lateral gains, through the acquisition of spheres of interest, rather than intensive gains, through improved organization or productivity. Similarly, U.S. expansion today is proceeding not through the creation of additional capacity, but by lateral gains: by squeezing other countries' firms out of their markets, restructuring those markets and integrating them into U.S. commodity chains; and, increasingly, through buying existing assets through mergers. Adding capacity is cheap when you are without competitors. Once there is competition, there is the threat of glut and declining profit. Thus, key players are concerned with keeping overall capacity from growing too fast.

The position of the U.S. following World War II was similar to that of Britain at the end of the Napoleonic Wars. Britain had emerged from the Napoleonic Wars with an economy that was far stronger than those of its nearest competitors. Its ‘take off' to industrial development prior to the war had occurred on the basis of the expansion of its domestic market. However, eventually its economic growth became dependent, not on a further expansion of its domestic market, but on the development of cross-national commodity chains, the acquisition of cheap labor abroad, and a backflow of cheap goods to keep domestic wages down.

The United States emerged from World War II with an economy that was far stronger than those of its nearest competitor. Like Britain, it had industrialized on the basis of the expansion of its domestic market. But, like Britain, its growth came to depend on the global integration of cross-national commodity chains, the acquisition of cheap labor abroad, and a backflow of cheap goods to keep wages down at home.

There is another similarity between U.S. expansion today and that of Britain in the nineteenth century. Hobson argued that in the nineteenth century the ‘taproot' of British imperialism' was a politically created mal-distribution of income in the British domestic economy. Today, it appears that ‘the taproot of U.S.-driven "globalization" is located in a politically created mal-distribution of income in the U.S. domestic economy' (Schwartz 2001: 15).

There would appear to be significant differences between the U.S. position today, and that of Britain in the nineteenth century. As Herman Schwartz points out, Britain was an ‘under-consumptionist' capital exporter' in the nineteenth century, while the U.S. today is an over-consumptionist capital exporter. However, Schwartz argues that the underlying dynamic fueling both British expansion in the nineteenth century and U.S. expansion today is the same. The ‘inversion of over and under-consumption', he argues, ‘is simply the surface manifestation of a more important underlying phenomenon that is consistent with Hobson's analysis'.

The structure of British imperial finance, Schwartz reminds us, rested not just on exports of British capital, but also on imports of capital into Britain. Most non-British banks kept large, low-interest, short-term deposits in London banks. As long as sterling was the international reserve currency of choice and virtually all international transactions cleared in London, Britain could borrow short-term at extremely low interest rates and then loan that money long-term, at higher interest rates. The Bank of England aggressively raised short-term interest rates when capital flowed out of London, to avoid maturity mismatches and also to profit from arbitraging between different interest rates. Schwartz argues that the structure of U.S. lending after 1971 parallels Britain's in the nineteenth century. The discussion, below, summarizes his argument.

Beginning in the 1970s, enormous flows of long-term capital from the U.S. produced, in turn, enormous imports of short-term capital back into the U.S. As in Britain, in the U.S., holders of capital issue fixed income securities and invest the proceeds in higher yielding equities and productive investments. In this way, Asian and European holdings of liquid US financial assets finance the continued expansion of the US economy by creating additional purchasing power in the US domestic market, and financing continued investment by US firms in real productive capacity. [28] It also creates more fictitious capital, permitting US firms to continue to invest at home and abroad with a low cost of capital.

As with consumers of British investment goods in the nineteenth century, today consumers of U.S. investment goods tend to have dualistic economies: underdeveloped domestic markets and large export sectors. While Asian trade surpluses are ‘parked in U.S. financial instruments', local consumption is constricted through fairly strict control over labor unions and workers, [29] making Asian economies increasingly reliant on a narrow range of exports to the U.S. economy. The 1990s investment wave made Asia even more structurally reliant for growth on exports to the US market. [30] These investments produced extensive growth in low-priced Asian textiles, toys and household goods, as well as low-end electronics, cars, and car parts. This increased output flowed into the US market.

The huge increase in Asian and especially Chinese production had exactly the effects that Hobson predicted. Hobson argued that Once encompass China with a network of railroads and steamer services, the size of the labour market to be tapped is so stupendous that it might well absorb in its development all the spare capital and business energy that the advanced European countries and the United States can supply for generations. . . . the pressure on the working-class movements in politics and industry in the West can be met by a flood of China goods, so as to keep down wages and compel [labor discipline]…. (Hobson 1902: 313).

The difference, however, is that these effects have been largely felt by Asian workers and not, immediately, by U.S. ones. The huge reservoir of purchasing power that workers retain has prevented the emergence of the ‘under-consumptionist' dynamic that Hobson described. In the U.S., real wages remained essentially flat between1980 and 2000, permitting valorization of overseas investments in basic goods. But U.S. investment in mass-consumption articles made with cheaper foreign labor keeps U.S. wages down in all sectors and compels labor discipline. This will eventually erode working class power and lead, again, to a withdrawal of ‘rights' previously held (power over wages and prices).

