25 October, 2021

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It’s Back To The Drawing-Board For Globalisation

By Kumar David

Prof. Kumar David

Prof. Kumar David

“Globalisation Needs Course Correction”- Obama In Athens; It’s Back To The Drawing-Board For Globalisation

Ranil Wickremesinghe is right to say growth in Lanka depends on international linkages. Local investors are effete; overseas ones have to be enticed. Western capital is risk averse and investors shy due to the prolonged low key depression, aggravated by Brexit, Trump and ascendance of the far-right in France, Holland, Denmark and Austria. Therefore trade and investment cooperation with China and India assume importance. We must not let self-serving professionals or skilled labour alarmed by competition stop ECTA. Likewise we must evolve a win-win strategy with China for an investment zone in Hambantota incorporating the harbour and that wacko flights-to-nowhere airport.

Let’s begin with a recap of the 40 year story from neoliberal times (mid-1970s). Globalisation was the poster child of imperialism; free trade, open markets, capital movement, curbing wages and worker’s rights (pseudonym ‘labour market reforms’), eliminating tax on multinationals and removing currency restrictions. For decades this was the IMF, Washington and Whitehall chorus, the refrain of learned economists, some of them Nobel Prize winners now strangely deaf and dumb, and of course our very own JR and his mouthpieces. Then what on earth went wrong? Unexpectedly millions in the West were left out and left behind; globalisation did not work in the Appalachian coal mines, Detroit, industrialised regions of France and in the north of England. The sorcerer’s apprentice, capitalist globalisation, turned on its master, Globalisation per se, and devoured it? Brexit, Trump and the rise of the European far-right manifests this wrath, but none has the foggiest notion how to stop the slide.

Flat-footed globalisation

Globalisation has gone sour; not news for the left which raged against it from day-one. (It committed to internationalism long ago; but more on that later). Neoliberal globalisation is interleaved with capitalism hence it has been a target of unremitting assault by the Left. What is the difference between ‘actually existing globalisation’ (AEG) and the Left’s cherished world without borders, nations as anachronisms and workers of the world unite? Why has a universalist vision of previous centuries flared up as class-struggle now? Why has globalisation become a political question? Simple, AEG is a process in the service of capital and profit. It lets transnational corporations disentangle from national constraints on wages, welfare, national labour regulations and trade union influence. It shapes not only the economy but also politics; it transforms society itself.

This was the story for decades but after the calamitous financial crisis and recession of 2008-09 and the subsequent prolonged low key depression (I call it a Wobble-U shape) the shoe moved to the other foot, nemesis came with a vengeance. Insecurity now is a phenomenon of Europe and the USA and to compound matters it is no longer just economics but also a startling political menace – racial intolerance. Obama laments “globalisation needs course correction”; Angela Merkel softens her election losing hard stand on border controls; strange words from unexpected quarters.

The political ramifications are far reaching. Take two scenarios (actually it will be a mix). If Trump is tamed by his GOP handlers and abandons his hare-brained promises there will be uproar in his feral following. If he does not, he will be declared unfit to lead the ‘free world’ – code for global capitalism. In the latter case I have a hunch leadership will be transferred into the trustworthy hands of Angela Merkel. Thereafter the ruling classes of America and Europe can breathe a sigh of relief. What was Obama up to in Germany last week – taking an Alpine holiday! Oh no; options must have been discussed and persuading Merkel to stand for a fourth term I am sure was high on the closed-door agenda. If the overbearing dominance of a Trump madhouse eases into a more pluripotent world with three power centres (US, Europe and China) it would be an opening for smaller nations. Ranil will find at hand a helpful table on which to play asking-hitting (booruwa), raise investments and promote Lanka’s exports if he plays a smart hand.

This account of the recalibration of the global pecking order is not farfetched if you read respected gurus of the establishment. I cannot devote space to quoting many so will make do with one, Martin Wolf Chief Financial Editor of the Financial Times. I abridge and quote

“Will there be another huge financial crisis? So it is with banks. They are designed to fall. So fall they surely will. A recent book explores this reality. What makes attention justified is that its author was at the heart of the monetary establishment before and during the crisis; Mervyn King, former governor of the Bank of England”.

This was written on 3 June before Brexit and perhaps can be read as exaggerated to persuade voters not to leave the European Union. Ok then, what does Wolf say now (15 November)?

“Donald Trump has won the presidency, the US has, as a result, chosen as its next president a man whose inexperience, character, temperament and knowledge make him unsuited for this office. The consequences will be many; the economic ones important. He may reverse globalisation, destabilise the financial system, weaken US public finances and threaten trust in the dollar. US-led globalisation is already fragile. Trump seems likely to push it into the coffin”.

