Magazine article Monthly Review

Globalizing the Economy: The Influence of the International Monetary Fund and the World Bank

Magazine article Monthly Review

Globalizing the Economy: The Influence of the International Monetary Fund and the World Bank

Article excerpt

In this talk I want to focus on three issues. The first is the relationship between globalization and the nation state. The second is the relationship between the nation states of the world on the one hand and the IMF and World Bank on the other. The third is the historical context of globalization, and in particular its development within a long period of economic stagnation.

To begin, globalization as commonly discussed refers to the explosive growth in the past twenty to twenty-five years of huge multinational corporations and vast pools of capital that have crossed national borders and penetrated everywhere. This globalization, in turn, is seen as largely the result of a parallel technological explosion in computerization, telecommunications, and rapid transportation. Now, while the facts of an accelerated internationalization of capital and technology are not in dispute, I want to start by taking issue with the conventional wisdom that these multinational corporations have become so large and powerful that they are fundamentally more powerful than national governments, and as such are independent of them.

Interestingly, this is not a new idea, and in fact predates the period of the last twenty years conventionally described as one of "globalization." Thus, back in 1974, Richard Barnet and Ronald E. Muller in their book Global Reach: The Power of the Multinational Corporations were already saying: "If we compare the annual sales of corporations with the gross national product of countries for 1973, we discover that GM is bigger than Switzerland, Pakistan, and South Africa; that Royal Dutch Shell is bigger than Iran, Venezuela, and Turkey; and that Goodyear Tire is bigger than Saudi Arabia."(1) Moreover, the authors were citing a 1967 research report of a corporate consulting firm warning that "the nation state is becoming obsolete: tomorrow.... it will in any meaningful sense be dead."(2)

Today, however, in addition to the relative "size" of companies versus countries, the emphasis is on trends like the rapid flight of capital from countries such as Mexico which forces national governments to bow to the will of companies, or the jumping of companies from the United States to Hong Kong and then to Mexico or Haiti. These facts are pointed to as examples both of increasing globalization and of the impotence of national governments to stop it. In the words of Barnet's latest book, Global Dreams: Imperial Corporations and the New World Order "the balance of power in world politics has shifted in recent years from territorially bound governments to governments that can roam the world."(3)

Without denying the validity of some of these factual observations, I want to argue that there is a basic fallacy in the interpretation of these events, insofar as the conclusion is that there is a divorce of capital and multinational corporations from states or governments. While it is true that Exxon, Bayer, and Toyota sell and invest all over the world and that their primary goal is to make money for their shareholders, this does not make each of them independent of its home country, by which I mean the country in which it is headquartered and in which the great majority of its capital stock is owned. The reason for my conclusion is that today, as throughout history, the power of the state has always been important to companies seeking to sell and invest internationally. This is true whether or not state power is used to pressure other countries to reduce barriers to the companies' exports or investments.

This crucial role of state power, whether it be military, political, diplomatic, or economic, is perhaps clearest in natural resource sectors like oil. Here the historic rivalries among the United States, Britain, France, Germany, Italy, and Japan for control of this crucial industry have in the last analysis been settled by the ultimate test of state power-war-making ability. Thus, it is thanks to United States and British victories in two world wars that the names of companies like Exxon, Mobil, British Petroleum and Shell are household words, while Veba and Nippon Petroleum Refining, leading national companies in Germany and Japan, are known only to specialists. …

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