The story of globalization is told by Western scholars as globalization is the result of capitalist West’s victory over the communist Soviet Union. In this article, I construct my argument by rejecting this Western perspective, looking globalization from the perspective of the Communist Party of China which is the most successful socio-economic and political institution in the era of globalization. We can summarize our position as Globalization is the outcome of victory of communist-led anti-imperialist movement over the Western colonialism in the 1970s.


The victory of the Anti Imperialist Movement against West

From 1917 Communist Party of the Soviet Union led the anti-imperialist movement against West. After World War II, Soviet emerged victorious in East Europe and China. West failed to maintain the colonial government in the face of the communist-led anti-imperialist movement. Communists were emerging successful by raising demand for independence and urge for rapid industrialization. Soviet state-led industrialization model was land reformation, state-led investment in education, health, infrastructures and heavy industries. These investments give no direct profits but raise all-round productivity of the society. So state-led planned resource allocation was necessary instead of the private-led market. As more countries of Latin America, Africa, Asia were following this Soviet model, West itself adopted this model in Taiwan, South Korea and Malaysia to check the growth of communism. In the 1970s, West started to relent into the pressure of anti-imperialist mass. West led by the USA recognized communist China and communist East Germany and allowed Saudi led OPEC cartel to raise oil price much above production cost.

Rise and Fall of Brettonwoods Agreement

Post World War II boom of the 1950s and 1960s ended in 1970s. The post-war boom was led by the fact that the USA was acting as an export market for Western Europe and Japan. In 1944, USA share of global GDP was as much as 45% while Western Europe and Japan have 30% (measured in PPP). So the USA started to act as the export destination of West Europe and Japan and the US Dollar was made most accepted global currency to suit the purpose. This is recognized as Brettonwoods Agreement where US Dollar value was also fixed with the price of gold. But by 1970, it fell down to approximately 33% for each of the USA as well as Western Europe and Japan took together. So the USA economy became too small to serve as the export destination of the later. This forced US Dollar depreciation and its fixed relation with gold price finally collapsed in 1971. This is the collapse of Brettonwoods Agreement.

Financial Capitalism

Anti-imperialist movement and economic crisis of the 1970s pushed the USA to financial capitalism. Financial capitalism means more investment in unproductive asset trading. Capitalism did this to get rid of the overproduction crisis. But to keep asset trading profitable you need to constantly inflate asset prices. This can be done only by channelling debt into an asset market. USA settles this fact by using its geopolitical strength which it inherited after World War II from Anglo-French-Dutch colonial empires. USA asked oil-rich gulf Arab states to sell oil in US Dollar only and save the earned income in the US asset market by buying US Treasury bills. Oil is needed by all countries and so US Dollar got a huge global demand both as a medium of exchange as well as a store of value. Thus the whole world started to deposit their earnings and liabilities in US asset market. US Federal reserve then distributes these deposits throughout the US asset market as debt. Thus the US asset market got a steady flow of debt which kept inflating its asset prices and hence profits from asset trading kept soaring. West Europe and Japan also tried to follow the US model of financial capitalism. But they failed because they did not have any geopolitical influence as the US had. So they gradually became stagnant by 1990s.

Globalization

As the USA began to concentrate on asset trading, it began to export its manufacturing base to cheap yet productive labour endowed Third World countries. Here an important point often overlooked is the fact that for making profit only cheap labour is not enough, labour needs to be productive as well. Profit seeks to maximize the difference between average productivity and average cost. All Third World countries labour is cheap but not all are productive enough. To increase productivity a country needs to have an independent nation-state, land reforms, investment in education, health, and infrastructure and base industries. Initially West and Japan tried to export its manufacturing base to Taiwan, South Korea and Malaysia where this model was followed to stem in the tide of communism. But by 1970s, it was communist China with a huge pool of productive cheap labour that attracted US attention. So the USA started to export its manufacturing base to China and it relied on asset trading. Gradually the globalization model emerged in the 1990s where the US acted as the main source of global demand and China as the ultimate source of global supply.