Wolf is an outspoken advance guard in his apprehensions about “free world” leadership. Trump’s version of America’s place in the world is to kill TPP (Trans-Pacific Partnership) and open the road for consolidation of the China-led Regional Comprehensive Economic Partnership; the Transatlantic Partnership was “unborn tomorrow dead yesterday”; NAFTA with Mexico and Canada will survive, damaged. Imposing tariffs on China and Mexico are contrary to WTO rules; the ensuing trade wars will not restrain US companies from investing overseas, nor bring jobs and investment to the America. The misery of Trump’s following will not be assuaged. In short, his threats if translated into action will kill AEG without help from detractors of globalisation.

Wolf and his ilk cry wolf but offer no way out. The way out is to shrink the obscene wealth and income gap everywhere and to curb the vast transfer of value from global labour to elites and multinationals. The crumbs falling from the table to the yokels below in America have evaporated; so Trumpets bellow and all manner of Exiters march to the global door. However shrinking inequality or crafting a fairer world-order are not what Wolves, Trumpets or for that matter Clintons, cherish.

Last week I said Trump’s bogus-Keynesian (loose fiscal policy and irresponsible monetary antics) infrastructure building impetuosity (Mussolini populism) will come in conflict with entrenched philosophy Republicans are committed to with near religious zeal. His policies lead to inflation (at last) and an erosion of the dollar encouraging search for a new global currency order. That is if Trump is allowed to have his way, but more likely he will not; Washington will cut in and tame him. If that is how the wind blows Trump and the GOP will face the music of an outraged gullible electorate.

What I am taking pains to say is not about Trump, America or its economy. It is that globalisation as we have known it for decades (AEG) is nearing the end of its shelf-life, one way or the other. A deep recession and economic dislocation in advanced capitalist economies will be painful for others as well, but small countries, if nibble and quick witted, can benefit by taking advantage of these fissures. Do people who make these decisions ever read my crap? Not likely.

Internationalism for the people

What is called globalisation these days and better known as internationalism in previous times is no stranger. I will close with two passages (heavily edited for length and style) from what is surely the best known of all the world’s political pamphlets.

“We are reproached with desiring to abolish countries and nationalities. Working men have no country! National differences and antagonisms between people are daily vanishing due to freedom of commerce, the world market, uniformity in the mode of production and corresponding conditions of life.”

“Exploitation of the world-market (has) given a cosmopolitan character to production and consumption in every country. To the chagrin of reactionaries it has drawn from under the feet of industry the national ground on which it stood. Old established industries have been destroyed, dislodged by new ones that no longer work indigenous materials but materials drawn from the remotest zones, whose products are consumed in every quarter of the globe. In place of national seclusion and self-sufficiency we have universal interdependence of nations. The intellectual creations of individual nations become common property. National one-sidedness and narrow-mindedness become impossible. In a word, the bourgeoisie creates a world after its own image”.

So be it. The next phase for mankind’s progress is not the illusory world of Walls and barriers but a world where “we shall have an association in which the free development of each is the condition for the free development of all”.

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Latest comments

  • 1
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    I vaguely remember that Prof. AKD had some hopes for globalization from a socialist perspective a couple of decades ago.
    Glad to note that he now fully accepts it is an imperialist project.

  • 2
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    American economy, unlike as Trump portrays, is not in “disaster”. Going back to dig it is going to make again and again keep questioning “Then How did Trump won?”, but will not give any better answer. It is not the condition of the American economy defeated Hillary. American companies cannot survive without going out. Most of them doing just designing or do only quality control in US, but producing outside. American can pull back from TPP or even WTO. If Trump becomes an extremist, American has to drop out the dollar and internally start to do barter system within them. It is not going to help. Globalization for developed countries is not reversible. People can be sensitized and can win one election. That is not the vision of American Nobel Prize winning economists’. Reviving industries lost to competition cannot be done easily. Rust belt does not have any short cut solution.

    When Bush was leaving American Banks and Auto Industry were falling. Bush refused to revive them saying he was a market economist. But Obama revived them and saw reasonable success. The reasons behind them were not really market economy or competition. During Regan time Auto faced real challenge. That was not the case in 2008. The threat of Japan going to walk over America did not happen. Auto difficulty in 2008-2009 was mainly finance. Competition was relative less severe. Ford which had pre-arranged loans did not suffer. GM suffered a lot and Chrysler went Bankrupt. Once the Obama’s Federal Government got into that and sustained the companies for short time, they came out and started to operate. It is not forever. But….………Most properly until the Indian and Chinese own brands start to rule. Then banks cases were not competition either. No foreign banks were really challenging American Banks. In Fact American Banks pulled down with them many other banks too. It was pure greed and fraud of Wall Street. So there too Federal government was able to meaningfully intervene. This medicine is not for all diseases. Particularly is not for the Industries beaten down by competition.

