Globalization and the End of the Labor Aristocracy, Part 1

This is part one of a four-part article, first published in the March/April 2017 special “Costs of Empire” issue of Dollars & Sense magazine. Subsequent parts will appear on Triple Crisis over the next three weeks.

Economist and Triple Crisis contributor Jayati Ghosh argues that imperialism has not disappeared, but changed shape. The direct military conquest and control of economic territory by the great powers has given way (at least some of the time) to control through multilateral agreements and international institutions. Economic territory may still mean the seizure of land, mines, or oil fields—but it also may mean privatization of public assets and services, or the extension of intellectual property rights to new realms. Where the “labor aristocracy” of the imperialist countries once shared in the bounty of empire, the new incarnation of empire as “globalization” has helped grind away the incomes and status they once enjoyed.

Jayati Ghosh

Twenty-first century imperialism has changed its form. In the 19^th century and the first half of the 20^th century, it was explicitly related to colonial control; in the second half of the 20^th century it relied on a combination of geopolitical and economic control deriving also from the clear dominance of the United States as the global hegemon and leader of the capitalist world dealing with the potential threat from the Communist world. It now relies more and more on an international legal and regulatory architecture—fortified by various multilateral and bilateral agreements—to establish the power of capital over labor. This has involved a “grand bargain,” no less potent for being implicit, between different segments of capital. Capitalist firms in the developing world gained some market access (typically intermediated by multinational capital) and, in return, large capital in highly developed countries got much greater protection and monopoly power, through tighter enforcement of intellectual property rights and greater investment protections.

These measures dramatically increased the bargaining power of capital relative to labor, globally and in every country. In the high-income countries, this eliminated the “labor aristocracy” first theorized by the German Marxist theorist Karl Kautsky in the early 20^th century. The concept of the labor aristocracy derived from the idea that the developed capitalist countries, or the “core” of global capitalism, could extract superprofits from impoverished workers in the less developed “periphery.” These surpluses could be used to reward workers in the core, relative to those in the periphery, and thereby achieve greater social and political stability in the core countries. This enabled northern capitalism to look like a win-win economic system for capital and labor (in the United States, labor relations between the late 1940s and the 1970s, for example, were widely termed a “capital-labor accord”). Today, the increased bargaining power of capital and the elimination of the labor aristocracy has delegitimated the capitalist system in the rich countries of the global North.

Increasing inequality, the decline in workers’ incomes, the decline or absence of social protections, the rise of material insecurity, and a growing alienation from government have come to characterise societies in both developed and developing worlds. These sources of grievance have found political expression in a series of unexpected electoral outcomes (including the “Brexit” vote in the UK and the election of Trump in the United States). The decline of the labor aristocracy—really, its near collapse—has massive implications, as it undermines the social contract that made global capitalism so successful in the previous era. It was the very foundation of political stability and social cohesion within advanced capitalist countries, which is now breaking down, and will continue to break down without a drastic restructuring of the social and economic order. The political response to this decline has been expressed primarily in the rise of right-wing, xenophobic, sectarian, and reactionary political tendencies.

21^st Century Imperialism

The early 21^st century has been a weird time for imperialism. On the one hand, the phase of “hyper-imperialism”—with the United States as the sole capitalist superpower, free to use almost the entire world as its happy hunting ground—is over. Instead, the United States looks significantly weaker both economically and politically, and there is less willingness on the part of other countries (including former and current allies, as well as those that may eventually become rival powers) to accept its writ unconditionally. On the other hand, the imperial overreach that was so evident in the Gulf Wars and sundry other interventions, in the Middle East and around the world, continues despite the decreasing returns from such interventions. This continued through the Obama presidency, and it is still an open question whether the Trump presidency will lead to a dramatic reduction of this overreach (“isolationism”) or merely a change in its direction.

The latter point is important, because there is little domestic political appetite in the United States for such imperial adventures, due to the high costs in terms of both government spending and the loss of lives of U.S. soldiers. The slogans that recently resonated with the U.S. electorate, such as that of “making America great again” were in that sense somewhat self-contradictory—looking towards an imagined past in which the American Dream could be fulfilled relatively easily (at least for some), without recognizing that this was predicated upon the country’s global hegemony and far-flung empire.

