it first became part of the English vocabulary in the early 1990s,
globalization was supposed to be the wave of the future. Fifteen years
ago, the writings of globalist thinkers such as Kenichi Ohmae and
Robert Reich celebrated the advent of the emergence of the so-called
borderless world. The process by which relatively autonomous national
economies become functionally integrated into one global economy was
touted as “irreversible. ” And the people who opposed globalization
were disdainfully dismissed as modern day incarnations of the Luddites
that destroyed machines during the Industrial Revolution.

Fifteen years later, despite runaway shops and
outsourcing, what passes for an international economy remains a
collection of national economies. These economies are interdependent no
doubt, but domestic factors still largely determine their dynamics.
Globalization, in fact, has reached its high water mark and is receding.

Bright Predictions, Dismal Outcomes

During globalization’s heyday, we were told that
state policies no longer mattered and that corporations would soon
dwarf states. In fact, states still do matter. The European Union, the
U.S. government, and the Chinese state are stronger economic actors
today than they were a decade ago. In China, for instance,
transnational corporations (TNCs) march to the tune of the state rather
than the other way around.

Moreover, state policies that interfere with the
market in order to build up industrial structures or protect employment
still make a difference. Indeed, over the last ten years,
interventionist government policies have spelled the difference between
development and underdevelopment, prosperity and poverty. Malaysia’s
imposition of capital controls during the Asian financial crisis in
1997-98 prevented it from unraveling like Thailand or Indonesia. Strict
capital controls also insulated China from the economic collapse
engulfing its neighbors.

Fifteen years ago, we were told to expect the
emergence of a transnational capitalist elite that would manage the
world economy. Indeed, globalization became the “grand strategy” of the
Clinton administration, which envisioned the U.S. elite being the
primus inter pares — first among equals — of a global coalition
leading the way to the new, benign world order. Today, this project
lies in shambles. During the reign of George W. Bush, the nationalist
faction has overwhelmed the transnational faction of the economic
elite. These nationalism-inflected states are now competing sharply
with one another, seeking to beggar one another’s economies.

A decade ago, the World Trade Organization (WTO) was
born, joining the World Bank and the International Monetary Fund (IMF)
as the pillars of the system of international economic governance in
the era of globalization. With a triumphalist air, officials of the
three organizations meeting in Singapore during the first ministerial
gathering of the WTO in December 1996 saw the remaining task of “global
governance” as the achievement of “coherence,” that is, the
coordination of the neoliberal policies of the three institutions in
order to ensure the smooth, technocratic integration of the global

But now Sebastian Mallaby, the influential
pro-globalization commentator of the Washington Post, complains that
“trade liberalization has stalled, aid is less coherent than it should
be, and the next financial conflagration will be managed by an injured
fireman.” In fact, the situation is worse than he describes. The IMF is
practically defunct. Knowing how the Fund precipitated and worsened the
Asian financial crisis, more and more of the advanced developing
countries are refusing to borrow from it or are paying ahead of
schedule, with some declaring their intention never to borrow again.
These include Thailand, Indonesia, Brazil, and Argentina. Since the
Fund’s budget greatly depends on debt repayments from these big
borrowers, this boycott is translating into what one expert describes
as “a huge squeeze on the budget of the organization.”

The World Bank may seem to be in better health than
the Fund. But having been central to the debacle of structural
adjustment policies that left most developing and transitional
economies that implemented them in greater poverty, with greater
inequality, and in a state of stagnation, the Bank is also suffering a
crisis of legitimacy.

But the crisis of multilateralism is perhaps most
acute at the WTO. Last July, the Doha Round of global negotiations for
more trade liberalization unraveled abruptly when talks among the
so-called Group of Six broke down in acrimony over the U.S. refusal to
budge on its enormous subsidies for agriculture. The pro-free trade
American economist Fred Bergsten once compared trade liberalization and
the WTO to a bicycle: they collapse when they are not moving forward.
The collapse of an organization that one of its director generals once
described as the “jewel in the crown of multilateralism” may be nearer
than it seems.

Why Globalization Stalled

Why did globalization run aground? First of all, the
case for globalization was oversold. The bulk of the production and
sales of most TNCs continues to take place within the country or region
of origin. There are only a handful of truly global corporations whose
production and sales are dispersed relatively equally across regions.

Second, rather than forge a common, cooperative
response to the global crises of overproduction, stagnation, and
environmental ruin, national capitalist elites have competed with each
other to shift the burden of adjustment. The Bush administration, for
instance, has pushed a weak-dollar policy to promote U.S. economic
recovery and growth at the expense of Europe and Japan. It has also
refused to sign the Kyoto Protocol in order to push Europe and Japan to
absorb most of the costs of global environmental adjustment and thus
make U.S. industry comparatively more competitive. While cooperation
may be the rational strategic choice from the point of view of the
global capitalist system, national capitalist interests are mainly
concerned with not losing out to their rivals in the short term.

A third factor has been the corrosive effect of the
double standards brazenly displayed by the hegemonic power, the United
States. While the Clinton administration did try to move the United
States toward free trade, the Bush administration has hypocritically
preached free trade while practicing protectionism. Indeed, the trade
policy of the Bush administration seems to be free trade for the rest
of the world and protectionism for the United States.

