In the art of communication, terminology is most important and has a big impact. A partisan idea or process can for a while be presented as the most benevolent and liberating with the choice of appealing and attractive terminology. “Globalisation” is a word with tremendous attraction and appeal as its meaning is impressive and sensible, with a promise of hope to expand towards new opportunities and adventures.
If globalisation is movement of ideas, goods and people across the planet, it’s as old as human existence. Then, why since the last century, particularly the last quarter of the twentieth century, is the idea being marketed as a new discovery or path that could transform world economy and liberate civilisation? What special magical attributes the “neo-globalisation” acquired compared to the original ancient idea that it has emerged with unquestionable cult status among the elite establishment in almost every nation?
“Globalisation” and words and phrases used as substitutes in the neo-globalisation propaganda like “free trade”, “free market”, “liberalisation” all sound very benign and rational. This charmed terminological jugglery has worked beyond imagination for decades, but nice words cannot forever promote or shield partisan ideas that lack integrity of purpose. Neo-globalisation is different and has been promoted to mean original “globalisation” through sustained propaganda, when in practice it actually means re-colonisation of former colonies.
Neo-globalisation is not about free movement of ideas, goods or people. It is about globalisation of few select western currencies, led by the US dollar. This monetary globalisation is a more potent method involving less effort and risk than the conventional brute approach practiced till the first half of the twentieth century. The combination of intellectual propaganda and tactics supported with projected military strength is the modus operandi of this neo-globalisation.
Who are the real beneficiaries of this process? A small group of establishment elites in politics, business, bureaucracy, judiciary, media, academia across nations, who are willing to shed the sentiments of nation, community interest, justice and conscience for access to global privileges and benefits. Not all enjoy the same power and recognition in the club, but there are many collaborators in erstwhile colonies. Mostly descendants of establishment propped up by old colonial masters, they are more than willing to cheer and slave for the neo-colonial masters.
The monetary colonisation promoted by the neo-colonisation agenda means transfer of real resources from nations to those who control global trade through a rigged global financial system, supported by a security and military architecture. Exchange of commodities through trade between nations is an ancient idea and process. No nation in history or in the present has remained isolated, even with most self-sustaining economies. In fact, historically there was little restriction on movement of people and not just trade, unlike the present where rich countries like unrestricted transfer of resources from poor countries, but not people.
Modern economy and the life style it promotes is very resource intensive. The modern economic and business theories don’t integrate this aspect; it is left to the governing class to find resources for continuous economic growth needed to maintain high employment levels following these theories. The corporate thirst for profit inherently needs beyond basic economic growth (needed with population growth) to sustain employment. The surplus profits have to be somehow reinvested for filling the employment deficit in the economy, created by the profit thirst, which means the modern economy has to continuously add new goods and services to sustain employment levels.
The necessity of continuous economic growth to serve corporate profit thirst puts tremendous pressure on the state and governing class to plan for and gather the resources needed for continuous growth. They need colonies to supply resources cheap; neo-globalisation is a process of achieving it through subtle monetary colonisation of poor and under developed countries, mostly former colonies in Asia, Africa and South America.
Monetary colonisation doesn’t need military occupation or physical takeover of colonies. The modern security requirements and aspirations of poor nations, particularly those squeezed during the colonial era, need some level of industrial infrastructure and modern economy. The single most important commodity that drives the modern economy is crude oil. Under Washington’s leadership, the West has managed to get control over the exchange and distribution of oil, exploiting the political and geographical insecurities and needs of the oil-rich Middle East.
It is incorrect to say that the US dollar and other western currencies are fiat and not backed by anything; they are backed by the most important commodity of modern era with support from modern military and technological might. These currencies are stronger than the gold standard. But, the power of petro-dollar is directly proportional to the use of crude oil, which means the resource intensive economic model depending on crude oil has to be promoted everywhere.
The combination of petro-dollar and general domination of international trade exchanges through well-established banking networks gives immense monetary advantage to the US and allied western powers. However, the power is proportional to the usage of crude oil and increased international trade. If the world at large outside the industrialised west, Asia in particular, remains indifferent to the resource intensive economic model of the west, the advantage with petro-dollar would be very less with little access to natural resources from former colonies in Asia. Africa, South America.
