The Globalization of Capitalism, The Rise of Capitalism's Fourth Epoch
Capitalism, as an
economic system, first debuted in the 14th century and existed in three
different historical epochs before it evolved into the global capitalism that
it is today. In this article we take a look at the process of globalizing the
system, which changed it from a Keynesian, "New Deal" capitalism to
the neoliberal and global model that exists today.
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The foundation of
today’s global capitalism was laid, in the aftermath of World War II, at the
Bretton Woods Conference, which took place at the Mount Washington Hotel in
Bretton Woods, New Hampshire in 1944. The conference was attended by delegates
from all Allied nations, and its goal was to create a new internationally
integrated system of trade and finance that would foster the rebuilding of
nations devastated by the war. The delegates agreed to a new financial system
of fixed exchange rates based on the value of the U.S. dollar. They created the
International Monetary Fund (IMF) and the International Bank for Reconstruction
and Development, now a part of the World Bank, to manage the agreed upon
policies of finance and trade management. A few years later, the General
Agreement on Tariffs and Trade (GATT) was established in 1947, which was
designed to foster “free trade” between member nations, premised on low to
non-existent import and export tariffs. (These are complex institutions, and
require further reading for deeper understanding.
For the purposes of
this discussion, it’s simply important to know that these institutions were
created at this time, because they go on to play very important and
consequential roles during our current epoch of global capitalism.)
The regulation of
finance, corporations, and social welfare programs defined the third epoch,
"New Deal" capitalism, during much of the 20th century. The state
interventions in the economy of that time, including the institution of a
minimum wage, the cap of a 40 hour work week, and support for labor
unionization, also laid pieces of the foundation of global capitalism. When the
recession of the 1970s hit, U.S. corporations found themselves struggling to
maintain the key capitalist goals of ever-growing profit and wealth
accumulation. Protections of workers' rights limited the extent to which
corporations could exploit their labor for profit, so economists, political
leaders, and heads of corporations and financial institutions devised a
solution to this crisis of capitalism: they would shake off the regulatory
shackles of the nation-state and go global.
Ronald Reagan’s
presidency is well known as an era of deregulation. Much of the regulation
created during Franklin Delano Roosevelt’s presidency, through legislation,
administrative bodies, and social welfare, was torn down during Reagan’s reign.
This process continued to unfold over the coming decades, and is still
unfolding today. The approach to economics popularized by Reagan, and his
British contemporary, Margaret Thatcher, is known as neoliberalism, so named
because it is a new form of liberal economics, or in other words, a return to
free-market ideology. Reagan oversaw cutting of social welfare programs,
reductions to federal income tax and taxes on corporate earnings, and removal
of regulations on production, trade, and finance.
While this era of
neoliberal economics brought the deregulation of national economics, it also
facilitated the liberalization of trade between nations, or an increased
emphasis on “free trade.” Conceived under Reagan’s presidency, a very
significant neoliberal free trade agreement, NAFTA, was signed into law by
former president Clinton in 1993. A key feature of NAFTA and other free trade
agreements are Free Trade Zones and Export Processing Zones, which are crucial
to how production was globalized during this era. These zones allow for U.S.
corporations, like Nike and Apple, for example, to produce their goods
overseas, without paying import or export tariffs on them as they move from
site to site in the process of production, nor when they come back to the U.S.
for distribution and sale to consumers. Importantly, these zones in poorer
nations give corporations access to labor that is far cheaper than labor in the
U.S. Consequently, most manufacturing jobs left the U.S. as these processes
unfolded, and left many cities in a post-industrial crisis.
Most notably, and
sadly, we see the legacy of neoliberalism in the devastated city of Detroit,
Michigan.
On the heels of NAFTA,
the World Trade Organization (WTO) was launched in 1995 after many years of
negotiation, and effectively replaced the GATT. The WTO stewards and promotes
neoliberal free trade policies among member nations, and serves as a body for
resolving trade disputes between nations. Today, the WTO operates in close
concert with the IMF and the World Bank, and together, they determine, govern,
and implement global trade and development.
Today, in our epoch of
global capitalism, neoliberal trade policies and free trade agreements have
brought those of us in consuming nations access to an incredible variety and
quantity of affordable goods, but, they have also produced unprecedented levels
of wealth accumulation for corporations and those who run them; complex,
globally dispersed, and largely unregulated systems of production; job
insecurity for billions of people around the world who find themselves among
the globalized “flexible” labor pool; crushing debt within developing nations
due to neoliberal trade and development policies; and, a race to the bottom in
wages around the world.
source:
https://www.thoughtco.com/globalization-of-capitalism-3026076
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