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The End of Economics

The world of the nation state belongs to the past, at least in the conomic sense. Since the 80s, a new reference system has appeared with breath-taking speed. Globalization has created new facts. However economics and politics remain with their old concepts and theories. "Made by Mercedes" now replaces "made in Germany". This article by social critic Robert Kurz is translated from the German by Marc Batko.
The End of Economics

By Robert Kurz

[This article originally published in the Brazilian newspaper "Folha", 1995 is translated from the German on the World Wide Web, www.krisis.de.]

Globalization and the Long Exodus from a World of Nations

Economics is in a deep crisis. Its ideas no longer agree with reality. The discipline was once called "economic theory" or "economics". Today the catchword is "globalization": globalization of markets, money and labor.

To be sure, there was already a world market since the 16th century. The modern market economy grew above all in the space of the nations that were a product of the 18th century. Nation states with national systems of law, infrastructure and so forth arose on the basis of a coherent national capital stock. The world market as "foreign trade" was limited to a secondary plane. This process of the formation of new nations and economics continued deep into the 20th century.

Although all our social ideas and "political emotions" still refer to the historical space of the nation, this world belongs to the past at least ion the economic sense. Since the 80s, a new reference system has appeared with breath-taking speed. Satellites and microelectronics, new communication- and transportation technology and cheap energy made this possible. A single global supermarket arises beyond the old economics. Everything is traded everywhere and at any time: the debts of the Third World (Brady bonds), auto parts, cheap labor, even human organs.

Globalization has created new facts. However economics and politics remain with their old concepts and theories. A "world economic theory" or "global economy" does not exist at the universities. What has changed? The world market penetrates deep in the intestines of the old economics. Its tongue reaches even the last village at the edge of the world. The export of goods was increasingly expanded by the export of capital since the beginning of the 20th century. Ford no longer exported cars to Germany from the US but built a factory for the German market in Germany. Conversely Volkswagen invested in the US to supply that market. Thus multinational corporations appeared without questioning the coherence of economics. This happened first through the new quality of the microelectronic revolution. Now both monetary transactions and material production processes can be handled globally.

In the form of the Euro-money markets, the credit system has emancipated itself from the control of the national central banks. A German speculator can operate in Japan with dollars. Credits in DM (Deutsch-marks) are accepted in the US by a Japanese firm. This is also true in production. For a product sold by a German firm on the German market, parts can be produced in England and Brazil, mounted in Hong Kong and the result expedited from the Caribbean. Since the 60s, world trade expanded more strongly than world production The apparent independence of trade even accelerated in the 80s. This phenomenon is a result of globalization. For example, Japanese "screwdriver factories" in Latin America and Europe only assemble pre-assembled components with minimal "local content". This is Mexico's export to the US or England's export to Spain. The export and import of consumer- and investment goods between different economies is no longer central but a novel division of labor within the multinational conglomerates or international alliance systems across the past political economies.

Productive functions are no longer concentrated administratively at one place. Rather the economic management of an enterprise is scattered across countries and continents. All the components of the production process and the financial system drift from place to place over the globe. Sales markets are also dispersed over the whole earth. The greater the capital-intensive high tech investments and the more rationalization advances through "lean production", the more worthless becomes human labor power, the greater the unemployed and the less the national purchasing power. Thus competition presses both to global marketing and "global outsourcing" always searching for low costs and high sales figures in whatever regions of the world. The German technical magazine "Wirtschaftswoche" formulated the slogan: "Produce where wages are low, research where laws are generous and show profits where taxes are trifling." In this way managers gradually change into "global players". Administrative capital is no longer part of a national capital stock but internationalizes.

We are at the beginning of this development. According to the McKinsey consulting firm, 5 percent of "German" capital is now globalized. Soon it will be 25 to 30 percent. As a result the strategic orientation changes. Administrative and national loyalty diverge. No national development and economic strategies exist any more. The board of directors of the German Siemens firm recently met in Singapore. The latest chip generation from Siemens will be manufactured in Scotland, not Dresden as originally planned. To the irritation of the German central bank, the Deutsche bank shifted its investment division from Frankfurt to London. Mercedes Benz publishes its annual report in New York, no longer in Stuttgart. The new Swatch car by Mercedes is built in France, not in southern Germany. Supplier industries also shift their production to Portugal, Poland, Czechnya and southeast Asia. Only the financing division is still in Germany. Their accounting is completed by workers in India.

The philosophy of quality assurance is also transferred from the national to the globalized administrative plane: "made by Mercedes", no longer "made in Germany". The consequences are doubtlessly absurd and dangerous. The economy of businesses is boundless while the state by its nature is limited to the national territory. Thus the state is increasingly less the "ideal total capitalist" (Marx) of a national capital stock with a certain command authority but is degraded into the hostage of the "positional question". The old "economics" turns into "economic policy" whose spoon no longer reaches very far. If politics seeks to socially restrict the unbridled total market, globalized businesses threaten with the "exodus from Egypt". This is also true for ecological conditions. What about water protection and contamination of the soil? You had best ask in Mexico where cows frothing at the mouth fall dead in the meadows without politics identifying any problems. We amuse ourselves with the cost question...

