Category Archives: Globalization

Globalization and Capitalism in the Twenty-First Century

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Tetsunori Koizumi, Director

What is the driving force behind globalization, behind dramatic and multi-dimensional changes taking place in the world around us? One interpretation of globalization would be to see it as the latest phase of “modernization,” which Karl Polanyi characterized as the “Great Transformation”1. The initial thrust of this Great Transformation, which would cover all aspects of people’s lives, took place in the late eighteenth century when the Industrial Revolution ushered in a revolutionary change in the capitalist mode of production with the adoption of assembly lines in factories, which made it possible to for capitalists to exploit economies of large-scale production, thus prompting them to seek markets globally beyond their domestic markets for their products.

While the Industrial Revolution was no doubt a transformative event in the evolution of modern societies, the invention of capitalism as a mode of organizing economic life goes back much further than the eighteenth century. As Immanuel Wallerstein points out, capitalism was an invention of late-fifteenth-century Europe: “My own view is that the genesis of this historical system is located in late-fifteenth-century Europe, that the system expanded in space over time to cover the entire globe by the late nineteenth century, and that it still today covers the entire globe.”2 Involving, as it does, economic change brought about by powerful transnational corporations from the West under the banner of capitalism, or “global capitalism” as it is called today, globalization can thus be seen as the culmination of the capitalistic expansion of Western nations that goes back, at least, five centuries.

The late fifteenth century, it may be recalled, is also known as the start of the Age of Great Exploration in the history of civilizations. As symbolized by Columbus’ voyage to what would become the New World in 1492, Western nations, headed by Spain first but soon followed by Portugal, England and France, started to explore new territories beyond their national borders to reap economic bounties with the military and technological prowess they possessed at the time compared with nations in other parts of the world. Seen in this historical context, globalization, whether driven by the acquisitive motive of capitalists or the religious zeal of Christian missionaries, can be seen as the triumph of Western civilization that became apparent with the emergence of the United States as the dominant power in world affairs in the second half of the twentieth century.

That globalization in the second half of the twentieth century can be seen as representing the triumph of Western civilization over other civilizations is well summarized in the following words of Arnold Toynbee: “Future historians will say, I think, that the great event of the twentieth century was the impact of the Western civilization upon all the other living societies of the world of that day. They will say of this impact that it was so powerful and so pervasive that it turned the lives of all its victims upside down and inside out—affecting the behavior, outlook, feelings, and beliefs of individual men, women, and children in an intimate way, touching chords in human souls that are not touched by mere external material forces—however ponderous and terrifying.”3

It is to be noted that Toynbee, with his uncommon insight as a historian, expressed these words as early as in 1958 when the word “globalization” was hardly mentioned in intellectual discourses, let alone in daily conversations. Toynbee’s choice of words “upside down and inside out” suggests that the impact of Western civilization and, by implication, of globalization on the lives of people in the rest of the world has been quite extensive and extremely disruptive. Whether they can be characterized as “victims,” globalization for the people living in the non-Western world can be said to have been the change imposed on their lives “from above” by the First World and by supra-national organizations such as the World Bank and the International Monetary Fund, which are seen by them as promoting the interests of the First World. Globalization for these people has also been the change brought into their lives by foreigners and foreign organizations “from outside” beyond their national borders.

Given the nature of globalization as representing the triumph of Western civilization, it is not surprising that anti-globalization movements sprung up in the rest of the world in the last decades of the twentieth century, and are still continuing into the twenty-first century. These movements that mostly reflect the efforts of local and regional communities to regain their autonomy can be seen as representing globalization “from below,” in the sense that they reflect the efforts of lower entities in the traditional hierarchy of political control within the nation-state. They represent globalization “from below,” also in the sense that they are grass-roots movements, with the initiative for opposition and resistance to globalization coming from NGOs, civic groups, and ordinary people in varied walks of social life. Indeed, recent development in UK and US suggest that anti-globalization sentiments, if not movements, are now spreading to the people living in the bastion of Western civilization.

Toynbee’s words, in addition to globalization “from below,” suggest another direction in which anti-globalization can take: globalization “from within.” In the first place, globalization “from within” is a useful—and meaningful—way of interpreting the nature of anti-globalization movements, because civilization as a social system has a topological structure that has the upside-downside dimension as well as the outside-inside dimension. Globalization “from within” is also a useful—and indeed meaningful—way of capturing anti-globalization movements as they represent the effort of the individual to find a stable sense of belonging as a member of a civilization that is being threatened and eroded by dramatic and multi-dimensional changes under globalization. The challenge for capitalism in the twenty-first century is, therefore, whether it can address itself to the individual’s need to find a stable sense of belonging in the world in which the violent clash of civilizations has become, unfortunately, a constant in our lives.

