What drives globalization?

With the increasing interconnectedness and interdependence of countries evident in

international political partnerships, trade of products, and cultural exchange, among others,
there is no question that we are living in the global age. But there is another question which
often gets varied answers from different disciplines — what drives globalization?

You could draw an explanation using the classic divisions in the social sciences — the idealist
and materialist approach. In an idealist viewpoint, globalization is driven by the evolution of
ideas and knowledge; that instead of thinking local or national, we have become global in
scope. A good example of this is the world’s recognition of climate change, and consequently,
the global efforts to address the problem.

While this claim is valid, even Max Weber, the most famous theorists to adopt such a view
argued that material factors are the main drivers of globalization. Materialists like Karl Marx
focus on objective aspects such as economic factors i.e. forces and relations of production,
technology, etc. More specifically — who owns, controls, and benefits from them. Given that
capitalists own and control the means and relations of production, Marxists argue that
globalization is just an extension of capitalist exploitation which means that transglobal
connectivity is being advanced, first and foremost, to provide opportunities for capitalists to
accumulate profit.

Marx and Engels’ description of capitalist expansion in The Communist Manifesto (1962)
captures the nature of capitalist globalization:

“The need of a constantly expanding market for its products chases the bourgeoisie over the
whole surface of the globe. It must nestle everywhere, settle everywhere, and establish
connections everywhere. The bourgeoisie has through its exploitation of the world market
given a cosmopolitan character to production and consumption in every country. All old
established national industries have been destroyed or are being destroyed. They are
dislodged by new industries, whose introduction becomes a life and death question for all
civilized nations, by industries that no longer work up indigenous raw material but raw
material drawn from the remotest zones; industries whose products are consumed, not only
at home, but in every quarter of the globe. In place of the old wants, satisfied by the
productions of the country, we find new wants, requiring for their satisfaction the products of
distant lands and climes. In place of the old local and national seclusion and self-
sufficiency, we have intercourse in every direction, universal interdependence of nations.”

This leads to the conclusion that globalization is primarily driven by the capitalist agenda to
control economies i.e. extract resources, exploit labor, and control flows of products and prices.
Now, learn how capitalist globalization operates — its related processes and the structures
responsible for them.
Shaping Global Economy

The new era of globalization has been defined as “the systematic spread of capital and open
markets” (The Employment Imperative, Report on the World Social Situation 2007) and
liberalization and privatization have become dominant forces in facilitating this process. In
return, globalized economies are more likely to be liberalized and privatized. These phenomena
began to spread around the world when wars and economic crises hit us, resulting to the rise of
superpowers that started to control economies and the downfall of developing countries which
needed economic aid.

Liberalization

Most states liberalize their economic policies with the aim of integrating their country’s economy
to the world economy and improving its productivity. Ideally, it will open markets for capital,
technology, labor, and goods and services. By liberalization, a country eliminates state control
over its economic activities or imposes fewer constraints on economic transactions like trade
and investments. This means reduced or even, the removal of government interference in
businesses. This may be done internally through reforms in the economic system, but is mostly
influenced by state-to-state relations and affiliation to international organizations. These trends
have an impact not just on economy, but also in governance, human rights, and other sectors.

Trade Liberalization

- Liberalizing policies and taxation on trade has led to the growth of exports and imports,
but does not essentially steer growth of Gross Domestic Product (GDP). In fact, it has
worsened the system of production and employment in developing countries. Most
developing countries today have become import-dependent and allow the surge of
imports to their country and rely on them for supply, resulting to being export-oriented —
exporting raw materials and resources instead of manufacturing them. This system
weakens domestic efficiency and causes decline in production, income, and
employment.

One example of an instance wherein trade liberalization resulted to a dramatic effect was
when the Agreement on Textiles and Clothing was terminated in 2005. This act removed the
quantitative quota restrictions and changed the flow of clothing and apparel exports and
imports. Back then, “developing countries accounted for more than half of the world’s
exports of apparel and clothing” (World Trade Organization, 2006) notably, while relying on
manual labor. But when the restrictions on quotas were lifted, developed countries with
more capital and machineries took advantage and dominated the industry. This ultimately
changed the patterns of trade and production as richer countries overpowered the small
firms in the developing countries. The total trade may have grown, but only a few countries
benefitted while most suffered from bankruptcy and job losses. Evidently, trade
liberalization has a tendency to result to uneven development if not accompanied by
policies promoting domestic economic efficiency.
 Investment Liberalization
- Foreign investors face a lot of barriers like tax laws, accounting regulations, and other
investment restrictions. Through the process of liberalization, these obstacles are
reduced and control powers are entrusted to the private sector. Liberalization makes
way for Foreign Direct Investments (FDI) or the process of investing to a firm in a
different country with the intention to gain control over its operations. FDIs play a crucial
role in the multinationalization of production since they can easily transfer capital from
one country to another. However, since majority of these investors are from developed
countries, FDIs tend to cause uneven growth in the global economy.

