Imperialism and the Great Reset Part 4: The Expansive Phase of Neoliberalism (1989 – 2007)

This is the third installment of a multi-​part series currently serialized in the MagMa. It contains the following parts:

1. Introduction & the Marxist Method

2. Classical Imperialism (1895 – 1945)

3. Late Capitalism (1945 – 1989)

4. Neoliberalism (1989 – 2020)

5. A Fourth Imperialist Epoch?

The original text in German can be found here.

4.1 The global counterrevolution

In the fall of 1989, a wave of counterrevolution swept through Eastern Europe. The indirect strategy of the United States to defeat socialism finally bore fruit. Perhaps not a majority, but a vocal and determined minority of the inhabitants of these countries wanted to return to capitalism. In their opinion, this was the only way to solve the existing problems. The state and party leaders failed to mobilize the working class against the marching counterrevolution. They, too, were no longer convinced of socialism and stepped down from the stage of history. In December 1991, the Soviet Union broke apart, despite a referendum in September of that year in which more than 75% of eligible voters had voted for its continued existence.

Many people hoped that the counterrevolution would bring them a standard of living comparable to that in the West — a consumer paradise. The opposite happened. A good illustration is the shock therapy that pro-​Western liberals administered to Russia under the then dictatorial President Boris Yeltsin in 1992/​93 — at the express request of the U.S. government.

The liberalization of wages and prices destroyed people’s savings and reduced wages to a point at which people could no longer live. Over 60% of the population sunk below the poverty rate. Tens of thousands of industrial enterprises were closed. One example was the large Moscow textile district, still the largest concentration of textile factories in the world in the late 1980s. Unscrupulous profiteers, later called oligarchs, snatched up the prime assets, for example the oil and gas industries and the nickel and aluminum plants. Western speculators flocked to Moscow to buy up these enterprises. Experimental and design bureaus (OKBs) were closed, highly qualified engineers, for example in the aerospace industry, were put out on the street from one day to the next, as were pianists who were forced to eke out a meager living as street musicians. Yeltsin privatized everything that was not nailed down, including the country’s entire housing stock, which generations of Soviet citizens had built up. The collective farms and sovkhozes were dissolved. Large areas of agricultural land were laid fallow. The health care system collapsed and medical treatment was only available for high payments. Between 1992 and 2006, the Russian population shrank by 6.6 million people. People were dying of despair, poverty, treatable infectious diseases such as tuberculosis, and alcohol abuse. Murder and suicide rates skyrocketed. Russia has not fully recovered from the consequences of such shock therapy to this day.¹

In China, although the West’s attempt to instigate a counterrevolution failed in 1989, in the following years the leadership was forced by the changed global balance of power to establish numerous free production zones and offer its own working class to international capital for exploitation. Large parts of the »old« state industries were shut down or privatized. More than 30 million workers were laid off. The social security systems, known as the »iron rice bowl,« were abolished.²

4.2 Basic Features of Neoliberal Capitalism

In one fell swoop, more than 1 billion people poured into the global labor market after 1989. Many of them were well educated, but in the desperate situation of having to take jobs at any price. These were paradisiacal times for capitalists, of course, but hell for workers worldwide.

The capitalists increasingly relocated industrial production — quite demanding jobs — first to Eastern Europe, but then increasingly to China and other Third World countries. Developments toward a completely automated factory, such as Volkswagen’s famous Hall 54 in Wolfsburg or at Fiat in Cassino, were brutally halted. Dirt cheap, well-​trained workers were more than plentiful. They were now cheaper again than most industrial robots.

As a result of these developments, profit rates rose in the long run in the 1990s, and they were well above the level of the crisis-​ridden 1970s in the 1990s and 00s. On the other hand, the rate of accumulation could not quite reach the level of the 50s and 60s.³ Stock market prices also knew only one direction: up. Only now was a lot of idle capital invested in the then new technologies of personal computers (PCs) and the Internet. This was the first time that many inventions made in the previous decades were applied on a large scale.

These go back to the 1960s. For the year 1969 can certainly be described as a second »annus mirabilis« of physics. Not only did it see the first moon landing, but it also marked the beginning of the Internet when, for the first time, computers from four U.S. universities were linked together by telephone lines. These were the University of California at Los Angeles, Stanford University, the University of Utah at Salt Lake City, and the University of California at Santa Barbara. In subsequent years, more and more universities and other U.S. organizations were connected to what was now called the ARPANET computer network. The National Science Foundation (NSF) provided the major backbones, or switching computers, between the more than 1,000 computers connected in 1984. In 1990 — after the defeat of socialism — the computer network, now called the Internet, was opened to commercial enterprises. Institutions from other countries were now also allowed to join it. The last backbones of the NSF were privatized in 1995.

