Globalization from below: The world’s other economy (New Preface)

By | June 1, 2014

New Preface to Carlos Alba Vega and Gustavo Lins Ribeiro editors Globalization from Below: The world’s other economy (Spanish edition, Mexico City, 2015)

Contents:

1. The great transformation
2. Globalization from above
3. Globalization from below (and above)
4. The informal economy has taken over the world
5. The digital revolution and intellectual property
6. Anthropology and economics

The great transformation

We are forming a world society and call it “globalization”. There is nothing inevitable about this. Globalization on a similar scale occurred before 1914 and was then reversed by an age of war and revolution. Emergent world society is the new human universal – not an idea, like the catholic or bourgeois versions that preceded it, but the fact of 7 billion people living together on this planet. We urgently need to find new principles of association that will make our world habitable. In approaching such a task, I imagine modern world history as a sequence of three centuries, 1800-2100, each profoundly different from the others. Indeed, if the 21st century repeats the pattern of the 19th or the 20th, there will not be a 22nd.

In 1800 the world’s population was roughly one billion. At that time only 3% lived in cities. The rest lived mainly by extracting a livelihood from the land. Animals and plants were responsible for almost all the energy produced and consumed by human beings. A bit more than two centuries later, world population has reached seven billions. The proportion living in cities is about a half. Inanimate sources converted by machines now account for the bulk of energy production and consumption. For most of the intervening period the human population has been growing at an average annual rate of 1.5%; cities at 2% a year; and energy production at around 3% a year. This last figure is double the rate of population increase, a powerful index of the economic expansion of the last 200 years. In consequence, many people live longer, work less and spend more than they did before. But a third of humanity still works in the fields with their hands; and the distribution of all this extra energy has been grossly unequal. Americans each consume 400 times more energy than the average Ugandan.

This hectic dash from the village to the city is widely assumed to be driven by an engine of economic growth and inequality known as “capitalism”. But several social forms have emerged to organize the process on a large scale: empires, nation-states, cities, corporations, regional federations, international organizations, capitalist markets, machine industry, global finance and telecommunications networks. There is a pressing need for more effective social coordination at the global level and the drive towards local self-organization is strong everywhere. Special-interest associations of every kind proliferate. Those who resist this unequal society often denigrate the dominant bureaucratic institutions — “the state” and “capitalism” being favourites – in favour of promoting small-scale self-organized groups and networks. Yet it is inconceivable that any future society of this century could dispense with the principal social forms that have brought us to this point. So we must work out how states, cities, big money and the rest might be selectively combined with citizens’ initiatives to promote a more democratic world society. A first step would be to emancipate ourselves from viewing the economy exclusively in national terms.

The period 1800-2100 may be thought of as a political drama in three acts driven by huge demographic shifts. In 1900 Europe (including Russia) had a population of 400 million, three times Africa’s and a quarter of the world total or 36% including lands of new European settlement. Europeans then controlled four-fifths of the inhabited land area. By 2100 Asia is projected to have 43% of the world’s population (down from 60% today), Africa 39% and the New World, Europe and Oceania altogether only 18%. Europe’s share will have shrunk from 25% to 6% in 200 years. This is because, while most regional populations are ageing, Europe’s is ageing fastest and only Africans are posting rates of increase comparable to Europeans in the 19th century. The Asian manufacturers, especially China, have recognized Africa’s centrality to the growth of world demand in the coming century, but the Europeans and Americans still cling to a model of world society in which their own dominance is taken for granted.

Europeans made modern world society in the nineteenth century by forcing the rest of humanity to join their empires. This was principally thanks to a machine revolution that gave them overwhelming superiority in transport, communications and armaments, as well as manufactures more generally. At the same time, a population explosion fuelled their migration to all corners of the planet. The most powerful political entity to emerge from all this was the Anglo-Indian super-state. The other European powers were forced to react to its dominance – the French in Egypt, the Russians in Afghanistan, the Germans in Persia – and in this way the seeds were sewn for the First World War.