Soviet failed to adapt to New Reality

The Soviet Union failed to prosper in this new material condition due to many reasons. The Soviet Union was designed to counter imperialism of first half of 20th century. By 1970s old imperialist model was defeated and a new financial capitalist model emerged. This new model was luring erstwhile colonies with the promise of a higher price for oil, greater access to the US market and more sharing of technology and liquidity. So naturally, Third World countries liberated by the Soviet Union began to drift away towards West in the 1980s. Soviet leaders tried to reform the old model but in the wrong way. Soviet leaders dethroned the communist party and brought multi-party democracy and launched indiscriminate privatization. The result was breakdown of economy and dissolution of the Soviet Union. West thought it was the victory of capitalism. We clearly say: No. It’s not. It could have been a capitalist victory if Russia emerged economically prosperous after embracing capitalism. Instead, Russia and most of the erstwhile socialist countries lost human capital and faced de-industrialization.

West’s Wrong Understanding of Globalization led its Downfall

West thought it had defeated communism with the fall of Soviet Union. So West can return to the pre-Soviet days of colonialism. This belief led the USA to invade Afghanistan and Iraq. False belief naturally resulted in disaster for the USA and West. The USA lost money, time and its military were exposed to be weak in Afghanistan and Iraq. Words like democracy and freedom became synonymous with colonialism.

Correct Understanding of Globalization by Chinese Communist Party

But what Chinese leadership did? They uphold the communist party rule and allowed private to operate in consumer goods industries while keeping key sectors mostly under state ownership. So the Chinese did not destroy the base created during the 1950s and 1960s but added the elements like competition, private ownership to attract Western technology and liquidity and get more access to the Western market. But Taiwan, South Korea, Malaysia also did the same. We can say China and these countries operated similarly up to the 2008 crisis. But after that China again took a decisive new course which only a socialist country can.

China took Center Stage of Globalization

2008 crisis happened mainly due to the fact that the US economy has become too small to act as the source of global demand. Its share in global GDP fell to 18% (in PPP). While the Chinese economy has become so big that it cannot rely on the Western market alone. Its global GDP share rose to 11% (in PPP). So China began to invest in infrastructure in a big way. This is impossible for a capitalist country because investment in infrastructure in most cases have a long gestation period and hence capital in search of quick profit avoids them. Chinese state-owned enterprises undertook most of such non-profitable yet productive, employment-generating and hence demand generating investment.

Firstly between 2008 and 2013, they did it inside China. By 2013, China under Xi Jinping offered this model to be applied throughout the globe. This is epitomized as Belt Road Initiative. Thus, China now started to lead globalization by creating demand through non-profitable infrastructure investment. China is now establishing itself not only as of the main supply source of globalization but also as its main demand source. The USA is gradually being pushed out of its chief role in the global economy. This is clearly reflected in Trump’s anti-globalization policies against WTO, Paris Accord, WHO. US share in global GDP in 2019 is just 15.11% while for China its 19.25% (in PPP).

Socialist Destiny of Globalization

In the last 40 years of Globalization, emerging economies’ share in global GDP (in PPP) rose from 30% to 60% while of developed economies fell from 68% to 33% (Word Bank, 2019  Data). But China’s share rose from 2% to 19%. So China accounting for more than half of the rise in the share of emerging economies. If we take into account the higher commodity price due to rise of China catering to higher-income among Emerging economies, we can say that China is only a success story of Globalization. Hence we can conclude that if the rest of the Third World follows the Chinese model, the rest of the World will develop too.

Globalization has two opposing effects. Negative Effect: Globalization results in the movement of capital from countries of higher wages to countries of lower wages which reduce the bargaining power of working-class in different nations. Positive Effect: Globalization helps Third World to gain access to richer market, over accumulated capital and higher technology of First World. Thus the gap of productive forces between the two worlds got reduced. As Globalization will proceed, the development gap between First World and Third World will be reduced further which will reduce the wage gap between two worlds as well. As the wage gap will fall, capital cannot bargain much by moving from one country to another country. Globalization will not be able to give capital any edge over the working class. It is then that working-class will gain superior bargaining position globally.

Conclusion

The Soviet Union defeated the old Western imperialist model. This forced West to adapt financial capitalist model which resulted in globalization. Endowed with cheap and productive labour, Socialist China was better placed to take the benefits of globalization compared to capitalist ruled Third World countries. So globalization is not resulting of the capitalist victory, rather it is the result of communist victory over imperialism. And now communist China is in position to lead globalization. Gradually gap between developed and developing countries will be reduced and the global working class will take centre stage. Like defeating European Colonialism and US hegemony, this will be another milestone step towards Communism.

DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy and position of Regional Rapport.
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Saikat Bhattacharya is Kolkata based Indian Research Scholar who currently attached with Jadavpur University, Kolkata, West Bengal, India