Towards the end of the 1980s, the only Internet applications were e‑mail, newsgroups, FTP and Telnet⁴ , and in 1989 the chat protocol IRC was added. All of these programs had to be operated from the command line and were therefore not particularly user-​friendly. It was not until the World Wide Web (WWW), developed by Tim Berners-​Lee at the European CERN starting in 1991, that the Internet became usable for normal users and thus, after a few years, became a mass medium.

In the 1990s, the network infrastructure was massively expanded on a wide variety of levels, from fiber optic cables to the large Internet nodes such as DE-​CIX. The demand for computers with all the associated components such as processor, main memory, mainboard, peripherals, operating systems and software skyrocketed. In the years that followed, numerous applications and business models were developed for the World Wide Web, such as search engines, social networks, online mail order companies and platform companies like Uber. There was also a digitization of entertainment media such as music, feature films and TV series, which could now also be transmitted via the Internet. Virtually every company, institution and organization created its own website in the 1990s.

But that was not the decisive moment. The Internet made possible a close-​meshed control of subordinate network companies around the world that would have been inconceivable with analog technologies. In other words, it made the large-​scale relocations to the low-​wage countries of Eastern Europe and China possible in the first place. The increased demand for IT equipment led to the investment of a lot of idle capital, and the relocations increased the profit rate considerably. True, the share of labor costs in manufactured products was relatively low, at no more than 20% for cars and computers, for example. But all other things being equal, with often excellent infrastructure and a well-​educated and skilled workforce working for a quarter or less of the wages in metropolitan areas, factories in low-​wage countries had a significant advantage and were able to rake in much higher profits. Technical advances in maritime transportation such as the development of containers also significantly reduced transportation costs, making outsourcing to low-​wage locations even more attractive.

The Internet also greatly accelerated trading on the financial markets and made entirely new trading volumes possible. It was now possible to exit a market in milliseconds and invest one’s billions elsewhere. This once again increased the power of the owners of capital.

Under neoliberalism, a new corporate structure emerged. The vertically integrated multinational conglomerates of late capitalism were broken up and numerous formally independent firms were intertwined in transnational production networks. The numerous developments in IT technologies facilitated — as indicated above — the outsourcing of production processes and a comparison of different locations. Product information and specifications could now be transmitted in digital form, e.g. as CAD files, extremely easily via the Internet. Special software for product lifecycle management could be used, among other things, to simulate the entire production process for a particular product. Taking all cost factors into account, it was possible to calculate, for example, whether it was more profitable to set up a highly automated production line or whether it is better to rely on manual assembly line production in low-​wage countries.⁵ This was even easier to do because contract manufacturers were forced to disclose their internal networks and calculations in order to get a contract. Supply chain management software could calculate real-​time demand for individual components and greatly simplified the coordination of value chains, even between disparate and geographically distant companies. Intermediate products now often consist of individual relatively independent modules with standardized interfaces. This also simplified outsourcing and production distributed across numerous countries.⁶

As a result, in an increasing number of industries — not least due to pressure from finance capital, which demanded ever higher returns — the major multinationals began to outsource actual production to contract manufacturers, while concentrating on particularly value-​added activities such as research and development, marketing and branding. This allowed them to significantly reduce fixed costs and capital employed. By letting existing contracts expire where necessary or ordering additional quantities of the products, the brand companies can respond to rapidly changing and fluctuating demand without incurring major costs. Since outsourcing has generally also been accompanied by a relocation of production to low-​wage countries, labor costs have also been significantly reduced. Only the comparatively few highly qualified employees remaining in the core companies still enjoyed high wages.⁷

The working conditions in the factories of the contract manufacturers, mostly located in the free production zones, for example in the People’s Republic of China and in the Philippines, were very poor and reminiscent of early capitalist conditions. The enormous fluctuations in demand in the electronics industry were absorbed primarily by »hire and fire« of the employees. As a rule, workers had no job security whatsoever. They were offered only short temporary contracts. Average working hours in the electronic industry were 12 hours per day, but could increase to 16 to 24 hours during peak periods. Wages in the electronic industry were generally somewhat higher than the national average, but in no case were sufficient to support a family.

Workers were barracked and lived in overcrowded dormitories. Female workers were also frequently subjected to gender discrimination, such as regular pregnancy tests or humiliating questioning about their personal circumstances. Workers had no access to collective bargaining.⁸

Wages and working conditions were apparently designed to allow only the immediate reproduction of the labor commodity for a limited period of a few years. However, these wages did not make it possible to maintain children or other family members. In this way, the capitalists were robbing future generations, as Karl Marx and Friedrich Engels described for 19th century Britain.⁹ However, since there was a large surplus of labor globally and in China, the state did not feel compelled to intervene in the 1990s.