So what happened in the 20th century? Three decades of war and depression suggested that the world’s future lay with competing states of various kinds – communist, fascist, liberal, developmental. This culminated in the nuclear nightmare of the Cold War. But the century’s main event was the anti-colonial revolution, the process whereby peoples coerced into world society by Europeans in the previous century now sought to establish their own independent relationship to it. Nowhere was the scale and speed of this revolution more dramatic than in China, the world’s most poverty-stricken and violent region in the 1930s and now a contender for global leadership. The impact of India’s development on world society since the end of the Cold War is almost as dramatic. But the freeing up of global flows of money and information in the last three decades has brought back extreme inequality and instability to the world economy along the lines of the age of financial imperialism before World War I.

National economic management has been unravelling since the US dollar left the gold standard in 1971. The money circuit has been progressively detached from politics and production and has grown exponentially in size; but the economic consequences of the lack of fit between national controls and global finance were long disguised by the credit boom that ended in 2007-8. Since then, the North Atlantic societies have been in the doldrums, while “emerging” countries like India, Brazil and China have sustained growth rates comparable to Russia’s earlier (annual average 10% in 1890-1913). The divergent unipolar world made by the European empires is being replaced by a convergent multipolar version which resembles the world in the 12th century.

The growing inability of national governments to cope with such a world has led to the rise of regional trading federations such as ASEAN, NAFTA and Mercosul. The European Union was originally one of these, following the path taken by Germany from customs union to federal state a century before. The rise of both neoliberalism and the internet encouraged dreams of money and markets uncontaminated by politics. Individual nation-states lack the means of protecting their citizens from the harsh winds of world markets. But Europe chose a fixed exchange-rate union that echoed Bretton Woods and before that the gold standard. This was ill-suited to the regime of multiple currencies, virtual markets, transnational corporate networks and shifting alliances between states that characterizes the world today.

Globalization from above

The dominant economic form of the 20th century was a synthesis of industrial capitalism and the nation-state that I call “national capitalism”. This was based on an alliance between capitalists and the military landlord class to contain the social energies of rapidly expanding cities in the late 19th century. It was an attempt to manage money, markets and accumulation through central bureaucracies in the interest of citizens. National capitalism originated in a series of political revolutions of the 1860s and early 70s, including the American civil war, the abolition of serfdom in Russia, Italian and German unification, British democratic reforms, Japan’s Meiji Restoration and the French Third Republic. Karl Marx published Capital at this time. These governments established new legal conditions for business corporations; a bureaucratic revolution was launched. Several decades of financial imperialism featuring the global migration of 100 million Europeans and Asians were followed by the second Thirty Years War of 1914-1945; and then by developmental states which imposed strict rules on economic actors in the post-war decades.

The current world crisis is not merely financial, a moment in the historical cycle of credit and debt, but rather a new stage in the history of money. Deregulation has led to politics being still mainly national, while the money circuit is global and lawless. We are witnessing the collapse of the economic forms that the world lived by in the 20th century. National capitalism has been unravelling since the US dollar went off gold, money futures were invented and the Bretton Woods fixed exchange-rate system was abandoned in the early 1970s. The chief symbol of this decline is the ongoing crisis of the euro that was meant to protect individual countries. As the need for international cooperation grows, the disconnection between economy and political institutions makes effective solutions unattainable.

Of the 100 largest economic entities on the planet, two-thirds are business corporations, half of them bigger than the eight largest countries. The corporations, having bought national governments, are now preparing to make a world society where they would be the only effective citizens. This process is actively promoted by the United States and European Union, where the majority of transnational corproations originated. Oliver Williamson recently received a Bank of Sweden (“Nobel”) prize in economics for his development of Ronald Coase’s theory of the firm (1937). Coase asked why, if markets are efficient, any self-employed person would choose to work in a collective rather than outsource what they can’t best do themselves. His answer was “transaction costs”. Williamson takes this division between what is internal and external to the firm – and by extension the social division of labour as a whole — to be entirely flexible, including relations between corporations and governments. The Fordist phase of internalizing transaction costs is over, not least because the digital revolution has cheapened the cost of transferring information reliably.

