“Globalization,” what is it good for?

This piece has previously appeared in German translation in Heft 10 (Oktober 2016).

When the global economic crisis erupted in 2008, it was not only historians who scurried in search of the lessons of the Great Depression of the 1930s. Nearly a decade later, as analysts of Britain’s departure from the EU diagnose the symptoms of an economic malaise called “globalization,” it is again worth considering what we can learn from the past. It might seem unimaginable—given the turn in present-day political rhetoric—but through the nineteenth and twentieth centuries the world’s growing economic interdependence repeatedly inspired optimism about a more peaceful future and opportunities for world-scale social and economic justice. In these darker days, historians are picking up the forgotten strands of failed global ambitions and practices that led to present disillusionment; their work is making it easier to remember the diverse ways in which the stakes of globalization have been imagined, to reflect on how we got here, and where we are.

***

When we look closer at the past, we see how persistently Europeans have imagined an economically interdependent world. We find it announced as confidently in the 1700s as the centuries that followed. The Scottish Enlightenment figure David Hume pictured the benefits of interdependence as the commercial effect of economic success amongst neighbours. By the early 1800s, there was a spreading view of the trading ships Europe launched into the world as the transporters of riches to their sovereigns and people, and peace to all. For the French liberal Benjamin Constant, a modern world of commerce and trade would overcome ancient proclivities for conquest and war. Through the nineteenth century, the Manchester-based manufacturer and politician Richard Cobden became the voice of this conception of free trade, in the pursuit of a peaceful world order. It was not, however, smooth sailing. Even the optimists registered that the ships collecting raw materials in the East for manufacture in the West brought guns and aggressive imperial competition amongst the European powers for markets elsewhere. Then there was the equally cynical cooperation between those same empires: In 1884, international lawyers and bankers aided European monarchs and diplomats in the infamous carving up of African territories; in 1901, each of the European empires happily shared the spoils of Chinese territory in exchange for supporting Britain in its suppression of the “Boxer Rebellion.”

As the European imperial system drew the world into war in 1914, the British economist J. A. Hobson underlined the obvious: Left to its own devices the principle of “free trade” had invited the exploitation of colonies, provoked hostility, rivalry, and monopolies, and finally world-scale conflict. Hobson prescribed a new vision of economic interdependence, replacing imperial man with “International Man,” and free trade with intergovernmental cooperation and economic reform.[1]

This strand of economic thinking on an international scale—we can usefully label it “economic internationalism”—took root in ideological soil prepared in the decades before the First World War, from the exponential growth of intergovernmental and international institutions, to the coining of the word “die Weltwirtschaft.” As Quinn Slobodian tells us, this German term had no equivalent in a major world language before the 1920s.[2] By that time, the League of Nations had been established as the world’s first experiment in international government. While the League did not meet some state’s desire for an institution that would distribute foodstuffs and raw materials, the American and European statesmen who towered over peace-making set up the International Labour Organization [ILO], with a constitution invoking “sentiments of justice and humanity,” and “social justice.” As an auxiliary of the League, the ILO was to tackle the “conditions of labour . . . involving such injustice, hardship, and privation to large numbers of people” as a means of ensuring “the peace and harmony of the world.” These were powerful economic ideals to enshrine, even when uttered by Western statesmen who feared the spread of the Bolshevik revolution, and although appended to the qualification that “differences of climate, habits and customs, of economic opportunity and industrial tradition may restrict uniformity in the conditions of labour difficult of immediate attainment.”

What became the League’s Economic and Finance Organization [EFO] worked to different explicit ends, as the guarantor of world security and a “liberal, capitalist world order.” As its historian Patricia Clavin has described, in 1922, in an international first, the EFO provided a desperate defeated Austria with food aid in the short term, and a finance plan in the long term.[3] The austerity conditions attached to this intervention were infamous, if familiar sounding: the Austrians had to cut food subsidies and state expenditure, all overseen by a League-appointed official with extraordinary fiscal powers. Austrian socialists railed against the League and its imposed “bourgeois capitalist order.” When Austria’s economy stabilized, and despite the human cost, the League’s playbook was soon used for managing other European economic crises.

Historians still have a lot to learn about the League sponsored economic internationalism, in part because its different institutional quarters and projects gave space to such divergent ambitions and imperatives. Its archives reveal both the participation of the classical liberal economist Friedrich Hayek—as a consultant on the nature of business cycles—and his Austrian compatriot, the socialist and “International Guild of Cooperative Women” spokesperson Emmy Freundlich. In 1927, the League (on the insistence of an international women’s association) granted Freundlich official status at its World Economic Conference, where she presented on the need for a “new economic evolution,” with reduced custom tariffs and regulation of prices.