The evolution of firms from vertically integrated conglomerates to transnational production networks is most advanced in the electronics industry, but it can also be found in the clothing and food industries. In the automotive industry, the lead industry of late capitalism, final assembly was still carried out by the main firms, but they had significantly reduced their vertical integration and increasingly sourced standardized system modules from their primary suppliers.¹⁰ In the following, the situation in the electronic industry, which developed into the new lead industry of neoliberalism, will be presented as an example of transnational production networks:

• At the top are manufacturers or developer companies of core components such as Microsoft (operating systems) and Intel (CPUs). The design of their products results in certain specifications for other components, which they can use to their advantage. This allows them to skim off a particularly high proportion of added value. For example, investigations in the context of lawsuits against Microsoft have shown that the costs for the operating system can account for up to 1/​5 of the total costs of a PC. However, these companies also have very high expenditures for research and development. Since the production process of main processors for Intel is extremely capital-​intensive but not very personnel-​intensive and technically difficult to control, they are exclusively produced internally and only in industrialized countries. However, many other tasks, such as testing the processors, were outsourced to contract manufacturers in developing countries at a very early stage.
• One level below in the transnational production networks are developer companies of other components such as graphics cards, hard drives, application software, monitors, etc., as well as brand-​name companies that sell computers and notebooks. This category includes IBM, Nvidia, Adobe, Seagate, LG Electronics, Dell, HP and Acer. Their main activity is research and development and marketing. They have largely outsourced the production of individual components and the final assembly of computers to contract manufacturers, because the production process is relatively standardized and does not involve any particular technical difficulties. They are generally also able to secure a considerable share of added value, albeit a smaller one than companies in the first category.
• Contract manufacturers take over the integration of the numerous individual parts on a motherboard or expansion card, the final assembly of the computers or notebooks, and the shipment to dealers or end customers for brand companies. They are also responsible for supply chain management, i.e. coordinating production in collaboration with the numerous subcontractors. The largely labor-​intensive production processes take place almost exclusively in low-​wage countries and the profits of companies in this category tend to be low. Contract manufacturers include Samina-​SCI, Flextronics, Celestica, Asustek, Foxconn, Lenovo, BenQ and Wistron. In recent years, some companies such as Asutek have moved to also sell self-​produced branded goods as OBMs (i.e. original brand manufacturers), which increases their share of produced added value. In a way, this blurs the distinction between brand companies and contract manufacturers. However, research and development still largely takes place in the industrialized countries.
• Suppliers to contract manufacturers produce simple, mass-​produced standard components such as resistors and capacitors. These companies are found almost exclusively in low-​wage countries and the working conditions often have sweatshop character. Their profit margin is also low.¹¹

It follows from this description that the capitalists in neoliberalism exploit the workers in both the developing and the industrialized countries. In doing so, they search globally for locations with the cheapest labor power commodity for their purposes, as far as all other factors such as sufficient infrastructure etc. are given.

The massive shift of industrial production to the developing countries substantially increased the industrial reserve army in the industrialized countries, which enabled the capitalists to lower wages there or at least let them stagnate. At the same time, the capitalists were able to moderately lower the prices of products manufactured in the developing countries, so that the nominal real wage losses in the industrialized countries appeared larger than the real ones. This allowed them to optimally siphon off dwindling wages in the West. In the U.S. and the U.K., members of the middle classes were even encouraged to go into debt for their consumption until the great global economic crisis of 2007-09.

This is the basis for the theory of the labor aristocracy recently brought to the fore by neoliberal Marxists. This is becoming increasingly popular and is being expanded by authors such as Peter Schaber into a theory of the imperial way of life that the German working class has supposedly indulged in. It profits from the exploitation of the developing countries and is to be counted in its entirety (including Hartz IV recipients) as part of the labor aristocracy.¹² The conclusion of such statements is obvious: We all have to give up large parts of our wages in order to no longer be indebted to the exploitation of the developing countries.

This purely moral argument, however, fails to recognize that wage levels are essentially a result of class struggle and depend on the relative strength of the two basic classes, capitalists and workers. This, in turn, is primarily a function of the size of the industrial reserve army. Even the relocation of many industrial plants to Third World countries generally did not result in thorough-​going industrialization there. The industrial reserve army remained very large and wages low.

For historical reasons, wages were much higher in empty settlement colonies like the U.S. than in the rest of the world from the beginning, and they also rose considerably in postwar Western Europe. Partly because of competition with socialism, but partly also because labor became scarce in the years of the economic miracle. With the reconstruction of the industrial reserve army in the 1970s, real wages also stagnated or fell in the industrialized countries. Wage increases above the inflation rate and further reductions in working hours below the 40-​hour week could no longer be implemented.

The workers of the industrialized countries are thus far from benefiting from the »exploitation of the Third World«. Rather, in the age of neoliberalism, they suffered from unemployment, wage erosion and social cuts. The only ones who profit globally from the exploitation of the commodity labor power are the capitalists.

4.3 The New Role of the Financial Markets

Under neoliberalism, global financial markets acquired unprecedented social and economic power. They are able to appropriate a significantly larger share of the surplus value produced and exert pressure to increase the rate of surplus value.

