The globalization of the international economy launched by the United States as an accidental policy of the Clinton administration has since been much lauded as benefiting (some of) the poor of the world by drawing them into the international capitalist system. This is not actually what it was designed to do.

It has proved, like the god Janus, to have two aspects. The second face now has been revealed. Economic globalization has, as its second result, impoverished (some of) the rich of the world.

The free market originated in 19th century Britain in what is called by historians the Great Transformation. As the English political philosopher John Gray describes it in “False Dawn,” a prophetic book (in 1998) on the destructive effects of globalization, that transformation tore from their local roots the economic markets that since medieval times and before had been tied to communities, and had evolved through the needs and adaptations of those communities and their immediate neighbors.

Because of their origins, these markets were constrained by the need to maintain social cohesion. In mid-Victorian England, in part because of the development of transportation and communications, these community-rooted markets — “embedded in society and subject to many kinds of regulation and restraint” — were destroyed.

They were replaced by deregulated markets that ignored social and communitarian constraints, and functioned only according to the rules that suited themselves. Because of their inter-communication and interaction, they no longer set prices according to what the farmer, artisan and community could bear. The free market created a new economy in which the prices of all goods, including labor — or, probably one should say, labor above all — were set or changed without regard to the effects upon local society. Welcome to the world of capitalism “red in tooth and claw.”

This was the capitalism that provoked the critiques and analyses of the great classical economists of the Scottish and British Enlightenments, generally read today (in Washington think tanks) chiefly in order to justify injustice, and in deliberate disregard of the social responsibility that was part of the work of such men as Adam Smith and David Ricardo.

This was the capitalism that gave birth to the Communist Manifesto, in which Marx and Engels wrote: “All old-established national industries have been destroyed or are daily being destroyed. … Everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones.” It provoked socialism and every variety of radical and religious reform meant to restore human values to economic life. Over the years, this version of capitalism was civilized, or half-tamed, until the arrival of globalization.

With globalization, technology once again was eagerly used to destroy existing capitalism by repeating the two crimes of assassination that had destroyed the pre-capitalist economy: the use of technology to expand markets so widely as to destroy existing national and international regulations; and, second, once again making labor a commodity.

Labor was no longer a social or economic “partner” in manufacturing, industry and business, which meant a human collaborator. Labor became simply a “cost,” to be reduced as far as possible, or to be eliminated.

This was rationalized with two contestable euphemisms. The first was that a progressive process had been set in motion by which the profits of globalization would “trickle down” so as to benefit the entire workforce.

This is unimaginable if labor is a commodity of unlimited supply, as it tends to be today — a specific characteristic of globalization. Destroyed was the power that labor had possessed when industry was forced to hire from a given pool of workers in a given location.

In addition, the tendency of globalization is to exploit a given workforce until it no longer has a margin of survival (Ricardo’s “iron law of wages”), and then move on. See Rust Belt industry and trailer-home former towns.

The second of the three self-destroying (indeed suicidal) qualities of globalization has proved to be the inner dynamism driving it to expand by means of the division, subdivision and quasi- universalization of the distribution of risk until this process broke through the barrier of professional dissimulation. This means that the risk has no accountability, because it is effectively unidentifiable — which was the unconscious or unavowed purpose of the process.

This is what has happened in international finance, where the accepted and normal framework of exchange between risk and responsibility, which is inherent in capitalism, has become indecipherable. Neither banks, the international financial institutions nor governments — and certainly not investors — are capable of assigning value to certain tradable paper or commodities, so that economic exchange comes to a halt. Today we stand on the brink of that fatality.

The third suicidal quality of globalized capitalism has been its creation of an organization of greed and individual acquisition of power that, because of the internationalization of the global economic system, has become not only unconscionable but unassessable. There is no assessable value in it. Thus the literally irrational pursuit of objectively meaningless rewards by some of those captains of finance now on the way to jail.

Welcome to the newest version of internationalized capitalism: the suicide version. It now is on display in Washington and other parliamentary and judicial inquiries and tribunals, with consequences that we and our children will now live with.

Visit William Pfaff’s Web site at

© 2009 Tribune Media Services, Inc.


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