The outbreak of a Second World War convinced many of the League’s structural failures. However, as the conflict and threats of world annihilation grew, politicians and experts returned to the theme of international governance, and even the peace and social justice agenda that had rippled through interwar economic internationalism. The result was the distinctive economic focus of the UN and the new international organizations orbiting in its system—not only the IMF and World Bank, but also the Food and Agricultural Organization [FAO].

The FAO’s institutional origins can be traced to Frank Lidgett McDougall, a small-town Australian fruit farmer who dreamed of international economic governance in the interest of connecting dietary needs with food supply on a world-scale, and measuring the “value” of food in terms of nutrition, not market pricing. In 1944, as the UN was being conceived, McDougall began to reimagine human-focused economic internationalism in a number of institutional forms: “an international Bank to regulate balances of payment and to finance development, a Development Authority, an Agricultural Office, a Nutrition Office, an Office for the co-ordination of National Public Works, a Commodity Control Central Authority, a Central Committee on Commercial Policy and an Economic Intelligence Service.” Franklin Delano Roosevelt’s government embraced McDougall’s plan for a FAO (albeit with drastically reduced offices and aims), in part because it spoke to the principles of the 1941 Atlantic Charter agreed between Britain and the US as the foundation for their war alliance, specifically “freedom from want.”

By the time an Allied victory began to look likely, the Philadelphia Declaration of 1944 had breathed new life into the ILO’s interwar social justice agenda, adding “human rights” to its brief. That same year, too, the famous Bretton Woods discussions that led to the creation of an International Monetary Fund [IMF] and the World Bank revealed the spectrum of economic internationalist thought.   While the US delegate Harry Dexter White sought an IMF with no conditional strings attached (the antithesis of the Geneva Protocol), the UK’s John Maynard Keynes imagined international economic governance in the interests of equality through the creation of an International Clearing Union, which would regulate currency exchange and trade using its own currency, the bancor. Eventually the best international intentions of both lost out.[4]

In the last days of World War II, against the background of demands for decolonization, the UN organization was established with “international problems of an economic, social, cultural, or humanitarian character” as its broad raison d’être. Given the diverse interests of the UN’s Security Council—­the executive authority that the United States, Britain, France, Russia, and China bestowed upon themselves—and the expanding number of members states that populated its General Assembly, and the bureaucracy at their service, it was inevitable that its international economic mission would take the organization in unpredictable directions. For example, when the UN’s Trusteeship Council was given oversight of eleven former (German, Ottoman, and Japanese) colonies as Trust Territories administered by the war’s winners, British delegates were confident the imperial (and economic) status quo had been secured; but the UN Trusteeship secretariat was placed in the charge of the African-American political scientist (and determined anti-colonialist) Ralph Bunche, who was determined to use his office to improve access to education, health, and housing for the twenty million subjects of this Trustee system.

Even as the Washington-based International Monetary Fund eventually became the unrestrained harbinger of neo-liberal themed free market globalization, the New York-based UN was early on the midwife of efforts to bring “technical assistance” and economic modernization to the “developing world.” On any typical day in 1949 at the UN’s Economic and Social Council, the Swedish social welfarist-cum-UN bureaucrat Alva Myrdal was glued to her seat “in order to demonstrate the interest of the Department of Social Affairs in the development of under-developed countries.” Myrdal was aware that this program brought with it a specific US-led agenda of modernization and industrialization measured by GDP. This made her more determined to advocate for “balanced modernization” on a Swedish model, home-grown by herself and husband Gunnar, and measured against standards of living criteria: housing, social welfare services, the prevention of crime, social care of immigrants, and the status of women. At stake in these international efforts to ensure economic opportunities and rights for the world’s “have-nots,” she believed, was both world peace and social justice.

Entwined visions of a world economy and its purpose threaded through the UN system’s people and policies. The first head of UNESCO’s Social Sciences department was Mahomed Bey Awad, a British educated Egyptian geographer who concentrated on equity issues around wages and collective bargaining; he was soon replaced. When the better-networked Myrdal moved from New York to Paris to assume the same role, she lasted five years. She resigned disillusioned with the impact of the competing Cold War economic and strategic interests of the US and the Soviet Union on UNESCO’s development role. From the 1960s, however, there were new state actors attempting to influence the direction of international economic governance. The UN’s offices and meeting places became the congenial settings for the creation of the Group of 77 coalition of “Third World” member states. In these decades, the new UN “Conference on Trade and Development” (UNCTAD) promoted “the development-friendly integration of developing countries into the world economy.”

