Friday, March 14, 2008

Over A Barrel

Political and economic theory dating from the 18th-century holds that commerce will be the grease that decreases nationalist sentiments, that leads to a softening of the warlike virtues and their replacement with economic virtues, that eventually will lead to what Kant called a "cosmopolitan peace" among a world comprised of liberal nations. For many commentators - among them, longtime proponents of theories of "democratic peace" - this theory seems to have been proven in the laboratory of modernity. Even at one point dubbed the "McDonald's Thesis" by Thomas Friedman, the belief was that free-market economics would lead to a world of peace and the decline of the assertion of national identity, honor and primacy.

While 9/11 already had partially shattered this view, it could be argued that one of the many reasons for undertaking the war in Iraq - and, in fact, one of the reasons that actually lie behind the invasion - was the continued faith in this theory. It was believed by many that establishing a liberal, secular, democratic, free market beachhead in the Middle East would create a domino effect in which the populations of other Middle Eastern nations would demand to have a similar arrangement. While many, perhaps most, have had this faith shattered as well, there are still a good many people in influential places who hold that this can still be the long-term outcome of the war.

But unfolding before us on the world stage right now are gathering warning signals that this long-held theory is running into a grim reality. This theory - summarized with brilliant and prescient insight by Marx and Engels in the opening pages of "The Communist Manifesto" - argued on behalf of the relentless unfolding of an international and cosmopolitan order that would expand according to the logic of industrial production. Wrote Marx and Engels,

All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations. And as in material, so also in intellectual production. The intellectual creations of individual nations become common property. National one-sidedness and narrow-mindedness become more and more impossible, and from the numerous national and local literatures, there arises a world literature.

The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilization. The cheap prices of commodities are the heavy artillery with which it forces the barbarians' intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.

Yet, what we see today arising alongside the seeming apotheosis of this predicted process is its opposite: the renewed assertion of nation both as a reaction to this process, but more deeply, in anticipation of its exhaustion. Written in 1848, Marx and Engels rightly foresaw a world in which commodities from one place would be shipped elsewhere, seeking out foreign markets for the import of money or other goods, while other markets would be employed for cheap labor for assembly and production. Their vision - that shared by most mainstream (non-Marxist!) economists today, was premised upon a future of expanding and seemingly endless resources. Nations would gladly rearrange their internal ordering - would sweep away "all fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions" and make "new-formed ones antiquated before they can ossify." While there is overwhelming evidence that this is the case, some signs suggest that this theory may be confronting a different reality.

Consider the current economic system, writ large. While it appears, at least on the surface, to resemble the order that was predicted by thinkers ranging from Smith to Montesquieu to Marx and Kant and beyond, another way of looking at it is that far from representing the growth of cooperation and growing empathy bordering on the transcendence of nations for a cosmopolitan worldview, what we are actually seeing with growing clarity is a system in which each player is trying to use the others to the greatest possible extent before scrambling out of the system to avoid the wreck. It's like a gigantic game of "Chicken" with all of us heading to a point of convergence - cosmopolitan bliss? - while in fact realizing that someone is going to swerve, and that everyone will get burned in the process. Economics is just war by another means.

The major players literally, and figuratively, have each other over a barrel. This is not cosmopolitan nirvana, but mutual exploitation that barely covers the ultimate ambition of zero sum game. America has/had wealth and insatiable appetite. China produces cheaply, buys little, and gobbles up our debt. The Saudis and a few others sit on an (evaporating) ocean of oil and little else, pumping madly to sell what they can while they can. None of these folks very much like each other, but we need each other for our own prosperity - right now at least. The Americans need the oil, so we transfer dollars (once of some worth) and provide a military umbrella for a familial dictatorship. Because we're going broke, we need cheaper goods, so we export jobs for Wal-Mart crap. Meanwhile, the Saudis need us as consumers/addicts, so they hold the line on keeping oil priced in dollars (for the moment) and, until now, have worked hard to keep the price of oil within a price band - at least until it's no longer possible to increase production to bring down demand-driven price increases. The Chinese are getting itchy about holding trillions of dollars in increasingly worthless debt - its worthlessness being increased every day by a Fed that's inflating the economy with full knowledge that we're screwing our owners - but can't quite afford to dump their Treasuries knowing that this would put a nail in the American economic coffin, correspondingly undermining their own "growth miracle."

