Issue 5 - Fall/Winter 1997

Economic Globalization: Capitalism in the Age of Electronics (page 1 of 2)

[The following is the Political Report from the April 19, 1997 meeting of the Steering Committee of the League of Revolutionaries for a New America.]

Every exploiting ruling class has had its global dimension and “global” aspirations. The level of the development of the productive forces and the economic relations of a society determine the form of this imperial oppression and exploitation. The Romans with their highly organized slave empire subjugated the world as they knew it and extracted taxes and slaves as their main source of wealth. Similarly, every stage and phase of development of capitalism has had a corresponding form of global activity.

At the beginning of this century, Lenin described the stage of the development of capitalism at that time as “imperialism.” Developing from major technological breakthroughs like electric generators and motors, the internal combustion engine, new steel-making processes, the telephone and the radio, the 19th-century system of competitive, industrial capitalism gave way to a global form of monopoly capitalism.

This new stage of development of capitalism was characterized by the concentration of production such that monopolies controlled the economy; the emergence of “finance capital” as the decisive form of capital; the growing importance of the export of capital, as opposed to the export of commodities; and the territorial division of the world among the major capitalist powers.

Today, this system of imperialism is giving way to globalization - a new stage of capitalism characterized by electronics-based production; the desperate attempt to maintain value and surplus value production by whatever means possible; the internationalization of capital; and the replacement of productive capital with speculative capital as the dominant form of capital.

“Imperialism” was capitalism in the age of electro-mechanically based monopoly capitalism; “globalization” is capitalism in the age of electronics.

The End of Imperialism

World War I and World War II grew out of the struggle among the imperialist powers to territorially redivide the world. The end of World War II, with the European and Japanese economies in ruins, marked the beginning of the end of direct colonialism, a system which had seriously constrained the ability of capitalist countries to invest outside their own colonies. The process of the dismantling of direct colonialism lasted over the next several decades.

Led by the efforts of the United States, which had emerged as the economically dominant power by the end of the war, the agreements made at the Bretton Woods meetings in 1944 formalized the new international economic order. The U.S. dollar, fixed in relation to gold, was made the chief international currency. The United Nations was the political counterpart of the institutions made possible by the Bretton Woods agreements - the World Bank and the International Monetary Fund.

With the revival of the European and Japanese economies by the mid-1960s, the period of U.S. economic hegemony was over. The end of this period was signalled by the dissolution of the Bretton Woods agreement in the early 1970s. Capitalism is driven by the maximization of profit. The drive for profits requires both a constant advance in technology to cheapen production and eliminate competitors, and a constant expansion of the markets in which to sell the commodities. This demanded the ultimate expansion of the market to encompass the entire world, free of national barriers; and, at the same time, the lowering of the cost of production to the absolute minimum. This expansion demanded the end of a territorially divided world, which was accomplished by dismantling direct colonialism.

At the same time, the introduction of labor-replacing technology means the beginning of the end of productive investment capital. All value (and profit) comes from the exploitation of labor. Laborless production means valueless production - and hence, profitless production. With laborless production, capital can no longer be utilized to create more value and more surplus value. So, capital is being shifted into purely speculative investment. A critical portion of capital is no longer “exported” (in the sense of being invested overseas for the production of more commodities). It is merely shifted, moved, transmitted around a global roulette table.

Imperialism extended industrial production throughout the world. The introduction of electronics into capitalism is ending the stage of imperialism, and opening the new stage of globalization.

Electronics-based Production

The stages of development of capitalism are defined by specific developments in the productive forces; the microchip defines the current stage of the development of the productive forces. Introduced in the early 1970s, the microchip is a light, tiny, cheap device that can be widely deployed to control production processes. It was the result of an effort to satisfy the growing demand for devices to reduce production costs and to cheapen the cost of coordinating the growing world economy.

The microchip and its sister developments in electronics made possible practical robotics. It cheapened the cost of the instruments of scientific production, paving the way for breakthroughs in other fields like “smart” materials, biotechnology, and digital communications; and it dramatically reduced communication costs.

The introduction of the microchip threw a radically new quality into an already global economy. Twenty-five years after its introduction, the power of the microprocessor continues to double every 18 months. As chips develop, they infiltrate new areas of production, increasing output and replacing the need for living labor - workers - in production.

At the same time, as the British newsweekly The Economist noted, “by reducing the cost of communications, [new technologies] have helped to globalize production and financial markets. In turn, globalization spurs technology by intensifying competition and by speeding up the diffusion of technology through direct foreign investment. Together, globalization and [new technologies] crush time and space.” Cheap transportation and communication have also created a global commodity market, including a global labor market.

Desperate Measures

Unless the market can absorb the constantly expanding output of capitalism, the economic system freezes up and enters a crisis. Ultimately, this crisis is a result of the introduction of advanced technologies that brings on a crisis in profitability, but it appears as a crisis of overproduction, the inability to circulate commodities that the market cannot absorb.

William W. Keller, director of the Office of Technology, has complained, “Capitalism everywhere is turning out to be too damn productive.” So, to out-compete the other capitalists on this world stage, each capitalist is compelled to seek out the cheapest labor and the most advanced technology.

The increased productiveness of capital has not been matched by a proportionate increase in markets. William Greider defines the “central economic problem of our revolutionary era [as] the growing, permanent surpluses of goods, labor and productive capacity inevitably generated by technological innovation and the free-running industrial globalization.” (Chicago Tribune, January 20, 1997.) These surpluses affect steel, auto, textiles, electronic appliances - virtually every industry, except those on the cutting edge today (like semiconductors or communications).

To maintain profitability, corporations must lower their break-even point, redeploying parts of the production process overseas, reducing fixed costs by selling plants and other assets, cutting out middle-level employees, converting jobs to temporary work. This results in reserves of idle people and unused production.

The problem is further complicated by the fact that some countries still have varying amounts of control over their markets. The United States has tried repeatedly to break down market barriers in Japan. China has been successful in limiting its home market, while benefiting from open markets, particularly in the United States. China's strategy is to build up high-cost, high-tech exports based on technology (gained from trading foreign technology for access to their markets), while producing cheap goods made by low-cost labor for its rapidly growing domestic market. Foreign goods enter China under strict rules. The Japanese feel particularly threatened by China's growth. As Harou Shimada, a Keio University economist, bluntly put it:

“China is a horror story for the rest of the world if it simply grows as an exporting nation. Overcapacity will have to be squeezed down. It will be increasingly unprofitable for companies to build new capacity in advanced nations. If the Chinese develop the technology and become productive without wages rising, then they will be a tremendous competitive menace against the rest of the world. If you bring in 1.2 billion workers at those wages, that can destroy the global trading system.” (Quoted in One World, Ready or Not: The Manic Logic of Global Capitalism by William Greider, Simon & Schuster, New York, 1997, p. 162.)

Already, high rates of economic growth in China coupled with low wages have produced a glut in the Chinese market, with goods worth $64 billion stockpiled, representing about one-fifth of China's total production. (“Bloom is Off China's Boom,” Chicago Tribune, February 4, 1997.)

At the same time, the United States is running up huge trade deficits as it attempts to soak up excess commodities. For the first time in a century, in the fourth quarter of 1993, the United States passed a critical threshold. The outflow of financial returns paid to foreign investors on the assets they held in the United States exceeded all of the profits, dividends and interest payments that American firms and investors collected from their investments abroad. In 1994, the annual outflow was negative for the first time since 1914. Trade deficits reached a record volume in 1995. (Greider, p. 201) More >>


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