- Editorial note from HC: In the piece I had in the CSM last Friday about the current, Georgia-revealed shifts in global power balances, I argued that the many economic interdependencies among the world’s major power centers will act as a powerful brake on their going to war against each other. Afterwards, I received an intriguing critique of this position from none other than Branko Milanovic, an economist on global inequality whose work I admire a lot. (Indeed, I used this recent book of his quite a bit in my Re-engage! book.)
So although Milanovic’s conclusions are very different from mine– or rather, precisely because they are so different from mine– I am very happy to publish the short argument he has composed on this subject, so we can have a good exploration of these issues.
From Global Trade to Global War
by Branko Milanovic, August 26, 2008
Openness to trade and globalization lead to interdependence and cooperation and hence to global peace. There is a venerable school of thought, beginning with Montesquieu and Kant, that argues more or less exactly this. Less famously, the same point was made in Norman Angell bestseller that had the misfortune of being published just a few years before the vaunted cooperation and interdependence transmuted into the worst carnage the world had ever seen up to that date (1914). But there is another school of school to whom the carnage of the Great War did not come unexpected. It belongs to the Marxist and semi-Marxist tradition, starting from Hobson and continuing with Lenin and Rosa Luxembourg. It viewed the war as inevitable as capitalists from different countries clashed when dividing up the globe, and then manipulated the public and used their nations’ armies to further own interests.
And indeed the unease with the standard (“peaceful globalization”) version of events is evident even today. In one of globalization cheerleading bestsellers Martin Wolf (“Why globalization works?”) shows a singular difficulty explaining how apparently benign global capitalist competition resulted in the disaster of 1914. His explanation is to lay blame on “German militarism”. But German militarism was only special because it was a late-comer’s militarism: once most of Asia and Africa was divided (not always without conflict; witness Fashoda) between the French and British capitalists, the up and coming German capitalists wanted a slice of the pie too. So, it is the very nature of global capitalism, not some unique “German militarism,” that is to blame.
Why does it matter today, exactly 100 years from the run-up to World War I (the Tangier crisis which almost led to a direct clash between the French and the Germans) and just short of the World War I centennial? Because the same forces are at work again. Consider the following. The three most important countries, US, China and Russia have a nicely balanced division of assets among them: US has capital and technology, China labor, and Russia land and natural resources. But to make more money, US capital needs control of as many natural resources as possible. A glance at the map shows that the sparsely populated and natural resource-rich Siberia and Central Asia are the prime candidates for their lucrative control. After the break up of the Soviet Union, it seemed, all too briefly, that the US and Western capitalists had all this wealth within their reach. The Yeltsin regime was engaged in a fire sale where multi-billion plants and oil-fields were being sold for a song. But already by the time the second Yeltsin administration, the rules of the game started changing. In the swindle that has since become known as “loans for shares”, Russian big capitalists (known as the “oligarchs”) figured out that they did not need to share all these riches with foreigners. Instead, why not keep them for themselves?
This trend accelerated under the two Putin terms. The division of spoils was limited to a restricted circle of cronies and secret agents who suddenly developed an acumen for business deals. The agreements with foreign capitalists were rescinded or revised (most famously, the British Petroleum Tyumen oil field deal). Oligarchs who did not accept the new rules of the game, and who wanted to build pipelines with foreigners (Khodorovsky) were stripped of their assets and sent to jail.
Thus today the struggle between the West and Russia that threatens the world with not only another cold, but rather hot, war is between the two bands of greedy men, and it involves the riches of the Eurasian heartland (“the world island”) east of the Urals. It is an implacable fight because it is a zero-sum game. In contrast, the nature of the Sino-US rivalry is different because of complementarily which exists between capital and labor. Both are needed to produce toys and micro chips. But when it comes to natural resources, it is either you or I who control it.
No less an admirer of global capitalism than Keynes saw its Achilles’ heel in greed that at times becomes so irrational that it works against person’s own interests. Lenin agreed: he thought that a capitalist would sell the rope with which he would be hanged. They might still be right. Halliburtons and Gazproms of this world, rather than ushering an era of universal peace, may bring us World War III.
To engage in global trade one automatically, given past historical records, engages in global war. The prime example, aside from the emerging one of resource control, was the Opium War.
While for some the temparatures of wars and trade, whether in F or C become the defining points, for millions of others the heat as well as the coldness of global trade or global war is a constant uncontrollable environment.
Again paraphrasing an adage ascribed to a Frenchman, “rulers never learn from history and they never forget”. Which translated means that in this the 21st. Century its some one elses turn, besides the anglo/americans to be the big kahunas.
There is a fundamental contradiction within capitalism that dates back to Adam Smith: it works for the common good precisely because participants in the market are greedy. The real insight by Marx (which has been consistently ignored by all because ppl who’d understand this point–the economists–generally don’t read Marx and don’t talk about his ideas in polite company and those who do read Marx usually don’t understand it–I konw I exaggerate the situation good bit: apologies to those who feel slighted) was to recognize this contradiction, and to conclude that, whenever given opportunity, capitalists are always looking to undermine and overthrow the very markets in which they operate. They always want to bring in the state, or other states, to tilt the market in their favor–i.e. abolish “free market” as such.