The global context of imperialism is a complex one, in which the contours shift constantly. Recent political changes in various countries of the North have meant that global strategic alliances are also much more fluid than at any time over the past half century. The most talked-about current examples are the changing attitude of the Trump administration towards the United States’ traditional enemy, Russia; and the complicated international politics emerging in Europe, with the Brexit vote and the emergence of right-wing political forces in a number of other European countries. But it is also evident in other parts of the world, notably in China, where traditional friends and foes are no longer so easily demarcated. Yet there is another sense in which the fundamentals of the imperialist process have not changed, even as the forms in which they are expressed are altered.

Defining imperialism broadly, as Lenin did—as the complex intermingling of economic and political interests, related to the efforts of large capital to control economic territory—it’s clear that imperialism has not really declined at all. Rather, it has changed in form over the past half century, especially when we embrace a more expansive notion of what constitutes “economic territory.” Economic territory includes the more obvious forms such as land and natural resources, as well as labor. These are all still hugely contested: The wars for oil in the Middle East, the continuing attempts at land grabs in Africa, and the struggle over the fruits of extraction of natural resources in parts of Latin America and Asia all testify to this.

But the struggle over economic territory also encompasses the search for and effort to control new markets—defined by both physical location and type of economic process. Understanding territory in this way helps us understand how imperialism is still very much alive and kicking, even though some of the more classic features (such as direct colonial control and annexations) are less in evidence.

One of the key aspects of recent capitalist dynamism has been its ability to create new forms of economic territory, bring them within the realm of capitalist economic relations, and therefore also subject them to imperialist control. Two forms of economic territory that are increasingly subject to capitalist organization and imperialist penetration today are 1) basic amenities and social services (earlier seen as the sole preserve of public provision) and 2) the generation and distribution of knowledge.

A major feature of our times is the privatization of areas that, until recently, were generally accepted as public responsibilities. Basic amenities like electricity, water, and transportation infrastructure, and social services like health, sanitation, and education all fall into this category. Of course, the fact that these were seen as public duties does not mean that they were always fulfilled. Indeed, expanding public provision and access to high-quality public infrastructure and social services has only come about historically as the result of prolonged mass struggles. And issues of inequality in access have always existed. Nevertheless, the fact that provision is no longer necessarily in the public domain, and that private provision is increasingly seen as the norm, has opened up huge new markets for potentially profit-making activity. This has been a crucial way of maintaining demand, given the saturation of markets in many mature economies, and the inadequate growth of markets in poorer societies.

Opening up such markets has occurred through a combination of inadequate public provision and changes in economic policy to encourage private investment. The expansion of the global bottled water industry, for example, is partly a result of the failure of adequate public delivery of potable water. Meanwhile, global institutions—including formal organizations such as the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO), as well as more informal bodies such as the World Economic Forum—have actively encouraged private investment in formerly public sectors. This is a more complicated expression of the imperialistic drive for control over economic territory than the direct annexation of geographic territory, but that does not make it any less consequential.

Another new form of economic territory, increasingly subject to imperialist penetration, relates to knowledge generation and dissemination. The privatization of knowledge and its concentration in fewer and fewer hands—especially through the creation and enforcement of new “intellectual property rights”—have become significant barriers to technology transfer and social recognition of traditional knowledge. This is evident in the case of access to medicines, even essential and life-saving drugs. Patents reward multinational companies, allowing them to monopolize production, set high prices, or demand high royalties. Similarly, control over seed patents, overwhelming held by multinational agribusinesses, have enabled monopoly control over crucial technologies for food cultivation across the world, even in the poorest societies. The cases of medicine and food are comparatively well known and highly controversial, but much the same is true for industrial technologies, as well as knowledge for mitigating and adapting to adverse environmental changes (themselves resulting from the production systems created by global capitalism).

It’s not just that national and international institutional structures that should provide checks and balances to the privatization of knowledge are more fragile and less effective than they used to be. Rather, it’s that they are actively working in the opposite direction. The numerous “trade agreements” that have been signed across the world in recent years have been much less about trade liberalization—already so extensive that there is little scope for further opening up in most sectors—and much more about protecting investment and strengthening monopolies generated by intellectual property rights.

NOTE: Parts of this article appeared in “The Creation of the New Imperialism: The Institutional Architecture,” Monthly Review, July 2015.

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