Privatization

- Privatization is closely related to the phenomena of liberalization as both were part of a

broader scheme to widen the flow of capital. It is introduced to countries as a form of
remedy to the public sector’s economic crises. When governments face issues in
efficiency and profitability such as political interference, labor problems, and income
losses, they seek help from the private sector. Accordingly, privatization is the transfer
of the public sector’s ownership and management rights of economic resources to
private entities. In liberalized economies, the prominent targets of privatization are
social services such as transportation, healthcare, and education. Although privatization
is supposedly done to improve as state’s economic efficiency, it is extremely risky to
privatize public goods, services, and properties since private corporations are innately
profit oriented; therefore, it is expected of them to prioritize income instead of public
good.

Global Economic Structures

Here are the major global economic structures established by the hegemon, the United States
of America to increase international trade and exploit other countries.

General Agreement on Tariffs and Trade (GATT)

GATT is a forum for state representatives that came into existence in 1947. It is a system for the
liberalization of trade, particularly in goods. It has initiated talks on reducing tariff rates on the
trading of goods, dealing with non-tariff barriers (e.g. quotas, national subsidies to industry and
agriculture, etc.), and liberalizing international trade in agriculture. In its first year, it was able to
negotiate trade agreements among 23 nations. It paved the way for multinational trade
agreements until 1995 when it was replaced by the World Trade Organization (WTO). Its
principal elements were incorporated into the WTO and the number of trade negotiations
continued to rise.
World Trade Organization (WTO)

With 152 member nations as of 2008, this multilateral organization focuses on liberalizing trade
in services which has put it in the center of economic globalization. WTO operates on the
premise that all nations benefit from free and open trade, thus, it is devoted to reducing and
even eliminating trade barriers particularly non-tariff-related barriers. The issue, however, is the
differences among nations on trade practices e.g. regulations on manufactured goods.
Additionally, although each member state of the WTO has an equal vote, there have been
instances where developing nations were excluded from meetings made exclusive for the larger
trading powers.

International Monetary Fund (IMF)

The International Monetary Fund is a specialized agency of the United Nations established in
1945. It concentrates on the macroeconomic stability of its member nations and, generally, the
global economy. According to IMF, they “provide policy advice and financing to its 185 members
in economic difficulties and also work with developing nations to help them achieve
macroeconomic stability and reduce poverty”. However, critics are concerned about the
conditionalities imposed by IMF to borrowing nations. IMF requires member nations to
restructure their economic policies in exchange for loans. Some of these conditionalities are
based on the so-called “Washington Consensus” i.e. liberalization of trade, deregulation of
domestic markets, and privatization of national industries which, most often, don’t resolve the
economic problems of the borrowing nations.

World Bank

The World Bank is also a specialized agency of the United Nations, and its official International
Bank for Reconstruction and Development (IBRD). Among its missions are (1) encouraging
"development of productive facilities and resources in less developed countries", (2) funding for
"productive purposes" when private capital cannot be obtained on reasonable terms, (3)
encouraging international investment in order to promote international trade and development
and equilibrium in balance of payments, and (4) helping member countries improve their
productivity, standard of living, and labor conditions (Bradlow, 2007). Like the IMF, it also
provides funding for government-sponsored programs in its poorer members. Ideally, the bank
is an important force in global economy as it serves as an avenue for nations to discuss
development and development financing. But World Bank operations have been controversial
over the years as it is dominated by wealthy developed countries, and conversely, prioritizing
their interests.

Organization for Economic Cooperation and Development (OECD)

Since its establishment in 1961, the OECD has been regarded as the club for the world’s richest
countries. It does not have formal powers i.e. policy-decision making capability, but it serves as
an avenue for governments to discuss policy experiences and development and is highly
influential. Generally, the organization is motivated by the goal of the US to create open,
multilateral, and cooperative international relations. It gathers statistics on economic
globalization, watches over the economic performance of nations, promotes the liberalization of
flows of capital and the globalization of finance and banking, as well as FDI and transnational
organizations, seeks to deal with the difficult issue of taxation, and the problems of double
taxation and tax evasion, in a global economy, and is sometimes involved in regulations dealing
with global environmental issues (Ritzer, 2010).