The petro-dollar helped Middle Eastern oil-rich countries as they import almost everything they need. Hence, petro-dollar is a mutually beneficial arrangement between western industrialised countries and the oil-rich Middle East. This alliance needed a major country in Asia to globalise petro-dollar and they ironically managed to rope in communist China, a vast country with close to one-sixth of the global population.
China, the ancient Asian giant, was a prosperous self-sustaining kingdom with its own sphere of influence, until the Europeans came and practically made it a colony. It was a noble and rich eastern civilisation that self-sustained for centuries on the principles of Confucian harmony, similar to other ideas of harmony and co-existence in eastern cultures. The country suffered indignities and poverty in the colonial era between the ambitions of western powers, Japan and Russia. Finally, the communist party under Mao Zedong, with tactical help from the Soviet Union and the United States on different occasions, managed to takeover the country in 1949 through a revolution.
Imperial China was very reluctant to accept European ideas, commerce and innovations, considering them inferior to its own ways and culture. After defeat in a few wars, the reality of its own security weakness vis-à-vis the European military technology made the country open up to European trade; it practically became a European colony.
Mao Zedong tapped into these sentiments of oppression and united China under a strong central government after long time. Mao realised the necessity of modern technology for China’s security. He threw China into a flux to come out of inertia, old habits and to consolidate his political hold. Even as a fledgling communist nation just out of colonial shadows, suffering from poverty and many internal problems, China under Mao zealously guarded its territorial integrity against the machinations of the super powers in its backyard during the Cold War era.
In 1972, US President Nixon visited China at a time when petro-dollar negotiations were going on with Middle-East. A new relationship emerged between the capitalist west and communist China. Mao’s strategy was collaboration with the far enemy in the west to counter the near enemy, the Soviet Union, to enable China’s rise to its potential.
The Nixon’s visit heralded US-China strategic engagement and in a decade it blossomed into a full blown partnership. China opened up its resources to western corporations in a very controlled manner, promoting joint ventures between its state owned companies and western corporations for technology.
The western powers got natural resources in the form of finished products at much cheaper prices through depreciated currency while China gained technology. China combined foreign investments in technology with much bigger domestic investment through state owned enterprises and state owned banking system, which kept real interest rates at near zero, to achieve unprecedented economic growth in modern history, in just three decades. In this period, China achieved more than ten percent average GDP growth.
With Chinese collaboration, the petro-dollar became the most potent and dominant medium of exchange in International trade. The export-oriented Chinese economic model provided resources at less than half the natural price through depreciated Chinese currency for western consumption. Neo-globalisation propaganda smartly uses “cheap labor” as a euphemism for this resource drain. There is no cheap labor; it actually means giving natural resources cheap through depreciated currency.
Currency depreciation by a country means willingness to sell more resources at less exchange value in return. A country with x billion dollar exports with a depreciated currency at one-third of its natural exchange value against dollar, actually exports 3x billion dollars’ worth goods and services. But when it imports from western economies, it has to pay the regular or high price.
The impetus given to petro-dollar by China forced other countries to open their resources for western consumption. With a large economy like China depreciating its currency for exports, the lesser and dependent trading partners of China had to further depreciate their currencies against dollar to remain as competitive suppliers of resources to the Chinese export economy. The net result was a massive one-way transfer of resources from former colonies in Asia, Africa, and South America to western powers. History is repeating itself in a sophisticated and stealthy way. China has become a conduit for massive transfer of resources to the west through its export economy.
Neo-globalisation has created some imbalance in western economy and society as western corporations outsource employment for cheap resources and more profits. This is an inevitable consequence of extreme profit-chasing, which needs resource intensive continuous economic growth, leading to a very consumerist society. The combination of profit-chasing and a stable economy with full employment without growth in new goods and services is impossible.
