Can the Philippines Handle Globalization?

Posted by Filipino socialism under Globalization, Walden Bello

January 25, 2005 By Walden Bello (Speech at Karangalan 2005, Cultural Center of the Philippines , January 21, 2005) Walden Bello is a recipient of the Right Livelihood Award for 2003. He is professor of sociology and public administration at the University of the Philippines and executive director of the Bangkok-based Focus on the Global South. I would like to thank the organizers of this event, particularly my co-awardee of the Right Livelihood Award for 2003, Nicky Perlas, for inviting me to speak at this event. Nickys optimism, as many of you know, is infectious, and I do hope all of us will be infected by it today. I think our previous speakers have already alluded to the mood of dispiritedness that shrouds the country today. Perhaps more than at any other time, self doubt has become a chronic collective neurosis. For some the way out is to emigrate, an option that according to the polls is preferred by one out of five Filipinos. As has often been pointed out, once out of the national milieu, Filipinos do indeed excel, and one can hardly keep track of the numbers of Filipinos who have become prominent as entrepreneurs, professionals, NGO leaders, and intellectuals in their adopted countries. Yet one can never really leave the homeland. Even if one is a success abroad, one never really feels complete knowing about the collective failure at home. Many in my generation that left for the US in the late sixties and became successful in their fields do not relish retiring in California or Florida but are now seeking ways to contribute their skills to the task of collective upliftment of the nation. Let me address the crisis of spirit in the Philippines by sharing a witty statement about China that I came across recently: China has had a few bad centuries, but its now back on its feet. To be a Chinese from the mid -19th century to the mid-20th century was to share in a communal spirit prone to despair and a sense of collective disintegration. To be Chinese at the beginning of the 21st century is to share in a sense of pride in a country that is not only back on its feet but well on the way to becoming an economic superpower. I say this to underline the importance of having the long view, of putting our current travails, both material and spiritual, in perspective. We can say, similarly, that we Filipinos have had a few bad decades, but, dont worry, well get back on our feet. Why should we be this confident? Because at various times in the past, we not only pulled together but also became a shining example to the rest of the world.

Take the Revolution of 1896. This was the first modern national liberation movement in the whole of Asia, one that served as an inspiration to so many other peoples. Read the novels of Pramodya Ananta Toer on the making of modern Indonesia, and you will see how Rizal and Aguinaldo and our struggles against the Spanish and the Americans helped spark the nationalistic imagination of Indonesia. Go to Malaysia , and you will come across people, including former Malaysia Deputy Premier Anwar Ibrahim, who regard Rizal as the first giant figure in the making of the modern Malay consciousness. Yet the Revolution was not our only finest hour as a nation. We also had the four years of tremendous collective sacrifice that brought together our country against the Japanese invaders. Then we had the 16 years of struggle against the Marcos dictatorship that climaxed with the first EDSA Revolution, which became an inspiring model of a largely nonviolent struggle based on people power for many other people in the world suffering under the yoke of dictatorships. The causes of our discontent Since EDSA I in 1986, the Philippines seems to have traveled steadily downhill. How could we have squandered such a golden opportunity to take a new course after the disaster that was the Marcos period? The answer, to paraphrase Shakespeare slightly, lies not in the stars nor in ourselves, but in our ever short-sighted elite. I think it is important to stress this, that our failures have less to do with our culture or our so-called personality as a nation but with the failure of the institutions and policies established by our national elite post-EDSA I to deliver both genuine democracy and development. It is fashionable to denounce corruption at the top as the reason for our failures. Of course, we must condemn corruption, but its much too easy an explanation since there have been other countries, among them South Korea and China , that have had levels of corruption similar or even worse than the Philippines but have achieved impressive records of economic growth. We must do a more hard-nosed analysis of the structural causes of failure in order to forge a pathway out of it. Allow me to share some possible insights into our national failure over the last 19 years. Some say that the promise of the post-EDSA I political and economic system was killed early on when President Corazon Aquino made two historic compromises. First, in protecting the family estate Hacienda Luisita, she failed to put her moral authority behind land reform, resulting in a land reform law with a thousand and one loopholes. Second, she chose to make repayment of the foreign debt the national economic priority, thus starving the country of the investment necessary for development. The combination of the lack of structural reform and capital starvation doomed the country to stagnation in the period 1986 to 2004. President Fidel Ramos tried to take another path, that of triggering growth by liberalizing trade, deregulating the domestic economy, and privatizing state or state-run enterprises in line with neoliberal, free-market doctrine. Social reform was placed on the backseat, behind so-called market reforms. The Ramos saga ended with the financial crisis

