cyRev Online Journal

Globalization and the Technological Transformation of Capitalism (page 1 of 2)
By Jerry Harris

Lenin, in his 1916 essay on Imperialism argued it was the domination of finance capital over the export of commodities that constituted one of the major features of the new age. Lenin saw imperialism as a new epoch changing the face of the world. A qualitatively different system from the early Dutch and Genoese banking houses which began trading commodity futures in the 1600s.

We are faced with a similar epochal question today. Is globalization a mature capitalism that has outgrown its national adolescence into a unifying world system with universal commodification? Or have we reached a new stage of development where the technological revolution has opened the door to a qualitative leap in the expansion of capital? Does the current “globalization” expansion have fundamental differences with the international markets that characterized imperialism from 1860 to World War II?

As A. Sivanandan has observed: “the qualitative changes brought about at the level of the forces of production have brought about changes in the mode of production which, in turn, have led to changes in social relations . . . If the handmill gives you society with the feudal lord and the steam-mill gives you society with the industrial capitalist, the microchip gives you society with the global capitalist.” (Race & Class, April '96).

Capitalism gave birth to the modern nation state; its economic form is historically bound to its political structure, and the social relations it created. Today globalization functions in a manner which undermines the nation state from which it originates. This is the essential difference between second wave imperialism and third wave globalization. The speed and carrying capacity of digital telecommunications have allowed capital to escape national control. These changes are occurring in the mode of production and the way in which wealth is created; in a new international legal superstructure; in the redefinition of sovereignty and state control of the economy; in the restructuring of the world labor force and it's social entitlement; and a new ideology of borderless free markets.

Not only does the information revolution affect the movement of capital, it also affects where production is carried out, and how products are sold. The old slogan, “What's good for General Motors, is good for America” can no longer be applied. That motto, of the most powerful second wave corporation, reflected an economic vision which sought to develop a stable “middle class” as a consumer base for a huge national economy. Corporate strategy was national strategy.

But today's transnationals set their sights on a world market; national strategies are secondary. This is how corporations have responded to the crisis of accumulation. As national markets became saturated and structural limits on real wage increases were reached, the technological revolution allowed capital to build a new global economy to escape its national restrictions. The abilities to instantaneously transfer money worldwide lead to such an explosion of financial speculative markets that a new structure is now being built to facilitate this qualitative change. Meanwhile on the commodity side of the economy, a market that targets the top 15% of the world consumer market is replacing a broad based middle class national strategy.

Wealth and the New Forces of Production

Time has conquered space. The digital and electronic transfer of information via satellite, telecommunications, fax, and modem has created an instantaneous and interconnected world of finance unlike previous times. The ability of these new means of production has propelled money into speculative activities unrelated to the production of useful commodities. Money is now simply in search of itself. Just as industrial technology directed money away from land and into the factory system, information technology has propelled investment away from manufacturing and into global speculation. This is an interconnected process driven by the needs of accumulation combined with the abilities of the new technology.

Perhaps the most important tool for the new economy is what the New York Times called “the computer system that is the heart of global capitalism,” CHIPS. The Clearing House Interbank Payment System ties together 142 banks and does 150,000 transactions a day. The system is owned by 11 large New York banks and transfers $2 billion a minute, or about a trillion a day. That is half of the electronic transfers in the world. The next largest electronic system is in Belgium, connecting 1,000 banks to SWIFT, the Society of Worldwide Interbank Financial Telecommunications. These are the new tools of production and transportation for international finance.

To get an idea of just how big the financial markets are, we need to review some figures. The total value of financial assets traded in global markets in 1992 was $35 trillion, twice the GDP of the 23 richest industrial countries. In the January 1997 issue of Monthly Review, Daniel Singer points out that, “daily international transactions now exceed on an average the astronomical figure of one thousand billion dollars, that is to say more than the total gold and foreign currency reserves of all the members of the International Monetary Fund . . . Financial capital now reigns supreme.” These assets have been growing at two-and-a-half times the rate of the GDP since 1980, and estimates have put their value at $83 trillion by 2000.