Coase/Williamson imagine a world where companies control the marketing of their brand, outsource production, logistics and much else and internalize government. Why rely on states for conflict resolution? Corporations also have to handle conflicts internally. Why have state laws, when what the world needs most is moral law? The discourse of Corporate Social Responsibility constitutes a forum for negotiating changes in the relationship between firms and society. Privatization of public services is the other side of that coin. What kinds of political mobilization are capable of resisting it all?

A global plutocracy has been formed in recent decades. Modern business corporations were granted the rights of individual citizens in the late 19th century and now combine those rights with limited liability for debts which the rest of us are denied. Even the ancient Romans limited the spending of the rich in political campaigns. The US Supreme Court has refused to restrict corporate political spending since it would infringe their “human rights” and is now considering if their religious rights are infringed by Obamacare. These corporations once built their wealth by producing industrial commodities for profit at prices cheaper than their competitors. Now they rely on extracting rents (transfers sanctioned by political power). Yet these rent-seekers, far from being punished for stealing from the public, are bailed out by our taxes and held up as shining examples of super-rich consumption to be adulated by a public that has exchanged equal citizenship for circuses without the bread (television). There are no longer any political solutions to our economic problems. Some new form of political economy may eventually emerge, perhaps ushered in by a world war or massive civic unrest, but its shape is hard to discern now.

Globalization from below (and above)

The present volume provides a vivid antidote to such a vision of world society as being made from the top down. I will not repeat here the excellent summaries of its contents given by the editors. Above all the book provides testimony to the power of ethnographic realism. The Marxist critic, Raymond Williams, once identified “realism” by three features: it reveals a class previously invisible to readers; it is contemporary; and it undermines the sacred narratives sustaining unequal society. Globalization from below succeeds brilliantly in all three. Its ethos, like that of the “informal economy” before, is empirical humanism — to make the invisible visible. But how do its descriptions relate to the political impasse of our world?

Effective resistance to a corporate takeover will require selective alliances between self-organized initiatives on the ground and large-scale bureaucracies of the public and private kind. As Albert Camus told us in The Plague, the human predicament is impersonal; there are powerful anti-humanist forces in our world. So we have to build bridges between local actors and the new human universal, world society. To be human is to be someone who depends on and must make sense of impersonal social conditions. In the struggle with the corporations, we need to be sure that we are human and they are not. The drive for economic democracy will not be won until that confusion has been cleared up.

Many activists, however, will not consider working with bureaucracies that they think of as the enemy. Yet the French revolution was partly financed by the shippers of Bordeaux and Nantes, the Italian revolution by the industrialists of Milan and Turin. Kenya’s world-leading experiment in mobile money, M-pesa, was launched by a subsidiary of Vodacom. Hewlett-Packard has developed research stations in outlying areas in order to make computers accessible to the world’s “poorest four billion”. The notion of a “popular economy” has emerged in Latin America since the 1990s, bringing new coalitions (peasants, urban informal workers, unions) into an alliance with progressive political regimes. Brazil under Lula introduced a community banking system combining microfinance and complementary currencies with strong local democratic input. The government of Uruguay has sponsored a “3C” alternative circuit of exchange and credit for SMEs in which national utilities and local tax offices anchor the circulation of unpaid invoices as currency. A South African company is speeding up slow payments to the self-employed through a clearing system that allows banks to pay 70% of the value of invoices immediately. Presumably we want to live in a wired world; but I haven’t yet met a grassroots movement capable of launching a communications satellite. It doesn’t make sense to go it alone on a small scale, but one has to be selective in picking who to work with.

Given anthropologists’ preference to anchor economic strategies in people’s everyday lives, their aspirations and their local circumstances, the intellectual movement required should be one of extension from the local towards the global. We can’t arrive instantly at a view of the whole, but we can engage more concretely with the world that lies beyond the familiar institutions that immediately secure our rights and interests. According to Marcel Mauss and Karl Polanyi — and all the founders of modern social theory — the chief way of achieving social extension has always been through markets and money in a variety of forms. Money and markets are intrinsic to our human potential, not anti-human. Of course they should take forms that are more conducive to economic democracy. Anthropology might be a new kind of political education, one grounded in the circumstances people know well, but also capable of opening up wider perspectives. It helps to recognize that money and markets span the extremes of our most inclusive associations and our most intimate needs. As Georg Simmel said, money illustrates our human potential to make universal society. New principles of “economy”, conceived of as a specific strategy, must be discovered, articulated and disseminated. Such an economy, to be useful, should be based on general principles that guide what people do. It is not just an ideology or a call for realism. The social and technical conditions of our era — urbanization, fast transport and universal media – must underpin any inquiry into how these principles might be realised.

