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Four Crises of the Contemporary World Capitalist System

William K. Tabb taught economics at Queens College for many years, and economics, political science, and sociology at the Graduate Center of the City University of New York. His books include Economic Governance in the Age of Globalization (Columbia University Press, 2004), Unequal Partners: A Primer on Globalization (The New Press, 2002), and The Amoral Elephant: Globalization and the Struggle for Social Justice in the Twenty-First Century (Monthly Review Press, 2001). He can be reached at william.tabb [at] This essay is adapted from a talk presented to the Amandla Conference “Continuity and Discontinuity of Capitalism in the Post Apartheid South Africa,” in Cape Town, April 4–6, 2008.

This essay examines aspects of the global political economy that I hope will inform progressive governments and movements for social change. It evaluates the constraints and opportunities presented in the current conjuncture of world capitalist development by analyzing four areas of crisis in the contemporary world capitalist system. These are not the only contradictory elements in the contemporary conjuncture, but they are, in my view, the most salient.

The first problem is the financial turbulence that has gripped the economy of the United States and has had widespread effects. It is a crisis that further discredits mainstream Anglo-American economics. I do not know that it is the crisis of capitalism. For this to be the case it would not only have to become much deeper, but its impacts would have to be felt more dramatically as a systemic failure. Most importantly, a party formation capable of explaining how such crises are inherent in the nature of the functioning of capitalism and of inspiring a socialist alternative would have to mobilize a movement of the sort that ended apartheid in South Africa. Without the last, even a deep and painful crisis will be, at best, only the occasion for reforming and not abolishing capitalism.

A second crisis is that of U.S.-led imperialism, which has been discredited both in terms of its regime-change-wars-of-choice and the increasingly effective resistance to the international financial and trade regime we know as the Washington Consensus. Because of the incalculable harm neoliberalism has done, and continues to do, it is now ideologically on the defensive. A third point of crisis is the rise of new centers of power in what had been the peripheries of the capitalist system and the tensions this has unleashed, providing room to maneuver for countries wishing to break with the United States. A fourth area of crisis has to do with resource usage, the uneven distribution of the necessities of life, and a growth paradigm that is no longer sustainable. Here grassroots social movements in South Africa and elsewhere are leading actors in resisting privatizations and the imposition of a hyper-individualism that brings disaster for the most oppressed and exploited.

Crisis One: Financialization and Financial Crisis1

How much damage the current financial meltdown will cause remains to be seen, but the harm is already extensive. At the level of systemic crisis an important issue relates not just to the economic costs and the way rescue operations are premised on tax payer bailout, but whether financial capitalism can sustain itself. Martin Wolf, the Financial Times senior economic columnist, writes about capitalism “mutating” from “mid-20th century managerial capitalism into global financial capitalism.”2 John Bellamy Foster, editor of Monthly Review, argues “that although the system has changed as a result of financialization… financialization has resulted in a new hybrid phase of the monopoly stage of capitalism that might be termed ‘monopoly-finance capital.’”3 Finance has been able to restructure productive capitalism, the economy that actually produces real goods and services people consume. In a new way it appropriates more and more of the surplus created in the processes of production, not only in the core, but in what has been the periphery of the world system.

Taken as a whole the corporate profits of the financial sector of the U.S. economy in 2004 were $300 billion, compared to $534 billion for all nonfinancial domestic industries, or about 40 percent of all domestic corporate profits. They had been less than 2 percent of total domestic corporate profits forty years earlier, a remarkable indication of the growth of financialization in the U.S. political economy. This was both an economic and a political development, as the financial sector gained leverage over the rest of the economy, in effect gaining the power to dictate priorities to debtors, vulnerable corporations, and governments. As its power grew, it could demand greater deregulation, allowing it to grow still further and endangering the stability of the larger economic system.

It seemed that finance had developed a new magical M–M circuit, in which money could be made solely out of money, without the intervention of actual production. The new secret of accumulation was presumed to be leverage and risk management, which allowed the purchase of assets that promised higher returns even if they carried a higher risk, and the borrowing of many times the amount the investor had in equity capital—perhaps ten, twenty, thirty, or in some cases a hundred times as much. When so highly leveraged, even a small rise in value could return great profit on the initial investment. Given global markets, the money might be borrowed at low interest rates in Japanese yen and invested in high return U.S. financial assets, junk bonds, and derivatives of all sorts.