of 1997, which was brought about by the panicky exit of the speculative capital that Ramoss technocrats had courted, precisely by eliminating many controls on their volatile movements and liberalizing the financial sector. Lower class disaffection with conservative social and economic policies resulted in the election of Joseph Estrada. Estradas populism, however, transmogrified into a mafia capitalism in which the president became the apex of an engine of capital accumulation that linked the underworld and the state. The more established section of the elite allied itself with the middle class to overthrow Estrada and displace the new rich faction during EDSA 2. The disaffected nouveau riche tried to get back by riding the spontaneous lower-class anger at Estradas arrest during the aborted EDSA 3. Under Gloria Macapagal Arroyo, all social reform initiatives were placed on the back burner, and development policy was reduced to a strategy of getting US aid and investment by allying the Philippines with Washington in the so-called War against Terror. The administrations overriding preoccupation became that of getting Arroyo elected. After elections in which the opposition candidate Fernando Poe, Jr. was widely perceived as having been cheated of victory, the administration has been overtaken by a fiscal crisis and has had little to offer the country in the way of vision except more and more indebtedness to foreign banks. It is important to provide this survey because if we talk about the Philippine crisis, we are saying that one of the causes is a failed democratic state, failed in the sense that over the last 18 years, what I have referred in other writings as the EDSA State has not lived up to its promise of being a mechanism of achieving more democracy but has been employed by our elite utilized mainly as a mechanism for succeeding one another in office, as an engine for personal and familial capital accumulation, and as a defense mechanism against comprehensive social reform. The tragedy of market fundamentalism But the institutional failure of the EDSA system is only one cause of our crisis. The other equally important source of disaster is the neoliberal or market fundamentalist policies that have been followed by EDSA administrations from Aquino to Macapagal. Over the last 19 years, we have had a revolution in the Philippines, in case you did not know it. But this has been a revolution that has come from the right, not the left. The vanguard of this revolution, which reached its apogee during the Ramos period, have been economists and technocrats who captured the highest reaches of the government, academe, and business, who were united in the belief that if you engaged in free trade, lowered tariffs, enacted more liberal conditions to attract foreign capital, and reduced governmental regulation of the economy, the result would be growth, prosperity, and the end of inequality. Let the market rule this was the battle cry of the neoliberal revolution that reached its climactic point during the presidency of Fidel Ramos. So confident were our technocrats that they not only pushed us to join the WTO but also adopted a radical tariff reform program that would bring down tariffs over 10 years to 1%-5%.

The result of this revolutionary policy of liberalization is now clear for all to see: nothing less than an unmitigated disaster. We have been converted into a net food importing country. Employment in agriculture has dropped precipitously. Whole sectors of our agriculture, such as corn, are in the throes of crisis owing to imports being dumped on us. As one of our trade negotiators told his counterparts in Geneva before the Cancun ministerial of the WTO in 2003, Our agricultural sectors that are strategic to food and livelihood security and rural employment have already been destabilized as our small producers are being slaughtered by the gross unfairness of the international trading environment. Even as I speak, our small producers are being slaughtered in our own markets, and even the more resilient and efficient are in distress. The results have been equally stark in industry. Doctrinaire liberalization resulted in multiple bankruptcies and job losses. The list of industrial casualties is awesome. It includes paper products, textiles, ceramics, rubber products, furnitures and fixtures, petrochemicals, beverage, wood, shoes, petroleum oils, clothing accessories, and leather goods. Our textile industry, for instance, has shrank from 200 firms in the 1970s to fewer than 10 today. The undermining of our industry and agriculture, however, has not been the only negative effect of doctrinaire liberalization. By reducing our tariffs so radically, we also drastically reduced government revenues, thus contributing to the fiscal crisis. Probably, the best estimates of foregone revenue are provided by economist Clarence Pascual of LEARN, who finds that total foregone revenue rises from P58 billion in 1998 to P108 billion in 2003, averaging 2.4% of GDP for the period. These are magnitudes that are, he notes, simply mind-boggling. These are the magnitudes that led former Finance secretary Jose Isidro Camacho to admit the obvious: The severe deterioration of fiscal performance from the mid-1990s could be attributed to aggressive tariff reduction. The Philippine crisis is not unique Let me now put our travails in a global context. The crisis of the Philippines brought about by the combination of failed democratic politics and neoliberal economic policies is not exceptional. It simply replicates the experience of so many developing countries over the last two decades under the hegemony of corporate-driven globalization. The successes are few and far between, and if some countries succeeded in growing in the last 25 years, as was the case with our neighbors in East and Southeast Asia, this was because they adopted anti-neoliberal policies that protected and subsidized their industries instead of throwing them open to the massively subsidized commodities produced by transnational corporations like we did. In this regard, let me share with you an insight of one Chinese economist on the difference between technocrats in the Philippines and those in Malaysia and Thailand and China . He said the Filipinos preach the free market and practice what they preach while the others preach the free market but proceed to adopt exactly the opposite policies. So let me recapitulate my main points so far. - Our national failure is largely a failure at the elite level.