Marx saw this state as arising from technological change–the rise of industrial economy and the concentration of market power. Alas, it wasn’t really market power that led to manifestation of the “fatal” contradiction of capitalism–although it did, to some degree.
Others, such as old-fashioned anti-imperialists and American progressives, saw much closer connection between the changing economy and the state. They saw that the state would be captured to become a tool of the capitalist class–whether to engage in imperial buildup overseas or to build a plutocratic state domestically.
The irony, curiously, is that so many of these people saw the answer in the strengthening of the state power and diminution of democracy–the state controlled by some sort of benevolent elite who stand aloof from popular passions–people who just happened to be like themselves (like every other elitist or populist anti-democrats in history.)
This pattern does illustrate one very dangerous problem: democracy, like capitalism, is inherently self-contradictory. Capitalist interests are people too–and their itnerests are necessarily reflected in public policy. I don’t see how wealth should be forced to pay for commonwealth beyond their willingness to do so. They’ll try to find ways to avoid it–that’s inevitable (much the way so much of regulatory state wound up helping serve there interests of the capital, in most industrial countries.) Indeed, it’s precisely the same problem that undermines both capitalism and democracy: people who play the game decide that abiding by the normal rules no longer suits them, so they decide to tear up the rule books, by enlisting support from others: the state, in case of (anti-)capitalists; the masses, in case of the anti-democrats.
I don’t know if global trade is necessarily unique in this dimension: this conflict has long been under way, long before the rise of global trade. It just so happens that, while use of military force cannot be easily enlisted in most domestic politics contests (since people on the other end are also constituents–but there are enough counterexamples even for this…), the scene changes in the international context–after all, foreigners don’t vote.
Just some rambling rant….
I dont understand the last half of the comment by Kao_hsien_chih — comparing democracy as a medium to capitalism. There is no competition in democracy, as we know it, since the process has already been captured and exploited by the capitalists. The first half of his comment is excellent.
plato’s cave,
I think you’re projecting things I’m not saying. Let me reiterate, hopefully, in a more organized form:
1. Smith recognizes that the logic of capitalism is inherently riven with an intenral contradiction–but dismisses it on the grounds that capitalists are price takers and they cannot affect the workings of a free market–not an incorrect assessment given a pre-industrial economy and constant returns to scale.
2. Marx observes that the intenral contradiction of capitalism can no longer be dismissed in an era of increasing returns to scale–but being an economic determinist, he has little conception of its political consequences.
3. Early 20th century American progressives discover another tool for capitalists to undermine capitalism by destroying free markets: the state. They propose to deny the state to the capitalists by making politics undemocratic.
4. Chicago school ecnomists, perhaps channelling Marx better than any Marxist ever did, at least in some dimensions, propose another solution to save capitalism from capitalists using the state: abolish the state so that capitalists would lack the means to undermine capitalism.
What I was pointing to was that 3 and 4 are based on hopelessly naive assumptions about how politics works. I don’t presuppose that capitalists necessarily “control” the state to do whatever they want to do. Indeed, whether one likes it or not, distorting the market for benefits of one group or other is always quite popular. Whether one likes it or not, there’s nothing fundamentally unfair or undemocratic about the political weight of capitalists and their allies–the organized labor, the “fair traders,” farmers, etc.–who seek to unfree the market. All the more so if the adversely affected are foreigners–when the dispute in question involves global trade: they don’t carry domestic political weight, after all.
Just to return more to Branko’s original piece… I wanted to comment that it strikes me, Branko, that you’re still really arguing within the frame of a US-hegemonic, US-centric, or US-dominated world economy. Your fundamental points are all made in the context of a US vs. the competition dynamic, whereas I see the world economy and world politics nowadays having a much more multisided dynamic; and this structure considerably dilutes the tendency to dyadic “winner-loser” outcomes or expectations of the same.
This kind of multi-skeined picture of global economic entwining– plus the fact that the world is, in an important sense, now “full” of full state actors, meaning there aren’t any big new “terra nullius” areas of the globe to be the subject of inter-power competition– are two factors disincenting the outbreak of open shooting war between big world powers. (What constitutes “big”, yet t.b.d. Does Georgia count? No. Does Iran? Perhaps…) Other disincenting factors include the transparency of the global information environment– hard to conduct any significant war anywhere these days without the whole world seeing the horrible human costs that are always inflicted during war– and probably also (I hate to say this) the possession by big powers of nuclear weapons and a generally good understanding of the need to avoid their use by any party.
The latter three of these factors make the 21st century very different from the 19th. The first makes it very different from the Cold War, which was relentlessly bipolar.
So while I agree with a lot of what you say about the tendencies of capitalism, I think the situation today pushes big powers toward using means other than war to solve differences between them. But we need to discuss this a lot more…