Contrasting Views on Globalisation and Industrial Structure

The nature and determinants of industrial structure are among the most important issues in economics. In the history of economics, there have been radically contrasting views on the basic determinants of industrial structure. For most of the twentieth century, industrial structure was heavily influenced by state industrial policy. Since the 1980s, the end of communist central planning and of inward-looking development strategies in poor countries, together with widespread privatisation and liberalisation, ushered in the epoch of ‘globalisation’. This provides an opportunity to test the validity of the competing views of the determinants of industrial structure under free market conditions.

There is a substantial empirical literature analysing the nature and determinants of industrial structure prior to the epoch of modern ‘globalisation’. However, there is still a dearth of empirical analysis of the nature and causes of the trends in industrial structure in the epoch of globalisation, and of the implications of these trends for both theory and policy. The assembly and interpretation of evidence on this issue is critical for understanding the current epoch.

Mainstream View

Introduction

The killing of hundreds, perhaps even thousands, of civilians by armed forces in Peking on June 4th 1989 is to be deeply deplored. Such violence is a sign of political failure. However, after the initial emotional shock, one has to attempt to analyse the event coolly to understand why it happened, to consider its significance and anticipate its impact on the future course of China's political economy. The broad thesis of this chapter is that, awful as this event was, it should not have surprised anyone familiar with the political economy of developing countries, especially those observers with more than a superficial knowledge of China. The recent history of virtually all developing countries contains examples of violence by the state against its own citizens. Not even the advanced capitalist countries have been immune in recent times from such actions, albeit on a smaller scale than in China (Kent State and ‘Bloody Sunday’ spring readily to mind). Not only do China's leaders have to deal with the conflicts characteristic of developing countries in general, but also they are presiding over the turbulent process of de-Stalinisation of their entire system of political economy. Such a process is difficult enough in the relatively advanced, urbanised societies of Eastern Europe. In a backward, hugely populous country with vast regional differences, such as China, the process is incomparably more difficult. The realities of China before June 4th were far removed from the fantasy image created by the Western media and observed through the darkest of glasses by Western tourists insulated in almost every way from the true condition of the Chinese people.

Introduction

In December 1997, shortly after the onset of the Asian Financial Crisis (AFC), the Chinese Central government sent Wang Qishan, then president of the China Construction Bank, to become a member of the Guangdong provincial party committee. One month later, he was appointed executive vice-governor of the province. The Guangdong provincial party committee subsequently set up the ‘Five-member team to deal with financial crisis’. Its main task was to deal with the intensifying payment crisis in Guangdong. Two of the flagship companies of Guangdong, Guangdong International Trust and Investment Corporation (GITIC) and Guangdong Enterprises (GDE), were insolvent and unable to survive. After intense debate, the Guangdong government decided to bankrupt GITIC and restructure GDE. These events caused an outcry in the international press. International creditors had wished to believe that regardless of the fate of the enterprises, the Chinese government would pay in full the international debts as it had normally done in the past.

In October 2000, after intense debate and tough negotiation, GITIC repaid US$ 85 million at the third creditors' meeting. In December 2001, the International Financial Review awarded GDE the title of ‘Asia's best debt restructuring project’. Subsequently, a much less-publicised event was the fact that by borrowing RMB 45 billion from the central government, the Guangdong provincial government had been able to restructure and close more than 800 local small and medium non-bank financial institutions.

Introduction

Since ancient times, the pursuit of profit by capitalists has stimulated human creativity in ways that have produced immense benefits. As capitalism has broadened its scope in the epoch of globalisation, these benefits have increased enormously. Human beings have been liberated to a far greater degree than hitherto from the tyranny of nature, from control by others over their lives, from poverty, and from war.

However, capitalist freedom is a two-edged sword. In the epoch of globalisation, its contradictions have intensified. Inequality has increased in both rich and poor countries. The threat to the natural environment has deepened. Capitalist globalisation has produced a high degree of instability in global finance. Its surging contradictions may even result in the obliteration of the human species through nuclear war. Capitalist globalisation has created uniquely intense threats to the very existence of the human species at the same time that it has liberated humanity more than ever before from fundamental constraints.

Since the late 1970s, under the leadership of the Chinese Communist Party, China's policy of reform and opening up has led to it becoming ever more deeply integrated with the capitalist global economy. This has enabled it to benefit from the ‘advantages of the latecomer’ and to the release of its latent productive forces based on a long history of capitalist development (Xu Dixin and Wu Chengming, 2000). It has produced remarkable economic growth and transformation of Chinese people's standard of living.

Introduction: Humanity at the Crossroads

Since ancient times the exercise of individual freedoms has been inseparable from the expansion of the market, driven by the search for profit. This force, namely capitalism, has stimulated human creativity and aggression in ways that have produced immense benefits. As capitalism has broadened its scope in the epoch of globalisation, so these benefits have become even greater. Human beings have been liberated to an even greater degree than hitherto from the tyranny of nature, from control by others over their lives, from poverty, and from war. The advances achieved by the globalisation of capitalism have appeared all the more striking, when set against the failure of non-capitalist systems of economic organisation.

However, capitalist freedom is a two-edged sword. In an epoch of capitalist globalisation, its contradictions have intensified. They comprehensively threaten the natural environment. They have intensified global inequality within both rich and poor countries, and between the internationalised global power elite and the mass of citizens rooted within their respective nations.

What is ‘Globalisation’?