So long as asset values rose, whether in bundles of mortgages in collateralized debt obligations (CDOs), or more exotic products, investors made a great deal of money. This encouraged others to copy these strategies, to bid up asset prices. The increasing value of these assets allowed even greater borrowing to purchase still more, further bidding up prices, in an upward spiral producing bubbles that eventually popped. Financialization as an accumulation strategy has brought not only severe crisis with the failure of financial markets but has put the United States in a position resembling that of a poor nation in debt to foreign creditors—its currency declining, its trade policies favoring elites, and its government demanding that some taxpayers pay more to recapitalize the financial system while providing more tax cuts to the affluent and corporations.

Toxic collateralized debt obligations are featured in most discussions, but a central aspect of financialization is the growth in debt itself: government debt (much of it the result of military spending and tax cuts and other “incentives” for corporations and the rich), consumer debt of all kinds, and corporate debt. The explosion in debt creation has powered an economy that has strong stagnationist tendencies. The irrationality of a class divided society is that profits accruing to corporations will not be reinvested to produce things people and the society as a whole need and want, because the purchasing power of the working class is kept limited and the corporate rich will not pay the taxes needed by the state sector to provide desired public goods.

There is an overinvestment in capacity to produce that cannot be utilized within an irrational social structure in which the only effective demand is that backed by adequate purchasing power. Overproduction in the midst of unmet social needs characterizes the system, as does pressure on workers everywhere to take lower compensation as a result of the class power of capital and its ability to pit workers against each other. The surplus produced and appropriated by capital cannot find outlets in production and spills over into financial speculation where it is absorbed in speculative bubbles that eventually collapse, spreading chaos and pain through the economy.

Beyond these general tendencies is the connection between financialization and rising inequalities and the declining economic fortunes of most working-class people as prices for basics—home heating oil, gasoline, health care, and food—have soared. In the United States, where the victory of shareholder capitalism has been extreme (as opposed to stakeholder capitalism in which workers, communities, and the public are also considered interested parties whose views and needs must to a greater extent be taken into consideration), workers have been squeezed the hardest.

During the Bush presidency, the United States lost one in five manufacturing jobs and that too is part of financialization and globalization. Wages have been pushed down, pension benefits curtailed, health care burdens shifted onto workers and their families, employees made to work part-time or fired and hired back as “temporary” workers, and so on—all in order to meet profit targets and to finance the huge debts companies are burdened with as a result of widespread borrowing to finance takeovers. More people are working part-time or as temporary workers and are pessimistic about the prospects of their children. They see their government captured by the corporations and the wealthy.

Widespread popular pessimism is justified because three trends interact to make the prospects of the majority of U.S. workers bleak. The first is continued globalization of the production of goods and services to lower-wage venues. Less skilled work can be done more cheaply elsewhere. Further, no amount of education can preserve many jobs that can be done by well educated workers in India, China, Eastern Europe, and elsewhere. Second, technology increases output per worker, meaning that each worker can produce more, and when demand for output does not expand faster than their productivity, fewer workers are needed. We see this in basic industries such as auto and steel that once employed far more production workers. Third, the jobs that are expanding are mostly low paid, nonunionized McJobs. Furthermore, the unrelenting attack on unions starting with Ronald Reagan’s destruction of the air traffic controller’s union set the precedent for using replacement workers to break strikes, not to mention the ability of owners—thanks to National Labor Relations Board connivance—to fire workers.

Anglo-American expertise in finance was presumed to be the lever that would ensure the continued prosperity of these economies. Having pioneered the growth of financialization in their own economies, promoting growth through the creation of vast amounts of debt, and forcing its financial regime and rules on the developing world through the mediation of the International Monetary Fund and World Bank, capital has been expanding financial operations into the so-called emerging markets. Now we see a meltdown on Wall Street and the irony of foreign sovereign wealth funds and other investors having to rescue the pillars of the U.S. financial empire. How should we understand these contradictory developments? This is a political question. It needs to be answered like any other economic matter in which a small elite benefit at the expense of the many. Its solution should not be how to allow them to continue to do so but how to force social regulation so they cannot do so.

