The New Era of Globalization Essay
The New Era of Globalization
One of the well accepted cliches of our time claims that we are living in a world of major and rapid transformations (Rosenau, 1990). A systematic analysis of historical cycles of capitalism shows that globalization is in a time of transition and perhaps a emergence of a new cycle, with peculiarities that may point to intense changes in the economic system. From the main approaches of Immanuel Wallerstein and his theory of world-systems supported by the Kondratieff cycles, It is possible to analyze the historical capitalism and the ramifications towards a new globalization.
In order to outline the globalization waves and find out if we are having the end of a cycle, is important to think aboutf the long recession since 2008, if it will mean a period of significant development, or if we are about to experience the “big bifurcation” toward a completely new, post-capitalist system in the next decades. (Giesen, 2010) The well known Kondratieff waves are critical to this type of world social processes because these long waves of economic growth are a primary vehicle for long term and fundamental, technological change in the world economy.
It is possible to use it to better understand about the current period we are in and the changes we are about to become aware of. Ian Gordon is a forecaster that based on the Kondratieff cycles tries to predict the likelihood of major economic and financial events by employing the long wave principle and in his predictions is clear to see that we are in the end o a cycle of recession that is supposed to be long. Globalization is the term most often used to identify the current changes affecting the current economic scenario, talking up flexibility of capital and labor, and transnationalization.
What Wallerstein analyzed is: what is the factor that gives the current moment an innovative feature, something completely different in world history? By the world-systems theory, capitalism, through distinct world economies acquired a worldwide dimension over time. In the historical perspective of capitalism, when realized in the long term, it is seen to be possible to identify some concepts that characterize changes in its development, and repetitions: the interstate system, the center and periphery relationship, the moments of capital accumulation and financial expansion, the interdependence of various regions of the globe.
The ways in which world economies are settled within the development of the capitalist system were specific to each time, each with its own characteristics. Wallerstein interpret the phenomenon of Globalization as a phase transition that passes the capitalist system. We are current in the fifth wave turn down, or economic winter as some authors call it. It is viable to observe below with the “Post- Kondratieff” waves and phases table: Source: Warner, J. 2012.
The globalization propagated in the 90s with all its “originality”, prevents us to realize that actually there is historic crisis. As the changes occurring not have well-defined rules, it is better to understand the period as a phase transition and changes in the world system. Despite being the 90s considered as main reference to globalization, its explanation as a phenomenon of capitalism is much earlier, divided into two temporal axes that extend to the present, the first started in 1945 and the second around 1450 (Wallerstein, 2003, p. 2-73). The A phase of the Fourth Kondratieff cycle corresponds to the apogee of the United States in the world system after 1945. The post-war situation allowed this country an enormous productive superiority, promoting longer expansion phase of production in the capitalist economy, generating great wealth and also great tension. The immediate goals of the United States after the war were favorable to maintain stability and reestablish their economic dominance to the rest of the world.
For this, were created international institutions like the UN, IMF and World Bank, for which the United States maintained order and political control. The United States took to restore demand and ship its products and created the Marshall Plan for Western Europe as well as provided economic aid to Japan after the Korean War. The Cold War tensions helped creating military ties that strengthened economic ties, both in Western Europe and in Japan, for example, with the emergence of NATO and the pact between US and Japan.
So, these were the areas from where benefit came after the Second World War. Meanwhile, the great prosperity of Europe and Japan has become the greatest risk to US hegemony, because it started to have high productivity regaining control of their national markets and competitive products so that the preponderance declining economic US in the late 60s. The world market has saturated and profitability of industrial sectors fell. With the excessive political and military spending in the exercise of its hegemony, the United States began a greater financial control.
Having reached its long period of stagnation, the world economy by 1970 suffered from the decline in profitability. This has to be sought in the financial sphere and no longer in production. Unemployment rose in the world and the production moved to outlying regions where wages were lower It was inaugurated in this context the phase B of the cycle with the rise in oil prices by the Organization of Petroleum Exporting Countries (OPEC). The United States responded by creating the trilateral agreement and the G-7, being more flexible, after Vietnam, in the crises of Nicaragua, Iran, Angola and Cambodia.
The Gulf War caused by the invasion of Kuwait, would be just too costly for the United States and had to occur in an alliance of countries. In Western Europe the creation of the Euro was an essential step for the subsequent unification, leading to the shutdown policy with the United States, which was exposed in the Balkan War with weak NATO intervention. Across the world, the “Asian crisis” and Asian Tigers was accompanied by a disastrous intervention of the IMF, spreading deflation in that region, Russia and Brazil.
In this brief analysis is possible to see capitalism and its cycles, which have always a different nature from the ones before. This situation brings links with the current situation of the capitalist world-economy we face. The current world financial crisis has passed through several stages that engage important turning points in its development (Guillen 2010b, 2011). Until now, It has passed through three different stages: 1. The initial phase from August 2007 to September 2008.