The biggest financial market is the exchange of foreign currency, the simple buying and selling of money. Exchange transactions are sixty times larger than world trade in manufactured goods, with some $1.3 trillion a day rocketing through electronic space. In fact, five of every six dollars that move in the world economy travel via electronic transfer. The currency markets never close. Forty-five percent of the activity occurs in Europe, 30% in Asia, 15% in the U.S., and the remaining 10% spread out in third world markets. This trading revolves through world time zones 24 hours a day where billions of dollars are traded with eighteen cent phone calls. Speed is so essential that software creating a ten-second trading advantage resulted in millions in profits for Bankers Trust.

The growth of stock markets has been worldwide. The $13 trillion listed in integrated markets circulate the globe in seconds. New markets exist in Brazil, Argentina, Thailand, Taiwan, Russia and 65 other countries. There are now 350 types of future contracts. The 1980s was a period of massive financial innovation. As pointed out by Saskia Sassen, “any concentrated pile of money has become attractive to traders.” (Losing Control? Page 47) Profits can even be made by selling off Third World debt. After collecting years of interest payments but still owning the principal, banks will sell the remaining debt for half price to other banks who will continue to collect interest. Some Third World governments seeking to escape debt will trade equity and stock in state owned corporations. Most coveted by international financiers are assets in communications and financial services.

Information technology has so transformed banking and financial activity that Sassen contends we “lack an analytical vocabulary” (LC, page 21) to properly describe the changes. Economist Felix Rohatyn gives us a picture of this new production of wealth as he describes people who; “...buy and sell blips on an electronic screen. They deal with people they never see, they talk to people on the phone in rooms that have no windows. They sit and look at screens. It's almost like modern warfare, where people sit in bunkers and look at screens and push buttons and things happen . . . ” (Global Dreams, p. 386). This is certainly a new type of worker in a new type of environment, creating a new type of value--value alienated from social production and solely based on information.

As Walter Wriston, past CEO of Citibank points out, “in the age of global banking, selling rapid information about money is the key to making money,” (Global Dreams, p. 381) Paper has no value in itself. In an electronic world the value of money is based on an exchange of information. Information based on an analysis rooted in the political bias and economic philosophy of several thousand transnational capitalists and money managers. Value grows or shrinks based on what governmental policies and economic activity they believe is best for their money--money that increasingly looks for quick results based on the ability to rapidly manipulate it through the new digital technologies.

An example of this activity was the crash of the Mexican economy. The peso became overvalued, driven by financial speculation and the huge investments of international financiers. When these electronic capitalists decided to withdraw their billions, (accomplished in less than three days) it was based on their analysis about Mexico's political stability. Their ideology did not consider alternate solutions, such as the promotion of real value-added activity based in manufacturing, the support of local business', the creation of jobs, and the protection of homeowners. Bankers recovered their profits, but at the expense of millions suffering a depression equal to that of the 1930s.

As Fred Rosen points out in an article titled, “IMF: One Step Closer to a Global State”, Mexico is no longer in control of its national economy. Rosen says; “As the multinationals become proxy governments, and transnational banking institutions become truly global, being the president of Mexico has become much like being mayor of Detroit. And soon being the head of a national bank like Mexico's Banamex, will be like being a branch manager of Fleet Bank in Poughkeepsie, N.Y.” (NACLA, Dec. 1996, p. 5).

Banks are no longer the only players, or even the most important. Trillions of dollars are invested through financial houses, investment firms, and insurance corporations. In 1980 Citibank was the largest in the world, and twice as large as any other U.S. bank. By 1992 it dropped to number 20 among world banks. Of the ten largest banks today, eight are Japanese and two are French. In fact, by 1989 the 13 biggest Japanese banks had five times the capitalized value of the largest 50 U.S. banks. While this is a significant change in the centralization of money, U.S. investment firms have in fact outgrown most U.S. banks.

Another huge pool for international investors is the bond market. Bonds are sold by governments seeking money to run their programs. But bond debt creates political constraints on government policy. Bond ratings are tied to assumptions about what constitutes good economic policy. That translates into narrow market efficiencies in which unemployment become unimportant. This means conservative money managers can manipulate the bond market in order to brake social spending. Since social programs are seen as inflationary, which devalues money, bond holders can dump their holdings, drive-up interest rates and slow economic growth. It's what Wriston likes to call: “asserting control over government, disciplining irresponsible policies and taking away free lunches” (The Twilight of Sovereignty, p. 66). In the U.S. 45% of all bonds are held by 1% of the population, and 17% by foreign interests.