Multinational Corporations (MNC)

Multinational Corporations are the major players of the global economy today. As per Dickens
(2007), an MNC is "a firm that has the power to coordinate and control operations" in more than
two countries "even if it does not own them". This means that they control a wide range of
operations encompassing economic, political, social, and cultural environments. Multinational
Corporations or Transnational Corporations usually operate through Foreign Direct Investments
(FDI) which involves investing to a firm in a different country with the intention to gain control
over its operations. However, since majority — 96 of the top 100 — of the MNCs are in
developed countries, the growth of FDIs does not necessarily mean growth for the global
economy (Dickens, 2007).

World Economic Forum (WEF)

The World Economic Forum is a non-profit organization founded in 1971 with the motto
“entrepreneurship in the global interest”. It is composed of corporate leaders and elites with at
least $1 billion in annual turnover or capital. They meet annually in Davos, Switzerland and
conduct meetings about globalization, technology, and cooperation. These meetings have
influenced developments in the global economy which critics deemed inappropriate. Moreover,
critics argue that the organization uses its influence to continue the expansion and increase the
profitability of the capitalist system.
Shaping Global Politics

Since the post-war period, the United States of America has preceded globalization. As the new
hegemon, the USA has hosted economic integration through introducing international
organizations like the World Trade Organization, International Monetary Fund, and World Bank.
Along with these economic means, the capitalist hegemon has also used political mechanisms
to maintain its reign.

Colonialism

Colonialism is a phenomenon wherein a colonial power establishes formal mechanisms to run

the internal affairs of its colonized country. This involves settling in the said colony, deploying
military forces, and establishing a new administrative apparatus. Historically, colonialism has
been capitalist in nature. From the conquest of the Americas by the Spaniards and Portuguese
in the 16th century, then by the French and the British, to America’s occupation of the East in
the 1900s, capitalism has used colonialism to construct a dichotomy of relations between the
dominating countries and the colonized.

In the words of Samir Amin (2001), “It has been based on unequal exchange, that is, the
exchange of manufactured products, sold very expensively in the colonies by commercial
monopolies supported by the state, for the purchase of products or primary products at very low
prices, since they were based on labour that was almost without cost — provided by the
peasants and workers located at the periphery. During all the stages of capitalism, the plunder
of the resources of the peripheries, the oppression of colonized peoples, their direct or indirect
exploitation by capital, remains the common characteristics of the phenomenon of colonialism.”

Imperialism

Today, capitalist nations no longer rely on military forces and direct political control. Imperialism
involves employing a wide range of methods to gain territorial, political, and economic control
over the subjugated countries. One of these methods is cultural imperialism or the so-called
westernization; this includes imposing the western culture e.g. media and technologies to less
developed countries with the underlying motive of maintaining influence over them. Moreover,
they advance political and economic control on the South by influencing their laws and policies.
This is done under the face of globalization where the west organizes international
organizations and urges developed countries to participate for the benefits of political and
economic integration; while masking the capitalist agenda of labor and resource exploitation.

Global Political Structures

Here are two of the major regional political structures that perpetuate capitalist globalization and
their impacts on their member countries, particularly the less developed ones like the
Philippines.
Association of Southeast Asian Nations (ASEAN)

ASEAN is founded by Indonesia, Malaysia, Phillipines, Singapore and Thailand with the
Bangkok Declaration in 1967. One of the aims and purposes of the organization as established
in the text of the declaration is “To promote regional peace and stability through abiding respect
for justice and the rule of law in the relationship among countries of the region and adherence
to the principles of the United Nations Charter”. Member states are committed to promoting
collaboration on matters of common interest in a broad variety of fields, economic, social,
cultural, technical, scientific and administrative, with the aim of accelerating economic growth,
social progress and cultural development in the region.

In 1977, the United States began engaging with ASEAN and one of the focuses of their
partnership is economic integration. In line with this is the implementation of the ASEAN
Economic Community in 2015. One of its core pillars is ASEAN’s integration into the globalized
economy. While the policy-makers of the ASEAN thinks that it would be the best for the
economy of the region, its member-states have different views. For instance, the adoption of
the K to 12 program as part of the ASEAN economic integration is believed to have weakened
the quality of education and have promoted labor export in less developed countries like the
Philippines. As Filipino academics and progressives would argue, the intention of AEC is to
create a single market and production base — to produce semi-skilled workers and provide
cheap labor to the global market; which should not be the purpose of education. Nevertheless,
governments must focus on ensuring economic dependency to have sufficient job opportunities
within the country.