The informal economy has taken over the world

The idea of an informal economy was born in the 1970s when the post-war era of developmental states was drawing to a close. It seems, four decades later, that the economy has now escaped from all attempts to make it publicly accountable. What are the forms of state that can regulate a world of money that is essentially lawless? The informal economy started off as a way of talking about the Third World urban poor living in the cracks of a rule system that could not reach down to their level. Now the rule system itself is in question. Everyone ignores the rules, especially the people at the top – the politicians and bureaucrats, the corporations, the banks – and they routinely escape being held responsible for their illegal actions. Whereas the alliance between money and power used to be hidden, now it is celebrated as a virtue, wrapped up in neoliberal ideology. National economies and the world economy itself became radically informal as a result.

Not only has the management of money gone offshore, but corporations routinely outsource, downsize and casualize their labour forces, public functions are privatized, often corruptly, a global war over “intellectual property” has broken out and whole countries abandon any pretence of formality in their economic affairs. Here is no clandestine operation living between the cracks of the law. The market frenzy has led to the “commanding heights” of the informal economy taking over the state-made bureaucracy. Wall Street banks launder gangsters’ money through the Cayman Islands while mafias run opium out of Afghanistan with the support of several national governments. All of this has undermined whatever conceptual clarity the formal/informal pair – originally inspired by the state/market opposition of the Cold War — once had, to the point of their becoming often indistinguishable. The contributors to this book recognize this and wish to substitute for the old terminology “globalization from below”.

The shadow banking system — hedge funds, money market funds and structured investment vehicles that lie beyond state regulation – is literally out of control. Tax evasion is an international industry that dwarfs national budgets. The behaviour of transnational corporations is often blatantly criminal. Where to stop? The drug cartels from Mexico and Colombia to Russia, the illegal armaments industry, the global war over intellectual property (“piracy”), fake luxury goods, the invasion and looting of Iraq, 4 million dead in the Congo scramble for minerals. In 2006, a Japanese electronics firm, NEC, discovered a criminal counterpart of itself, operating on a similar scale under the same name and more profitably because it was wholly outside the law. The informal economy was always a way of labelling the unknowable, but the scale of all this goes beyond comprehension.

Inevitably, some dream of restoring the post-war era of social democracy, Stalinism and developmental states. The world turned then to governments to regulate markets. Their mission, for the first and only time in world history, was to reduce the gap between rich and poor, to increase the purchasing power of working people and to expand public services. The European empires were dismantled, beginning in Asia; a new world order was inaugurated under US hegemony, implementing the accords of Bretton Woods; the United Nations was formed and “development” – a post-colonial compact between rich and poor nations — was the order of the day. All of this took large amounts of state intervention.

The long post-war economic boom began to come unstuck around 1970. By the end of that decade, neoliberal conservatives were installed in power throughout the West. Their slogan was the free market and in the 1980s, with the active support of the IMF and World Bank, they set about dismantling state restrictions on the international flow of money in the name of “structural adjustment”, at first in the developing countries. The informal economy emerged in this context, not just to describe the Third World urban poor, but as a universal feature of modern economies.

“Informal” says what these activities are not – not regulated by state-made laws. We need to know more about what they are, to expose the positive principles organizing the informal economy. Its improbable rise to global dominance is the result of the mania for deregulation, linked to wholesale privatization of public goods and services and to the capture of politics by high finance. Deregulation has provided a fig leaf for corruption, rentier accumulation, tax evasion and public irresponsibility. Yet, while the credit boom lasted, criticism was drowned by celebrations of unending prosperity. Even after the bust, the political ascendancy of finance has hardly been challenged.