It is here that the loyal opposition, in the United States the Democratic Party, in Europe the social democrats, and third-way triangulators everywhere, by essentially accepting the power of capital, lose the respect of working people, who now must self-organize by creating anticapitalist parties if they are to defend their interests and change the social relations that promise only a future of further exploitation. In Die Linke, the German party formation far to the left of the Social Democrats, we see a successful example of such a party, which is becoming a force in that country’s politics. As noted later in this essay, in Latin America, the continent with the longest experience with the devastation of neoliberalism, the masses have supported a variety of left parties that promise to one degree or another to break with capitalist social relations.

Crisis Two: U.S. Imperialism—Losing Hegemony

There have been two recent failures of U.S. imperialism: the discrediting of the neoliberal Washington Consensus and the revulsion against the shock and awe violence of Washington’s arrogant militarism. The growing condemnations qualify, I think, as a crisis for the continued easy exercise of hegemony and for the ruling-class presumption that it has the capacity unilaterally to run the world. After the failures of Iraq and Afghanistan, the hubris of the Bush neocons has been discredited and their program of wars and conquest has been questioned and perhaps now rejected by most Americans.

One faction of this ruling class has seen international trade and finance regimes favoring U.S. capital as key. The other wing has been quick to threaten and take military action to reassert and impose U.S. hegemony. The U.S. ruling class always employs both strategies, but the balance between the two shifts with the state of the world and domestic politics.4 The two dominant ideological factions of this class can be characterized by looking at the most powerful cabinet figures and policies of two recent presidents. The key figure in Bill Clinton’s administration was Robert Rubin, the secretary of the treasury. Under Bush, Donald Rumsfeld, the secretary of defense was the most powerful.

Of course, the dominant figure in the administration is Vice President Cheney, a man of incomparable devious devotion to an imperial presidency and the rewarding of a small elite, willing to use whatever means necessary to intimidate and destroy opposition at home and abroad. With Clinton, although the projection of U.S. power and use of violence were important, the spreading of the Washington Consensus was the key foreign policy. Under Bush it was shock and awe. Today both strategies are proving unsuccessful to a remarkable extent. The failure of the Washington Consensus to bring development is widely recognized, and despite its imposition on dozens of countries in the 1980s and 1990s, it is now being effectively resisted around the world. Again, this is not to say that both policies have not done and continue to do great damage.

Let me comment briefly first on U.S. militarism and then more fully on the demise of the Washington Consensus. Americans were led into a war in Iraq on the basis of lies and are now unconvinced that the attack on Iraq was a good thing. There is a dawning understanding that the United States not only lost Iraq but that the situation in Afghanistan is further revealing an inability to occupy and enforce regime change and imperialist stability. The increased awareness that such adventurism is bankrupting the country while domestic priorities like health care and jobs with adequate pay need to be the priority is challenging imperial America from within to an extent not previously seen.

Many Americans may still support the assertion of national power in easy victories over weaker “enemies,” but they have had their fill of long, drawn out, costly misadventures. For many, the charade of “Mission Accomplished” has produced reactions ranging from unease to hatred of those who think them stupid and so easy to manipulate. U.S. imperial ambitions in Iraq have led to much elite soul searching, and they have promoted popular opposition not only abroad but increasingly at home where the claim to be spreading democracy and fostering development are wearing thin. Globally these pretenses are thoroughly discredited. The decline of U.S. credibility and hegemonic power is a major part of what is new in the world system.

Last year on the tenth anniversary of the East Asian financial crisis, two points were widely made. The first was the acknowledgment that capital market liberalization had brought instability and not growth. Even studies by International Monetary Fund (IMF) economists came to this conclusion. A paper coauthored by the chief economist of the IMF concluded that it is difficult to make a convincing connection between financial integration and economic growth once other factors are taken into account. The sudden stop of capital inflow can be devastating. Second, neoliberal policies were hardly mistakes. It is clear that neoliberal ideologues and Wall Street interests pushed policies that harmed debtor countries while the financiers profited from financial liberalization. It is not only radical leftists who now hold this view.5

What took place in countries forced into accepting Washington Consensus neoliberal policies was a process of accumulation by dispossession—a construct introduced by David Harvey. This is a process in which working people are divested of their assets and their rights. He has in mind the privatization of water, health care, and education, goods that had been or should be entitlements. The sale of these things in private markets dispossessed those who could not afford what should have been theirs by right. The term is a propos of what has happened in the aftermath of financial crises. Global state economic governance institutions have imposed structural adjustment programs and conditionalities that, in privatizing public goods, dispossess people through debt repayment, the loss of government benefits, and the liberalization of the local economy to the benefit of foreign investors and domestic elites.

