Paresh Chattopadhyay: “No Basis In The Real Economy”

Criticism &c. recently came across a review by Paresh Chattopadhyay, author of The Marxian Concept of Capital and the Soviet Experience, of a 2001 World Bank report on trends in the global economy. While Chattopadhyay does not refer to Marx’s categories here (due to his audience, no doubt), the outline of globalization’s “three waves” he provides is valuable for its critical treatment of the basic currents of the development of the capitalist world economy. While Chattopadhyay does not describe it as such, the reader should note that the interval between the first and second waves (characterized here as one of “inward looking economic policies pursued by different countries”) is the era of the rise and consolidation of state-capitalism as a world phenomenon.

Chattopadhyay’s second critical note on globalization’s third wave is of particular interest (the third note is not included in the excerpt provided here), as it describes succinctly one of the fundamental aspects of the contemporary world economy, the “domination of global financial capital over productive capital.” The final sentence of the review as excerpted here looks forward directly to the capitalist crisis the world entered in 2007.

• • •

Globalization, Growth, and Poverty: Building an Inclusive World Economy.

Washington, DC: World Bank, 2001, 188pp.

Excerpts from a review by Paresh Chattopadhyay published in Labour, Capital & Society, April 2001 (Vol. 34 Issue 1).

Global integration—the result of reduced transportation costs, lower trade barriers, rising capital flows, faster communication and rising pressure for migration—is a powerful factor for poverty reduction inasmuch as more integrated economies tend to grow faster and this growth is widely diffused. There are of course both winners and losers in the process. Compared to the two percent annual growth of per capita Gross Domestic Product (GDP) in the rich countries in the 1990s, there has been for three billion people in the developing countries—”breaking into global markets”—a five percent annual growth of GDP accompanied by a reduction of the number of “extremely poor” people during the same period. However, two billion people in the rest of the developing countries, left out of the globalization process, have seen their income decline and their poverty rise. Globalization also involves power, culture and environment. While globalization has not meant a significant shift of power in favour of those already powerful, its impact on culture and environment has not been unambiguous.

The process of globalization has undergone three waves—the first between 1870 and 1914, the second between 1950 and 1980 and the third since 1980. During the first wave, flows of goods, capital and labour increased greatly, helped by advances in transportation and negotiated reduction of trade barriers, opening up the possibility of using land in some countries more productively. The process resulted in an unprecedented rise in the global per capita income. However, this period also saw both a widening gap between the globalizing countries and those left behind and increased world income inequality together with an increase in the absolute number of poor people across the globe.

During the period between the First and the Second World Wars, the inward looking economic policies pursued by different countries resulted in a slowdown of the growth process accompanied by a continued rise in world inequality. During the second wave there was integration among the countries of Western Europe, North America and Japan which saw a restoration of trade relations through multilateral trade liberalizations. The OECD countries experienced unprecedented growth rates and a modest trend toward income equality within them aided by public policies for wealth redistribution and social protection. However, most of the developing countries were isolated from capital inflows and remained primary commodity exporters. The gap between the rich and the poor countries widened.

The third wave started around 1980 spurred by technological advances in transport and communication and the opening up of a large group of developing countries to foreign trade. Many poor countries broke into global markets for manufactured goods. The share of manufactures in total exports from developing countries rose from 25 percent in 1980 to 80 percent in 1998 helped by major trade liberalizations. At the same time many of these countries have eliminated barriers to foreign investment. As opposed to the new globalizers, the rest of the developing world has remained marginalized. In regards to wealth distribution, inequality has declined in some countries like Malaysia and the Philippines while it has increased in others like China and the countries of Latin America. Regarding the environment, the report notes that the rich countries continue generating most of the carbon dioxide and that the USA, with only four percent of world population, emits 25 percent greenhouse gas. The Kyoto Protocol is considered favourably.


In this document the spokespersons of world capital have very lucidly argued the virtues of neo-liberalism. However, in the process they have left aside certain aspects of world development in recent times that need to be stressed. For lack of space we limit ourselves to three aspects.

First, the division of the post Second World War epoch of the globalization process between two “waves” does not mention an important qualitative difference between them, namely, a systematically lower annual growth rate of the global GDP in the post 1970s neo-liberal era compared to the rate in the pre-neoliberal so-called “golden age” of capitalism between 1950 and 1973. This rate averaged about five percent in the “golden age” and then steadily came down to two percent in the 1990-1999 period. (A. Maddison, Monitoring World Economy 1820-1992, OECD, 1995; and UNCTAD. Trade and Development Report, various issues.)

Secondly, while discussing the third “wave” of globalization the report does not mention the most dynamic aspect of contemporary globalization—the domination of global financial capital over productive capital. From the end of the Second World War to the early 1970s—the “golden age”—finance was at the service of the accumulation of productive capital. Now finance drives the economy. Global daily currency transactions rose from a total of less than US$0.2 trillion in 1986 to $1.5 trillion toward the end of 1990s, most of which had no basis in the real economy. The value of “derivatives” traded during 1997 was more than ten times the value of global production during the same year (N. Kristof and E. Wayatt in New York Times, February 15,1999). This financial globalization has been accompanied by endemic instability leading to recurrent financial crises.


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