As late as the 1980s, there were still nationally organized monopoly complexes in the major European capitalist countries, for example the so-​called Deutschland AG in the FRG. This is understood to mean a conglomerate of corporations and banks mutually intertwined by share ownership, with Deutsche Bank, Dresdner Bank, Commerzbank and Allianz at its center. Gutehoffnungshütte, MAN, Veba, VIAG, Thyssen, Krupp, Klöckner, Ruhrkohle, Volkswagen, Preussag, BASF, Höchst, Bayer, Hoesch, Ruhrgas AG, Mannesmann, Linde, the Kraftwerksunion, Lufthansa, Hochtief, Philipp Holzmann, Siemens and Daimler-​Benz, together with many other stock corporations, embodied the industrial core of the German monopoly complex. This Deutschland AG was dissolved under the Red-​Green Schröder government after 1998. The banks were pressured by various measures to divest their industrial holdings. Over the course of several years, the corporations gradually came into the possession of U.S. capital accumulation agencies such as Blackrock. Similar processes took place in other European countries, such as France, Switzerland and Italy.¹³

In the period between the breakup of national monopoly complexes and the rise of shadow banks such as Blackrock beginning in 2008, financial markets heavily concentrated in the United States played the critical role in controlling and looting industrial enterprises.

The financial markets are divided into several submarkets:

1. The Credit Market

In the credit market, companies, governments and private individuals borrow from banks to finance expenditure that they cannot fund from their current income. The banks pass on the savings deposited with them as loans; they earn their profits from the interest margin.

2. The Primary Market for Securities

Here, particularly financially strong companies and governments generally raise external funds directly from savers by selling shares or promissory bills. In 2000, shares worth $863 billion and other securities such as government promissory bills worth $896 billion were issued worldwide; together, this amounted to $1,759 billion.

3. The Secondary Market for Securities

These are markets on which securities are traded. The main players are yield-​seeking financial investors. The secondary market allows investors to exit a particular market or investment at any time. In 2001, $26.8 trillion worth of stocks existed and $42.2 trillion worth of stocks were traded.

4. The Market for Currencies

National money as a means of payment and asset is related to other national money on the currency market. The exchange rate defines the respective quality of the national money as a means of payment and asset abroad.

World foreign exchange reserves held by central banks amounted to $1,908 billion in 2000. However, per working day in 2001, $1.2 trillion, or almost the entire stock of foreign exchange, was turned over. World trade was $8 trillion in 2000.

Foreign exchange trading has increased sharply since the 1970s, because after the end of the fixed exchange rate system, internationally active companies had to hedge against exchange rate risks, for example by means of forward transactions. The currency markets have seen numerous waves of speculation in recent decades, which have regularly triggered financial crises. The unregulated and liberalized foreign exchange markets are a particularly unstable and aggressive component of the international financial markets.

5. The Market for Derivatives

Derivatives are claims and obligations arising from forward transactions that are put into securities form and traded themselves. They first emerged in the 1970s from commodity futures transactions to hedge against price fluctuations. Derivatives mainly consist of claims on financial products such as shares or foreign exchange. For example, trader A may agree to buy a certain number of shares from trader B on a certain day at a certain predetermined price. Derivatives make it possible to achieve extremely high profits for a small capital investment, but also high losses, and thus contribute significantly to the instability of the financial system. In 2001, derivatives with a claim value of $2784 billion were traded worldwide on working days.¹⁴

Global financial assets¹⁵ rose from $12 trillion in 1980 to $167 trillion in 2006, while during the same period world GDP increased from only $10.1 trillion to $48.3 trillion. The rapid increase in financial assets is attributed to insufficient investment opportunities in the real economy amid rising corporate profits, falling capital taxes and the introduction of a funded pension system.¹⁶

The main players in the financial markets were commercial banks, investment banks and, increasingly since 2008, investment funds such as Blackrock.

In the 1980s and 1990s, financial markets were also liberalized as part of neoliberal policies, initially in the USA. Since the financial sector in the U.S. was far better developed in the 1970s than in Europe, liberalization was primarily in the interest of U.S. players, as they could assume that they would be able to capture significant market shares in the global financial business, which is what happened. The most important measure was the lifting of capital controls. This took place in the U.S. as early as 1974. Together with the massive increase in key interest rates by Paul Volker from 1979 and a decidedly anti-​labor policy by the Reagan administration from 1980, this development led to financial investors gaining confidence in U.S. policy. This led to a massive influx of capital into the U.S. and put pressure on other countries to follow the U.S. example. In 1981, the FRG lifted its own capital controls. The last Western European country to follow suit was Greece in 1994.