- Corruption is certainly a factor, but far more important in accounting for our stagnation is a failed democratic state and a disastrous policy of market fundamentalism. - The crisis of the Philippines is not unique. It is the typical crisis of a developing country in the period of corporatedriven globalization, which has been marked by the rise in the absolute numbers of the poor globally, more inequality both between and within countries, and economic stagnation. - The countries that escaped stagnation did so because, on almost every point, they followed policies that were protectionist, restricted the market, and put development ahead of the free market. If this analysis is correct, then the way to climb out of the whole were in is to adopt an approach with th ree key prongs: making the political system more democratic, adopting radical social reform measures aimed at making income and asset distribution more egalitarian, and making a 360-degree turn in economic policy to counter the negative thrusts of corporate-driven globalization. Other awardees will speak about the first and second dimensions of this comprehensive program. Let me limit myself to addressing the third, that is proposing an alternative set of economic policies that could create the basis for the resurgence of our country. Elements of a program of economic resurgence High up on the list is adopting the dictum that what we need for development is not less state but more. The Philippine state must be given a greater relative autonomy vis-a-vis the elite. It must be able to discipline the private interests that have constantly hijacked it for particularistic ends. In this regard, the problem with protectionism as it has been practiced in the Philippines is not protectionism per se but that it has been opportunistic one simply oriented to promoting narrow vested interests and without reference to a strategic plan to deepen the economy. Yet this prescription must be taken in the light of the experience of the newly industrializing countries with a strong state. In Korea and Taiwan, development was accompanied by authoritarianism, by regimes whose lack of democratic accountability resulted not only in human rights abuses but in the adoption of strategies that resulted in the degradation of the environment and the sacrifice of agriculture. In any future arrangement, both the private sector and the state must be checked by the participation of civil society in both political and economic decision making. Owing to its recent history, in particular, the struggle against dictatorship, a not insignificant organized civil society has developed in the Philippines. It is now time to institutionalize its participation in any future political arrangement. Democracy does not contradict the development of an effective state. Indeed, democracy promotes an effective state by endowing it with legitimacy.

A second element of a post-EDSA development strategy is focusing on the internal market as the driver of development. Export-oriented growth of the kind that was pursued by NICs is no longer possible in an era of tremendous manufacturing overcapacity and the resulting protectionism in developed country markets that this has spawned. And even if developed country protectionism were not a problem, export-oriented manufacturing would not be an advantageous strategy today, given the tremendous advantage that China has in labor costs. Given the renewed centrality of the internal market, the imperative for massive income distribution to create consumers with purchasing power becomes very critical. Concretely, this means renewing the drive for effective land reform. It would also mean effective programs of taxation of the richer parts of the population, in order both to increase mass purchasing capacity through transfer payments, as well as to accumulate the capital necessary for strategic investments. Creating a viable internal market is one priority. Protecting it from artificially cheap imports that stem from subsidization or overexploitation is another. However, protectionism can longer remain opportunistic, an incoherent policy that is simply dictated by vested interests. Protectionism must be strategic, one that is linked to deepening the countrys industrial and manufacturing structure through selective tariffication or selective liberalization. Building up capital intensive industries such as steel, transportation equipment, and computers will necessitate a flexible tariff policy, coupled, of course, with investment incentives and state-sponsored technological development. A fourth important dimension of a post-EDSA economic strategy is sustainable development. The pillage of our natural resources has proceeded to the point where the economic future of future generations of Filipinos has been severely threatened. The high 6%-8% growth of the NIC model simply is not possible to replicate without inviting more environmental dislocations. The key lies in opting for a strategy of lower, sustainable growth rates, which is only possible if there is much more equitable sharing of the fruits of a sustainable economy (meaning, you cant have sustainable development without radical social reform), a reinvigoration of agriculture along the lines of smallholder systems producing mainly for local and national markets with environmentally friendly agro-technology, and the greening of manufacturing technology. It will also mean reinvigorating local manufacturing and agricultural industries through flexible application of the principle of subsidiarity, meaning whatever can be produced at least cost at the local level should be undertaken at that level. Strong central leadership of the strategic planning process must be coupled to decentralized, sustainable production in key areas like agriculture. This is the challenge of development in a Philippine context in the 21st century. A fifth critical element is coordinating our national development strategy with those of our neighbors. The reality of international economics in the 21st century is the existence of large economic blocs, the most important of which are the European Union, the United States, and China . It is difficult to see small and medium nation states being able to effectively develop or participate in the international economy without becoming part of a larger formation, whether this is based on common interests as developing countries for instance, the Group of 20 or being part of a regional bloc such as a reformed ASEAN that is marked by comprehensive economic cooperation.

