World politics and Economics in the Era of Globalisation

[From the Political-Organisational Report of the Sixth Party Congress.]

The collapse of Soviet Union and the end of Cold War led to a unipolar world. This was reflected in the Gulf War when all the major imperialist powers rallied around US in a grand alliance. However, this proved to be temporary. When the US wanted to enact the second edition of the Gulf War in September 1996, the alliance cracked. Russia criticised it openly, France registered its protest, China conveyed greetings to Saddam, the Japanese advised restraint and even US’ Arab allies turned the other way.

Internal differences are quite manifest on the question of expansion of NATO. From 1991 onwards, i.e. with the end of Cold War, France and Germany began mooting the idea of a pan-European security arrangement. The US is apprehensive that once Germany, on its own or with France, becomes hegemonic in Central Europe it may reach some agreement with Russia over excluding the US from Eurasia. To prevent the Europeans from forging an independent strategic entity, the US embarked on an eastward expansion of NATO and pushed through its unilateral decision as to which countries were to be admitted. The eastward expansion of NATO is an important way to keep Europe tied down to the US and assert America’s unipolar dominance. Moscow was opposed to this expansion of NATO but had to accede in exchange for economic incentives and a NATO-Russia permanent joint council where it will have its say in NATO decisions without veto rights.

Although the US talks of ‘positive engagement’ with China, in practice it doggedly pursues the policy of containment of China. China is deeply worried over the expansion of NATO in Europe and the growing strategic activism of US in Central Asia, which borders China to the west. To break out of the encirclement, apart from strengthening their nuclear and conventional capabilities, the Chinese have rapidly boosted their strategic cooperation with Russia. The joint communique issued after the summit meeting of Russian and Chinese leaders vowed to create an equal partnership aimed at strategic interaction in the 21st century and building a multipolar world. This development is of crucial importance as it is for the first time that the two big powers have openly questioned American hegemony and talked of a multi-polar world.

China is putting enormous pressure on Japan to exclude Taiwan from the ambit of Japan’s recent military alliance with the US. China has been strengthening its economic and political ties with East Asian countries and in a gathering of East Asian leaders the Chinese premier talked about a ‘new international economic and political order’ opposed to the ‘irrational western order’. The Chinese are invoking the national plank in a big way and have started taking more active and vocal role in world politics. Hong Kong’s unification has boosted both the economic strength of China as well as its nationalist plank.

Lenin had said that it is perfectly possible for imperialist countries to forge an alliance for the "peaceful" division of some region. "But the question is whether such alliances will be permanent and eliminate friction, conflicts and struggle in every possible form.

"The only conceivable basis under capitalism for the division of spheres of influence etc. is a calculation of strength and the strength does not change to an equal degree, for the even development of different undertakings, trusts etc. is impossible.

"General alliances, therefore, are like periods of truce in a war. Peaceful alliances prepare the grounds of war and in their turn grow out of war; one conditions the other."

A unipolar world is thus an anachronism. The objective process is leading towards multipolarity where Europe and the China-Russia axis may emerge as important poles apart from the US.

The US is bent upon exercising its hegemony all over the world. It continues to pursue policies like the economic blockade of Cuba which began in the ’60s, economic sanctions against Iraq and Iran and bullying China, Russia and Japan. It is engaged in trade wars with European countries. And it meddles in the internal affairs of a host of countries including India. And for these purposes it uses international financial and trade institutions as well as the UN which, of late, has become an instrument pursuing US policies.

For small and weak countries therefore, the national question continues to be of paramount importance in this age of globalisation.

In US strategy India fits in as a countervailing force against China. Indian foreign policy response is quite vague on this question. Though, of late, Sino-Indian relations have considerably improved, there is a strong pro-US lobby in India which raises the bogey of China’s expansionist designs, makes a hue and cry over the Tibet question, presents China as India’s main trade rival etc.

