Globalization Is Just a Contemporary Word for Financial Colonialism – Truth-Out

The collapsed remains of the Rana Plaza garment factory in near Dhaka, Bangladesh, June 30, 2013. The police in Bangladesh filed formal murder charges June 1, 2015, against 41 people accused of involvement in the 2013 collapse of a building that housed several clothing factories, leaving more than 1,100 people dead in the worst disaster in garment industry history. (Photo: Khaled Hasan / The New York Times)

What do imperialism and colonialism look like today? John Smith's Imperialism in the Twenty-First Century argues that core capitalist nations are no longer reliant on military force and direct political control of other countries. Instead, they maintain a financial grip on the Southern Hemisphere in particular, exploiting labor in these countries to increase their own profits. Order this book from Truthout by clicking here!

The "have" nations increase profits for their corporations at the expense of grievously underpaid workers in developed nations. The developed nations call this globalization, John Smith argues in his book Imperialism in the Twenty-First Century: Globalization, Super-Exploitation, and Capitalism's Final Crisis. In this interview with Truthout, Smith discusses his contention that globalization is just neocolonialism by another name.

Mark Karlin: Why did you choose to begin your book with the collapse of Rana Plaza in 2013, which killed more than one thousand exploited garment workers in Bangladesh?

John Smith: Three reasons. First, the Rana Plaza disaster -- a heinous crime, not an accident -- aroused the sympathy and solidarity of hundreds of millions of people around the world, and reminded us all of just how intimately connected we are to the women and men who make our T-shirts, trousers and underwear. It epitomized the dangerous, exploitative and oppressive conditions endured by hundreds of millions of workers in low-wage countries whose labor provides firms in imperialist countries with much of their raw materials and intermediate inputs and working people with so many of our consumer goods. I wanted to bring these legions of low-wage workers "into the room" from the very beginning; to confront readers with the fact of our mutual interdependence and also with facts about the great differences in wages, living conditions and life chances that we are aware of but too often choose to ignore.

This brings me to the second reason. Fidel Castro, the greatest revolutionary of our times, explained Cuba's unparalleled international solidarity as repayment of its debt to humanity. We who live in imperialist countries have an enormous debt of solidarity to our sisters and brothers in nations that have been and are being ransacked by our governments and transnational corporations! There can be no talk of socialism or progress of any sort until we acknowledge this debt and begin to repay it! We need to redefine -- or better, rediscover -- the real meaning of socialism: the transitional stage of society between capitalism and communism in which all forms of oppression and discrimination which violate the equality and unity of working people are progressively and consciously overcome. It is indisputable that the greatest violation of this equality and greatest obstacle to our unity arises from the division of the world between a handful of oppressor nations and the rest; working people in imperialist nations must seize political power and wrest control of the means of production in order to heal this mutilating division. This is what informed my decision to begin Imperialism in the Twenty-First Century with the Rana Plaza disaster.

Finally, Rana Plaza and Bangladesh's garment industry is an extremely useful case study which exemplifies features shared with other low-wage manufactures-exporting nations. These include the centrality of ultra-low wages, the predilection of employers for female labor, and the growing preference of firms based in imperialist countries for arm's-length relations with their low-wage suppliers, as opposed to foreign direct investment. Furthermore, analysis of Bangladesh's garment industry poses a series of questions and paradoxes which mainstream economics cannot resolve and which Marxist economists have barely begun to tackle. Chief amongst them is the mainstream doctrine that wages reflect productivity, and that if Bangladeshi wages are so low it means the productivity of its workers are correspondingly low -- but how can this be true when they work so intensely and for such long hours? Another is this: what is the relation between the global shift of production to low-wage countries and the global economic crisis, still in its early stages? This question is absent from mainstream and most Marxist accounts of the crisis, rendering them, in my opinion, completely redundant. The study of the Rana Plaza disaster and of Bangladesh's garment industry therefore generates a list of issues and paradoxes which provide the themes for each subsequent chapter, and so serves to organize the whole of the rest of the book.

John Smith. (Photo: Monthly Review Press)

How has uber-capitalism, asserted globally by developed nations, replaced the need to control colony nations through direct political power?

Uber-capitalism signifies the supremacy of the law of value, which now rules uber alles. In other words, markets -- in particular, capital markets and the capitalists who wield their social power through these markets-- rule the world to a greater extent than ever before. This doesn't mean there's nothing else under the sun -- pre-capitalist communal societies and subsistence economies still survive in parts of Africa, Asia and Latin America, as do the post-capitalist economic relations manifested in the welfare states in imperialist democracies (a major concession won by workers in those countries, financed to a large extent by the proceeds of super-exploitation in low-wage nations), the post-capitalist economic relations in Cuba defended by the revolutionary power of its working people and the remnants of China's socialist revolution which have yet to be reversed by this country's ongoing transition to capitalism. However, as capitalist social relations have extended their grip on the oppressed nations of the global South, and as the transition back to capitalism of the former socialist countries gathers pace, so these remaining redoubts of non-capitalism have shrunk, and today exist in highly antagonistic contradiction to rampant "market forces," a euphemism for capitalist power.