This is not to say that the state has faded away. It is very strong in the BRICS countries, for example, each of which in their own way is entering a phase of welfare state capitalism comparable to the West’s trajectory during the boom years after 1945. Pessimism concerning the political impotence of national institutions prevails in the North Atlantic societies whose world system is waning.

The digital revolution and intellectual property

What matter in our world are money, machines and people, in that order of priority. Our political task is to reverse the order. But most intellectuals know very little about any of them, being preoccupied with their own production of ideas. We need a new humanism appropriate to a world dominated by the impersonal power of money and machines. How is human communication evolving in the context of the digital revolution?

The digital revolution in communications consists of rapid changes in the size, cost and speed of machines processing information. The world economy is being transformed once more by radical reductions in the cost of producing a basic commodity, in this case the transfer of information. There was a time when international trade was in commodities extracted from the ground and services were performed locally in person. Now the person answering your business call could be located anywhere in the world and a growing number of service jobs are exposed to global competition. Vast profits are to be made in entertainment, education, the media, finance, software and all the other information services. But the digital revolution poses specific problems for accumulation since there is continuous downward pressure on prices in this sector arising from the ease of copying proprietary products.

Cheaper information transfers affect long-distance market relations. Money was traditionally impersonal so that it could retain its value when it moved between people who might not even know each other. The idea that transactions involving money are essentially amoral comes from its impersonal form; but until recently, in most societies, economic life was carried out by people who knew each other and were able to discriminate between individuals on the basis of experience. The transition to impersonal economic institutions came suddenly in the late 19th century. The main imperative of management was now to control subordinates; and this bureaucratic ethos stretched from the production lines to a mass market of consumers whose tastes were manipulated by public advertising.

The era of mass production and consumption may be ending as a result of cheap information transfers. It is now possible to attach a lot of information about individuals to transactions at distance. Some firms have adopted a system known as Customer Retail Maintenance (CRM) based on data banks that know no limit in scope. This enables them to target buyers who generate above average sales. Nowhere has this process gone further than in the market for personal credit. The number and variety of customized financial instruments now on offer is growing exponentially. For many people, this has introduced new conditions of engagement with the impersonal economy. It will be some time before its social effects are known, but digitized commerce has already spawned a war for control of the value generated by sales of information-based commodities. The slogan of this war is “intellectual property rights.”

We still think of private property as belonging to living persons and oppose private and public spheres on that basis. But what makes property private is holding exclusive rights against the world. Abstract entities like governments and corporations, as well as individuals, can thus hold private property. We are understandably confused by this development, especially since the rise to public power of the corporations rested substantially on collapsing the difference between real and artificial persons in economic law. This constitutes a major obstacle not only to the practice of democracy, but also to thinking about it. Sadly, it has become commonplace even for anthropologists to obscure the distinction between living persons and abstractions, as well as between persons, things and ideas.

Private property has not only evolved from individual ownership to predominately corporate forms, but its main point of reference has also shifted from “real” to “intellectual” property, that is from material objects to ideas. This is partly because the digital revolution promotes the economic preponderance of information services whose reproduction and transmission is often costless or nearly so. A similar sleight of hand is at work here as in the claim to corporate personhood. If I steal your cow, its loss is material, since only one of us can benefit from its milk. But if I copy a CD or DVD, I am denying no-one access to it. Yet corporate lobbyists use this misleading analogy to persuade courts and legislators that duplication of their “property” is “theft” or even “piracy.” It is ironic that the United States, born in an act of resistance against corporate monopoly, should now be foisting onto smaller countries an IP treaty that shores up the monopoly profits of transnational corporations.

Our world now resembles the Old Regime of agrarian civilization with unequal power concentrated in the hands of enforcers and rentiers. The label “information feudalism” is highly appropriate for our era. There is an obvious contradiction between coercive demands for tax and rent and the formation of a world market where people could enjoy the benefits of the digital revolution, if they were left free to exchange goods and services as equals. Human work was once conceived of as collective physical energy, as so many “hands”. The internet has raised the significance of intangible commodities. Labour is increasingly understood as individual creativity, as subjectivity. This shift has temporarily been captured by capital in insisting that “intellectual property” deserves closer regulation in the interest of its owners.