We did welcome India’s refusal to sign NPT and CTBT because, as a sovereign country, India should have the freedom to decide its course and not succumb to US dictates. But the threat of a nuclear race hotting up in South Asia is looming large before us. Despite the Gujral doctrine promising good neighbourly relations and despite making a beginning in talks with Pakistan, nothing concrete is expected to emerge. Outstanding problems between India and Pakistan, including the Kashmir dispute, can only be solved within a broader framework of cooperation that includes developing SAARC as a powerful regional economic bloc and concluding a bilateral NPT with Pakistan. India should also explore the potential of strategic cooperation with China in order to accelerate the process of multipolarity. But it is highly unlikely that India’s present ruling dispensation, attached as it is with numerous overt and covert ties with West, will tread this path.

The impact of globalisation is already being felt in Europe where the unemployment rate has gone up to 11% (in absolute terms 20 million persons are without jobs), a figure comparable to that of the pre-Second World War Great Depression. France, where the unemployment rate has reached 12%, is the worst hit. This coupled with a drastic reduction in social welfare has given rise to waves of protests and strikes.

The election outcome resulting in the Left’s victory in France or the voting out of ruling parties in several other European countries is essentially a backlash against liberalisation and globalisation. The recent victory of the socialist coalition in France is perhaps most significant. It has come in the wake of a decisive popular resistance by the French working class defeating attempts to place the economy on a Thatcherite path, as well as rightwing anti-immigrant legislation with racist overtones. By contrast, there is hardly anything socialistic or social-democratic about the victory of the New Labour in Britain. The term New Labour is essentially a misleading euphemism for what should be called New Conservative. Any euphoria over the so-called leftward shift in Europe would thus seem to be patently misplaced.

The European Monetary Union and the introduction of a single currency, Euro, by 1 January 1999, doesn’t hold any promise for the working class. On the contrary, individual countries in their bid to attain a competitive edge in an integrated Europe are further tightening the noose around the workers. Thus the working class is opposed to the whole exercise of unification and is organising major protests.

The economies of the republics of the erstwhile USSR and Eastern Europe are still trapped in their transitional trauma which is now threatening to grow into a kind of permanent paralysis. The so-called neo-liberal panacea has failed miserably in resolving this crisis. This economic reality has found its political reflection in the popular dissatisfaction with the new post-socialist regimes in these countries. The replacement of Soviet puppet regimes by Western puppet regimes in these countries has met with an early collapse, and in many cases ex-communists who appear to be more rooted in the soil, have come back sans the communist tag.

This year in Russia millions of angry workers demonstrated demanding immediate government action to pay back wages, procure jobs and restore social services. In the first stirrings of class action since the collapse of the socialist system, over 10 million workers participated in strikes.

The crisis of neo-liberalism is also evident in country after country in Africa, Latin America and Asia. This has given rise to a lot of dissension among the high priests of neo-liberal orthodoxy and Japan has reportedly begun to question the wisdom of the neo-liberal package of macroeconomic stabilisation and structural adjustment. The recent resurrection of the state in the neo-liberal discourse — redefining the crucial role of the state in the economy was the focus of this year’s World Development Report released by the World Bank — is said to be a fallout of this divergence between the US and Japan. Now in the wake of the recent currency turmoil in South-East Asia, this difference is becoming accentuated and coming out more strongly into the open with Japan calling for curbs on currency speculation and proposing a $100 billion monetary fund for Asia. The IMF, in its recent Hong Kong meet, has strongly opposed these Japanese proposals insisting on a single source of conditionality.

Unemployment in the USA remained at the rate of 6% but the proportion of low-wage service sector jobs has increased. Jobs are being created but many are temporary jobs without any security and without a future. Japan which till recently was paraded as the model of economic progress — and Indian capitalists missed no opportunity to preach to their workers about the cooperative attitude of the Japanese workers that is supposed to have worked wonders in Japan — has lost much of its shine. Gone are the heady days of the ’80s when Japanese companies seemed unstoppable. Seven years after the boom in the stock markets, Japan is in deep trouble. All attempts at overcoming the slump have had only a moderate effect. The US goes on pressurising Japan to deregulate its economy and open its markets for American goods. While Japan has entered the phase of political instability, the communist party there has significantly improved its presence in the last elections.