Fourth, there has been too much dissonance between
the promise of globalization and free trade and the actual results of
neoliberal policies, which have been more poverty, inequality, and
stagnation. One of the very few places where poverty diminished over
the last 15 years is China. But interventionist state policies that
managed market forces, not neoliberal prescriptions, were responsible
for lifting 120 million Chinese out of poverty. Moreover, the advocates
of eliminating capital controls have had to face the actual collapse of
the economies that took this policy to heart. The globalization of
finance proceeded much faster than the globalization of production. But
it proved to be the cutting edge not of prosperity but of chaos. The
Asian financial crisis and the collapse of the economy of Argentina,
which had been among the most doctrinaire practitioners of capital
account liberalization, were two decisive moments in reality’s revolt
against theory.

Another factor unraveling the globalist project is
its obsession with economic growth. Indeed, unending growth is the
centerpiece of globalization, the mainspring of its legitimacy. While a
recent World Bank report continues to extol rapid growth as the key to
expanding the global middle class, global warming, peak oil, and other
environmental events are making it clear to people that the rates and
patterns of growth that come with globalization are a surefire
prescription for ecological Armageddon.

The final factor, not to be underestimated, has been
popular resistance to globalization. The battles of Seattle in 1999,
Prague in 2000, and Genoa in 2001; the massive global anti-war march on
February 15, 2003, when the anti-globalization movement morphed into
the global anti-war movement; the collapse of the WTO ministerial
meeting in Cancun in 2003 and its near collapse in Hong Kong in 2005;
the French and Dutch peoples’ rejection of the neoliberal,
pro-globalization European Constitution in 2005 — these were all
critical junctures in a decade-long global struggle that has rolled
back the neoliberal project. But these high-profile events were merely
the tip of the iceberg, the summation of thousands of anti-neoliberal,
anti-globalization struggles in thousands of communities throughout the
world involving millions of peasants, workers, students, indigenous
people, and many sectors of the middle class.

Down but not out

While corporate-driven globalization may be down, it
is not out. Though discredited, many pro-globalization neoliberal
policies remain in place in many economies, for lack of credible
alternative policies in the eyes of technocrats. With talks dead-ended
at the WTO, the big trading powers are emphasizing free trade
agreements (FTAs) and economic partnership agreements (EPAs) with
developing countries. These agreements are in many ways more dangerous
than the multilateral negotiations at the WTO since they often require
greater concessions in terms of market access and tighter enforcement
of intellectual property rights.

However, things are no longer that easy for the
corporations and trading powers. Doctrinaire neoliberals are being
eased out of key positions, giving way to pragmatic technocrats who
often subvert neoliberal policies in practice owing to popular
pressure. When it comes to FTAs, the global south is becoming aware of
the dangers and is beginning to resist. Key South American governments
under pressure from their citizenries derailed the Free Trade of the
Americas (FTAA) — the grand plan of George W. Bush for the Western
hemisphere — during the Mar del Plata conference in November 2005.

Also, one of the reasons many people resisted Prime
Minister Thaksin Shinawatra in the months before the recent coup in
Thailand was his rush to conclude a free trade agreement with the
United States. Indeed, in January this year, some 10,000 protesters
tried to storm the building in Chiang Mai, Thailand, where U.S. and
Thai officials were negotiating. The government that succeeded
Thaksin’s has put the U.S.-Thai FTA on hold, and movements seeking to
stop FTAs elsewhere have been inspired by the success of the Thai

The retreat from neoliberal globalization is most
marked in Latin America. Long exploited by foreign energy giants,
Bolivia under President Evo Morales has nationalized its energy
resources. Nestor Kirchner of Argentina gave an example of how
developing country governments can face down finance capital when he
forced northern bondholders to accept only 25 cents of every dollar
Argentina owed them. Hugo Chavez has launched an ambitious plan for
regional integration, the Bolivarian Alternative for the Americas
(ALBA), based on genuine economic cooperation instead of free trade,
with little or no participation by northern TNCs, and driven by what
Chavez himself describes as a “logic beyond capitalism.”

Globalization in Perspective

From today’s vantage point, globalization appears to
have been not a new, higher phase in the development of capitalism but
a response to the underlying structural crisis of this system of
production. Fifteen years since it was trumpeted as the wave of the
future, globalization seems to have been less a “brave new phase” of
the capitalist adventure than a desperate effort by global capital to
escape the stagnation and disequilibria overtaking the global economy
in the 1970s and 1980s. The collapse of the centralized socialist
regimes in Central and Eastern Europe deflected people’s attention from
this reality in the early 1990s.

Many in progressive circles still think that the
task at hand is to “humanize” globalization. Globalization, however, is
a spent force. Today’s multiplying economic and political conflicts
resemble, if anything, the period following the end of what historians
refer to as the first era of globalization, which extended from 1815 to
the eruption of World War I in 1914. The urgent task is not to steer
corporate-driven globalization in a “social democratic” direction but
to manage its retreat so that it does not bring about the same chaos
and runaway conflicts that marked its demise in that earlier era.