This chapter gives a loose definition of globalization and sheds light on the history of how England fought for free markets, how the gap between rich and poor peaked in the years before World War 1, how World Wars, the Russian Revolution and the crisis of the 1930s reduced the gap between the classes, and how the era of globalization after 1980 has created a world more unequal than 100 years ago.
Globalization is a term first used in the 1960s. The term does not have one final definition, but many have an opinion of what globalization is and of whether it is good or bad.
Very briefly, globalization means “The process of becoming global” and refers to the development of the societies on this Globe where we live.
A longer definition could be:
“Globalization is a set of social processes that creates and intensifies worldwide social connection and creates a growing awareness among people of the relations between the local and the global reality”.
Our world together, where the process of globalization has been going on for some time, may be called a “globalized world”.
When globalization has been set in motion, we maybe use the word “globality “ to describe the state of a globalized work or a globalized community.
Liberal economists, who analyze the blessings of capitalism, see globalization as a sign of the success of capitalism in developing to world that is more “global”, where production is increasing and opportunities to create profit are expanding. This view is promoted by international organization such as the IMF and the World Bank, government of Western countries and USA in particular and by multinational companies that over the past decades have benefited greatly from “globalization”.
Those who are disturbed by a the growing inequalities of the world and the social, economic and environmental damage caused by globalization, see globalization very differently, as a process that is dangerous for people, societies and nature. This group of often referred to as the anti-globalization movement, but if you are opposed to the way globalization proceeds in the world today, you may wish for a globalized world where people care about each other across oceans and borders, where people may travel freely and where all can enjoy and protect the beauty of the globe.
There are political, environmental and humanitarian groups in the world, who wish to create just such a world. The international Committee of the Red Cross was created in 1863 in Geneva to protect the life and dignity of people in armed conflict. The organization today has 100 million volunteers and workers all over the globe across all dividing fault lines. World Wildlife Fund was established in 1961 in Switzerland to protect nature. The first Humana People to People organization was created in 1977 to build connection from people to people across continents.
The Globalization that these non-governmental organizations work to create is a good thing, which most people in the “anti-globalization” movement would support.
In the following, we will mostly use “globalization” to mean the negative, capitalist globalization, which has been moving forward at fast speed for the last decades. For clarity, we would call it “capitalist globalization”, sometimes only globalization. To provide an understanding of the term we will put it into the context of history and then look at how it works.
Victoria was crowned queen of England in 1837 and ruled for 64 years until her death in 1901. The Victorian age is known as the golden age of the British Empire. The year after her crowning, England started the Opium War that forced China to open its marked to opium produced in India. Victoria took pride in being crowned Empress of India. Lake Victoria in East Africa, Victoria Falls in Southern Africa, Victoria State in Australia and towns in Canada, all bear her name. She was said to rule an empire where the sun never set.
In the days of Victoria, England was the Worlds leading industrial power and dependent on its overseas empire for raw materials and marketing its industrial goods. In 1848, during a wave of revolutions in Europe, Karl Marx described in the communist Manifest how capitalism had created a world market and capitalist development:
“The discovery of America, the rounding of the Cape, opened up fresh ground for the rising bourgeoisie. The East-Indian and Chinese markets, the colonization of America, trade with the colonies, the increase in the means of exchange and in commodities generally, gave to commerce, to navigation, to industry, an impulse never before known, and thereby, to the revolutionary element in the totteering feudal society, a rapid development”.
The British navy moved more goods around the world than any fleet in history. The Suez Canal was opened in 1869, shortening travel routes between Europe and Asia. Steamships were developed that moved faster than sailing ships. England was a staunch supporter of free trade, which allowed British Merchants to trade all over the world and did so while paying a minimum of custom duties.
The British supported the freedom of movement of people. The feudal kingdoms of Europe had passport systems, so that only traders and nobility could travel, whereas passports were abolished in Europe in the 1860s and indeed in most of the world, and were not reintroduced until World War 1.
One of the results of free trade, free travel and the power of the British Empire was an extreme inequality between rich and poor, as wealthy capitalists accumulated ever-larger fortunes.
By 1001, when Queen Victoria died, the richest 0.1% of the UK population earned 13% of the national income. In the USA and France, this group share of the income was 10%.
Before World War 2, World War 1 was called the Great War, “the war to end all wars”, but it took only 20 years before the world was fighting yet another war to end all wars.