The Asian ‘tiger’ economies, assiduously projected as the model for developing countries, are now caught in a web of crises. South Korea’s growth rate is slowing down and its trade balance is upset. It was already rocked by the student protests against the stationing of 37000 US troops in South Korea. Now workers have come onto the streets. Tens of thousands of workers have marched on the streets of Seoul and other cities against a new labour law that makes it easier for employers to fire their workers. Thailand’s external debt has mounted to $90 billion, exports have declined and its current account balance has turned negative. This led to a free fall of the Thai currency whose tremors soon reached South Korea, Philippines, Indonesia and Malaysia. A loan of $16 billion — of which, interestingly, $1 billion was committed by China — was arranged by the IMF to bail out Thailand but currently a fresh round of currency turmoil has engulfed the region. The Tigers have started showing signs of tiredness and in the coming years militant working class actions are bound to intensify.

In fact, a run on Third World currencies and sudden flight of capital resulting in a debilitating impact on the economy, first witnessed in a very acute form in the case of Mexican meltdown, is becoming a wider phenomenon rendering many Third World economies highly vulnerable in the era of globalisation. On the whole, in seven years of globalisation the growth record of the world economy has remained lacklusture — the average growth rate in this period being lower than the rate in the 1970s.

The Chinese Puzzle

Only the yuan, the Chinese currency, held steady amidst the recent currency turmoil in East Asia. This shows the strength of China’s economic fundamentals as well as its financial mechanisms, which do not give much scope to speculators. Its economy is growing at the rate of average 10% a year. China’s trade surplus stands at $16 billion whereas foreign exchange reserves have crossed the $200 billion mark. Foreign debt is meagre. China has attracted huge amount of foreign direct investment (FDI) — about 80% of which comes from overseas Chinese.

Although state-owned enterprises still employ the bulk of the 170 million-strong urban workforce, their share in the total industrial output has fallen to less than one-third, down from over three-quarters in 1978 when reforms began. State-owned enterprises are in deep crisis and it is reported that hundreds of thousands of workers have gone unpaid for months. The huge amount of money lent by the state banks to ailing state enterprises has risen to $120 billion last year. Much of the borrowing, however, went just to pay wages. Reform of the state sector has been the foremost agenda in the just concluded congress of CPC. The capitalist sector is making giant strides and China is at a crossroads.

The Chinese Communist Party has coined the term ‘socialist market economy’ based on the premise that within an overall socialist framework, viz. communist party rule and state control over planning, finance etc., the market can be guided, controlled and put to use for building socialism. This they call the primary stage of socialism, and it is expected to continue for the next fifty years till China attains a per capita income level comparable with moderately developed capitalist countries. This revision of the classical Marxist theory on socialism is what is known as Deng Xiao Ping’s theory of building socialism with Chinese characteristics. The genesis of this theory can be traced back to the two-lines struggle in the CPC since the 1950s.

We do acknowledge the enormous difficulties in building socialism in a single country, and that too in a backward Asian country.

We also refute the methodology that discusses the question of building socialism in the abstract, as an ideal utopian model that can just be transplanted anywhere, anytime by sheer will power. Instead we look at socialism as a society evolving out of contradictions of capitalism, evolving as a natural process of history and therefore adopting myriad forms in different contexts and different countries.

Still, the whole perception of socialist market economy appears to be highly controversial and in view of the fact that the Chinese economy is becoming overwhelmingly capitalist, regional imbalances and rich-poor divide are growing, a whole new class of neo-rich is coming up and corruption is becoming quite rampant, we cannot but feel seriously concerned about the future of Chinese socialism.