The fight is on to save the commons of human society, culture and ecology from the encroachments of corporate private property. This is no longer principally a question of conserving the earth’s natural resources, although it is definitely that too, nor of the deterioration of public services left to the mercies of privatized agencies. Increasingly we buy and sell ideas; and their reproduction is made infinitely easier by digital technologies. So the larger corporations have launched a campaign to assert their exclusive ownership of what until recently might have been considered shared culture to which all had free and equal access. Across the board, separate battles are being fought, without any real sense of the common cause that they embody. Readers of this volume will find many examples of this war in practice.

Anthropology and economics

Over a century ago, Alfred Marshall (Keynes’ teacher at Cambridge), in his synthesis of the marginalist revolution, Principles of Economics, defined economics as “both a study of wealth and a branch of the study of man”. Now Ronald Coase, who died recently aged 101, has published a manifesto with Ning Wang in the Harvard Business Review, “Saving economics from the economists”. They argue there that “The degree to which economics is isolated from the ordinary business of life is extraordinary and unfortunate…In the 20th century, economists could afford to write exclusively for one another. At the same time, the field experienced a paradigm shift, gradually identifying itself as a theoretical approach of economization and giving up the real-world economy as its subject matter…

“Economics thus becomes a convenient instrument the state uses to manage the economy, rather than a tool the public turns to for enlightenment about how the economy operates. But because it is no longer firmly grounded in systematic empirical investigation of the working of the economy, it is hardly up to the task….The reduction of economics to price theory is troubling enough. It is suicidal for the field to slide into a hard science of choice, ignoring the influences of society, history, culture, and politics on the working of the economy. It is time to reengage the severely impoverished field of economics with the economy. Market economies springing up in China, India, Africa, and elsewhere herald unprecedented opportunities for economists to study how the market economy gains its resilience in societies with cultural, institutional, and organizational diversity. But knowledge will come only if economics can be reoriented to the study of man as he is and the economic system as it actually exists.”

Globalization from below announces the aim of anthropologists to build a conversation about world society in the making — among ourselves and with other specialists, ultimately with the general public. This conversation is as much based on empirical investigation and comparison as it is on developing a theoretical and methodological framework for organizing research. Our first basic method is inspired by the ethnographic revolution that launched social and cultural anthropology in the twentieth century. This was the first sustained effort by a class of academics to break out of the ivory tower and to join the people where they live in order to discover what they do, think and want. Second, the economy is always plural and people’s experience of it across time and space has more in common than the use of contrastive terms like “capitalism” or “socialism” would suggest. This approach addresses the variety of particular institutions through which most people experience economic life. Third, our aim should be to promote economic democracy by helping people to organize and improve their own lives. Our findings must therefore ultimately be presented to the public in a spirit of pragmatism and made understandable for readers’ own practical use.

All of this is compatible with a humanist view. It must be so, if the economy is to be returned from remote experts to the people who are most affected by it. But humanism by itself is not enough. Our efforts must also be informed by an economic vision capable of bridging the gap between everyday life (what people know) and humanity’s common predicament, which is inevitably impersonal and lies beyond the actor’s point of view (what they don’t know). For this purpose a variety of methods have to be drawn from philosophy, world history, literature and grand social theory. It is not enough to seek alternative imaginaries of survival and development. We should be educating people about the world they live in. The “informal economy” idea was always part of that project. The present book is another. Ethnographic and historical realism, especially if focused on the classes hiding behind liberal myths, can be a powerful tool for anthropologists who make public education their mission.

Thomas Jefferson believed that the greatest threats to democracy were big government, organized religion and commercial monopolies. He managed to get safeguards against the first two included in the constitution, but was defeated on the third. He called them “pseudo-aristocrats”. Today they plunder our wealth at will, live in splendid isolation and know nothing of the rule of law. Welcome to the world the pseudo-aristocrats are making for themselves. The left need to wake up from their dogmatic slumbers. Anthropologists of globalization could tell them what is really going on out there.

 

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