The massive expansion of financial markets was facilitated by electronic trading. Since the 1980s, traders on the central stock exchanges have been using computer systems, while floor trading lost importance. The individual financial markets are also linked by computer networks, so that it is now possible to transfer large amounts of money around the world at the speed of light.¹⁷

Capital market liberalization, combined with the use of electronic trading venues, allows financial investors to exit the market in the shortest possible time of a few seconds and invest huge amounts of money elsewhere. Under these circumstances, states are forced to implement policies that are primarily aligned with the »confidence« of these markets. Companies, too, must align themselves with the expectations of financial investors. These expect short-​term profits, while research and development spending is cut back. They also exert massive pressure to increase the rate of profit by lowering wages and introducing new forms of work organization.¹⁸

The financial markets expect immensely high profits, which often can no longer be satisfied from the real economy. Therefore, there is a concentration on short-​term speculative profits. This increases the instability of the system and fosters financial crises. The time horizon for companies to recoup their investments is also becoming shorter and shorter under the pressure of the financial markets, which want to see new successes every quarter. Companies and economies often have to generate the high interest demands from their substance.¹⁹ For Christian Zeller, this is a feature of a global expropriation economy.

The liberalization of the financial markets led to a wave of financial market crises, but these had comparatively little impact on the real economy in the developed countries. Examples include the Asian crisis in 1997 and the Russian crisis in 1998. This changed with the major global economic crisis in 2007/​08.

4.4 Expropriation economics

Ernest Mandel already pointed out that processes of original accumulation did not only take place at the beginning of capitalism, but, besides accumulation through surplus value production, still occur in later epochs up to the present. Accumulation mechanisms based on expropriation, violence, and new forms of property rights have gained renewed importance under neoliberal capitalism. Harvey and Zeller cite the following forms of expropriation processes in particular:

• Forms of classical original accumulation such as displacement of peasants from land. For example, in Mexico in 1991, under pressure from the IMF and World Bank, the common land ownership of indigenous communities (ejido) was abolished and privatized. Numerous peasants were forced off their land and flocked to the world market factories on the U.S. border.
• An expansion of capitalist property and production relations is also taking place through privatization and liberalization. In particular, numerous services that were previously not or not fully subject to the market are now offered exclusively according to profit maximization considerations. In many cases, access to even basic services such as water supply is now granted only to people with financial means. The result is a »fee-​based capitalism« (Roth) that takes advantage of the most elementary conditions of reproduction in society. At the same time, this fosters pro-​capitalist attitudes. Citizens experience on a daily basis that everything has its price.
• Predatory wars to appropriate important raw material deposits. The war in Iraq was also waged by the U.S. with the aim of using the country’s significant oil reserves for the benefit of its own corporations.²⁰
• Elements of fraud and theft in the financial sphere. These include, for example, balance sheet fraud and price manipulation, Ponzi schemes, and takeovers and cannibalization of businesses by institutional investors.
• Extension of patents and copyrights to areas that were not previously subject to them. This is leading to a new »clearance of the commons,« i.e., to enclosures in the area of knowledge. Examples of this are biopiracy, the increasing use of patents to prevent and monopolize production processes, and the restriction of copyright exceptions, which criminalizes numerous actions that were previously permitted. An example of this is private copying. The holders of intellectual property rights are thus able to pocket rent-​like incomes.²¹

Through forms of economic expropriation, there was an extension of capitalist property and production relations to countries, sectors or social activities that were not yet or only partially subject to these relations. The state, with its monopoly on the use of force and its power to define legality, played a decisive role in promoting these processes.

The reason for the increasing importance of the expropriation economy is that profits are still too low from the point of view of capital. It was possible to increase the rate of profit, which of course presupposed stagnating or falling wages. This led to insufficient demand and thus — compared to late capitalism — to lower investments by companies. In addition, people’s needs were oriented away from the markets for consumer durables — which were largely saturated in the industrialized countries — toward services, which were still run by the state in many cases. This led to investment-​seeking capital rushing into the service sphere. In many cases, technological advances facilitated private-​sector organization.²²

The extremely high return expectations of the financial markets could often no longer be satisfied by all the accumulation from surplus value production. This also favored the increased use of expropriation.

4.5 The unipolar moment

In the new epoch of imperialism, the USA remained as the only superpower, after the USSR collapsed in 1991. The latter discredited the ideas of socialism or a planned economy for the time being. The victory of the USA in the Cold War meant that, for the first time since 1917, almost the entire world was open to capital. In the absence of alternatives, the ideology of free markets gained considerable plausibility, especially in the 1990s.

The U.S. lost no time in exploiting the unipolar moment that had now occurred to its maximum advantage. In the first decade of neoliberalism, the focus was still on relatively peaceful economic expansion, especially of U.S. capital. By means of multilateral treaties, the USA tried to make neoliberal economic policy irreversible and to open all countries to its capital. In this, they were supported mainly by the Western European countries. In the period of Bill Clinton’s presidency (1992 – 2000) military operations were not in the foreground²³ . Often it was enough to send aircraft carrier groups threateningly off the coasts of recalcitrant countries to break their will.

The most important multilateral treaties of this period are the WTO agreements. The World Trade Organization emerged in 1995 from the GATT, the General Agreement on Tariffs and Trade. Although an expansion of GATT had been under negotiation since 1986 in the Uruguay Round, the U.S. was only able to assert itself with its far-​reaching proposals after the defeat of socialism. Now it was no longer just a matter of reducing tariffs; all industries and sectors of a country’s economy were to be opened up to »international competition.« At the same time, intellectual property rights were massively tightened so that large corporations could collect additional rent-​like income.