Let me explain briefly. The problem with ASEAN, however, is that its most important economic project, the ASEAN Free Trade Area, or AFTA, is one that is strategically directionless. The aim of AFTA is to reduce and eliminate tariff barriers among participating economies, but whether this is for the purpose of serving as a step towards global free trade or as one towards a regional market protected by tariffs and quotas to serve as base for regionally coordinated import substitution has not been decided. This indeterminacy has left the regional formation unable to effectively undertake planning, technology sharing, and institutionalizing a division of labor at a regional level. Without such a program, the different national economic actors will see tariff reductions as leading to a zero-sum game in which the more advanced industrial elites will end up dominating the regional market. An even greater concern is the democratic deficit in ASEAN. This regional formation was a creation of government elites that was done with no consultation of peoples in the region. Not surprisingly, being part of an entity called ASEAN is not in the consciousness of the peoples of ASEAN. This means that projects that technocrats agree to in the name of ASEAN unity such as AFTA enjoy little legitimacy and binding power. Democratizing ASEAN is essential if it is to become an effective participant in a world marked by the dynamics of big economic blocks. Participating in a reformed ASEAN regional bloc should just be one of several cooperative initiatives the Philippines must engage in. The Philippines is already part of the Group of 20, a larger formation that also includes India, China, Brazil, and South Africa. The potential of this group in terms of coordinating the policies of its members beyond the immediate issue that brought them together in Cancun opposition to agricultural subsidies maintained by the developed economies is great and can extend to technology sharing, transborder industrial policy, shared investment policies, and common environmental strategies. The organizational framework for what has been called, in the language of development economics, South-South development cooperation, is present in the G20. A forward-looking Philippine government can make an invaluable contribution in translating this potential into reality. Finally, national, regional, and South-South initiatives must be coupled with Philippine leadership in restructuring the system of global economic governance, which is today dominated by the powerful developed economies. The key institutions that have institutionalized the hegemony of the North are the International Monetary Fund, the World Bank, and the World Trade Organization. Reform of these institutions has proven to be extremely difficult, while dismantling them seems to be a political impossibility. A coalition of developing countries can, however, aim at reducing the power of these institutions and work to gradually supplant the current system of global governance with a more pluralistic system of institutions and organizations interacting with one another, guided by broad and flexible agreements and understandings. In other words, this strategy would aim at turning the current multilateral giants into just another set of actors coexisting with and being checked by other international organizations, agreements, and regional groupings. It would include strengthening diverse actors and institutions as UNCTAD, multilateral environmental agreements, the International Labor Organization, and regional economic blocs.

The aim of such a strategy is to create space in the global economy for developing countries like the Philippines to put together unique strategies for development that respond to their values and rhythms as societies, something that is not now possible owing to the one-size-fits-all neoliberal model promoted by the IMF-World Bank-WTO complex. There is an alternative In sum, there is an alternative to the political economy of anti-development that currently reigns in the Philippines. A hard, unromantic analysis is the key to a viable program for change. We will not get anywhere unless we accept the fact that the interests of our elite and the Filipino people diverge, and it is time we put the interests of the people ahead of that of our elite, which is distinguished by the fact that it is one of the most unenlightened in Asia. We will not get anywhere unless we accept the fact that corporate-driven globalization is part of the problem, indeed a major part of the problem, not the solution. We will not get anywhere unless we adopt a policy framework that consistently puts national development in command instead of free trade and the free flow of corporate capital. We will not get anywhere if we continue to be seduced by false doctrines such as that of market fundamentalism peddled by such institutions as the UP School of Economics . (Incidentally, contrary to popular perception, I come not from the UP School of Economics but from the UP College of Social Sciences and Philosophy. The difference, friends, is night and day.) Let me end by telling those who call us the sick man of Asia , those who talk about our damaged culture, those who say that our best chance is by adjusting ourselves to the demands of corporate-driven globalization: the best years of this country are still ahead of us. The project called the Philippines is not over. Its barely begun.

Globalization in Retreat: Capitalist Overstretch, Civil Society and the Crisis of the Globalist Project
Posted by Filipino socialism under Walden Bello Comments Off

By Walden Bello* Let me begin by saying that from the point of view of a person from the South, things do not look as bleak as they seemed a couple of years ago. The United States is bogged down in Iraq, in an unending war that, as the November 2006 elections demonstrated, has lost the last shreds of legitimacy among the American people. The peoples of Latin America are on the move away from neoliberalism. Hugo Chavez baits the bear with impunity. The European Union and the US continue their inexorable drift from each other. The mighty Israeli war machine has been humbled by a most unexpected source: a few hundred guerrillas in Lebanon. Now, you and I may have disagreements on how to view some of these developments, but for us in the South, a significant