The technological revolution has also deeply affected global manufacturing and commodity production. Anything can be produced anywhere, and sold everywhere. Skills and jobs are transferred worldwide, with the production process itself fragmented between different countries. Of the 100 largest economies in the world, 50 are transnationals. While centralized controlled remains in the hands of a few, there has been a deconcentrating of production away from the old industrial urban centers of the north. When new industrial factories are built in Mexico, Thailand, or Indonesia, they don't look like Henry Ford's River Rouge in 1935. Many of these plants use the most up-to-date computerized production methods, increasing their profits through both low wages and technological advances in productivity. If faced with rising labor costs when workers organize, corporations will jump to other countries. Greater flexibility exists not only in moving money, but also in moving manufacturing.

Ford's plant in Hermosillo, Mexico has the best quality and production rates in North America. Hourly labor and benefit costs are $2, compared to $30 in Detroit. That translates into a boost of $672 in profits per car. In Chihuahua, Mexico, Ford has built a state of the art factory with automated capital intensive machinery. Applications run 12 to every available job. Training goes on at a local technical college with graduates going directly to Ford. The plant produces 1,200 cylinder blocks per shift with only 16 workers. Workers paid at half the wages of other Mexican auto workers, and at two-thirds the benefit level.

In the computer industry both high and low end jobs are done worldwide. Data processing centers are spread from Manila, to Ireland, and around the globe to the Bahamas. The time it takes to send work from New York to the Philippines, differs only in seconds from the executive sending work to a secretarial pool downstairs. International data centers are doing everything from credit checks, library catalogs, to patient records and Playboy articles.

At the high end of software writing are new centers such as Bangalore in India, where universities have produced 75,000 programmers. The results have been home-grown computer businesses which receive work from Motorola and IBM. These knowledge workers are as well educated as most American graduates, but are paid about $4 an hour.

This global production is carried out by 100,000 Transnational Corporations (TNCs). But the largest 350 have sales that equal one-third of the GNP of the industrialized countries. These corporations have more than 25% of the world's stocks and assets. The top 100 TNCs have only half of their assets in their country of origin.

The New Relations of Production

Globalization has been resulting in a changing relationship between labor and capital. The deconcentrating of manufacturing coupled with its flexibility has lead to a weakening of unions and the strengthening of capital. The new technology has also been used to develop new forms of control on the shop floor and in the office. But even deeper effects are evident. Significant changes in work categories and labor stratification are occurring along with growing permanent unemployment for masses of people. Within the capitalist class there is a shift in power and wealth away from the national industrial barons to a new global bourgeoisie and information elite. As the economic base shifts, as wealth is created in different ways from second wave industrialism, these changes shape new relationships between classes.

In the U.S. manufacturing jobs have shrunk from 33% of the labor force in the 1950s to about 17% today. The losses began in the 1960s and turned into a flood by the 1980s. Many of these jobs have been exported to a global labor force as technology has made the transfer of skills easier. In 1991 50% of all U.S. exports and imports were within U.S. corporations. Today there are 175 manufacturing free enterprise zones in the world employing four million workers, 2.6 million of whom are young women. In Indonesia Nike pays 82 cents a day. Their cost per shoe averages $5.60, for a product selling from between $75 to $135 a pair. Michael Jordan makes $20 million for his contract with Nike. The Nike workforce of 12,000 mostly teenage girls in Indonesia earns a total of $5 million a year. But the transfer of jobs has not been all one way. BMW went to South Carolina where they pay $12 an hour, rather than the $28 per hour they pay in Germany. The flow of jobs and capital is happening everywhere.

Within the U.S. productivity has risen in the industrial sector, with many areas using just half the workforce of the past. The productivity gains of robots and numerical control machines are most clearly seen in industry. For example, Ford in the 1980s cut hours 47%, but gained in productivity by 57%. But new technologies have also been used to control the labor process. Just in time production, work by stress, flexibility, and lean production are all ways management has organized information technology to squeeze workers. More >>