Asia-Pacific Economic Cooperation (APEC)

Comprising of Australia, Brunei Darussalam, Indonesia, Japan, South Korea, Malaysia, New
Zealand, Philippines, Singapore, Thailand, Canada, and the United States, the Asia-Pacific
Economic Cooperation or APEC was formed in 1989 in the Canberra Summit supposedly as an
“informal consultative forum” for the advancement of economic cooperation among countries in
Asia-Pacific. As translated in the Bogor Goals of 1994, it aims to enhance the economic
condition of the member-states through a framework known as the “Three Pillars”. In order to
attain the overall goal of free trade and investments, APEC introduced the following guiding
instruments: (1) Trade and Investment Liberalization with the aim to aid inflation by eliminating
tariff and non tariff barriers to trade and investment, (2) Business Facilitation which through
reducing business and trade transaction costs should increase employment opportunities, and
(3) Economic and Technical Cooperation with the intention of addressing inclusive growth,
improving and protecting people’s quality of living through sustainable growth, structural reform,
and human security.

Decades after its establishment, the Philippine government claims that it has “come a long way”
and a “remarkable turnaround” has been observed since it last hosted the APEC. But the non
profit development organization, IBON (2014) noted that “economic growth is slower,
unemployment is greater, and there are more poor Filipinos today than two decades ago” due to
reckless liberalization since the 1980s. Through World Bank structural adjustment programs
and more liberalization, the third-world backwardness of the Philippines has only intensified; it
is no more a producing economy, but a service and trading economy. The country’s main
production
sectors composed of agriculture, manufacturing, construction, mining, and quarrying, has
dropped since the 1980s and this collapse of domestic production led to the scarcity of job
opportunities and increased the rate of unemployment, hence, incessant poverty. The
liberalization agenda of APEC also perpetuated the concentration of wealth among few
corporations and families, thus, aggravating inequity in the country (IBON News, 2014).

According to the economist, Sonny Africa (2015), APEC has always been about pushing the
globalization agenda of advanced capitalist economies, the biggest transnational corporations
and their Third World junior corporate partners since it was founded post-cold war. In fact,
APEC’s first Economic Leaders’ Meeting (ELM) in 1993 was called by the US in order to launch
the WTO Uruguary Round and gradually break the resistance of underdeveloped countries so
they could penetrate their economies. It is consistent with the US-initiated Washington
Consensus in advancing neoliberal globalization which involves trade and investment
liberalization and privatization. It has been committed to the WTO objectives to create
agreements to further penetrate different economies, obtain more profits through plunder of
national assets and natural resources, and exploit the people of these nations. APEC tries to
conjure the illusion of equality among member-states and the promotion of the interest of all
even if it is evidently an instrument of imperialist plunder.

Evidently, capitalism has shaped global economy and politics through exploitative
mechanisms and manipulative structures. Now, the question is how does global
capitalism affects people around the world?

Chapter Summary

▪ Globalization is an extension of capitalist exploitation which means that

transglobal connectivity is being advanced, first and foremost, to provide
opportunities for capitalists to accumulate profit. It is primarily driven by the
capitalist scheme to control economies i.e. extract resources, exploit labor, and
control flows of products and prices.

▪ The new era of globalization has been defined as “the systematic spread of capital
and open markets”, and liberalization and privatization have become dominant
forces in facilitating this process — liberalization involves opening markets for
goods and services, capital, technology, and labor through eliminating state
control over economic activities or imposing fewer constraints on economic
transactions like trade and investments; and privatization is the transfer of
ownership and management rights of economic resources from the public
sector to private entities. International and regional organizations like the World
Trade Organization (WTO), International Monetary Fund (IMF), World Bank,
and other US-backed channels create avenues to intensify economic
liberalization and privatization.

▪ Since the post-war period, the United States of America has preceded
globalization. Along with these economic means, the capitalist hegemon has
also used political mechanisms to maintain its reign — one is colonialism, a
phenomenon wherein a colonial power establishes formal mechanisms to run
the internal affairs of its colonized country and includes settling in the said
colony, deploying military forces, and establishing a new administrative
apparatus; and the other is imperialism, which involves employing a wide range
of methods to gain territorial, political, and economic control over the
subjugated countries other than military control. Both aims to maintain the
dichotomy of relations between the dominating countries and the victims of
capitalist exploitation with the help of international and regional political bodies
like the Association of Southeast Asian Nations (ASEAN) and Asia-Pacific
Economic Cooperation (APEC).