Overall, the circuit of capital that underpins U.S. expansion redounds to the benefit of those who hold US equities, and to the detriment of overseas workers and those in the US who work in basic manufacturing and/or pay the taxes that fund the US public debt. The circuit, as Greg Albo points out, is leading to an unstable vicious circle of "competitive austerity": each country reduces domestic demand and adopts an export-oriented strategy of dumping its surplus production, for which there are fewer consumers in its national economy given the decrease in workers' living standards and productivity gains all going to the capitalists, in the world market . . . . So long as all countries continue to pursue export-oriented strategies, which is the conventional wisdom demanded by IMF, OECD, and G7 policies and the logic of neo-liberal trade policies, there seems little reason not to conclude that "competitive austerity" will continue to ratchet down the living standards of workers in both the North and the South (1994: 147).

The globalized integration of cross-national commodity-chains, together with the process of increasing enclosure and deepening commodification of all possible aspects of daily life, leads inevitably toward the depression of working conditions and wages in the core.

Lessons From History

In current discourses, ‘globalization' tends to be misrepresented in two ways. First, it is wrongly represented as either a radical and absolute break with the past or the result of an evolutionary process. Second, it is treated as impelled by macro-economic forces and the technological evolution of capitalism. Globalization is not new: capitalism 'globalized' from the start. [31] Moreover, throughout its history, the globalization of capital has been driven by processes that are largely national and political. A broad-based political campaign is endeavoring to accelerate the globalization of capital today. While it is being waged on many fronts, it is specifically aimed at reversing the post-war social settlements that tied capital to the development of national communities by shifting power from labor to capital within states and undermining democratic national governments. Two factors had helped to increase working-class political power relative to that of capital by the end of the Second World War: the participation of labor in broad-based social movements, and mass mobilization for war. Both of these sources of empowerment were gradually eliminated after 1945. With the re-embedding of capital after 1945, unions became more narrowly based and focused; as a result, national union federations came to represent a declining and often minor part of the working population (Norway and Sweden are exceptions). At the same time, states ceased to raise citizen armies and to mobilize mass populations to fight wars. The Viet Nam war ended the use of citizen armies in the United States. Since then, the Cold War fight has depended on the use of anti-communist mercenary armies wherever possible (the Contras in Nicaragua, Renamo in Mozambique, Savimbi in Angola), selective military engagement, and the occupation of strategic chokepoints (both geographically and institutionally). As was the case with nineteenth century European imperialism, the deployment of military force to secure and defend capitalist globalization today is being carried out by professional armies. Overall, this has weakened the bargaining position of workers and strengthened the position of capital. [32]


[1]. In The Will to Power, translated by William Kaufmann, New York, Vintage Books, 1967, p. 546.

[2]. Translated by Michael Henry Heim, New York, Harper and Row, 1984, p. 2.

[3] Many historians assume that England did not experience a form of state corresponding to the absolute monarchies of the continent because English monarchs could not take the property of their subjects without their consent in parliament. But continental absolutism were also based on the rights of property. The term ‘absolutism was used by those who opposed state policies and reforms which, today, we associate with the welfare state and progressive liberalism. Conventional accounts of this history assume that opposition to absolutism was principally concerned with a variety of ‘freedoms'. The record of the state that emerged with the defeat of ‘absolutism' provides little, if any, support for this view.

[4] Pat Thane (1998: 55) rightly points out that ‘There is a real question as to whether the vastly richer Britain of the twentieth century is relatively more or less generous to its poor that the England of the seventeenth and eighteenth centuries'.

[5] The legal measures were never fully implemented, however, because of resistance from aristocratic office-holders whose job was to apply them.

[6] British exports increased 67%; production for the home market increased only 7%.

[7]. Machinery which intensified labor and deprived skilled labor of employment.

[8]. And erroneously restricted in their application to that world; see, for this argument, Halperin 1997.

[9.] As Phyllis Deane, and many others, have pointed out, a ‘distinctive and significant dimension' of British industrial growth was ‘the extent to which it was dependent on the international economy both for material inputs and for final demand' (Deane 1979: 294). The crucial input in Britain's cotton industry (its ‘leading sector'), cotton, was imported, so linkages were with foreign rather than domestic industries.

[10]. McCloskey 1981: 143. The United States, which at the same time was the largest economy in the world, exported only 7%. (Floud 1997: 90). At the height of the Marshall Plan, in 1947, the level of foreign investment as a share of national income was around 3% (McCloskey 1981: 144).