The recent explosive changes in the world business system constitute a surge forward of capitalism to a global scale. However, despite the dramatic advance of capitalism, it constitutes only the most recent stage in an evolving process that has been under way since human beings' early history. For several thousand years, human history has been organised to an ever-increasing extent around the division of labour, the extension of the scope of the market, and the pursuit of profit. This force has been the central factor in technical progress. Until the early modern period, the main consequence of technical progress was to enable population growth and output more or less to keep pace with each other, advancing together in a complex symbiotic relationship. However, around 200 years ago, a new relationship between population and per capita output emerged. Population growth and per capita output and income began an unprecedented, simultaneous acceleration.

Pre-Modern Capitalism

Capitalism, in the sense of production for profit for the market, is an ancient phenomenon.

In the aftermath of the revolt, the government of India followed a policy of non-interference in Indian affairs relating to religion and caste. Nervous of a repeat of the widespread military and civil unrest experienced during 1857–8, the government was keen to dispel the apparently popular belief that its aim was the cultural defilement or even wholesale conversion of the entire population to Christianity. British administrators were also eager to untangle the seemingly tight knot that bound together the question of native ‘loyalty’ and ‘treachery’, and increasingly came to understand individual posturing with or against the state in relation to broader collective groups and relationships. In its drive for cultural understanding, if not empathy, the government created what is now commonly described as an ‘ethnographic state’, through which it differentiated, distinguished, and sharpened categories of religion and caste. These fed into colonial forms of governance generally, particularly new modes of recruitment into the Bengal army, as also the specifics of colonial alignment with particular sections of the Indian population. Indian communities were themselves central to the formation of such social discourses and practices. As during the pre-colonial period they continued their attempts to reposition themselves socially, economically, and culturally according to their own needs and desires.

Yet, as we have seen, colonial concerns about the relationships between the individual, society, religion, caste, and tribe were not solely a post-1858 development.

Introduction

The green challenge to Marx's socialist vision for its purported commitment to industrial giganticism and the fact that a green politics has emerged as a focal point for oppositions to the current world order has spurred Marxists to reconsider the theory and practice of socialism in a green light. The present chapter follows in the spirit of that work intent upon defending the potency of Marxist theory – particularly Marxian economics – to expose the roots and modalities of the eco-destructive tendencies of capitalism. And, this work shares in the belief that it is only through the building of a genuine socialism that an eco-sustainable global future for humanity can be realized. However, the chapter maintains the case Marxism makes regarding such paramount questions needs to be strengthened and that there exists a latent power of Marxian analysis waiting to be tapped for precisely this purpose.

Marx's Capital has been successfully mined for its elucidation of the class-exploitative, crises-ridden, lop-sided wealth-concentrative nature of capitalism. But only marginally has it been explicitly drawn upon for its exploration of how it is possible for such a society – what Marx referred to variously as an ‘upside-down’, ‘alien’, ‘fetishistic’ social order reducing human socio-economic relations to ‘relations among things’ – to reproduce human economic life over an extended period in the first place.

The transition from the Keynesian ‘golden age’ to the current ‘age of neo-liberalism’ was one of the defining events of the international political economy in the post-war era. This chapter examines this transition in terms of changes in the theory and practice of monetary policy across these two periods, and their socio-economic implications. It is argued that monetary policy regimes are irreducibly political. They do not simply offer alternative approaches to macroeconomic management; policy regimes also discipline nation states and social actors in different ways. For example, they constrain the choice of economic policy priorities and the use of the available policy tools, influence inter-capitalist relations within and between countries, and limit the demands of the working class. The macroeconomic policy regime is one of the basic features of the system of accumulation. By the same token, crises of the policy regime can bring to light limitations of the hegemonic processes of economic production and social reproduction.

This chapter shows, first, that the demise of Keynesianism was the outcome of intractable social, economic and political problems in the late 1960s and 1970s, including monetary and exchange rate disturbances, social discord and the weakening US hegemony. The neo-liberal transition was the historically specific (contingent) outcome of the search for solutions to these mounting problems in the accumulation process. The development of a new monetary and exchange rate policy regime was one of the decisive aspects of this transition.

Introduction

Contemporary observers claimed frequently that religion was an important cause of the Indian mutiny-rebellion of 1857–8. They viewed missionary activities, inappropriate legislative interventions into religious affairs, and the alleged introduction of cartridges greased with animal fat into the Bengal army as significant reasons for revolt. A number of nineteenth-century writers and historians have taken up this perspective to argue that the uprising was at least partly a cultural arena in which north Indian communities responded to perceived colonial assaults on religious practices. As we have seen, other military, social, and economic concerns fuelled and sustained widespread unrest. However, this chapter will focus on a further dimension to the cultural background to revolt: the colonial jail in north India. Accounts detailing the run-up to the mutiny-rebellion sometimes mentioned local hostility to prisons, for jails were newly constituted colonial spaces in which Indian bodies were confined, controlled, and disciplined in unprecedented ways. Penal practices often transgressed Indian social norms, particularly with regard to religion and caste. In this reading, jails both embodied and symbolized broader social fears about colonial interference in religious affairs and forced conversion to Christianity.

In the pages that follow we will examine the penal practices that invoked these concerns, discussing north Indian responses to and negotiations with colonial innovations in imprisonment during the first half of the nineteenth century. Now it is historiographically well established that prisons were sites in which essential colonial social categories were reflected, institutionalized, and embedded.