In this phase, the subprime-mortgage crisis erupted, followed by the gradual but uncontainable collapse of the bond and mortgage derivative markets (credit default swaps, investment vehicles, etc. ). As the entire financial pyramid was constructed on a base of debt, the tightening of credit and the deflation of assets began in this stage. The crash on securities exchanges was still limited. The stock crash began to materialize in July and August 2008, when instability in the bond market got worse. There was limited impact on production. 2.
The second stage of the financial crisis ran, generally speaking from September 2008 to March 2009. This subsequent phase was characterized by a pointed reduction of credit, the banking crisis, the breakdown and sensible disappearance of investment banks and their absorption by enormous commercial banks, the deepening of deflationary tendencies in the central economies, the fall in prices of primary goods, and the beginning of a widespread recession. The Great Recession of 2008–9 is the most severe one that capitalism has experienced since the Great Depression of the 1930s.
According to data from the International Monetary Fund (IMF), in 2009, world gross domestic product (GDP) declined by 0. 5%, for the first time in decades. The depression has had the greatest effect on developed countries, which experienced a fall that year of 3. 4%. Most badly affected were the great capitalist powers: Germany (–4. 7%), Japan (–6. 3%), and the United States (–2. 6%). Only a few of the emerging powers escaped declining into a recession. China and India showed continued growth but at a slower rate.
Latin America felt tough effects, but international reserves and some other factors prevented it from falling into its own financial catastrophe. The most worrying aspect of the recession was reduction in the unemployment rate. Among the countries shown in above, this rate increased Source:Eurostat (as April 2012) considerably everywhere except Germany. Between 2006 (the year before the crisis actually began) and 2009, the unemployment rate increased by 1. 6 points in the European Union, 10. 7 points in Spain, 2. 3 points in the UK, and 5. 6% age points in the United States.
The total number of unemployed persons in the United States in November 2012 was 12 million, of whom 4. 8 million have been without work for more than six months. Adding to this number the 2. 5 million idled workers no longer seeking employment, plus those forced to work part-time, the rate of underemployment rises to 15. 9%. The International Labor Organization (ILO) estimated worldwide open unemployment at 210 million people, claiming that between 2007 and 2009, 34 million people lost their jobs as a result of the Great Recession. 3. The third period of the world crisis began in March 2009 and persists to this day.
This new stage has the following common characteristics: the beginning of an uneven and doubtful recovery of productive movement; still tight credit; the use of restrictive structural alteration policies in countries with large deficits; and the currency wars, encouraged by the search for an end from the crisis with export income. According to Guillen (2010b) during the first phase of the crisis, the turmoil began in the financial sector and moved to the productive economy. In the second and third stages, the problems moved in both directions: from finance to the productive economy, as well as the reverse.
From this fact it can be deduced that anti-crisis measures cannot be limited to efforts to reestablish normal conditions in the financial systems, it is important to include unemployment and recession in production to the plan. This cycles of long waves that Gordon (2013) uses for predications have been reiterate itself four times recently. According to the table of Kondratieff waves and Gordon (2003) we are now in a downswing phase lasting anything between ten and forty one years. Dating the beginning of the crisis from 2008, that’s between five and thirty six years to go.
Ian Gordon states: “But the truth is, it’s only the start. In fact you will certainly see the consequences of this deep-rooted. No one will escape the fallout. In all recorded history no country has ever recovered from the financial position we find ourselves in today. No government has ever been able to reverse this trend. No emergency action has ever come close to a solution. The inescapable problem has only ever had one outcome: financial collapse” (2013) The worst of the previous long wave winter lasted only three and a half years, between September 1929 and March 1933.
Between those months 10,000 US banks failed, US unemployment reached a peak of 25%, the GDP collapsed by 45% and the Dow Jones Industrials Average lost 90% of its value. This winter started in January 2000, when the DJIA peaked at 11,750 points. As of January 14, 2013 we will have been 13 years into winter. During that time less than 500 US banks have failed; official unemployment numbers are 7. 7%, whereas John Williams who monitors official government statistics on his website Shadow Government Statistics estimates total US unemployment is currently at 22. %; official GDP is plus 2% and the DJIA is 14% higher than its onset of winter price peak in 2000. (Gordon, 2013)
Look like that from this point on things can only get worse and that’s a lot worse. With such analysis, it could be unfair to finish them with the reinterpretation of the present. A final possibility can also be sought: if there are indeed facts and theory that denote that the current time undergoes changes and that these changes may mean a period of transition, this phase seems to be heading to an end of a cycle, the end of an era of economic globalization.
But how globalization is going to be next? This question put us toward a very particular historical situation, to witness or even participate to these changes. We are all in a point where just one path must be followed: the capitalist classes attempt to build an uneven and hierarchical system, which can no longer be capitalism and the outcome of that will depend on the clarity of the analysis of this system and the construction of a large block of democratic world forces to face the instability that the new system will impose to the necessary balance.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 11 September 2016
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