The central principles of the WTO are:

• Market access: Quantitative restrictions on trade, such as limitations on the number of suppliers, turnover, number of units, amount of equity investments are prohibited.
• National treatment: Domestic and foreign providers must be treated equally. Preferential treatment of domestic suppliers is prohibited.
• Most-​favored-​nation treatment: Trade preferences for one country must also be granted to all other WTO members; the result is strong liberalization pressure.

Dispute settlement bodies have been set up to deal with cases of non-​compliance. They are staffed mainly by pro-​capital lawyers and are allowed to impose deterrent penalties on individual countries in the form of legal economic sanctions.

Four different treaties exist under the umbrella of the WTO:

The old GATT (General Agreement on Tariffs and Trade) regulates trade in goods. It is relatively uncontroversial, since classical tariffs hardly exist anymore.

The GATS (General Agreement on Trade in Services) is an extremely complex agreement that regulates the opening of the service sectors of the states. On the one hand, it contains numerous general obligations that apply to all sectors, and on the other hand, specific obligations that apply only to those service sectors that are registered in certain lists.

The general obligations include: The most-​favored-​nation clause, transparency rules, prohibition of capital controls, rules on domestic regulation that include a right of WTO intervention at the national level, rules on general procurement and subsidies. Under very narrowly defined conditions, exceptions to these liberalization rules are still possible for the time being.

Market access and national treatment apply only to those service sectors of a country that are included in lists. However, further rounds of negotiations are to take place with the aim of achieving additional liberalization. Once opened, service sectors can no longer be withdrawn from international competition.²⁴

TRIPS (Trade Related Aspects of Intellectual Property Rights) creates a global minimum standard for intellectual property. The national laws of the member countries must be adapted to the TRIPS regulations. In this way, corporations can assume that their intellectual property is protected in every country.

TRIPS specifies that the following areas of intellectual property must be protected:

• Copyright and related rights
• Trademarks and geographical indications
• Patents and industrial designs and models
• The layout of integrated circuits
• Trade secrets

For each of these areas, TRIPS sets minimum standards that have already been exceeded in most developed countries but did not yet exist in many developing countries.

TRIPS stipulates, for example, that the restrictive provisions of Articles 1 to 21 of the Berne Convention on Copyright are to be applied. This includes, among other things, a very strong control over reproduction rights. Authors also have the right to permit or prohibit the commercial rental of their works to the public. The minimum term of protection for works is 50 years. Exceptions to the exclusive rights are to be limited to certain special cases that neither interfere with the normal exploitation of the work nor unreasonably prejudice the legitimate interests of the rights holders (three-​step test).

Patent law provisions: Patents must be granted for inventions in all fields of technology if they are new, involve an inventive step, and are susceptible to industrial application. Plants and animals, microorganisms and biological processes are patentable. Exceptions are to be limited to a few special cases and applied restrictively. The minimum term of protection is 20 years. In the case of allegations of patent infringement, the burden of proof is shifted: in the case of process patents, defendants must prove that they did not use the protected process.

The WTO’s AoA (Agreement on Agriculture) sets the maximum level of agricultural subsidies and stipulates that they must be phased out. De facto, the AoA ended agricultural subsidies for developing countries, while industrialized countries continued to support their farmers under various pretexts.

Other international agreements include the WIPO Treaties, which entered into force in 1997. The World Intellectual Property Organization (WIPO) is a Geneva-​based subsidiary organization of the UN and was first established in 1967. The WIPO Copyright Treaty (WCT, for copyright) and the WIPO Performance & Phonograms Treaty (WPPT for related rights²⁵ ) contain largely word-​for-​word massive tightening of intellectual property rights adopted in response to the ease of copying digital content. The most important provisions of the WIPO treaties are:

• The right of reproduction was strengthened and the storage of works in the computer without the permission of the copyright holders was expressly prohibited.
• The transmission of works on the Internet has been prohibited without the permission of copyright holders. They can also stipulate that their works be made available via the Internet for a fee, only for a certain period of time, or only for one-​time viewing or listening (»on demand«).
• The manufacture, distribution, or use of any device, product, or component whose primary purpose is to override, circumvent, remove, disable, or otherwise defeat copyright holders‹ copy protection mechanisms is prohibited.
• Altering, falsifying or deleting copyright management information that is essential for identifying and licensing works on the Internet is also prohibited.
• Under certain circumstances, Internet Service Providers (ISPs) are civilly and criminally liable for their customers‹ copyright infringements.

