Where, and how, one distinguishes between continuity and change goes to the heart of methodological differences in the social sciences, and in intellectual endeavors more broadly. In the case of globalization, there are those who stress the underlying continuity, while others claim there has been a profound disjuncture in the historical development of capitalism as a mode of production. Political implications always follow from theorization of the social world. But even when there is agreement on the dimensions of a situation there may still be profound differences over what is to be done, and where individual and organizational efforts are best directed. In the case of the overlapping conversations concerning globalization, the topic of the book under review here, this is all certainly true.
Analytically, Paul Hirst and Grahame Thompson argue on the side of underlying continuity rather than radical discontinuity. Politically, they argue in favor of middle ground reforms. They are critical of both extreme free–market analysts on the political right, and of Marxists and other critics of capitalism, on the left. Specifically, they argue that: the present highly internationalized economy is not unprecedented; genuinely transnational companies appear to be relatively rare (most are multinationals imbricated in their home countries’ political economies); contemporary capital mobility is not producing a massive shift of investment and employment from the advanced to the developing countries; foreign direct investment is actually highly concentrated among the advanced countries and the Third World remains marginal in both investment and trade; the world economy, far from being genuinely global, concentrates investment and trade flows within the economies of the core; and perhaps most importantly, global markets are by no means beyond societal capacity to regulate transnational capital, instead it is elite preferences and power which prevent such measures. They do not deny trends towards increased internationalism, nor that there are important constraints on nationalist industrial policy; their claim is rather that there is still a major role for nation–state level policy measures.
These writers suggest that the myths have changed from the claim, circa the 1950s and 1960s, that a capitalism without victims was a clear prospect, to the contemporary and equally wrong–headed myth of the uncontrollable global juggernaut, which requires all individuals, companies, and countries to accommodate to competitive forces at any cost or else become losers. As they see it, globalization is a myth suitable to a world without illusions. It robs us of hope by overstating the extent of dominance of the world market.
The book’s strengths are in the discussions of the history of the international economy, especially migration and international labor markets, monetary and exchange rate regimes, and integration measures. Hirst and Thompson note the dramatic inequalities of contemporary capitalism in terms of life expectancy, income, wealth, and the exclusion of the vast majority from the benefits to be derived from the present system. By looking at the numbers they show that, to the extent a globalized economy exists, it is oligopolistically organized and hardly the outcome of the perfect market competition of the mythmakers. Their treatment of technological determinants skirts close to a technologist framing at some points but also stresses the unprecedented attack on labor by business interests, especially in the United States and the United Kingdom since the 1970s, which included the deliberate undermining of the wages of production workers and cutbacks in shop floor employment. They link the increased dominance of finance to the growth of income inequality.
Discussing the East Asian financial crisis Hirst and Thompson underline the (now widely accepted point) that although these countries had strong sources of domestic savings, they opened their economies to foreign investors, and permitted reckless lending by banks and other financial intermediaries, under intense Western pressures. International Monetary Fund (IMF) bailouts protected these foreign creditors but brought little benefit to local economies. In their discussion of trade and competitiveness they review the extensive research that clarifies the nature of European unemployment. They demonstrate that the labor market characteristics in Europe, which conventionally appear under the heading of “harmful rigidities,” such as protective labor standards, job protections, unionization, and high unemployment benefits, have no observable impact on unemployment.
The degree of international exposure per se is not the issue, rather the domestic response to it is what counts. Their discussion of the contrasting experiences of Sweden, which has disappointed social democrats, and the great success in recent decades of the Danish welfare state, and more broadly, the Danish economy in the world economy, is useful as are the analyses of the Dutch and Italian cases. The nature of local politics and policies do matter, as do the struggles over control of the public realm and the extent of freedom of the market.
Hirst and Thompson are also helpful in demystifying assertions that the managers of financial institutions have known what they were doing. They suggest that such people have been as dazed and confused as the average citizen concerning how the financial system operates. Hirst and Thompson suggest further that, since the financial crisis which began in Asia in 1997 and the counterproductive interventions by international agencies and the United States that followed, there are clear indications that the project of creating a world economy based solely on market forces is “if not in full retreat, at least in suspension.” This seems to me an overly optimistic reading of the current situation. They are surely right, in the present historical moment, that what exists is an international economy in which nation–states matter. However, they implicitly overestimate both the willingness of national elites to take independent action, and the room for them to do so, caught as they are between the demands of their working class, and those of multinational capital, which is supported by powerful host governments and the international institutions they command. By ignoring class relations, and minimizing the power and agenda of imperialism as a political economic force, these authors take an altogether too optimistic view that suggests grounds for optimism concerning the prospects for benevolent international cooperation.
For all the virtues of their analysis Hirst and Thompson side with those who frame the core argument in this grossly oversimplified and misleading form: prosperity and growth of the world economy are more likely in an open, liberal trading order; environmental concerns are best addressed by diverting revenues from growth in a prosperous international economy. Their framing of the issue as “protectionism equals stagnation, free trade equals growth” is surely disappointing. They tell us that the lesson of the 1930s is that widespread protectionism is self–defeating. They do not distinguish between policies motivated by the need of the working class for protection from the depredations of capital, and protectionism in which national capitals and their labor allies, attempt to gain at the expense of other national capitals and workers.
The choice, according to these authors, is between rule by an economic liberal technocracy pushing its free–market dogmas, which have been discredited by economic crisis, and the progressive governance of capital’s reformers, as in the World Bank’s push for better public administration and its advocacy of good governance measures for Third World economies. Their policy discussion offers such judgments as “Public development assistance can best be performed by a limited variety of competing agencies…sufficient to embody different development strategies and thus permit alternative routes to the future.” What does that mean? It is the coded siding with those who want to end the monopoly control by the IMF and the Washington consensus, which strangles the freedom of developing countries and forces them into the mold of privatization, devaluation, and austerity, which are part and parcel of imperialism’s design. However, this is not what these authors, who wish to carefully position themselves in opposition to the free–market right, and the anti–capitalist left, are willing to say outright. Their policy discussion thus remains within the terms of mainstream development discourse, focusing on developing better taxation systems, the orchestration of social consensus, and the emergence of a political culture that “balances collaboration and competition.”
Hirst and Thompson advocate close coordination between the major capitalist powers to promote employment in the advanced countries. We are told that the European Union can best ensure its security by promoting prosperity in the east and increasing living standards in its own poorer southern states. But little is said about how to do these things. The goal of promoting prosperity in the east can be the rationale for reneging on former socialist state promises of pension funding at levels which match inflation, closing child care centers, and offering tax incentives to foreign capital with monies taken from education and public health. In this book, the real effects of economic choices are rarely made explicit.
This reviewer would like to see would–be capitalist reformers accept a “dare to struggle, dare to win” militancy on such matters as tax havens and dumping pollution, or even as the authors suggest, on agreeing to minimum standards of conduct and relief from such harms. I like the social democratic agenda compared to the viciousness of neoliberalism. But, which reforms the system is willing to make has something to do with how well organized the antisystemic forces are. Even for good reformists who want modest change, the support of more radical proposals and more militant tactics is a good approach to consider.
Of course there is some danger that if people really understood the nature of the system the radical critique of capitalism would spread. There is some evidence in the current period, since the Seattle protests against the WTO in 1999, that a more radical critique of capitalism is gaining strength and that the workers of the world, and increasing numbers of progressive activist participants in demonstrations, are bringing capitalist globalization into question. This book provides important insights for those seeking to understand what is going on—even to those readers who will want to go well beyond its modest appeals to the presumably more enlightened sectors of the ruling class.