This year we are observing the hundredth anniversary of the eruption of the First World War. One hundred years ago, one June morning, the Archduke of Austria, Franz Ferdinand, was assassinated in Sarajevo. This event sparked a flame that would plunge the whole of continental Europe into warfare, leaving 40 million dead, a landscape torn to pieces, and a series of economic and social problems that would eventually lead to the rise of fascist dictatorships in the years ahead.
What are the lessons that we can distill 100 years later?
First, let’s recall the conditions leading to 1914. The 19th century globalization that culminated on the eve of the First World War was shaped by the imperial interests of colonial Europe, with England serving as the hegemonic leader of the global economy under the gold standard. The logic of global capital required that the metropoles of Europe extend their imperial control over lands in sub-Saharan Africa, the Middle East, and East Asia. Nineteen-fourteen exploded as the imperial titans clashed over the boundaries of expansion.
Colonial imperialism had a further role in the global expansion of capital. Given the logic of global finance, the hegemonic leader, England, had to run a current account deficit in return for supplying sterling, the world currency of the time. England indeed ran a deficit with the other metropoles; while it financed these deficits from the surpluses it acquired from its colonies. The global peripheries of the Ottoman Empire, India and Pakistan, and East Asia fell prey to “free trade,” as colonial markets served as outlets for surplus cheap manufactures produced in England. Imperial expansion helped create conditions of sufficient effective demand and resolve the main threat to the logic of capital: overproduction/under-consumption.
As more and more indigenous lands were absorbed into the imperial logic of global capitalism, the limits of capital accumulation were gradually reached. In Lenin’s words, “when capitalism enter(ed) the monopoly stage of imperialism, it exhausted its potential and became moribund.” Rival imperialist powers clashed as their colonial borders met. A world war to reshuffle these borders was thus inevitable.
In our current era, conventional colonial wars are a thing of the past. The hegemonic metropoles of global capital ceaselessly try to portray 21st century globalization as a project about sharing technology and cultural values. In this age of new-imperialism, developed economies of the capitalist core behave as a collective imperial agent and use “globalization” as a cover-phrase. Today’s globalization disguises the ideological interests of globalizing capital, its strategic policies to re-arrange the roles of developing nations in the international division of labor, and to consolidate the capital’s supremacy over labor.
At a more general level, this process entails “… a programme for destroying collective structures which may impede the pure market logic” (Bourdieu, 1998). In order to sanctify the power of the markets in the name of economic efficiency, this “infernal machine” requires the elimination of administrative or political barriers which limit the owners of capital in their quest to maximize individual profit, which is upheld as the supreme indicator of rationality.
The current phase of modern imperialism is further marked by the hegemony of international finance capital, which is the driving force behind globalization. In Prabhat Patnaik’s words,
not only does capital-as-finance function as capital-as-finance, but even capital-in-production also functions as capital-as-finance; capital-as-finance on the other hand has no special interest in production. This is basically what the process of ‘financialization’ involves.
such uninhibited global operation requires that the world should not be split up into separate blocs, or into economic territories that are the preserves of particular nations and out of bounds for others. The interests of international finance capital therefore require a muting of inter-imperialist rivalry. If this process of muting of inter-imperialist rivalry began in the post-war period as an outcome of the overwhelming economic and strategic strength of the U.S. among capitalist powers, it gets sustained in the current phase by the very nature of international finance capital.
In this environment, portfolio investors become the ultimate arbiters of national macroeconomic policy. Public policy becomes synonymous with populism and waste. Democratic institutions are put under siege through endless lists of conditionalities set forth by the IMF and the World Bank. The IFIs’ ratings turn into strategic weapons for aligning economies under the strategic realm of finance capital. Even narrowly political decisions are under scrutiny. Consider, for example, the Turkish parliament rejecting the use of Turkish soil by U.S. troops in the early days of the Iraq invasion. In exchange for $25 billion of aid, the United States asked permission from Turkey to use its borders with Iraq. When the proposal was rejected, chaos ensued, driven by the IFIs and their rating agencies. The following excerpt from Morgan Stanley Economic Forum on Turkey (March 4, 2003), was a critical example:
[T]he latest parliamentary decision to reject the much-debated ‘war motion’ is such a risk that will no doubt disturb the fragile equilibrium…[Turkey] is unlikely to get the promised $24 billion that would ease pressure on the domestic debt market.
The report concluded with the stunning question:
[W]hat happens if the parliament does not altogether vote for the economic reforms, arguing that 80% of the Turkish population is against the IMF program?
The report was not only concerned with the loss of $25 billion worth of liquidity for the Turkish financial centers, but was further concerned that the people would exercise their rights over the future of the IMF-led austerity program in Turkey.
In the classic words of Diaz-Alejandro: “Good-bye budget deficits, hello democracy deficit…”.
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