    This is a case like a chasing police and running thief. Unless thief finds new roads, he will come to a dead end and will be caught. America will have to innovate methods, cannot win by politically challenging the international trading partners. Oil industry is classic example for American innovation. Prices were kept by cartel at very high. Importing that only drain out American customer, but does not improve their standard of living, unlike the other cheap products imports. American invention of Shale oil not simply put America as leader in oil, but brought the price low for the entire world. OPEC cartel took the lesson in competition. The same way, the Auto can be revived if the American makers come out with the fuel cell cars’ Chassis and let the third world to make the bodies. This can beat the fast developing electric cars by foreign makers, who are from other developed countries like Germany, Japan. Agriculture and consulting are still remaining as good area for America. English is the international Language. American Universities can do the knowledge exporting for a long time to come. By revolutionizing the saving packing and transporting, America can deliver the much needed food all over the world. Poor countries are starving without money to buy. So instead of waiting other countries start to lead in that, America should start to innovate on that area.

    Time to time developing countries use protectionist policy. This looks like working for a short time. Japan was using this and inundating the world. Their banks in 70s lent unlimited money to the corporation. Once markets became saturated their banks and electronic companies faced extremely severe problem. Japan faced a 17 years recession. Now mainly China is doing it. Unlike Japan which saturated markets and faced no way to export any more, China is creating white elephant projects internally and externally. This is how it is bankrupting its client’s countries. Already Myanmar, Lankawe and few African nations cannot take Chinese services and their imports. Two years ago China tried to fix its currency. But it is not easy. Now their growth is cooling down. Their infrastructure is still poor. When they face problems outside they can improve the internal consumptions. But unless they get into genuine competition, they may face what Japan faced.

    Russia’s economic problems stems from their current political decisions. Unless they get back to normal relationship with EU, they are going to be isolated by the Global, other than China. China is a trading partner for them like EU.
    Back in Lankawe, ETCA is different from the Chinese deals. China has been paying and buying the lands. The benefits supposed to go for them. They are paying around $1.5 billion for Hambantota. Like Nuraicholai they will bring their prisoners to man the labor class job. They already have complained about the CEB engineers. They may not like Lankawe engineers manning their mills. Hambantota is alone 15,000 acres. That is about four to five small villages spread (60 Square Kilometers). When water, electricity are drawn for these plants, nothing be let for Hambantota Sinhala Buddhists. Then the Sinhala intellectual will be kicking each other’s back to put the blame on the other.
    ETCA is a starting level free trade. Lankawe is a better structured country than India, other than North and East. This should enable Lankawe to reap more benefits than India. If the bridge is built West, Northwest, North Central and Northern provinces should benefit out of it.

  • 0
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    [Edited out]

  • 2
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    Ranil wickremesinghe must first learn the culture, inheritance, and the inherent wealth in this country before he embarks on looking outside for wealth. Since his treacherous uncle started his open economy the inter ethnic economic status has changed causing social destabilisation.. Economic development is not only earning money it is improving the standard of living with out social disruption. JRJ policies created a JVP insurrection killing about 100000 sinhala youth and a similar number in the north and east in a 30 year old war. and what ever economic gain we had was lost in the destruction by war. This man Ranil is a fool if allowed will create much more problems than his uncle JRJ.

  • 0
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    As usual Guru, I have to disagree with you.

    You say: “Local investors are effete; overseas ones have to be enticed”. Agreed. But, how are you going to entice them with the government unable to make a proper budget and draw up a decent and realistic long term economic plan. The ship is zig zagging and no one wants to get aboard for fear crashing with it in to a rock and sinking with all aboard. Rather than enticing them here, the government may succeed in enticing would be investors in to the arms of a more favorable country ruled by people who have their feet firmly on the ground.

    At this rate we may soon become not joke of Asia – not the Wonder of Asia.

    Look at Ranil’s economic policy statement presented to the Parliament a few weeks back. Was energy planning even mentioned there? No! You, as an expert in electrical energy, know how important energy planning is for any economic planning. It is more so today because of the complications due to the increasing penetration of renewable energy in every country in the world. Who will invest here without knowing how much the energy costs are going to be and how reliable the supply is going to be?

    Just after this government came in to power a certain Minister was talking in a TV discussion about the ‘Helium economy’. I have no idea what it is. But he claimed that they are waiting for the Helium economy to develop before they decide what type of vehicles are to be imported. Can someone throw light on what ‘helium Economy’ means?

    Ranil’s speeches in the Parliament are becoming drags, with him going on and on in the same tone, at a speed that rivals a runaway train. It is like having verbal diarrhea. It is time he takes some antibiotics to stop that.

  • 5
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    Sri Lanka did not benefit from enormously from globalisation. How many multi national companies have manufacturing base here. Do not confuse GSP+ with globalisation.

    Sri Lanka failed to exploit the globalisation to attract inward investment.

    Making Hambantota an investment zone will be a disaster.
    No Flights; No Ships and you can add no Investments.