When the United States got in trouble in 2007, Washington rescued financial institutions, rather than imposing the harsh medicine it advocated and forced on others. Instead, it lowered interest rates and bailed out those responsible for the crisis. Moreover, after decades of denouncing the unsophisticated banking structures and practices and crony capitalism of the third world, the United States financial system was revealed as incompetent. The presumed sophistication of bank risk-assessment models were shown as so much hogwash. The dishonesty revealed in the subprime market was far more extensive than anything found in any developing nation. Rather than letting the value of financial assets find their equilibrium level in transparent markets, the U.S. Treasury tried to organize a cartel to prevent this process and to shore up the housing market and save the collateralized debt instruments from collapsing, much at odds with what the Treasury Department had recommended to others. As Martin Wolf wrote, “Not for a long time will people listen to U.S. officials lecture on the virtues of free financial markets with a straight face.”6 Of course, countries like South Africa are left with heavy debt burdens and the neoliberal policies embraced by the Mbeki government, while the United States itself follows far different policies.

One impact of this unmasking of the interests that benefited from the Washington Consensus policies was a rush by Western leaders to invite the now more significant developing countries to take a greater role, to be given greater voting rights, and to exercise more power in the Bretton Woods institutions. By 2007, when the developing economies were accounting for a far larger share of the world economy and many were growing significantly faster than the richer economies that had long dominated these regimes, we began to hear statements such as the one from Mervyn King, governor of the Bank of England, that the IMF could “slip into obscurity” without radical reform.7 That the developed countries with 15 percent of the global population hold 60 percent of the voting power at the IMF and World Bank is perhaps finally no longer in their own interests.

On the diplomatic front, there have been proposals to broaden the G-8. Philip Stephens, the chief political commentator of the Financial Times, proposes expansion to a G-13 by adding the IBSA countries (India, Brazil, and South Africa), along with Mexico and China. The idea of such expansion according to World Bank President Robert Zoellick is that they are being invited to become “responsible stakeholders.”8 It may be that the reorganization of the world economy is producing a more inclusive transnational capitalist class with a global interpenetration of ownership most prominently through sovereign wealth funds but more commonly through a diversification of ownership on a global scale and the increased interaction among elites.9

At the same time, discontent with growing inequalities and the arrogance of capital, local and foreign, has created local movements for fundamental change and awareness through venues such as the World Social Forum that another world is possible. There are conflicting pressures on the governments of the South, from capitalists at home, the masses below, and governments and international agencies representing foreign capital above. While there is at the moment the expectation that these governments will generally throw their lot in with the traditional imperial powers, there has been increasing popular pressure against this.

There is of course the likelihood that financialization centered in the North will continue to grow in the countries of the South, with banks and other financial institutions (many foreign-owned) appropriating a larger slice of the surplus. Such a repetition of the historic pattern of the penetration of imperialist finance in these countries will undoubtedly produce new and more severe crises and once again the people will have to bear the cost. The alternative would have to be a fundamental shift to social control over capital. We will have to use what we have learned in opposing neoliberalism to say no to the growth of high-risk finance and its depredations.

On the positive side, some third world governments have shifted in a progressive direction, sometimes in an effort to strike a better bargain for local capital, sometimes because of genuine commitment to a social agenda, and often as the result of a compromised tension between the interests at stake. In Latin America, after periods of military rule and neoliberal policy dominance, Mercosur under Brazilian leadership has put a crimp in the U.S. attempt to form a Free Trade Area of the Americas. As a single market, it is the world’s sixth largest economy. With 260 million people and a combined Gross Domestic Product of over four trillion dollars, it represents a formidable development.