Against the background of early 1970s Cold War détente and world oil crisis, the UN became the sponsor of perhaps the most radical statement of international economic and social justice, known as the New International Economic Order [NIEO]. Taking a global view of economic inequality, it challenged the continued economic dominance of former imperial (“North”) powers in formerly colonial (“South”) regions by advocating for the reduction of the worsening gap in standards of living across that divide. One panacea was the national expropriation of natural resources that had remained in the hands of imperially backed corporations.[5] For the retired UN Secretary-General U Thant, the NIEO was one component of “a bridge” that was being built between the North and the South, out “of a community of interest and recognition of interdependence.” The U.K. permanent delegate to the UN too ventured that the NIEO would not go away. By contrast, the US dismissed the NIEO as the thin edge of British social welfarism—a view that ignored the long tradition of economic internationalism devised by Americans themselves, especially those involved in the ILO.. Ultimately, the NIEO economic agenda did indeed go away, exposing the international clout of the North-controlled IMF and the Security Council.

According to Mark Mazower, in the latter half of the twentieth century, economic policies pursued through international organizations calibrated with Cold War US politics, and the global flows of investment capital, often with the help of “native partners”: “Bodies like the World Bank, the IMF, and GATT had just one purpose, to save capitalism for the American dollar.”[6] Mazower is even able to show how this process was not purely abstract, it involved the movement of experts between the policy offices of America’s Marshall Plan for European Reconstruction, the Rockefeller and Ford foundations, and the UN itself.

And yet, when we track the forward trails of the entwined themes of economic internationalism and globalization through to the end of the Cold War, suddenly, in the 1990s, the scales of economic progress were primed by the UN for recalibration in the interest of world-scale economic justice. Rhetorical promulgations of a new World Social Charter, and the new UN “Human Security” policy, revived older economic themes such as international minimum living standards. This re-booted vision of the UN’s international role once again prioritized economic equality as the path to peace. But now it featured the global dimensions of environmental decline, poverty, and violent conflict, as burdens disproportionately borne by women.

***

Over the last century, economic inequality and its remedies were consistently conceived as world-scale challenges. In the opening decades of the 21st century, even as the idea of globalization evokes an unwieldy borderless, sometimes menacingly “cosmopolitan,” undemocratic hyper-capitalism, and the calls for economic equality have perhaps never been louder, it is difficult to imagine world-scale solutions, or demands for social justice that transcend the interests of the nation-state. No empirically based study has more dramatically captured these characteristics of our own time than the French economist Thomas Piketty’s blockbuster Capital in the Twenty-First Century.

Published in 2011, Capital caught the attention of a worldwide readership, drawn to its data-driven revelations of the growing magnitude of global inequality—at levels last seen a century ago, in Gilded Age America and Belle Époque France. Piketty locates the source of this inequality in a patrimonial capitalism, the global reach of which can no longer be reduced to the imperial geography of North versus South. He has a particular fascination for Russian oligarchs, Qatari billionaires, and African dictators, many of whom derived their fortunes from the private appropriation of natural resources—an analysis affirmed by the release of the “Panama Papers.” As importantly, Capital warned that unaddressed, this increasingly entrenched global inequality would foster defensive nationalism and identity politics, racism and xenophobia.

Piketty’s depressingly prescient portrait of the present also connect us with the long past of economic internationalism: From the argument that global inequality and injustice threaten peace and democracy, to imagining the possibility of a progressive global capital tax. In 1884, the British international lawyer James Lorimer proposed an international tax levied on the citizens of each state to fund an international government, on the view that taxation and representation went hand in hand at an international level. Through the twentieth century, international institutions attempted to mirror this equation by indexing membership fees according to the principle of ability to pay; the League of Nations’ formula divided government revenue by population; the UN takes account of differences in per capita income. Then there were the persistent proposals for the creation of international tax revenue through the creation of international banks, international development corporations, international airways, international waterways, and internationally controlled monopolies. Sometimes it was taxes on non-renewable resources or international pollutants, on transnational (multinational) enterprises, or international corporations or deep seabed mineral extracts, or Antarctica, or international trade, or international inventions, or the consumer spending of international civil servants, or national spending on armaments, or public spending on travel, or immigration, fisheries, or even the cost of brain drains. Most scenarios posited absorbing the profits in an international purse, in the interest of world stability and prosperity. The British economist Keynes’ Bretton Woods proposal—to levy international taxes on balance of payments surpluses, which could be spent on economic relief, rehabilitation and the reconstruction of Europe—fits here too.

While all these schemes remained in the realm of the imagined rather than the applied, the importance of imagining economic justice on a world scale retained its hold, even through the darkest days of the Cold War. The 1960s saw the failed ideas of an international court of economic justice, and an international joint stock cosmic development corporation to exploit resources of outer space as ‘international public goods’. Piketty even dusts off the underpinning idea—natural resources might belong to the earth, not to any one nation—as one antidote to the corrupt exploitation of those resources for personal gain by oligarchs who eventually benefited from the NIEO’s state-focused agenda.