  1. Polanyi, Karl, The Great Transformation: The Political and Economic Origins of Our Time, Boston: Beacon Press, 1957.
  2. Wallerstein, Immanuel, Historical Capitalism with Capitalist Civilization, London: Verso, 1983, p. 19.
  3. Toynbee, Arnold, Civilization on Trial and the World and the West, 1958, p. 278.

Can capitalism be saved, or should it be saved?

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Tetsunori Koizumi, Director

Shocks and disturbances are the facts of life in capitalist economies. For one thing, shocks and disturbances come from the fact that in capitalist economies production and consumption are not coordinated activities but are disjoint activities conducted by different groups of individuals with different goals and motivations. These shocks and disturbances, which stem from mismatches between supply of, and demand for, goods and services, are, in a way, normal shocks and disturbances inherent in the way capitalist economies operate as a system. Besides these normal shock and disturbances, capitalist economics are occasionally hit with abnormal shocks and disturbances, the Great Depression in the 1930s being an outstanding example of such major disruptions in the world economy.

What took place in the global economy in 2008 is another example of major disruptions in the world economy that was far beyond normal shocks and disturbances, prompting the International Monetary Fund (IMF) to call it “the most dangerous shock in mature financial markets since the 1930s”. Indeed, this was the most serious economic crisis since the Great Depression of the 1930s, as exemplified by the stock market crush of October 2008, with stock market losses estimated to be $6.5 trillion on October 6 and 7 alone, according to Standard & Poor’s BMI Global, an index of major markets worldwide. As the title of a featured article, “The Meltdown Goes Global”, in the October 20th issue of Time illustrates, the crisis of 2008 would soon to be called as “The Global Economic Meltdown”.

The Global Economic Meltdown reflects a fundamental shift that has taken place in the world economy from the era of the “goods-and-services-based economy” to the “information-based economy” in which trade between nations has become mostly trade in financial services and information-related products and services. The new era of “information-based economy”, which is said to have emerged around 1990s, requires new thinking about the way it works and the way it is to be managed. This is so because the “information-based economy” is new in the sense that the products and services transacted are financial and information products and services, most of which are non-excludable like public goods. As a matter of fact, it is not often transparent what are actually transacted in the new “information-based economy” when customers’ private information, for example, is sold on the Internet from one company to another.

While private economic activities know no national borders, economic policies are mostly conducted by national governments to stabilize their own economies and very seldom, if ever, done to stabilize the world economy. We are caught in a fundamental dilemma here, for, while financial and information products and services transacted in the global marketplace today require non-market regulations by concerted efforts of national governments, the national government has become powerless as it, too, has to live by the rules of the global marketplace if it wants to keep its national economy competitive in that global marketplace. This is one reason why income disparity between rich and poor has dramatically expanded, for the national government that conducts redistributive economic policies must do so at the risk of financial capital of rich people leaving the country for greener pastures elsewhere in the global marketplace.

The global financial market—and the world economy for that matter—is driven by one logic, that is the logic of the marketplace, in which capital always seeks the most profitable place, irrespective of its geographical location. While this logic has been the driving force behind capitalist economic development, its impact on the world economy has dramatically expanded with the swiftness with which capital moves from one place to another, thanks to the development of information technologies. The world economy has indeed been turned into a gigantic casino, with millions of investors participating in the game of financial gain and loss 24 hours a day, seven days a week.

Global capitalism that surrounds us today is a new phase in capitalist development in which the conventional wisdom concerning the role of the national government in managing the economy formulated during the Great Depression is no longer relevant. While both represent great shocks and disturbances in the working of capitalist economies, the Great Depression and the Global Economic Meltdown reflect the fundamentally different characters of the world economy in the twentieth century and in the twenty-first century. This is the reason why we need fundamental rethinking about capitalism. While capitalism in the twentieth century was saved by the Keynesian intervention in the national economy, that kind of intervention is no longer effective to manage the world economy in the twenty-first century. Indeed, the question we need to be asking is not whether capitalism can be saved as it was but whether it should be saved in view of the fundamental change in its character in the last few decades.*

*Two books published in 2015 offer two opposing views on what we should do with capitalism today. While Robert Reich, in his Saving Capitalism: For the Many, Not For the Few (New York: Knopf, 2015), argues for saving capitalism despite its apparent drawbacks, Paul Mason, in his PostCapitalism: A guide to Our Future (Bristol: Allen Lane, 2015) argues against it on the ground that capitalism today is saddled with the contradiction between network and hierarchy.