The more radical Bolivarian Alternative for Latin America (ALBA) promotes not only regional solidarity but social transformation based on socialist goals and ideals. In 2007 the Mercosur and ALBA countries created a Banco del Sur (Bank of the South) to offer an alternative development finance instrument premised on solidarity and totally rejecting Washington’s thinking and controls.10 Some of the member countries have withdrawn from the IMF and the World Bank. The Banco del Sur operates on a one country, one vote principle and, building on the Venezuelan Bank for Economic and Social Development priorities, favors cooperatives and community ownership, offering below-market interest rates to public and social enterprises. With a proposed capitalization of seven billion dollars, it represents a serious challenge to the U.S.-controlled Bretton Woods Institutions as well as the Washington-dominated neoliberal Inter-American Bank.

The changes in the region have been dramatic as leftist governments have come to power. In 2005 South America accounted for 80 percent of IMF outstanding loans. Today the region’s borrowing accounts for less than 1 percent of the IMF global loan portfolio. Along with the Banco del Sur there is talk of a regional monetary system so that bilateral trade can take place in domestic currencies with a goal of eventually creating a common currency for the region.

Social movements are pushing the Banco del Sur to take a more grassroots approach, to reject mega infrastructure (as pushed by Brazil) that supports monocultures including agrofuels, and instead finance local infrastructure to support food and energy sovereignty, produce generic medicines, and extend membership to other countries of the South. Such formations—always a mix of transformational and reformist elements—illustrate important historical momentum. The failures of the Washington Consensus and the increased strength of alternative centers of power, both of the left and the national-developmentalist right, are reshaping the global political economy. Also significant is the great weakening of the U.S. dollar—its former strength having been both a result and a source of U.S. power.

We are now witnessing the loss of what Charles DeGaulle once called the “exorbitant privilege” of the United States, derived from its role as issuer of the international currency. George Soros, speaking to the World Economic Forum in January of 2008, suggested, “It’s basically the end of a sixty-year period of continuing credit expansion based on the dollar as the reserve currency.”11 The advantage the United States has enjoyed by being able to borrow in its own currency has been undercut by abuse, outsized current account deficits, and the buildup of dollars in foreign hands. This has progressed to the point where the money creation and lower U.S. interest rates implemented by the Federal Reserve to stave off financial collapse have driven down the currency’s value and encouraged further flight from the dollar.

Given the dollar’s serious decline, there would be fear of free fall if not for the fact that it is not easily replaceable in the short term. While at present about a quarter of the world’s monetary reserves are in euros and two-thirds are held in U.S. dollars, there are predictions from respected sources that the euro could be a more important reserve currency than the dollar within a decade. These predictions are based on rising inflation in the United States, its large current account deficits, the costs of imperial overreach, and simulation models by leading economists.12 Of course, the economic situation continues to deteriorate everywhere; at this writing Europe is facing severe economic problems, and there is a slow down in the “emerging economies” suggesting a larger crisis than has heretofore been acknowledged. A renewed strength of the dollar could be a reflection of greater trouble elsewhere rather than economic recovery in the United States.

Finance capital has expanded in parasitic form. Not only have the masses in the South suffered but the working people of the rich countries are now being told they must bail out “their” banks and other financial institutions. The class component of this redistributive model is becoming more apparent. As the international political economy becomes more multipolar U.S. hegemony will increasingly be challenged in other areas in addition to the currency issue.

Crisis Three: The New Centers of Power

Let me turn then more broadly to the world historic phenomenon of the rise of non-Western economic and political players. In 2006, for the first time, emerging markets accounted for over 50 percent of global output. If they continue to grow at the rate they have, forecasts project a very different world by mid-century. Their rise will, I expect, prove as significant as the emergence in the late nineteenth century of Germany, Russia, and Japan. A 2006 study by PriceWaterhouseCoopers projected that in the year 2050 the Chinese economy would be almost as large as that of the United States in dollar terms, and that India would be the third largest. A year later Goldman Sachs researchers predicted China would pass the United States in 2027 and India’s economy would become larger than that of the United States before 2050. Investment bankers predict Brazil’s economy in 2050 will be as large as Japan’s, and the Indonesian and Mexican economies will be larger than those of the United Kingdom and Germany.