Together with the competence of the state, the old opposition of "national liberation" and "imperialism" collapses. The regimes of national accumulation in the Third World have nearly all capitulated since they could no longer finance the capital costs of an independent industrial development under the pressure of globalization. Large parts of state industries unprofitable according to global standards are shut down and the rest privatized, that is sold to globalized corporations in many cases. Perhaps the state treasury can be revitalized in the short term. However the capital streams are no longer interested in the development of a whole country. Enticement with low taxes and other advantages is necessary. Jobs are reduced through rationalization. Profits flow elsewhere and no guarantees exist for investments.

On the other hand, the old imperialist states lose interest in territorial annexations and in "spheres of influence". What should they do about enormous areas of poverty whose people cannot be used any more? Every national "sphere of influence" is only an unproductive cost-eater. The "zones of profitability" which change almost daily are distributed like a skin rash across the globe. Even the most powerful states cannot exercise any control any more over this scattered economy. In this way the differences between rich and poor countries will be leveled slowly but surely though not in the sense of the general welfare. Orientation in exports prevails everywhere, that is the direct integration in the raging world market while simultaneously fewer and fewer people can be integrated in the market economy.

Regional free trade zones like Nafta, EU or Mercosur usually accelerate the economic disintegration and only lead to a multinational system of small islands of growth. From the chaos theory, we know the "principle of self-similarity": certain structures are repeated on all large scales. The global market system becomes "self-similar". On every continent and in every country and every city, mass poverty and slums will soon exist on one side and little obscene islands of wealth and productivity for the world market on the other side. On account of inadequate financial strength, the states abandon larger and larger parts of their own population who are practically no longer treated as citizens. Finally the authorities keep the "extraterritorial" sectors of misery and madness under military control. For business travelers, a "security guide" enumerates wherever "lawless conditions" dominate today.

Obviously this kind of capitalist globalization cannot achieve a good end. A global economy for an increasingly small minority is not viable or capable of surviving. When globalized competition makes more and more industrial production "unprofitable" and more and more regions become deserted, world-capital minimalizes its own sphere of action. Capital can no longer accumulate in the long run on a small base dispersed over the whole world just as one can not dance the samba on a beer coaster. On top of that, globalization produces a new structural contradiction between the market and the state. Through the internationalization of the capital stock, capital evades state control diminishing the revenue of the state. On the other hand, globalized capital depends more than ever on a functioning infrastructure (airports and seaports, streets, transportation- and communication systems, schools, universities and so forth) which still must be organized in the nation state.

Globalization takes the financial resources from the state necessary for the prerequisites of globalization itself. Above all there are the desperate reactions of people "spit out" by the total world market which plunge the new world system into crisis. The costs of "security" rise astronomically. Former imperialist countries cannot wage any wars any more against one another in a globalized economy but must mobilize together a "world police" against the global losers to assure the commercial conditions for the islands of wealth. This new war will probably be more expansive than the earlier "Cold War". Everywhere the Mafia begins to usurp attributes of state sovereignty. Dissolute former development dictatorships, for example the regime of Saddam Hussein, become inscrutable. Religious fundamentalism floods the world with terror. In more and more countries there are militant movements without perspective that are called "nationalist" but in reality are "ethnicist" and usually separatist. Unlike the old national movements from the 18th century to the "liberation nationalism" of the Third World, disintegration of nations or political economies is central, no longer integration.

The globalization of an "economy of the minority" leads directly into the "world civil war" in every land and every city. Only with a husky voice can we ask what can be done against this development. Presumably there can be no return to the old world of political economies. Nevertheless in a paradoxical way the nation state remains the main space of the political public. In this contradiction, can the nations be anything but merely negative? Can "post-national" territories and fields arise beyond the market and the state? New forms of self-government, cooperatives and self-sufficiency for basic human needs are developing in several countries on local and regional planes "below" the political economy. Still resources for such developments are miniscule. Movements like the Betinho in Brazil exist along with NGOs (non-governmental organizations), associations operating worldwide like Amnesty International or Greenpeace that are neither commercial nor governmental. However all these groups do not have any new socioeconomic powers. They are occupied almost exclusively with individual negative consequences of globalization without questioning the economic system.

Where is theory, the internationale of critical thinking? The "eternal peace" that Immanuel Kant proclaimed at the threshold of the middle class modern age as peace between independent nations can not redeem its promise any more than the "proletarian internationalism" of the socialist movements. Today philosophy finally capitulates before the barbarism of the total market. Should the globalized financial markets remain the only form of international communication at the end? Non-conformist thinking can be as nimble or fleet-footed as fleeting money. We need the globalization of a new social criticism.

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