weakening of the global hegemony of the United States such as that which has occurred since 2003 is a giant step forward, for it gives our societies more breathing space, more freedom of maneuver. In this regard, let me just say, contrary to those who extol the alleged benign effects of hegemonic power, that the alternative to hegemony is not chaos but space, creative diversity, and the possibility for a genuine multilateral order. But let me go immediately to our topic here this morning: the retreat of corporate-driven globalization. Crisis of Multilateralism Let me speak from personal experience. Over ten years ago, in 1996, I attended the World Trade Organizations first ministerial meeting in Singapore as an NGO observer. There was an air of triumphalism, a sense among government delegates that corporate-driven globalization was the wave of the future. The newly established WTO was toasted as the jewel in the crown of multilateralism, as one director general of the organization was later to put it,[1] and at the meeting, the officials of the WTO, International Monetary Fund, and the World Bank saw the remaining major 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 management of the global economy. Those of us who dissented from this view of the future were definitely a minority at the conference. We were the token Luddites who had been allowed to crash the party so we could have a glimpse of the future. Ten years later, in September 2006, the World Bank and the IMF held their annual meeting in Singapore behind the heavy protective shield of the Singaporean government. The two institutions had chosen Singapore because they wanted to make sure there would be no protesters in the streets, and if there was anyone in the world that could ensure that, it was the Singaporean state. 28 of us were banned from entering the country on various pretexts. In my case, the government said that the reasons for keeping me out were that I had led protests against the WTO, that I had spearheaded the seizure of embassies and consulates, and that I had broken into the World Bank to steal documents. These were all peaceful activities to which I plead guilty, but my point here is that the crisis of legitimacy that has overtaken the two institutions is so profound that they had to hold their annual conference under armed guard! Seemingly triumphant just a decade ago, corporate-driven globalization is now in very deep crisis. What are the indicators of this crisis?

Well, first of all, as noted above, the loss of legitimacy of the key multilateral institutions that serve as the political canopy of corporate-driven globalization-the ones that set the rules that facilitate the mobility and extractive capacity of global capital. Sebastian Mallaby, the influential pro-globalization commentator of the Washington Post, writes the globalist project is in trouble because trade liberalization has stalled, aid is less coherent than it should be, and the next financial conflagration will be managed by an injured fireman.[2] In fact, the situation is worse than he describes. The International Monetary Fund (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 Funds budget greatly depends on debt repayments from these big borrowers, this boycott is translating into a budget crisis. The upshot of these developments is that payments of charges and interests, according to Fund projections, will be cut by more than half, from $3.19 billion in 2005 to $1.39 billion in 2006 and again by half, to $635 million in 2009. These reductions have created what Ngaire Woods, an Oxford University specialist on the Fund, describes as a huge squeeze on the budget of the organization.[3] 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. Robin Broad, one the of the leading experts on the Bank, claims, in fact, that the crisis of the Bank is really more profound than that of the Fund, but that, unlike the IMF, the Bank has a well-oiled PR machine that transmogrifies questionable research into sound-byte friendly factoids.[4] But now that a high-level Commission of established economists has scolded the Bank for promoting a picture of the benign effects of globalization on the basis of inadequate research and ignoring evidence to the contrary, this act will be more difficult to pull off.[5] As with the Fund, unwillingness to accept the conditions attached to Bank programs is making more and more governments reluctant to borrow heavily from it. Since the Bank, like the Fund, is mainly supported from debt repayments, this is, as Woods points out, leading as to a budget crisis as well.

But perhaps the crisis of legitimacy is most acute at the World Trade Organization, where the Doha Round of global negotiations for more trade liberalization unraveled abruptly last July, when the

talks among the so-called Group of Six collapsed in acrimony. A key reason for this is that developing country governments, under pressure from their citizenries, no longer want to open their agricultural markets to dumped goods from the European Union and the United States and to allow their manufacturing industries and services to be bankrupted or taken over by transnational corporations. 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. That point of collapse may be nearer than it seems. Dimensions of the Crisis of Globalization But the crisis of the multilateral system of world economic governance is but the most noticeable sign of the crisis of the globalist project. There are other, deeper indicators. A decade ago, the writings of the globalists celebrated the emergence of a functionally integrated global economy, the so-called borderless world. Ten years later, despite runaway shops and outsourcing, what passes for an international economy is still a collection of national economiesinterdependent no doubt, but economies whose dynamics are still largely determined by internal factors. Indeed, the globalist theorists oversold globalization: As Paul Hirst and Grahame Thompson and others have demonstrated, truly global TNCs are relatively few, with most continuing to have the bulk of their production and sales in national or regional markets rather than spread out globally.[6] Ten years ago, we were told that state policies no longer mattered and that soon, corporations would dwarf states. In fact, states still do matter. The European Union, the United States government, and the Chinese state are today stronger than they were a decade ago as economic actors. Moreover, state policies, such as industrial policy and trade policy-that is, interfering with the market in order to build up industrial structures or promote welfare policies-still make a difference. Indeed, over the last ten years interventionist government policies have spelled the difference between development and underdevelopment, prosperity and poverty. Malaysias imposition of capital controls during the Asian financial crisis in 1997-98 prevented it from unraveling like Thailand or Indonesia. And it was also strict capital controls insulated China from the economic collapse engulfing its neighbors. A decade ago, we expected the emergence of a transnational capitalist elite that would manage the world economy. Indeed, this was project of Bill Clinton and his Secretary of the Treasury Robert Rubin. The adoption of a strong dollar policy in the mid-nineties that would assist the recovery of the Japanese and German economies, even at the expense of US firms, was Washingtons way of