An international economic system destined for the transcendence of nation? Or, a game of Chicken? Who blinks first? Do the Chinese dump the dollar? Do the Saudis agree with the likes of Kuwait (a nation of much gratitude for its "liberation") to price oil in Euros or gold? Does Uncle Sam continue to give them the big middle finger in its efforts to bail out its bankers and Wall Street "playas"? When one card gets pulled out of the house, what happens to our happy narrative of globalization?

Lying behind all this is what Smith, Marx, Kant, etc., did not envision - a world of increasingly constrained "stuff." The cosmopolitan dream - all Martha Nussbaum airy "expanded mentality" Kantianism aside - was most deeply premised on what Marx clearly saw, namely, the circulation of commodities and cheap labor. For this circulation to work well and readily, those commodities had to be plentiful and relatively cheap. With growing constraints in nearly every area - petroleum, metals, water, food (a.k.a. petroleum), you name it - the world is seeing a resurgence of resource nationalism and the growing sense that cooperation works best when the pie is growing, not so well when it's shrinking. Could we call it "peak globalization"? Just at the moment when our universities and elite institutions are preparing the next generation for a utopic world of international cooperation and glorious cosmopolitanism, we may just be re-playing an ancient human tragedy in which our theory blinds us to reality.

Indeed, my nugget for today: beware of any academic peddling a theory that ends with the suffix "-ization." We have not yet given up the Geist, but history never had it.


Anonymous said...

America has/had wealth and insatiable appetite. China produces cheaply, buys little, and gobbles up our debt. The Saudis and a few others sit on an (evaporating) ocean of oil and little else, pumping madly to sell what they can while they can. None of these folks very much like each other, but we need each other for our own prosperity

None of your examples reflect long-term economic reality.

Until 1970, America was the world's largest exporter of oil. China only recently started producing wealth, and was able to do so due wholly to Western investment of knowledge and technology in her. And you conveniently forgot Japan, 1/3 of our population, zero resources, and yet 1/2 of our GDP.

Japan is living proof of how the resources-exploitation theory falls down. Who is exploiting who? Does Japan not produce any real wealth? The system could work well with all the people with natural resources sitting on their butts and all those without making their cars. Everyone would still be fat and wealthy. This is the fruit of technology.

Suggestion: read Adam Smith's Wealth of Nations carefully, with special focus on the pin factory. Next, read David Ricardo. Finally, read Thorstein Veblen.

with growing constraints in nearly every area - petroleum, metals, water, food (a.k.a. petroleum), you name it

You have listed four (4) items: Food, water, oil, metal. Let's go through them:

Food: I see no contraints. I just paid $0.35 pound of ground whole wheat flour. This is so inexpenive it might as well be free. And biotechnology advances will drive these costs down even further. Imagine if everyone grew a garden on their front lawn?

Water: Snort. When we see an Alaskan/US water pipeline, then we can say water is in short supply. So that people want to live in the desert makes a water shortage?

Metals: the cost of metals is increasing, but compared to what? They are still very, very inexpensive when conpared to GDP. The primary reason metals are increasing is due to higher energy costs of processing, not lack of the metal itself.

Oil: I agree this one is a problem; it will be hard to find a liquid fuel replacement. But we can use coal and nuclear (and Stirling and electric engines don't need liquid fuels just heat), and we can conserve at least 50% of our current useage via conservation without losing any GDP. We just need the price a lot, lot higher first. Oil is only $0.15 a cup. That's practically free.

Anonymous said...

That $0.15 a cup sure puts a dent in my gas budget. For "practically free" it sure is costing me a bundle, and making Shell and Exxon rich.