The Russian Red Army was the main force in bringing down the Germans. In many countries in Europe, communist guerilla groups had led the fight against Nazi occupation. The support for socialism was widespread in Europe. To stop communists from taking power, capitalists supported social democratic labor parties who wished to reform, but not to remove, capitalism.
The labor parties introduced taxes on the wealthy and strove to redistribute wealth from the rich to the poor. As a result, the share of national income controlled by the richest 0.1% dropped to less than 2% in France, USA and the UK in the 1960s. In the UK, this share of the richest dropped to 1% in the late 1970s, the lowest level of hundreds of years.
It was a very remarkable shift towards a society of greater economic equality.
This did not last. Capitalist globalization increased inequality. By 2000, the richest 0.1% in the USA had 6% of the national income. In the UK it was 4%. Sine then, income inequalities have continued to grow, so that income distribution in these rich countries, by the beginning of the 21st century, was almost as great as in the early 20th century.
Furthermore, international inequalities have increased in the last decades, so that the world of today is more unequal than at any time in history.
New technologies have been preconditions for globalization. The Portuguese and the Spanish could not have built overseas empires without the compass, which enabled them to stay the course when sailing across oceans.
By 1870, telegraph cables had been laid from New York to London and from London to New Delhi. After 1895, commercial ships started to use wireless telegraph. In 1927, Charles Lindbergh flew an airplane solo from the US East Coast to France.
During World War 2, German scientists experimented with rockets to send bombs from one country to another. Before they succeeded, the war ended. The scientists, who had worked for Nazi Germany, were invited by the US government to continue their work in the USA.
The Soviet Union also worked to build rockets. In 1957, Sputnik 1 became the first man-made object to reach outer space. It became possible to send rockets from one continent to another, loaded with nuclear weapons.
In the USA, the Sputnik event is referred to as the “The Sputnik Shock”, and it prompted a intense race between the USA and the USSR to reach the moon and build more nuclear missiles.
Five years later, in 1962, the first television satellite was in orbit around the globe, and it became possible to send live pictures around the world in “real time”.
In 1958, the first container ship was used for transport of commercial goods. 15 years later, most international freight was carried on container ships, with the result that freight rates dropped sharply.
In 1958, the first commercial non-stop flight across the Atlantic made fast travel between continents possible.
Many of the technologies and activities that we consider part of globalization: Watching satellite TV, Buying goods from China anywhere in the world, and moving from continent to continent on the same day, were introduced in the Sputnik age of the 1950s and 1960s.
In 1975, the first fax machines could send documents across phone lines. In 1980, the first cell phone system was introduced and in 1988, the first commercial Internet system was opened. The space age, as symbolized by the sputnik blasting off, opened a new era of technological developments that made globalization possible and spurred it to pick up speed by the end of the 20th century.
In 1960, 12 years after Sputnik, Neil Armstrong was the first man to walk on the Moon as he stepped out of the Apollo 11 spacecraft. This was a great triumph for USA, which had been trailing the Soviet Union in the race for the Moon.
But all was not well for US capitalism. In South Vietnam, USA was fighting to protect a corrupt regime against a socialist liberation movement that took power six years later, while US embassy staff fled Saigon in helicopters.
The US dollar, which had been “as good as gold” was in trouble, as US gold reserves were running low.
Multinational companies (other than oil companies) in the USA had problems keeping up proof rates: Workers demanded higher wages, while products from other parts of the world competed with US goods. At the end of the 1970s, US inflation was at an all time high. The US Federal Reserve Bank increased interest rates from 6% to 18%, but inflation continued for a while. Not until many people lost their jobs, and industries closed, did prices stabilize.
It was at this time that Ronald Reagan became president and introduced neoliberal policies. He cut taxes for the rich dramatically. He fought the labor unions and kept the legal minimum wage low.
He spent less on health care, education and other social benefits for the poor and the middle class. He invested in the military and in essence did what the multinational companies wished for. This was no coincidence. The multinational had financed his election and supported him. He had risen to power by joining hands wit fundamentalist Christians, who were against anything they regarded a sin, such as abortion, socialism, teaching science and evolution in the school, sex education of teenagers, development aid to poor countries, homo sexuality – and the list went on. Reagan wanted to ensure absolution superiority in space.
This was achieved, and though many counties today can launch rockets, the USA maintains an absolute superiority in space. If the USA wants, it can disable satellites of other countries, and no other nations has the military power to disable US satellites unless an all – out nuclear war is waged by Russia or China and that would kill most of humanity.