The social power of capital is enforced through the so-called rule of law, which exalts the sanctity of private property and negates the sanctity of human life. Any people that dares to defy laws protecting capitalist property, e.g. by defaulting on debts or by expropriating assets, is subject to the most severe economic penalties, and, if that is not sufficient, is threatened with subversion, terrorism and invasion. The transition from colonialism of yesteryear to the neocolonialism of today is analogous to the transition from slavery to wage-slavery, and merely signifies that capitalism has largely dispensed with archaic, precapitalist forms of domination and exploitation, while taking great care to preserve its monopoly of military force for use in cases of revolutionary challenge to its rule.

What is the "GDP illusion?"

GDP -- gross domestic product -- measures the monetary value of all the goods and services produced for sale within a national economy. It is often criticized for what it excludes -- goods and services that aren't produced for sale, such as those produced by domestic labor and those provided for free by the state; and so-called "externalities," i.e. the social and environmental costs which don't appear in the accounts of private firms, such as pollution, damage to workers health, etc. However, it has never, to the best of my knowledge, been criticized for what it includes. The problem can be illustrated by considering the mark-up on a T-shirt made in Bangladesh and consumed in the US. Leaving aside, for simplicity's sake, the cost of transport and of the raw materials used up in production, up to $19 of the $20 final sale price will appear in the GDP of the US, the country where this commodity is consumed, while the GDP of Bangladesh will be expanded by just $1, made up of the factory-owner's profits, taxes levied by the state, and a few cents paid to the workers who actually made the T-shirt. The $19 mark-up can be broken down into the "value-added" by wholesalers and retailers and by the advertisers, owners of commercial property, etc. who provide services to them. This strongly suggests that much, most or all of the value-added that is captured by US wholesalers and retailers was actually generated in Bangladesh, not in the US.

GDP is simply the aggregate of all of the value-added of all the firms in a national economy. Taxes, and the government services financed by these taxes, are accounted for by assuming that the value of these services is exactly equal to the taxes used to pay for them -- and so GDP can therefore be calculated by summing firms' income before the deduction of taxes.

What is critical, therefore, is the nature of so-called "value-added." For an individual firm, this is obtained by subtracting the cost of inputs from the monetary value of its output. At this point, mainstream economic theory and standard accounting practice makes a crucial and wholly arbitrary assumption: a firm's value-added is identical to the new value created by the production process within that firm and does not include any value generated elsewhere and captured by that firm in circulation, i.e. in markets, where titles to value are circulated but none is generated. This conflation of the value generated in the production of a commodity and the price received for it is the basis of the ruling economic doctrine in all its forms. On the other hand, recognition that the value generated in production and the value captured in the marketplace are two entirely different quantities which bear no necessary relationship to each other is the starting point of Marxist value theory, one implication of which is that activities, such as advertising, security services and banking produce no value whatsoever and are instead overhead costs, forms of social consumption of values generated in productive sectors of the economy -- much of which have been relocated to low-wage countries like Bangladesh.

This, then, is what I call the GDP illusion, whereby the value generated by low-wage labor in poor countries appears to be generated domestically in rich countries. In this way, the parasitic and exploitative relationship between imperialist countries and low-wage countries is veiled by supposedly objective raw economic data, considered as such even by many Marxist and other radical critics of the system who should know better.

How do you define "global labor arbitrage"?

This term was popularized in the early 2000s by Stephen Roach, a senior economist at Morgan Stanley, who described global labor arbitrage as the replacement of "high-wage workers here with like-quality, low-wage workers abroad," adding that "extract[ing] product from relatively low-wage workers in the developing world has become an increasingly urgent survival tactic for companies in the developed economies." Yet this only offers a superficial description of the phenomenon, while the mainstream theory that Roach subscribes to does not adequately explain it. Before I give my definition of global labor arbitrage, I should first explain its meaning in terms of the mainstream economic theory. Simply, it means moving production to where labor costs are lowest. "Labor costs" doesn't just refer to wages -- from the capitalist's point of view, what matters as well as the cost of labor (i.e., the wage) is the monetary value of the goods or services produced by this labor -- in other words, unit labor cost, defined as the cost of the labor required to produce an extra unit of output. According to mainstream theory, efficient, unimpeded markets equate workers' wages with their "marginal product," i.e. their contribution to total output, and from this two important consequences flow. First, workers are not exploited -- they receive in wages no more and no less than they contribute. Second, free markets equalize unit labor costs between industries and countries -- if wages are higher for some workers, it means they are more productive.