saying that it had the long-term strategic interests of global capital, not just US capitals interests, in mind. A strong dollar translated into cheaper Japanese and German products in the US and European markets relative to US products, thus acting as a boost to Japanese and German recovery, as Robert Brenner pointed out.[7] But the Clinton project was aborted under Bush. The transnationalized fractions of the different national capitalist classes have been overwhelmed by the nationalist fractions, and what we have today are national elites in sharp competition with one another, seeking to beggar one anothers economy. For instance, the US elite does not sign the Kyoto Protocol in order to get the European and Japanese elites absorb most of the costs of global environmental adjustment and thus make US industry more competitive against them. Causes of the Crisis Pointing to the stalling of globalization leads to the question: what are the factors responsible for this? I think we can identify six reasons. One, already alluded to above, is the preference of national capitalist classes for a strategy of shifting the burden of adjusting to the global crisis of overproduction and stagnation and the environmental crisis to each other rather than forging one common, cooperative response. While cooperation may be the rational strategic choice from the point of view of the system, that may not be the case from the point of view of national capitalist interests. A second factor has been the corrosive effects of the double standards brazenly displayed by the hegemonic power, the United States. While the Clinton administration did try to move the United States towards free trade, its successor, 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. A third reason is the gap between ideology and reality. There has been too much of a dissonance between the promise of globalization and free trade and the actual results of neoliberal policies, which have been more poverty, more inequality, and stagnation. One of the very few places where poverty diminished over the last 15 years is China, and there, it has not been neoliberal policies but interventionist state policies that managed market forces that were responsible for lifting 120 million Chinese out of poverty. There are, of course, many major problems with Chinas highspeed growth, but we will return to this issue later. Another example of great dissonance was that between the prosperity promised by the elimination of capital controls and the actual collapse of the economies that took this policy to heart: The Asian

financial crisis and the collapse of the economy of Argentina, which had been among the most doctrinaire practitioner of capital account liberalization, were two decisive moments in realitys revolt against theory. A fourth 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 the World Bank 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. A fifth factor is the weakening of the coercive capabilities of the empire. A crisis of legitimacy intersecting with a crisis of coercive capability on the part of the hegemon that protects the system has very damaging implications for the global structures of capitalism. The US state is today suffering a crisis of overextension that has made it weaker than it was before March 2003, that is, before the invasion of Iraq. There is, however, a view, recently expressed by Josef Joffe in an essay in Time, that a decoupling of the world economy from world politics is in progress.[8] That is, the processes of globalization are proceeding just fine, even as the hegemon is suffering reverses military and politically. This is an illusion. Without their protective politicio-military canopy, global economic structures eventually, to borrow a Pentagon term, degrade. Just take a look at Latin America. With the US tied up in Iraq, it cannot stem developments that erode or evade the rules of capitalism. Nestor Kirchner tells his creditors he will only pay 25 cents for every dollar he owes them, and he gets away with it. Hugo Chavez is busy creating an alternative trading bloc, ALBA, or the Bolivarian Alternative for the Americas (ALBA), whose rules, which include huge discounts on the price of Venezuelan oil for poor Caribbean countries and barter-that is Argentinian heifers or Bolivian soybeans for Venezuelan oil-go beyond the logic of capitalism, as Chavez puts it. Such actions would have invited determined US-supported destabilization in the past, as Jacobo Arbenz found out when his agrarian reform policies were seen as a threat to United Fruit interests in Guatemala in 1954 and Salvador Allende discovered when he nationalized the Kennecott and Anaconda mining corporations in 1971. There is a precedent here. The weakening of the British Empire that stood guard over the system of global free trade in the 19th century as new powers emerged to challenge it was a central factor in collapse of that system in 1914. Again, we must never forget that, as Paul Hirst and Grahame Thompson remind us, that before the retreat to nationalist economic policies after 1914, the 19th century global economy was, in many respects, more globalized or integrated than todays. [9]

But perhaps the most critical factor has been resistance, peoples resistance. The battles of Seattle in 1999, Prague in 2000, Genoa in 2001, the massive global anti-war march in Feb. 15, 2003, when the anti-globalization movement morphed into the global anti-war movement, Cancun in 2003, and Hong Kong in 2005-these were critical junctures in the decade-long peoples counteroffensive that has resulted in the equivalent of a Stalingrad for the neoliberal project-though my friend Boris Kagarlitsky disputes this image and says we are still not at the Stalingrad junction of 1943 but at that of the successful defensive resistance in Leningrad of 1941. These struggles, it must be emphasized, were merely the tip of the iceberg, the summation of thousands of struggles in thousands of communities throughout the world involving millions of peasants, workers, students, indigenous people and many sectors of the middle class. We should never overestimate our influence, but we must never underestimate ourselves either. In this regard, let me say that action is a condition for the emergence of truth. What I mean to say is that for over a decade before Seattle, the United Nations Development Program and other agencies had been publishing data showing the negative impact of structural adjustment programs, neoliberal reforms, and corporate-driven globalization. However, these remained lifeless statistics that were largely ignored by the media, the academy, and policymakers that held on to faith-based assumptions about the beneficial impact of these measures and processes. Seattle, by bringing the message of the protestors so forcefully to world attention, turned abstract statistics into brutal facts. It forced many influential actors to reconsider, then to backtrack on their assumptions. In other words, to break through to world consciousness, truth needed a world-historic event like Seattle. It is doubtful if people like the Nobel Prize-winner Joseph Stiglitz or the star economist Jeffrey Sachs or financier George Soros would have detached themselves from the mainstream and begun to criticize corporate-driven globalization so forcefully had Seattle not occurred. Paradoxically, Seattle made anti-globalization opinions respectable. We were no longer Luddites. We had perhaps graduated to being barbarians at the gate-people you feared but had a healthy respect for-but we were no longer out-of-touch, outof-synch Luddites. Down but not Out But while corporate-driven globalization may be down, it is not out.