10. Barratt Brown 1970: x. See, also, Davis and Huttenback 1988. Similarly, many studies have shown that while French investments were helping to industrialize considerable parts of Europe, France was technologically backward, and clearly in need of much larger home investment. Cairncross argues that French industry was 'starved for capital' (1953: 225). The issue was a matter of debate from at least the 1830s. See Cameron 1961: 123, 152; and Landes 1954: 260 n9

[12.] Bairoch 1993: 172. The minerals prominent in tropical trade today did not come to the fore until the end of the nineteenth century. Minerals amounted to only 13% of tropical exports in 1913, compared with 29% in 1965. Moreover, it was only after World War II (in the 1950s, and again in the 1980s) that terms of trade in primary goods deteriorated (Bairoch 1993: 113-4). [13]. Dress restrictions based on income were common outside of Europe, e.g. in Japan. Today they persist, for instance, in north Africa, where Tuareg women and slaves are forbidden to veil.

[14]. As, for instance, the following sentiment:

There is a very great consumption of luxuries among the labouring poor of this kingdom: particularly among the manufacturing populace, by which they consume their time, the most fatal of consumptions.
(anonymous, An Essay On Trade and Commerce, London, 1770, pp. 47,153; in Marx 1990: 342, fn4).

[15] British overseas investment and, in particular British railway and harbor and ship building for Baltic and, later, North American grain, produced a backflow of cheaply produced/regulated raw materials and foodstuffs that did not compete with domestic English agriculture and drove domestic working class wages down. Britain imported a third of its food after 1870 (Barratt Brown 1970: 66).

[16] Britain's industrial wage earners realized 55 60% of their wage in the form of food; the steady fall in prices of staple food imports after 1874 (grain, tea, sugar, lard, cheese, ham, and bacon), allowed real wages in Britain to rise until World War I (Mathias 1983: 345).

[17] Geographically, the industrial revolution was limited to the great centers of the export industry in the North and 'Celtic Fringe' (Manchester was the capital of the basic export industries).

[18] The introduction of the factory system in spinning, in fact, increased the number of domestic weavers (to handle the expanded production in yarn). Traditional manufacturing organized around the putting out system continued to make profits of as much as 1000% (Gillis 1983: 41, 159); as long as it did, there was little incentive to introduce new techniques having the capacity to produce social externalities.

[19] New techniques were introduced "slowly and with considerable reluctance." In the 1930s, half the industry's workforce still practiced "their traditional handicrafts, especially in house building, largely untouched by mechanization" (Benson 1989: 20).

[20] There were 200.000 coal-miners in Britain in 1850, half a million in 1880, and 1.2 million in 1914 (Hobsbawm 1968: 116).

[21] Romein 1978: 195. In 1900, less than 1% of the population owned more than 40% of the land of Austria, Hungary, Romania, Germany, Spain, and Poland; less than 4% of the population owned 25% of the land of Denmark and France. Ten percent of landowners held 85% of Italy (Goldstein 1983: 240).

[22] According to a semi-official Land Enquiry Committee report in 1912; cited in Ogg 1930: 174.

[23] The table leaves out other countries with cartelised industry; see Halperin 1997: Chapter 7.

[24] Only the production of modern armaments is more capital absorbing (the mass production of armaments in the United States, and their export to Europe's great and small powers, began in the 1860s.

[25] Floud 1997: 24. Various investigations showed that, in the decade before World War I, a significant proportion of the population of England and Wales were living in poverty without recourse to poor relief (Bell 1907; Davies 1909; Rowntree 1913; Bowley and Burnett-Hurst 1915).

[26] Most historical accounts treat the welfare provisions of the post-WWII ‘Welfare State' as the outcome of progressive developments and of a modern and enlightened era which is immeasurably superior to anything which went before. But studies have shown that, in Britain, transfer payments to the elderly (see, e.g., Thompson 1984) and to single-parent families (see, e.g. Snell and Millar 1987) were significantly less under Britain's post-WWII welfare system than under the old poor law.

[27] Similar changes took place in France (1982 3), Australia (1983), Canada (1984) and New Zealand (1984).

[28] By 2001 the Asian economies had huge holdings of US Treasury and other passive foreign assets: Japan $404 billion; China $196 billion; Taiwan $122; Hong Kong $111 billion; Korea $103 billion; Singapore $77 billion (Hong Kong Monetary Authority 2002; in Schwartz 2001: 12).

[29] ‘Appeals to national pride, "Asian values" and a general sense that Asia's century had arrived were used to gloss over substantial dislocation of peasant populations and worker unrest' (Schwartz 2001: 12).

[30] There is a high level of intra-Asian exports in comparison to other developing regions. In 2000, for example, 38 percent of Asian (excluding Japan) exports went to other Asian economies. But external demand remains critical for growth (Schwartz 2001: 13).

[31] That globalization is the necessary product of capital's expansion was asserted, in 1848, by Marx and Engels in the Communist Manifesto: ‘The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe.'

[32] ‘The replacing of mass conscript armies with professional armed forces', as Joachim Hirsch has argued, ‘is incompatible with maintaining the principles of citizenship. Universal liability for military service has historically been inseparable from democracy' (1999: 309). What would be the consequence, in the current context of widespread anti-globalization sentiment, if governments depended on mass citizen armies to advance and defend through military means the further globalization of capital?


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