Before proceeding any further, I want to focus on the origin of global capitalism.
Also, I want to discuss why it is widely accepted by the great majority of world leaders and political parties. I assert that today’s global capitalism has been widely accepted through state policy, making it exceedingly difficult to be changed or
abolished. However, global capitalism often brings about exploitation, social injustice, and instability rather than freedom, equality, and prosperity. In his observation, Karl Marx writes, “The circulation of commodities is the starting-point of capital. The production of commodities and their circulation in its developed form, namely trade, form the historic presuppositions under which capital arises. World trade and the world market date from the sixteenth century, and from then the modern history of capital starts to unfold” (Marx, Capital, 247). Therefore, from the commercial activity in the sixteenth century, the modern history of capital begins from the process of commodity circulation, and later develops to include the production and circulation of commodities. As the commercial activity expands, the production and circulation of
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goods become a global activity. Marx also reveals the profit-accumulating trend of capitalism. It first works through the basic circulation, in which a merchant exchanges a commodity for money, which he then exchanges for other commodities. He then sells other commodities to purchase something attractive to other consumers. It forms the activity of the social-economic system, which Karl Marx depicts as Commodity-Money-Commodity transference. Money here serves as the privileged link that can be exchanged for any commodity at any time.
With this C-M-C circulation, the merchant can buy in order to sell commodities at a profitable price, which leads to the eventual accumulation of money. The
exchange process can be regarded as Money-Commodity-Money (“accumulation”) (Karatani 95). This M-C-M’ becomes the formula for capital. Marx writes, “The circulation of money as capital is an end in itself, for the valorization of value takes place only within this constantly renewed movement” (Marx, Capital 253). So to possess money is to own a “social pledge” which can be openly exchanged at any time and place in any community (228). The power “held by a commodity serving as money is due to its being positioned as the universal equivalent” (Karatani 93). In the above modes, a commodity has no guarantee that it can enter into the exchange system while money takes up a superior position and has the power to be exchanged at any time for any community (93). With money, the owner can undoubtedly possess overwhelming influence in the exchange system. From Marx’s description, we can notice that the wealth begins not in the storing up of commodities but in the
accumulation of money (Karatani 5). Capital accumulation therefore equates to power and influence accumulation. A wealthy person who possesses a large sum of money has the ability to influence and coerce others to work for him, which explains the desire to accumulate money. Because capital gives its owner a superior position in the
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economic exchange system, the capitalists who desire dominant positions in the market will concentrate on profit and capital accumulation.
Throughout history, capitalism never shifts its focus from the task of capital accumulation. Instead, it integrates perfectly well with different forms of
governments. About the development of capitalism, Kojin Karatoni gives us a clear picture (273). From 1750-1990, capitalism has four different forms: mercantilism (1750-1810), liberalism (1810-1870), imperialism (1870-1930), and late capitalism (1930-1990). Since 1990 to present day, we have neoliberalism. At the same time, states have gone through transformations as well: absolute monarchy, nation-state, imperialism, welfare state, and regionalism (272-73) All the while, the practice of capital accumulation remains unchanged. In these five stages, state leaders come to sense that the power of capital can strengthen their control over their states. A
capitalistic economy brings about the “bureaucracies and standing army” (166) of the state, which enable state leaders to solidify their ruling power. The concentration on capital accumulation also ends in the exploitation of workers. The capitalist hires employees to produce goods that have value exceeding the sum of what a single employee can do on his own. When the capitalist takes possession of the surplus value, this process of production becomes exploitation.
For Karatani, these different stages of global capitalism appear “as a linear development driven by increasing productivity and as an ongoing cyclical alternation between liberalism and imperialistic stages” (Karatani 273). In other words, despite different names in different times, the state oscillates between liberal and imperialistic economic policies (Karatani 273). Liberal policies regulate development of state intervention and focus on the liberty, equality, and welfare of the individual.
Imperialistic policies aim to employ military force to exploit and “monopolize
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markets, raw materials, and labor” of another nation-state by one dominant nation (201).
When a state becomes a world hegemony, such as the United States from 1930-1990, it will apply liberal policy, which is “domestically characterized by robust social welfare systems” (Karatani 277). Yet, when the state loses its position as the world hegemony, it will abandon liberalism and engage in “imperialistic” battle and compete against other states to be the next hegemony (273). The imperialistic policy refers to the state intervention that assists the domestic capital expansion outside the country’s geographical boundaries. A state intervenes to ensure its superiority in production and circulation of capital. For example, when England replaced Holland to become the world hegemony as a financial and world trade center in 1750, it enforced the policy of liberalism, which focused on robust social welfare systems and worker-protection policies (277). From 1870 to 1930, although most states were imperialistic, the influence of capitalism never receded. During this period of time, Britain’s role as world hegemony declined, and other states including Britain started to embrace imperialism. Different from liberal capitalism, imperialism is not predicated upon free competition over price. While liberalism improves the situation of exploitation and oppression, both liberal and imperialistic policies still involve these two problems of capitalism. In imperialistic policy, the state resorts to vehement exploitation in the hope for the highest possible capital accumulation. Even when the state becomes the world hegemony politically and economically, it may not necessarily improve the poor working situation of the workers. Throughout history, capitalism has been adjusting itself between liberal and imperialistic modes. It becomes the indispensable part of the policy for the state to become competitive and hegemonic. Karatani’s analysis shows us the difficulty of structurally changing or abolishing capitalism.