With things not moving at the WTO, the big trading powers are putting the emphasis on free trade agreements (FTAs) or economic partnership agreements (EPAs) with developing countries. These agreements are in many ways more dangerous than the WTO since they often require greater concessions in terms of market access and tighter enforcement of intellectual property rights. Moreover, the massive flow of corporate investment from the US, Japan, and Europe to China continues, with the tremendously negative consequences for workers in these countries as well as workers in China. The structures of global capitalism are far from being in that state wherein all that is solid melts into thin air. However, things are no longer that easy for the trading powers and the corporations. When it comes to FTAs, people in the South are becoming aware of their dangers and they are beginning to resist. The Free Trade of the Americas (FTAA)-the grand plan of George W. Bush for the Western Hemisphere-was derailed by the opposition of key South American governments-under pressure from their citizenries during the Mar del Plata conference in November 2005. Also, it must be pointed out that one of the reasons many people came out to resist Prime Minister Thaksin Shinawatra in the months before the September 2006 coup was his rush to conclude a free trade agreement between the United States and Thailand. In fact, some people would date the beginning of the end for Thaksin to January 9 , 2006, when some 10,000 protesters tried to storm the building in Chiang Mai, Thailand, where the negotiations were taking place between US and Thai officials.

When it comes to China, a superficial view is that the flow of labor from the rural areas, where some 700 million Chinese make an average of $285 a year per capita, will ensure that wages will forever remain low and attractive to foreign capital. There is, however, another reality that is emerging: increasing resistance of migrant labor and peasants to the low wages, loss of land, and environmental poisoning that has accompanied the foreign-capital intensive export-oriented model of growth. In 2004, the Public Security Bureau reported that the number of mass incidents had risen to 74,000. In 2005, the number jumped another 13 percent. According to David Zweig, an expert on Chinese politics at Hong Kong University of Science and Technology, A protest begins in China every five minutes. If the protests run longer than five minutes, then there are two going on at the same time.[10] All this has the leadership worried, and it is now apparently turning one ear to the socalled New Left, which is proposing a very different path. That path would be that of hitching Chinas growth to the internal market, and in order for that to happen, local wages would have to rise

significantly to create consumers with purchasing power. That could mean the end of China as the nirvana of cheap labor and the haven of transnational corporations. This could also be accompanied by measures to take China on a more environmentally sustainable path.

Of course, the odds are still against this sea change occurring, but it is by no means impossible, and our role is to support the voices within China urging this alternative path. Indeed, with the crisis of neoliberal globalization, an alternative path is a project that we urgently need to come up with not only for China but our own societies. For although neoliberal policies have become discredited all over, neoliberalism continues to be the default mode that technocrats and academics resort to because they do not perceive a credible alternative. We are in a situation akin to that familiar scene in the old western movies: the outlaws have shot the engineer, but his hand remains on the throttle of the train. Were like the passengers trying to break into the engine room in order to get his dead hand off that throttle. Meantime, the train picks up speed and is going to round the bend at high speedWill we be able to get in there in time and peel those fingers off that throttle? Neoliberal policies are like that dead hand of the engineer.

Humanizing Globalization or Deglobalization? Before we move to the question of alternatives, let me just venture my opinion in concluding this section that from todays 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-developments stemming from the dynamics of overproduction and overaccumulation. The collapse of the centralized socialist regimes in Central and Eastern Europe deflected peoples 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. Todays 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. Is the articulation of an alternative agenda to globalization really that distant or utopian a project? The key thrusts of an alternative program, I submit, are not difficult to discern, They have been articulated in many contexts and in different ways by people who have done work on alternatives to global capitalism over the last thirty years. I have labeled this alternative approach deglobalization. Others have used other terms, such as the solidarity economy or economic democracy, but we have one thing in common: we have shamelessly borrowed and lifted ideas from one another in blatant disregard of intellectual property rights. In my particular formulation, there are two levels at which what I call the process of reconstruction takes place: the global and the national or local.[11]

