Globalisation - what does it mean?

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..with the latter coming into force in 1948.
Although these new institutions eased the existing rules on tariffs and the movement of currency, by seeking common ground on exports and imports and Foreign Direct Investment (FDI), they had no powers to control new forms of protectionism
that had been instigated by the major powers in order to maintain their market share and economic dominance.

 And this was reflected in what happened shortly after the Second World War ended,
when the US introduced the Marshall Plan in 1949 involving $13.5 billion of loans
by the US government to near-bankrupt European economies. All told $90 billion
was steered towards 16 countries that agreed to move towards currency convertibility, lowered trade tariffs, who promoted exports to the US and who were 'tough on communism'. This not only meant that the US export market was protected in Western Europe but was also, in retrospectthe first economic warning shots in the
start of the Cold War. Cold War Economics

  The Cold War itself proved to be a nice little earner for those countries in the
"developing" world who allied themselves to either East or West, with most of the
proceeds ending up in arms deals or directly into the pockets of corrupt politicians
and bureaucrats. Not that this bothered the developed countries, for during this period of Cold War economics many developing and undeveloped countries found themselves accepting loan agreements whether they wanted them or not -and with very favourable terms of borrowing at very low rates of interest, plus longterm
payback dates. They seemed at thetime to have little to lose by becoming debtor nations. As for the creditor nations,both East and West, their aim during the cold war was to increase their hegemony and market share by making the client debtor nations militarily and financially dependent on them as creditor states and to gain the upper hand over their competitors.

 Marx predicted the potential for capitalism to become a global system, whilst Keynes,  convinced the capitalist class held the centre stage with help from the state.

  The loans themselves came from a variety of sources: manufacturing and financial businesses, banks, donor states, the IMF and the World Bank being the main lenders. Much of this money was lent under a 'no risk' guarantee covered by Export Credit Agreements (ECA), where individual donor states with their export agencies would underwrite the loans through aid contracts - specifying that thecapital investment could only be spent through named companies established in the donor state.
 
  For instance, the Nigerian governmentcould have decided to build a university, and could approach a donor state like the UK to finance the project, both seeking agreement as to the profitability of the aid. The UK government would then stipulate
that the university could to be built by a UK developer and equipped by Britishmanufacturers and key posts staffed with British-trained personnel. Should theNigerian government default on their repayments of the loan what would usually happen is that the UK would agree to pay off the loan under ECA if the Nigeriangovernment issued a bond tied to a percentage of Nigerian oil exports in order to cover the amount owed. This would ensure the capital invested stayed in circulation via petrodollars, despite the losses incurred. Obviously, deals like this could only continue whilst there was sufficient confidence in the strength of the US-driven
Western economies.

Crisis of Over-Accumulation
During the early 1970s this changed dramatically when loss of confidence over escalating costs of the Vietnam War became evident with many countries selling off their dollar reserves in favour of gold. Unable to withstand this pressure the US came off the Gold Standard in 1971 and allowed the fixed exchange rate system that was pegged to the dollar to collapse. The price of gold increased and there followed a period of financial instability which, in essence, reflected the return of economic crisis in the sphere of production, with economic downturns in major western economies and growing unemployment. It was at this time that the
main oil-producing cartel dominated by capitalists in the Middle East (OPEC) decided to quadruple their oil prices.

 These events eventually flooded the North American and European financial markets with vast amounts of accumulated petrodollars searching for profitable investment that was difficult to find in the more 'traditional markets' of the post-warperiod. Due to the European Economic Community (EEC) at the time being insufficiently organised or integrated to attract the massive amounts of capital in the OPEC countries, some of it filtered towards the Pacific Rim, commonly referred to as the 'Asian Tigers'.  More


PROTECTIONISM
An economic policy designed to actively restrict imports into a country, through means such as 'quotas' (which only allow for the import of certain maximum numbers of goods in a given period), or 'tariffs' (which place a tax on imports to make them less attractive to importers).
Advocates of protectionism, such as British Tory politician Joseph Chamberlain a century ago, have typically argued that it is a means for protecting domestic industry and agriculture from foreign competition. Historically, it has been most actively and aggressively taken up by state capitalist countries of the political far right (e.g. Fascist Italy and Nazi Germany in the 1930s) and of the far left (Soviet Union, China, etc) when attempting to
challenge other, more dominant, states.
FREE TRADE
This is a situation whereby the free flow of goods and services is not inteferred with by state intervention and measures such as protectionism. In practice it is an idealist conception within capitalism that is never attained completely because of the active role of the state in modern  capitalist nations,
 but advocates of free trade argue that the nearer economies get to this situation, the greater world growth and prosperity will be as there will be fewer restrictions on production and trade. For obvious
reasons, it is a policy favoured more by powerful,
dominant economies with a competitive advantage - but even then, some selected elements of protectionism may remain where needed (e.g. the US economy today).


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Page 7                                                                                                             Socialist Standard August 2006