    Sri Lanka has it’s own “Appalachian coal mines, Detroit, industrialised regions of France and in the north of England” and that is not due to globalisation but due to successive Sinhala govt’s racist policy of denying developments to the NE.

    The Government should make the entire country an investment Zone.
    They are making this grave error of focusing all developments and investments to the South.

    • 0
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      Rajash,

      “that is not due to globalisation but due to successive Sinhala govt’s racist policy of denying developments to the NE.”

      When the governments have been unable to attract FDI to the rest of the country why do you think FDI to NE would be more attractive?

      • 0
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        This is exactly what I am saying.
        There is no local investment in the NE either.
        There are many countries willing to do FDI in the NE to develop the NE. However the Sinhala govt policy is that when it comes to investing in the NE, the investment should be channelled through the central govt.Not just investment even aids.

  • 4
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    Beware of the free trade agreements by Ranil ‘who will be selling the sovereignty of the country for FDI . With the agreement with India and west he will be illegal signing off the rights of the citizens by this agreement making way for predatory foreigners to invade the country on the back of these agreements like the unfortunate situation in Quebec where even the parliament cannot stop the raping of their country because of NAFTA. Beware Sri Lankans . It is like how the sovereignty of the country was undermined by the 13th amendment and still after almost 30 years it is still in force. This is trechoury perpetrated on the country by the threat of resignation letters by JRJ and now by bribery and corruption ,Increased salaries for MPs, Tax free car permits when the country cannot afford.

    • 2
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      vas

      What is sovereignty?

      Whatever it is, does Sri Lanka possess one?

      How do you secure it while the country depends on export/import trade, employment opportunity abroad, foreign loans, aids, tourism, oil, ….. ?

      If you haven’t got any idea, please ignore my comment.

  • 6
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    China & India invading Sri lanka through different pacts and loans.our goons are busy on making commissions.

  • 1
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    vas,

    Utter donkeys like you JR defecated into his toilet pit. Today the very entity called dumb vas is the result of freedom JR dawned upon this land.

    • 0
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      Dont talk like an idiot. If you can’t express your thoughts don’t attempt to do it. Keep your mouth shut if you can’t express your thoughts. What did JR do to give freedom of expression He got his thugs to stone the judges, he created 83 riots and did nothing to stop it for 4 days. Freedom my foot, You better jump into hrs JRs shit pit and you probably will realise the freedom you get.

  • 2
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    In my view since Nixon -Kissinger- Deng era China has been piggy backing on US for more than 3 decades. Further Gorbahev’s glasnost and prestorika policies too gave China early warnings.
    Can China overtake US ? It is too early to tell.
    It was Portugese, Dutch, British, US who took turns to dominate the world.
    Will China get her turn soon without WW III ?

    • 0
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      Can China overtake US ? It is too early to tell.

      Britain was bankrupt by 1847.

      but, only by 1950, when Suez Canal problem, it showed that Britain can not carry any longer.

      Just wait and see.

  • 1
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    The next phase for mankind’s progress is not the illusory world of Walls and barriers but a world where “we shall have an association in which the free development of each is the condition for the free development of all”.

    Above is good for materialistic world. After material success, people feel empty and look for something else. You can see that in the economically developed societies. Some go back to that old life styles and some look for spiritual development. So, don’t generalize because that is what you want.

    Understand the world not for it’s present mentality, for the past experiences too. Western mentality is temporary.

    Globalization di dnot work for America. China applied it better. So, Obama wants to change it.

    Why don’t you think, Obama would be one of the worst leaders that america had. One day people will understand. Bush junior was a genuine white man from the couthern bible belt. but, Obama was different who tried to be another.

  • 0
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    Sri lanka has pnl Twenty two million people. It is mostly an importing country and None of the govt since the independance has been able to make it an exporting country. but, in order to fool voters they talk about various plans. Ranil wickramsinghe is no different.

    How can you think about handling India or China when Sri lankan politicians do not handle the local issues in Sri lanka. Sri lanka can not can not be self sufficent in it s food reqyirements. Only in the past Sri lanka had exported foods. Now, they want even onion from overseas. they don’t have any food preservation. It is still primitive world there.

    Ranil comes and explain economic plans in CT. when he is home he talks about increasing the number of politicians, giving more duty free car permits to politicians, increasing the salries, benefits and perks for politicians.

    Kumar David is talking BS here. Talk most basic things before talking big issues.

    It looks you are looking for some free money via some short contracts from the Ranil wickramsinghe govt. So, you are writing this garbage here.

    Sri lanka can think big, if they can handle the most basic issues. Sri lankan politicians’ basic need is to earn some commis. So, they do every thing to support that. Ranil Wants more politicians for that.

  • 0
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    Governments will exploit the people, world governments will exploit the worlds people.

    Until that changes nothing will change.

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