The WIPO treaties ensured that only the big entertainment companies, not consumers, benefited from the easy copying and transferability of digital content. They were able to rake in substantial additional annuity-​like income, while consumers were plagued with price increases, had to shoulder the costs of storing and transferring content, and were hit with deterrent punitive damages and even imprisonment for infringements.²⁶

The Washington Consensus, adopted at a conference in Washington in 1990, stipulated that all countries must implement structural adjustment measures as a condition of loans from the IMF or World Bank. These include, among other things:

• Demand curbs, wage cuts and reductions in government spending
• Devaluation of the currency, which makes imports more difficult and exports easier
• Liberalization
• Deregulation of markets and prices, reduction of subsidies
• Privatization of public enterprises and institutions

In this way, the IMF and the World Bank formalized a practice that had existed for some time. De facto, the Washington Consensus made import-​substituting industrialization impossible for the developing countries. The previously existing industry, which was not competitive on the world market, was destroyed. The economies of the affected countries were tailored to the needs of international capital. They were to serve primarily as a source of cheap raw materials and labor. Large sections of society became impoverished. For the developing countries, the two lost decades began.²⁷

Other treaties, such as the secretly negotiated MAI (Multilateral Agreement on Investment), could not be enforced in the 1990s.

In addition, there are a large number of bilateral treaties, for example on investment protection, which have been concluded between the USA and the EU on the one hand and developing countries on the other.

Free trade alliances such as the EC (later EU) and ASEAN were strengthened. The North American Free Trade Agreement (NAFTA), comprising the USA, Canada and Mexico, was not established until 1994.

Informal discussion forums of the world’s richest capitalists such as the World Economic Forum gained importance in the 1990s. Its power was already considered so high by the globalization-​critical movement that counter-​summits in the form of the World Social Forum were held between 2001 and 2018. The first World Social Forum was held in Porto Alegre, Brazil.

As a result of these developments, nodes and elements of supranational power have emerged in the transnational space that have gone far beyond loose forms of cooperation between states. Organizations such as the IMF, the World Bank, the WTO, the OECD, the G8, informal meetings such as the World Economic Forum in Davos, and regional structures such as the EU, NAFTA, etc. form an increasingly dense network that cements the current power relations. These organizations are relatively independent of the balance of power in the nation states and only weakly democratically legitimized, which is by all means intentional. A transnational power bloc of asset owners, large corporations and dominant nation-​states has emerged.²⁸

This created a basis for ever greater integration of the individual economies. For example, foreign direct investment increased from $13.3 billion in 1970 to $18 trillion in 2007²⁹ . Of this 18 trillion, 12 went to industrialized countries and the rest to developing countries, with China being the largest recipient of direct investment in the South at 83 billion. With much of this investment, corporations sought to grab a larger market share through mergers and acquisitions by shutting down the acquired firm, or they pursued the purpose of moving the actual production areas to low-​wage locations. The latter is often done through outsourcing and subcontracting within the framework of transnational production networks. Thus, a gigantic process of concentration and centralization of capital occurred, in the course of which global oligopolies emerged. In many sectors, e.g. the automotive industry, the manufacture of computer processors or the entertainment industry, the world market is controlled by fewer than a dozen companies.

Profitability norms apply equally to the whole earth. According to Marx, the formation of a uniform rate of profit takes place all the more rapidly,

1. The more mobile the capital
2. the more rapidly the labor force can move from one sphere to the other and from one »local seat« of production to the other.³⁰

In the meantime, complete capital mobility has been achieved at the world level. Likewise, it is possible for workers worldwide to move from one sphere (e.g. agriculture) to another (e.g. industry) without any problems. However, a complete geographical mobility of the commodity labor power was not given at any time. But this was also not absolutely necessary. After all, a total of 128 million people were employed in industrial production in the OECD countries in 2005. China’s huge industrial reserve army had a size of 430 million people in the same year³¹ . Theoretically, all industrial activities of OECD countries could be performed by Chinese labor alone. Therefore, the value of the commodity labor force worldwide gravitated more and more downward toward Chinese wages.

Operations were relocated from Western Europe to the Eastern European EU member states. Many companies reacted to the slowly rising wages there by relocating further to countries with even lower wages. But factories were also relocated to China from numerous free production zones in Mexico, the Philippines or Indonesia because wages there are even lower.³² Therefore, they increasingly determined the global value of the commodity labor.

Accordingly, uniform world market prices and a uniform profit rate slowly emerged. Producers who could not compete with the most productive companies in the world had to give up sooner or later.

It was no longer individual major banks but the global financial markets that now exerted a decisive influence on the real economy. Through the possibility of immediate relocation of investments, they succeeded in imposing their very high return expectations on companies and committing them to a strategy of short-​term profitability, if necessary also at the expense of their substance. Even entire economies have been forced to adopt capital-​friendly policies by threats of relocation. Most developing countries have been opened to foreign capital through IMF structural adjustment programs. At the core of the financial market system is the U.S. Wall Street Treasury complex, which defined the Washington Consensus. But the financial markets in London, Frankfurt and Tokyo also had global significance. Since the profits of the real economy are often insufficient, processes of accumulation by expropriation gain importance.³³

Developing countries could no longer keep up with the now extremely high global productivity standards, and their production capacity was largely shut down by the world market. Only islands of highest productivity remained integrated into the world economy, such as manufacturing plants in free production zones or operations for the extraction of coveted raw materials. Large parts of the population of these countries no longer had access to formal employment. They vegetate in slums in the big cities, have reverted to subsistence farming or, in the event of a complete collapse of the state, are active in the plunder economy.³⁴ But the metropolises also saw the pauperization of entire populations, while, conversely, a middle class of several hundred million people emerged in countries like China and India. While this was a large number in absolute terms, it was rather small compared to the total population of these countries.