So, if, in the real world, (unit) labor costs are actually lower in some countries than in others, it means that workers in those countries receive wages which are lower than their marginal product -- in other words, even according to mainstream economic theory, they are being exploited. And, secondly, it means that the functioning of the labor market is impeded by extra-economic factors that depress wages, namely restrictions on the free movement of labor across borders. In mainstream economic theory, "arbitrage" means profiting from market imperfections that result in the same commodity fetching a different price in one place than in another. No other market suffers from imperfections on anything like the same scale as those encountered by the sellers of living labor, creating enormous opportunities for corporations to profit at their expense.

While none of this can be disputed by mainstream economists, the norm is to obfuscate these issues for what might be called public relations reasons, and it is to his credit that Stephen Roach spoke so plainly. But the mainstream explanation is inadequate, for several reasons. First, workers don't just replace their wages; their unpaid labor is the source of all of the capitalists' profits, and also pays for economic activities that do not add to social wealth, such as advertising, security, finance, etc. In other words, the exploitation of living labor is fundamental to capitalism and does not depend on market imperfections. Second, suppression of the free movement of labor cannot be regarded as an incidental, exogenous factor; instead, we need a concept that recognizes this to be an intrinsic part of contemporary global capitalism. And the same goes for the compulsion mentioned by Stephen Roach that has obliged capitalists in imperialist countries, on pain of extinction, to shift production to low-wage countries.

My definition of so-called global labor arbitrage is, therefore, that the division of the world between a handful of oppressor nations and a great number of oppressed nations, "the essence of imperialism," as Lenin said, is now an intrinsic property of the capital/labor relation and is manifested in the racially- and nationally-stratified global workforce; and that the super-exploitation this makes possible is a central factor countering the tendency of the rate of profit to fall, postponing the eruption of systemic crisis until the first decade of the 21st century.

What is the relationship between imperialism as currently practiced and mass migration?

Decolonization has emancipated the national bourgeoisies of the oppressed nations, giving them a place for their snouts in the trough, but the working peoples of the oppressed nations, whose hard-fought struggles achieved decolonization, still await their day of liberation. The division of the world between a handful of oppressor nations and a great majority of oppressed nations is today manifested in the racial and national hierarchy that constitutes the global working class; maintaining these divisions plays an absolutely central political as well as economic role in capitalism's continued survival. Violent suppression of free movement of labor across national borders, especially those between imperialist and low-wage nations, is a key factor producing and perpetuating wide international wage differentials; these in turn propel both the migration of production processes to low-wage countries and the migration of low-wage workers to imperialist countries, which are therefore two sides of the same coin.

How is gender discrimination built into the capitalist workforce?

Capitalists utilize all forms of division and disunity amongst working people in order to reap super-profits from doubly-oppressed layers and to bear down on the wages of all workers. Since hunger for cheap labor is the main force driving the global shift of production, it's no surprise this is manifested in a preference for the cheapest labor in those countries, namely that of women (and children); and as Bangladesh illustrates, this is no less true of countries where patriarchal culture has hitherto excluded women from life and labor outside the home. Conferring the status of wageworkers and breadwinners on young women and concentrating them in large numbers in factories tends to transform their social status and self-image, never more so than when fighting street battles with baton-wielding cops and company goons. To temper the subversive consequences of their greed, capitalist politicians crank up promotion of obscurantist, patriarchal ideologies, aimed at impeding the growth of militant class consciousness among these doubly-oppressed layers of the working class, performing a similar function to the promotion of sexiest celebrity culture and the cosmetics and fashion industries in other parts of the world.

More generally, the wealth gap between men and women is much greater than the income gap, reflecting the cumulative results of centuries and millennia of patriarchal class society. Patriarchy, like imperialism, predated capitalism and was a condition for its rise. Frederick Engels explained, in Origin of the Family, Private Property and the State, that women's oppression originated in the transition from primitive communism to class society, when a layer of the male population used their superior physical strength and aggression to seize possession of the social surplus and live at the expense of the rest of society. To pass accumulated wealth down the male line, they seized control of women's fertility, resulting in what Engels called the "world-historic downfall of the female sex." This implies that social revolution, opening the door to the abolition of class division, is a prerequisite for uprooting women's oppression, which can only be accomplished by building a society that places human beings and children at its center, in place of profit and private wealth accumulation.

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Globalization Is Just a Contemporary Word for Financial Colonialism - Truth-Out