PriceWaterhouseCoopers’ researchers expect the “E-7” (Brazil, China, India, Indonesia, Mexico, Russia, and Turkey) will be about 25 percent larger than the current G-7 and will be driving the growth of the global economy. Whatever one may think of the details of such projections, there is little doubt that momentous changes in relative nation-state economic standing are in the offing. The role these new economic powers play in the international political economy will matter significantly. Whether they will be prone to new crises brought on by increased financialization of the sort now plaguing the United States will also be important. Greater financialization and fragility creates new dependencies and therefore new possibilities for global crisis.

The importance of China is hard to overstate. It has already made advances in a number of parts of the world. For example, at its recent summit with forty-eight African leaders, Hu Jintao pledged to double assistance to the continent, cancel debt owed by thirty-three countries, and provide five billion dollars in concessional loans and credits. The Chinese president has also been traveling in Latin America, which is increasingly orienting its trade to Asia. Other developments in Asia, such as the move by the region’s finance ministers toward creating a common currency, also have major implications for the dollar.

In Asia itself there are major historical changes underway. A recent Foreign Policy essay begins: “Northern Asia is in transition. After 60 years of U.S. domination, the balance of power in the region is shifting. The United States is in relative decline, China is on the ascent, and Japan and Korea are in flux. The implications for Washington are profound.”13 What has been called a “Beijing Consensus” based on respect for sovereignty and mutual economic benefit is widely appealing as an alternative to Washington’s version of spreading democracy and the “free” market by cruise missiles and economic threats. Nonetheless, China is an exploitative power repressive to its working class. It is a transitional capitalist economy in which the children of high party officials have appropriated the social wealth as a result of the defeat of socialism.

The point is not that these emerging state powers are progressive but rather that a multipolar world offers other countries some space they did not have when U.S. hegemony was unquestioned. There is emerging what Conn Hallinan calls a “consortium of convenience,”14 the drift toward a partnership among China, India, and Russia, which, if it matures, could shift global power from Washington. Russia is selling advanced military systems to both India and China and cooperating on energy. Daniel Drezner, writing in Foreign Affairs, the publication of the establishment Council on Foreign Relations, describes “a coalition of the skeptical,” which includes states ranging from Argentina to Pakistan and Nigeria, and a revitalization of the nonaligned movement in an anti-Americanism that is taking on renewed salience.15 It is possible then that we are entering a period where there will be more room for progressive states to maneuver.

The need for access to energy on the part of India and China is a factor in the Shanghai Cooperation Organization (SCO) formed in 2001, which includes China, Russia, and the “stans” (Uzbekistan, Turkmenistan, Kyrgyzstan). India has joined SCO and Iran, Pakistan, Mongolia, and Afghanistan have been given observer status. (The United States was pointedly denied observer status.) The SCO has declared that the United States should leave the Middle East and is emerging as a counter to NATO.16 While a country like India plays all sides in global maneuvering, it has invested tens of billions in gas and oil interests in Iran. Such actions, driven by the need for energy supplies, impact the prospects for U.S. violence toward Iran and the future of U.S. military bases in Turkmenistan, Kyrgyzstan, and Azerbaijan. China, which in a few years will be the biggest consumer of energy in the world, has been exceedingly active all over the planet in search of energy supplies and indeed other commodities.

There is as well the emergence of a new “Seven Sisters,” a term Enrico Mattei coined to describe the seven Anglo-American companies that controlled oil in the Middle East after the Second World War. Today it is not ExxonMobil, Royal Dutch Shell, and the others but Russia’s Gazprom, CNPC of China, Venezuela’s PDVSA, Brazil’s Petrobras, Saudi Aramco, and Petronas of Malaysia that are the seven giant producers. Resource nationalism is likely to grow in importance as these state-owned companies squeeze the Anglo-American companies to force additional concessions. The politics of the new Seven Sisters is, of course, diverse; the Saudis, a staunch U.S. ally, are the most powerful. That Venezuelan oil is controlled by the Chávez regime, which is trying to lead the nation toward a twenty-first century socialism, is an important development, as are new nationalizations in Ecuador, Peru, and Bolivia. Putin’s takeover of Gazprom symbolizes a reawakened Russian bear.

Crisis Four: Resources and Sustainability

The final and perhaps greatest crisis is that of the availability and distribution of such critical resources as oil, food, and water. The sustainability of human life is simply not consistent with inherently wasteful capitalist growth.