Within the new globally distributed value chains, a clear hierarchy existed, with the large research-​based brand companies from the industrialized countries at the top. They were able to appropriate the largest share of the added value generated in their production networks. One level lower were the large contract manufacturers, some based in industrialized countries and some in developing countries. At the bottom of the value chains were the subcontractors from developing countries. In the words of Christian Zeller, the geography of the new imperialism can be described as a cascade of interlocking hierarchies and relations of domination that, despite the production of a global space of exploitation, creates new trenches and fault lines.³⁵

However, neoliberal globalization would have been unthinkable without the preeminent U.S. military power. Thomas Friedmann of the New York Times aptly formulated this insight in 1999: »For globalism to work, America must not be afraid to act as the all-​powerful superpower that it is. The invisible hand of the market will never work without an invisible fist. McDonalds cannot thrive without the F‑15 designer McDonnell Douglas. And the invisible fist that keeps the world safe for Silicon Valley technologies is the U.S. Army, Air Force, Navy and Marines.»³⁶ But as yet, the U.S. military machine remained mostly on the sidelines.

In addition to the transnational level, neoliberalism also strengthened the scope for action of some regions and cities. In late capitalism, the aim was still to create roughly equivalent living conditions in all regions of a country. Now, individual urban systems are developing radically apart from each other. On the one hand, the importance of so-​called global cities has increased. They are at the center of a new type of urban system. Financial markets, centers of banks and transnational business networks, and high-​quality, business-​oriented service providers are concentrated in them. They are closely interconnected and often relate more to each other than to their immediate environment, from which they tend to decouple. Examples of such global cities are New York, London or Frankfurt am Main. Some Third World cities, such as Hong-​Kong, Manila and Taipei, have been able to hold their own in the tough global competition for locations by successfully specializing in the direct control of material production on behalf of the large network companies.³⁷

On the other hand, the industrialized countries also saw the decline of large industrial areas such as the Ruhr region and numerous other cities such as Lyon and Marseilles. In Third World countries, there are many cities such as Lagos or Mexico City that consist largely of slums. According to a UN study, in 2005, of the more than 3.2 billion urban dwellers worldwide, over 1 billion lived in slums. The growth of these slums was greatly accelerated by the Green Revolution of the 1970s and the structural adjustment programs of the 1980s and 1990s. These IMF- and World Bank-​imposed measures greatly reduced public services in many countries, and market openings either severely damaged or completely destroyed national industry and agriculture.³⁸ But slums also spread in the industrialized countries, while the rich retreated more and more into »gated communities.«

By the end of the 1990s, the methods of relatively peaceful capital expansion had slowly been exhausted. As described above, continuous rounds of negotiations were supposed to lead to a complete liberalization of world trade. However, the participants in the WTO Ministerial Conference, which took place in Seattle from November 30 to December 2, 1999, were unable to agree on further liberalization steps. The clashes of interests between industrialized and developing countries had become irreconcilable.

In addition, militant protests by globalization critics took place in Seattle for the first time. The Peoples Global Action network had called for a blockade of the summit, which was partially successful. As part of the coverage of this summit, the Internet portal Indymedia went online. In Genoa in July 2001, between 300,000 and one million people again protested, in some cases militantly, against the G8 summit. Civil war-​like conditions developed. One demonstrator was killed and numerous others were seriously injured by the police. Autonomists caused extensive damage to property by »devitrification« of numerous stores.

The background to this development was that in the 1990s, more and more inhabitants of the industrialized countries experienced that globalization had serious negative effects for themselves. As described above, numerous industrial plants were relocated to Eastern Europe or China, jobs were massively cut, numerous public utilities were privatized, which worsened their service and caused fees to rise, the welfare state was cut back and intellectual property rights were massively tightened. To make matters worse, the dot​.com bubble burst in March 2000, causing an unprecedented plunge in stock market prices, especially for stocks in the so-​called new economy, i.e., companies in the Internet and computer sectors.

An increasingly militant anti-​globalization movement turned against these negative developments. Movements against neoliberalism also took off in the Third World. This was demonstrated, for example, by the election victory of the charismatic military leader Hugo Chavez in Venezuela in 1998. These events showed that neoliberal capitalism was by no means firmly in the saddle, but was increasingly mobilizing counterforces that — if developments continue in this way — could once again raise the question of power.

References