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From the sixteenth to the nineteenth century, the strength of capitalism was still limited by the technologies of the time and geographical restrictions. By the close of the twentieth century, capitalism became substantially more globalized than it was even fifteen years prior (Kotz, “Globalization and Neoliberalism” 70). With the goal of capital accumulation, capitalism itself has had the strong tendency toward global expansion. After World War II, when local markets had reached their limits of capital accumulation, large businesses started shifting to the world market, hoping to locate new opportunities for capital accumulation.
In 1990, one major historical event helped to bring about the domination of capitalism in the world. The fall of the Berlin Wall and the demise of Eastern state socialism proved not only a decisive victory for the Western bloc, but also brought about the acceleration of global capitalism. Before 1990, the existence of a powerful Eastern bloc during the Cold War tended to suppress the development of capitalism with the alternative of state socialism. It increased fear among capitalists that their own working class could renounce capitalism and choose socialism. Due to this fear in capitalist states, the Eastern bloc also had an impact on the creation and operation of state-regulated capitalism and social welfare. After 1990, Eastern bloc socialism was viewed as outdated and inappropriate for most states around the world. Almost every country in the world accepted capitalism as the solution to eradicating human poverty while promoting freedom and equality. As the Soviet Union and its allies crumbled in the late1980s and the early 1990s, capitalism emerged victorious and began to expand globally.
Globalization is interpreted as an increase of cross-border economic interactions and resource flows, producing a qualitative change in the relations between national economies and between nation-states (Baker, Globalization 5). Globalization
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promises not only merchandise trade flow and direct foreign investment, but also cross-border financial investment. All of these suggest greater global accumulation of capital, while enduring the strong pressure of global competition. In the era of global capitalism, local large corporations and banks become comparatively smaller when they enter the world market. To compete with big businesses of other states both domestically and internationally, large banks and companies face “a daily battle for survival, which prevents attention to long-run considerations and which places a premium on avoiding the short-run costs of taxation and state regulation” (Kotz 69).
Therefore, large corporations began shifting to neoliberal theories and policies.
Neoliberalism is a concept that involves economic theory and policy. Neoliberalists hold that the unregulated capitalist system (free market economy) not just represents the personal freedom of choice, but also reaches the greatest economic goal (high capital accumulation) regarding “efficiency, economic growth, technical progress, and distributional justice” (Kotz 64). In the theory of neoliberalism, the state has a limited role in the economy by defining rights and enforcing contracts, and neoliberal policy mainly refers to decreasing regulations of the welfare state. From an international standpoint, neoliberalists ask for free trade of “goods, services, capital, and money”
globally (64). For Karatani, neoliberalism has the same economic policy of imperialistic capitalism, which chooses the large corporation over the individual (Karatani 278). Although it may seem like classical liberal policy that demands less state intervention and a much freer market, neoliberalism is in effect imperialistic capitalism in which states intervene to ensure the superiority of their industry in the production and circulation of capital globally.
The problem of neoliberalism lies in these deregulations of the capitalist system, in the promotion of the free market economy, and in the decrease of state intervention
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and budgeting for social welfare. In neoliberalism, free individual choice puts the individual under the coercion of the contract of the large corporation, in which various working conditions of the individual are often exploited. As capitalism is deregulated, the individual is further exposed to risks of exploitation. With such intense
competition and weak state intervention, local large corporations become
multinational corporations, which are companies that have “a substantial proportion of [their] sales, assets, and employees outside [their] home [countries]” (Kotz 67).
Because of these basic components, multinational corporations have limited ties to domestic markets of their own home countries for goods and labor. The multinationals will find the most advantageous locations for capital accumulation, which have the lowest minimum wages, reduced taxes, and available land. Due to the free market and global competition, these corporations have negligible social duties and
responsibilities to the workers and society. The labor of the individual can be minimized and sacrificed for the private profit of the corporation. When the large corporation finds another place beneficial to capital accumulation, it will move freely from one state to another, focusing only on the place with highest capital
accumulation possible. Without sufficient regulation and social welfare policies, the workers first face problems of exploitation in the company; then they have to deal with unemployment, which can trigger social instability. The free flow of capital without restrictions can often cause social injustice since the accumulation of capital flows solely in one direction. The high capital accumulation contributed by employees flows to the already wealthy corporation in the name of boosting the corporation’s global competitiveness. The large multinational corporations take away most of the surplus value generated by the workers without paying much tax or salary, and the wealthiest one percent control the financial flow in the market. However, those in
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control bear neither attachment nor responsibility to anything since their sole purpose is capital accumulation. The irresponsible free flow of capital can result in social injustice and financial crisis as well.
As I have argued above, the neoliberal policy helps the rich get richer. In free trade and free market policy, the wealthy entrepreneurs can accelerate their
accumulation of capital by paying little or no tax back to the state. And due to the tension of global competition, nations and large companies throughout the world start to embrace neoliberalism as an effective way to become leading countries and
companies in the global market. As a result, neoliberal procedures bring about social injustice and world-scale cutthroat competition, thus exacerbating exploitation and oppression. By decreasing state intervention and increasing private control, the individual faces a future of constant crisis.