As Ronald Reagan introduced neoliberalism in the USA, Margaret Thatcher did the same in the UK. She defeated the strong British labor unions, cut taxes for the rich, and privatized coalmines, railways, health care and government owned industries whereby capitalists gained control of new means of production to earn more profit.
The British GDP increased, and banks and multinational companies benefitted mightily. Thatcher stayed popular with her strong message of traditional values. She went to war with Argentina and won a war over the Falkland Islands thus furthering her prestige.
Reagan and Thatcher preached the benefits of neoliberal policies all over the world, and most countries followed, turning away from socialism or even social democratic policies. Tax cuts became very popular; not only among the rich, who paid a lot of taxes, but also among middle-income people, who believed it to be good. At the same time, governments cut social benefits that ordinary people were used to getting, and the poverty increased.
In the wake of this development neoliberal policies were forced on newly independent poor countries by using development aid, trade arrangements and the IMF and the World Bank to “convince” countries to accept neoliberalism. The inevitable result was that gap between rich and poor increased.
As countries in Asia and Africa gained their independence, their governments tried to build an independent economy. To do so mines, industries, banks, telecommunication and other key economic sectors, which had been controlled by the colonial powers, were nationalized, so as to enable the new nation to control its economy.
The policies were similar to policies in Europe after World War 2, in which social democratic governments nationalized mines, car factories and other industries. The policies were accepted by the former colonial powers, who often continued to provide development aid to countries that carried through such “socialist” policies.
A reason for this soft line was that Western countries were afraid that the newly independent countries would side with the Soviet Union in the Cold War: They therefor “accepted” that countries, which supported them politically, might act against western economic interest.
The newly liberated countries invested in education and health care. Government spending increased. To cover the costs, countries relied on development aid and mineral and cash crop productions developed by the colonists. The rich nations promised, in the 1960s, to pay 1% of the GDP in development aid. This never materialized. In 2008, 0.25% of GDP was given in development aid. The percentage given by the USA was even lower: Prices of raw materials and cash crops like cocoa, copper, rubber and bananas were good in the 1960s, but have since declined for many years.
Economists call this ”deteriorating terms of trade”. Many poor countries relied on the export of one or a few products and were hit hard.
To continue national development, governments of independent countries turned to private banks. Western banks gave large loans for some years. As the goods of the poor nations continued to fall in price, they found it increasingly difficult to pay back the loans.
When Reagan came to power, American banks were about to lose a lot of money, because poor countries could not pay their loans. The US government turned to the IMF and the World Bank where the USA, together with the other G7 countries, hold the majority of the votes. The IMF promised indebted countries “rescue packages”, where they would get a big long-term loan from the IMF to keep their economy going.
The loan came with conditions that fitted the neo liberal policies of Reagan and the interest of the big banks. They included the condition that the countries must pay bank loans to the private banks as well as the “structural adjustment” policies. The policies were the neoliberal policies Reagan and Thatcher had pursued in their own countries. The conditions also included the demand that the countries opened up their markets to investment, extraction of profits and the sale of “foreign” goods.
1. Privatize state-owned industries, ports, schools, water sources, health care, farmland etc.
2. Spend less on health care and education.
3. Keep worker’s wages low.
4. Devalue local currencies to promote export.
5. Abolish price controls that keep prices on food or fuel low.
6. Allow foreign companies to invest and take out profits.
7. Reduce taxes on foreign companies.
8. Allow import of foreign good and reduce custom duties.
These policies allowed multinational companies to operate freely in the newly independent countries and acquire valuable assets such as mines at low prices. And Western banks did not lose their money. The poor in the liberated countries paid the price. Their wages fell. They had to pay school fess. There was no free health care. Prices on farmers’ products feel as cheap foreign imports arrived. Many lost their jobs. The Worldwide spread of neoliberalism averted the crisis of capitalism and the wealth of the richest has continued to grow during the age of neoliberalism. Neoliberal polities, and the way they were imposed on countries all over the world, can be called “capitalist globalization
Capitalist globalization has been moving forward at great speed over the past 40 years. It has in many ways made the globe smaller as travel and communication has become faster than ever. It has increased the production of goods, and new scientific knowledge has been assembled.
At the same time, the distance between people and communities remain, and new walls are erected between people all the time.
We must work for and hope that the multiple crises, now visible under globalization will make the many people understand that we only have this one-shared globe and act, so that globalization one day no longer means capitalist globalization.
Else Marie Pedersen, Denmark.