The income lost with stagnated wages and unemployment in western economies caused by outsourcing is being filled with consumer credit and government deficits funded by the surplus foreign exchange reserves accumulated by China, Middle East and other countries, invested in western financial system and sovereign debt. It’s just a process of recycling and since foreign debt is also denominated in own currencies, it’s not a serious matter for western powers when push comes to shove. Just like how trillions were pumped into the system from nothing after the 2008 financial crisis, similarly foreign debt can be recycled or paid. The sovereign creditors won’t push too far as it would undermine the real value of their own surplus exchange reserves.
The promises being made in the 2016 US election campaign by contenders on both sides, on stopping outsourcing and forcing offshore manufacturing back to the United States, cannot be realised without fundamental changes to the economic system and lifestyles.
A self-sustaining stable economy with high employment needs a balanced lifestyle with skills to utilise and be content with local resources that can be recycled. The current standard of living in western nations is not possible with a self-sustaining national economy, but if at all it is achieved by structural changes and reducing consumption levels, it would be more fulfilling with greater socio-economic stability and also provide for reasonable consumption.
China has greatly benefitted the west since it opened its economy. It has overdone its export model and accumulated a mountain of foreign exchange reserves, currently more than $3.5 trillion. It has achieved this at immense cost to its resources and environment; it has opened its economy for joint ventures with western companies but unlike India and other countries, until recently it didn’t allow any foreign investment in its financial system or stock markets. It gave limited access to foreign investment in its stock markets in 2014, as a necessary pre-condition for reserve currency status from IMF to Renminbi, which it achieved in 2015.
On purchase power parity basis, China is the largest economy and its share in global trade is highest, surpassing the US. The Chinese economy is a controlled export-oriented economy; its internal consumption levels are low compared to its GDP. To move away from exports and rebalance, after the 2008 crisis China engineered a real estate and stock market bubble through its state banking system to move the economy to internal consumption and maintain growth. Many mistake this as a big structural flaw in the Chinese economy and they have been predicting doom since then, which hasn’t happened so far.
But while reorienting its economy to internal consumption, there is one real problem China has to face like any other modern economy. Growth through internal consumption means either most resources have to be available locally or the country has to promote its own neo-globalisation model, which means China has to look for globalizing its own currency.
Getting reserve status from IMF is the first step. But for a country with four times the population of the US, aspiring for the same standard of living means its currency should be much more powerful and acceptable than the petro-dollar. The trading partners should accept Renminbi as a substitute to dollar for China to divert its finished products or import finished goods for internal consumption without bothering about trade deficits.
This is a very tough task for China; though it has the highest share in global trade, it is still mostly denominated in dollars. Western soft power is immense; they have over centuries of colonisation, via selective immigration policies, co-opted the elites in former colonies across the world. The English language and network of tax havens makes elites in former colonies more comfortable with western currencies to secure and hide their surplus profits, than with Mandarin or Renminbi. The world economy still runs on oil denominated in dollars.
It is almost impossible for China to rise following the same resource intensive neo-globalisation approach of the west. It would end up paying tribute to the west as it did for the last four decades. Having secured its economic position and achieved a level of military deterrence, China should go for new technologies based on sustainable energy sources. It has already immensely contributed to mainstream solar energy.
Though it is aggressively pursuing acquisition of natural resources, including engagement with resource rich Russia, and improving its financial footprint through infrastructure bank AIIB and projects like the ambitious Eurasian corridor through Central Asia, ultimately it has to achieve a higher degree of less resource-intensive economic sustainability inside its borders in order not to repeat the same modus operandi of neo-globalisation on other hapless nations. It has to revive its Confucian thought and principles of harmony which sustained its rich civilisation organically for millennia within its borders
The Trans Pacific Partnership is designed to isolate China in the Asia-Pacific and Trans Atlantic Trade and Investment Partnership is to contain Russia-China Eurasian ambitions through Central Asia. There is pressure within western nations against these neo-globalisation agreements that are depriving local employment, but ultimately the issue boils down to economic ideas and lifestyles of people. It’s futile to blame policy-makers when businesses promote and people aspire for high consumerist life styles.
It would be interesting to see whether China could manage to come out of the shadows of Western powers and create its own sphere of influence at least in Asia, in collaboration with Russia, which has resources and a dwindling population. China can rise peacefully and sustain itself, but not by following same extractive resource-intensive strategies of neo-globalisation on other countries.