But Piketty also breaks with the history of economic internationalism in ways that suggest that our options for imagining change in this era of globalization have contracted. Despite his vision of a global tax, and the need for transnational cooperation (in the interest of discovering the hidden data concerning the capital wealth of individuals buried in myriad tax havens and Swiss bank accounts), Piketty’s plan for transnational cooperation has no place for international institutions. And even though he turns to the EU as a possible test-site for his ideas, since he wrote Capital the political and economic legitimacy of that regional unit of economic governance has come under serious threat.

Instead, seen from the perspective of the late twentieth century, Capital marks the declining status of international institutions as the heralds of world-scale ambitions for peace through economic and social justice. Perhaps the past teaches us that this is no great loss. The historians who are currently doing such an excellent job of dissecting the ways in which nineteenth-century laissez-faire economic policy—free trade, free movement of capital, and, ironically minimal government interference—worked its way through the twentieth century in the name of modernization and industrialization, harnessing the instruments of international governance as much as imperial and national governments, hardly give us confidence to imagine any role for international institutions in tackling the challenges of global inequality.

History, however, also offers evidence of the power of global, world, or even international imaginaries. The German and Austrian intellectuals who invented the word “die Weltwirtschaft” had to imagine it first with the help of new mapping technologies and the collection of new kinds of statistics that allowed them to visualise world-scale trade and commercial networks. When Gandhi had searched for a diet that would rescue India from poverty and malnutrition, he found ideological succour in the League of Nations’ promotion of universal minimum standards, and “the pooling of the world’s resources for the common good of all.” The role of imagination was not lost on a young New York woman named Edith Wynner who worked for the Campaign for World Government in 1944. Wynner, who was no dupe, conceived of that campaign as “pace-setting”: “A specific plan for world government is to international cooperation what a model of the first airplane was to man’s desire to fly. The model helped people visualize what a flying-machine would be like and served as an object for further experimentation and improvement.”

What in one age seems incomprehensible in another might be taken for granted. Piketty, like the new international historians, emphasises the relative status of the ‘unimaginable’. If we can’t imagine a 90% tax rate, Piketty reminds us it happened, once in America. In recent days we have been witness to other kinds of unimaginable developments, as the IMF offers a self-critique of its neo-liberal agenda, describing its own policies as laissez-faire economics gone wild.

What can we learn from the past? Can we harness globalisation for good on a global scale? Any constructive answers will benefit not only from imagination, but also the compelling recollections of the entwined strands of economic thinking, of paths not taken and hidden deep in the international past.

 Notes

[1] For more on this history, see “Patrioten und Mondialisten,” Geschichtskolumne Merkur (2016/3). These themes are discussed in greater historical detail in Glenda Sluga, Internationalism in the Age of Nationalism (2013), and Glenda Sluga (with Patricia Clavin), Internationalisms: A Twentieth Century History (2016).

[2] “How to see the world economy: statistics, maps, and Schumpeter’s camera in the first age of globalization,” Journal of Global History (2015).

[3] Securing the World Economy: The Reinvention of the League of Nations, 1920-1946 (2013).

[4] Eric Helleiner, Forgotten Foundations of Bretton Woods: International Development and the Making of the Postwar Order (2014).

[5] Humanity Special Issue: “Toward a History of the New International Economic Order” (2015).

[6] Governing the World: The History of an Idea (2012)

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Contributors
About Glenda Sluga

Glenda Sluga is Professor of International History, and ARC Kathleen Fitzpatrick Laureate Fellow at the University of Sydney She has published widely on the cultural history of international relations, internationalism, the history of European nationalisms, sovereignty, identity, immigration and gender history. In 2013, she was awarded a five-year Australian Research Council Laureate Fellowship for Inventing the International - the origins of globalisation. Her most recent book is Internationalism in the Age of Nationalism (University of Pennsylvania Press, 2013) and with Carolyn James, Women, Diplomacy, and International Politics (Routledge, 2015). She is currently completing two ARC-funded studies, one on the Congress of Vienna, and the other on the early years of the UN. She is also editing with with Patricia Clavin, Twentieth Century Internationalisms, A History (CUP, 2016); and special journal issues on 'Provincializing Europe' (with Jan Rueger, and Maurizio Isabella); most recently she edited a special issue of Modern Intellectual History on 'Global Liberalisms', with Tim Rowse (2015). In 2002 she was awarded the Max Crawford Medal by the Australian Academy of the Humanities. In 2006 she was appointed a member of the International Scientific Committee for the History of UNESCO. In 2009 she was elected to the Australian Academy of the Humanities. In 2012 she won the inaugural Faculty of Arts and Social Sciences Research Mentoring Award. In the past she has been a visiting fellow at the University of Vienna, Centre for History and Economics, and Charles Warren Centre, Harvard University, the Fondation Maison des Sciences de l’Homme, Paris, the University of Bologna, Clare Hall, Cambridge University, Leiden University, the European University Institute, Monash University and the ANU. In 2016, she will be a Visiting Fellow at All Souls College, Oxford.


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