The International Energy Agency’s World Energy Outlook tells us that 50 percent more energy will be needed in 2030 than in 2005 (after adjusting for efficiency improvements) and that almost three-fourths of this increased demand will come from developing countries, with China and India alone responsible for 45 percent of the increase in demand. After 2015, China is expected to be the planet’s biggest carbon dioxide emitter, ahead of the United States, followed by India as the third largest emitter. (Other studies show China is already the biggest contributor of greenhouse gases.)

There are two political issues of some significance here. The first is that the United States and other rich countries have used the lion’s share of the world’s resources for a long time. Social justice requires not simply that the developing countries help ration future use of nonrenewable resources but that those who have long overconsumed bear a greater than proportionate share of the cost of such a transition. Second, there must be new patterns of human development premised on ecological concerns as well as social justice and these must take a more prominent place in the work of international councils, which now seem to accept that the only important thing is terrorism. A sixth of the world’s population enjoys an energy-intensive lifestyle. As the numbers aspiring to this type of consumption grows, the planet’s problems will increase. The American Dream will become much more expensive and finally unsustainable. It cannot be widely shared along present production and consumption patterns. Not only are billions of people not benefitting from global capitalism, but those who do are adding pressure to the resource base of the planet.

Today a quarter of all deaths in the world have some link to environmental factors and most of the victims are poor people who are already vulnerable due to malnutrition and lack of access to medical care. Malnutrition is likely to become a more serious issue as food prices continue to rise. Seventy-five percent of the world’s poor people are rural and most of them depend on agriculture. Since it is hard for them to make a living, there is massive migration to the cities of the developing world. A billion people now live in the slums of these growing cities where they scavenge a living or eke out a marginal existence as street vendors. Agronomists tell us that almost every country in the world has the soil, water, and climate resources to grow enough food for its people to have an adequate diet.17 However, this would require serious land reform and technical and financial support. In very few places are such policies practiced, and food insecurity is said to affect close to half of humanity.

On the more hopeful side, we are seeing countries reject the World Bank’s insistence that they not subsidize agriculture. Malawi, which for years hovered at the brink of famine, with five million of its thirteen million people needing emergency food aid after a disastrous 2005 maize harvest, decided to subsidize its poor farmers and was soon exporting hundreds of thousands of tons of maize thanks to the help it gave the farmers, whose yields grew dramatically. The United States, while willing to provide food aid from its agricultural surplus (grown with huge federal subsidies to U.S. farmers), refuses to assist farmers in poor countries. Even as it insists that they follow the free market, the United States undermines the ability of third-world farmers to compete by dumping free or low-cost agricultural exports in their countries.

There is a growing use of maize to produce ethanol and soy beans for diesel fuel, as well as an increased desire of large numbers of the newly affluent to consume meat. Increasingly, grains feed animals and not people. China’s average caloric intake from meat consumption, for example, has doubled since 1990, and given that it takes ten pounds of grain to produce one pound of pork and double that for beef, such a growing demand has consequences for those who find the staples of life becoming too expensive for their own survival. The food-price index computed by The Economist magazine went up by 30 percent in 2007 and will go up by far more in 2008. Indeed, the United Nation’s World Food Program issued an extraordinary emergency appeal on March 23, 2008, to governments to increase their collective donations by at least a half-billion dollars to fund the higher cost of their feeding seventy-three million people in close to eighty countries. They noted a 20 percent jump in food costs in just three weeks along with the impact of the increase in oil prices on shipping costs. Grain prices are rising at an annual rate of 80–90 percent. Rice prices surged 30 percent in one day in late March 2008, having doubled in the less than three months since the start of the year, provoking protests among the poor in some Asian countries where rice is a dietary staple.

At the same time, what has been called the American diet of refined white flour, corn sweeteners, and corn-fed animal fats is replacing traditional diets for too many of the world’s people. Refined sugars create obesity and promote diseases such as diabetes by replacing the complex nutrients of traditional foods. The uncontrolled profit motive is destroying health and increasing medical costs dramatically as it poisons its customers with adulterated and unhealthy foods. Each of these broad areas of crisis is brought about by the normal activities of capitalists in a system that accepts the right to profit at virtually any cost. The mass media and the political system strive at all times to keep the public from understanding the heavy burden on global humanity that these systemic priorities impose.