At the global level, the aim is to disempower the centralized neoliberal bureaucracies-meaning the WTO, IMF, and World Bank-and empowering such institutions as the United Nations Conference on Trade and Development (UNCTAD), multilateral environmental agreements, and regional economic associations such as a transformed Mercosur in order to create a mutipolar system of global economic governance marked by checks and balances. The aim is to create the space for national economies to have space to devise strategies of development. At the national or local level, the key elements for an alternative program would be:

moving away from export-oriented production to production for the domestic market; maintaining production of vital agricultural and industrial products, as well as key services, at the local level instead of shipping them out elsewhere, if this can be done at reasonable cost; this is otherwise known as the principle of subsidiarity.

undertaking income redistribution to create a vibrant internal market as well as promote ecologically sustainable development; institutionalizing fair, managed trade instead of free trade; democratizing economic decisionmaking, that is, letting the electorate make the key economic decisions, such as creating or phasing out industries, and not leaving this process to the market and to corporations;

creating a system of regulating the market and the private sector that involves not only the state but civil society.

These are general principles. How they get articulated by different societies into specific strategies and policies will depend on their needs, their values, and their rhythms as societies, and this is why there will be internationally a diversity of economies, just as there is a diversity of individuals within a species. Elimination of diversity is pathological-yet this is what neoliberal economics does, and this is why we must junk its dystopian dream of one functionally integrated global economy. I think the best way of describing this process of moving toward the alternative is a movement from an arrangement where the market, to use the words for great Hungarian economist Karl Polanyi, has been disembedded from society and drives society to one where the market is reembbeded in society and is driven by society. We are taking about systematically subordinating the operations of the market to the higher values of justice, cooperation, and community. Often, when neoliberal economists and policymakers say we have no alternative to offer, they are really asking: what system can you offer that would be more effective than capitalism in promoting efficiency, that is reducing the unit cost of production? Well, no, that is not what we are offering. We are, in fact, talking about supplanting the economics of efficiency, where the key criterion is the reduction of unit cost, with effective economics, one that, instead of disintegrating national and local economies, like globalization does, reintegrates them, thus promoting stability, the general welfare, and happiness. I would like to end by saying that we live in a period of great contradictions, where there are signs of despair as well as signs of hope. The future is not fixed. It is, as Michel Foucault and the post-modernists have so rightly asserted, contingent. Corporate-driven globalization is not irreversible since it is the actions of human beings alienated from themselves by the dynamics of global capital that have made globalization possible. We must replace our alienated selves subjected to man-made laws with our real selves as agents that consciously create our economic and social worlds. With this liberated consciousness, we can work across borders to bring about a different but all too possible world built on cooperation and not on a race to the bottom, on diversity and not on what Vandana Shiva describes as global monoculture. Only then, as an interesting thinker told us over 150 years ago in a for-my-eyes only document known as theGrundrisse, will we truly move from the realm of necessity to the realm of freedom. *Walden Bello is the executive director of the Bangkok-based research and advocacy center Focus on the Global South and professor of sociology at the University of the Philippines at Diliman. He received the Right Livelihood Award-also known as the Alternative Nobel Prize-for his writings and activities on globalization in 2003. He is the author or co-author of numerous books, including Dilemmas of Domination: the Unmaking of the American Empire (New York: Henry Holt,

2005) and Deglobalization: Ideas for a New World Economy (London: Zed, 2002). He is also currently an editor of the Review of International Political Economy.

[1] The description is that of Mike Moore, the second director general of the organization.[2] Sebastian Mallaby, Why Globalization has Stalled, Washington Post,April 24, 2006.[3] Ngaire Woods, The Globalizers in Search of a Future: Four Reasons why the IMF and World Bank Must Change, and Four Ways they can, CDG (Center for Global Development) Brief, April 2006, p. 2.[4] Personal communication, April 21, 2006; see also Robin Broad, Research, Knowledge, and the Art of Paradigm Maintenance,: the World Banks Development Economics Vice Presidency, Review of International Political Economy, Vol. 13, No. 3 (August 2006), pp. 387419.[5] Eoin Callan, World Bank Uses Doubtful Evidence to Push Policies, Financial Times, Dec. 21, 2006.[6] See Paul Hirst and Grahame Thompson, Globalization in Question (Cambridge: Polity Press, 1996) [7] Robert Brenner, The Boom and the Bubble (New York: Verso, 2002) pp. 127-133. [8] Josef Joffe, Those Gloating Dismal Scientists, Time, January 27, 2007, p. 64. [9] Paul Hirst and Grahame Thompson, Globalization in Question (Cambridge: Polity Press, 1996), pp. 26-31. [10] Peter Kwong, The Chinese Face of Neoliberalism, Counterpunch, Oct. 7-8, 2006,http://www.counterpunch.org/kwong10072006.html [11] See Walden Bello, Deglobalization: Ideas for a New World Economy (London;Zed, 2004).