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QUESTIONING HENWOOD ON GLOBALIZATION
Richard B. Du Boff and Edward S. Herman

For some reason Doug Henwood feels called upon to play down globalization. 
Others on the left, some associated with MONTHLY REVIEW, have done the same,
warning that any acceptance of the globalization thesis will discourage
leftists and breed "defeatism." Henwood expresses no such fears; but his
treatment of globalization, his stress on the benefits of trade and
"cosmopolitanism," and his concern that globalization has been "greeted as
an evil in itself" are based on arguments that are incomplete and
unconvincing. 

One of Henwood's problems is an apparent unwillingness to recognize that
globalization today is bringing about integration at the level of production
itself, through trade, investment, mergers and acquisitions, and
intercorporate alliances, rather than integration of markets by trade alone. 

Take Henwood's treatment of "trade penetration in general," based on
"exports as a share of GDP." He states that by that standard Britain, Japan,
and Mexico are no more globalized today than in 1913, although he grants
that "exports are just one indicator." Even by that indicator, however, the
source of his own data (Angus Maddison) shows that for the world as a whole
the export percentage of GDP was significantly higher in 1992 (13.5%) than
in 1913 (8.7%). A more recent study (by Michael Kitson and Jonathan Michie)
compares average annual growth rates of world exports and world output, with
the world economy becoming more "open" when trade grew faster than output. 
By this measure, the "openness indicator" for 1913 was reached in 1968 and
has since been left far behind. 

Henwood's constricted view of trade carries over into the service sector,
where he notes, correctly, that most of us work in services that are
"largely exempt from international competition." As a snapshot frozen in
time, yes; as analysis of a process, no. Powered by new technologies, trade
in services is actually growing more rapidly than trade in merchandise. It
covers finance, telecommunications, transportation, and a range of business
services and now accounts for around 30 percent of world trade, up from 17
percent in 1980 (percentages that are understated for several reasons, among
them the less reliable statistical coverage than for merchandise trade). The
result is that larger numbers of skilled and semiskilled workers in
high-income countries are no longer "exempt." A global "back office" data
entry industry is developing in the Caribbean, with labor costs running 25
to 40% those in North America and Western Europe for services requiring a
low level of computer literacy. Higher levels of occupational skill can be
tapped as well: for computer software programming, a $100,000 a year circuit
board designer in California will cost less than a third as much in India,
and similar subcontracting is spreading to other areas, and other industries
(film and television among them). Henwood needs to think more seriously
about the direct and indirect effects of globalization on worldwide labor
supplies, the "20-25%" econometric impact on real wages notwithstanding. As
he himself has pointed out elsewhere, the economists' chief explanation for
real wage stagnation at the bottom of the income scale--computer-led
"technological upgrading of skills"--is a myth. 

Economic globalization is centered in the production process itself. Again,
Henwood picks out a single tree in the forest--intrafirm trade in component
parts narrowly defined--to claim that a global "assembly line" is an
"overblown" image. True, but increasing global production and marketing
capacities of corporate capital are not. In simple trade terms, the
proportion of world trade in the form of intrafirm trade has grown from 20%
in the early 1970s to somewhere between 30 to 40% in the 1990s. In U.S. 
corporations, intrafirm exports both finished and unfinished have increased
markedly as a share of total corporate exports over the past 20 years: they
now make up about 45% of the total. But U.S. data also indicate that the
fastest growing trade of all is taking place among foreign-based affiliates
of parent corporations. And all such intrafirm trade figures exclude the
increasingly important "outsourcing contracts in China" and elsewhere. 

Across the globe multinational corporations now number around 60,000, and
their 500,000 foreign affiliates by themselves had sales (of goods and
services) of $11 trillion in 1998, now exceeding global exports (as they
have ever since these data were first gathered in 1984) by $4 trillion. The
stock of foreign direct investment, the prime mover of international
production, is now estimated at $4.1 trillion, equivalent to 12% of world
output compared to 9% in 1913; foreign direct investment flows have grown
from 2% of world output in the early 1980s to 6% at present. And these
figures do not reflect a very rapidly growing network of nonequity
arrangements among firms, like strategic partnerships and joint technology
and R&D ventures, which are not captured by usual measures of international
production and serve as leading elements of market power in a number of key
industries (telecommunications, electronics and computers, biotechnology,
instrumentation, automobiles). While most production and distribution is
still carried on within national boundaries, self-contained and localized
production networks are quickly becoming less important in the operations
and strategies of corporate capital--the Fortune 500 in the United States
and their foreign counterparts, which are both competitors and strategic
allies depending on situations prevailing in one industry or another. 

The steady enlargement and integration of global money and capital markets
too, where private holdings now tower over the reserves of central banks,
constrain national economic policies. Henwood agrees but stresses the fact
that financial markets were also free before 1913. In that earlier era,
however, there were no welfare states to be subverted by the mobility of
money, so that even a return to freer markets is a matter of serious
concern. 

Henwood's treatment of the role of the state is curious. "States have been
acting for centuries . . . in the interests of capital," he says. He's right
of course, but he uses this as a club against an argument that no serious
student of globalization would make--that the state "is withering away under
a new regime of stateless multinational[s]." The point is that, once again,
the state is helping to create new institutions for new modes of
accumulation. In the late 19th century, the state helped create and refine
the legal entity known as the corporation, and its creation of joint-stock
companies goes even further back in time. Now, nation states are working to
create international institutions to further the globalization process. So
effectively is the state serving the interests of multinational capital that
it enters into international agreements like WTO and NAFTA that actually
diminish its own abilities to serve ordinary citizens. 

Henwood then asks: "And when did internationalization become something
feared and hated in itself?" Again he sets up a straw person. Many who think
globalization is a menace are "cosmopolitan" and don't object to trade and
other exchanges in themselves. They hardly deny the potential benefits of
international trade--cheaper imports, a wider range of consumer choice, new
technologies, the spur of foreign competition. But we live in an age of
trade shaped and dominated by multinational capital, not by small,
competitive producers with little control over prices, costs, techniques of
production, and market shares. Henwood admits that "export-oriented
development has offered very little in the way of real economic and social
development for the poor countries who've been offered no other outlet."
Then he asks, "But does that mean trade itself is bad?" No Doug, but your
question is bad. You just conceded that export-oriented development has hurt
poor countries: why don't you acknowledge that this is part of the
globalization process? And wouldn't you agree that the unprecedented growth
in world trade since the 1960s has been associated with steeply rising
inequalities of income and wealth, both internationally and within nations?

"Why," Henwood also asks, "do so many people treat globalization itself as
the enemy rather than capitalist and imperialist expansion?" But why can't
you see, Doug, that capitalist and imperialist expansion now takes the form
of globalization, a form that feeds back to crush democracy at home? You are
embarrassed that Nader echoes Pat Buchanan in describing NAFTA and GATT as a
threat to U.S. sovereignty; and you say that "Washington has been abusing
Mexican sovereignty for over a century--which is why it's a good idea to
stop saying globalization when you mean imperialism." But you miss the
point: globalization is a major contemporary form of imperialism, and Nader
is right that it reduces U.S. sovereignty while beating up on Mexico as
well, a point that he certainly would have made without any prompting from
Buchanan.