In my remarks I have stressed four areas of crisis of the contemporary world system: the financial crisis, the loss of relative power by the United States, the rise of other centers of accumulation, and resource depletion and ecological crisis. The U.S. strategy remains to project military power to control oil and other resources. The other wing of the eagle is relying on appropriation of surplus through financial vehicles, but this hardly exhausts its tactics. It also demands the enforcement of protected monopoly rents by international patent and licensing regimes to protect intangible property rights, from Microsoft Windows to Big Pharma claiming ownership of the human genome. The extension of property rights and the enclosing of the scientific commons need to be (and are being) opposed by developing countries, which pay exorbitant licensing fees and are not allowed to use what in the past would be common knowledge inheritance.

Just as high-risk finance needs to be limited and socially controlled, science should be liberated so that technological progress is not artificially constrained and monopoly rents cannot be demanded. For the developing world, the strategies of both wings of the imperial eagle have been exposed.

The Washington Consensus has been discredited, and although the damage it causes continues, it has not achieved Washington’s goals. There has been a uniting of much of the world into a coalition of the unwilling. If serious left-wing governments took power in many countries of the South, there could be dramatic reconstruction of the global political economy. However, those who now run these countries are hardly revolutionaries. We can expect elements of collaboration, cooperation, and contestation depending on what pressures these elites are subject to. A progressive South Africa could help shape an alternative to the Anglo-American capitalist world system and influence new centers of power that claim to represent the interests of the Global South and someday may have governments that actually do so.


  1. This section draws on William K. Tabb, “The Centrality of Finance,” Journal of World-Systems Research, XIII (2007), 1.
  2. Martin Wolf, “Unfettered finance is Fast Reshaping the Global Economy,” Financial Times (June 18, 2007).
  3. John Bellamy Foster, “The Financialization of Capitalism,” Monthly Review (April 2007): 1.
  4. William K. Tabb “The Two Wings of the Eagle,” in John Bellamy Foster and Robert W, McChesney, eds., Pox Americana: Exploring the American Empire (New York: Monthly Review Press, 2004).
  5. Kenneth Rogoff, Eswar Prasad, Shang-Jin Wei, and M. Ayhan Kose (2003) “The Effects of Financial Globalization on Developing Countries: Some Empirical Evidence,”
  6. Martin Wolf , “Why the Sub-Prime Crisis is a Turning Point for the World Economy,” paper presented at the Globalisation and Economic Policy Centre, Nottingham University, March 5, 2008, The Powerpoint presentation, which is available on the Web, has a number of useful graphs and tables.
  7. Krishna Guha and Chris Giles, “IMF wants more say for rising economies; Asian countries would have greater influence,” Financial Times, April 5, 2008.
  8. Philip Stephens, “A Table for Thirteen,” Foreign Policy (January/February, 2008): 65.
  9. Willaim K. Tabb, “Globalization Today; At the Borders of Class and State Theory,” Science & Society (January 2009).
  10. Mark Engler “Latin America Banks on Independence,” In These Times (February 2008): 43.
  11. Craig Karmin and Joanna Slater, “Dollar’s Dive Deepens as Oil Soars,” Wall Street Journal, February 29, 2008.
  12. Jeffrey Frankel, “The Euro Could Surpass the Dollar Within the Next Decade,” (March 18, 2008), 2008.
  13. Jason T. Shaplen and James Laney, “Washington’s Eastern Sunset; The Decline of U.S. Power in Northeast Asia,” Foreign Policy (November-December 2008): 82.
  14. Conn Hallinan, “Challenging a Unipolar World,” Foreign Policy in Focus, January 21 2008,
  15. Daniel W. Drezner, “The New New World Order,” Foreign Affairs (March/April 2007).
  16. William K. Tabb, “Fumbling Through the Great Game in Eurasia: the British and U.S. spreading ‘Freedom’ through Invasion, Occupation, and Regime Change,” Z Magazine (November 19, 2006).
  17. Fred Magdoff “The World Food Crisis,” Monthly Review (May 2008).
2008, Volume 60, Issue 05 (October)
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