GLOBALISATION, THE GLOBAL FINANCIAL CRISIS AND THE REINVENTION OF THE STATE

• Citation: (2012) 24 SAcLJ 367
• Author: John H FARRAR LLB (Hons), LLM, LLD (University of London), PhD (University of Bristol); Emeritus Professor of Law, Bond University; Professor of Corporate Governance, Business School, University of Auckland; Joint Director, New Zealand Governance Centre. Louise PARSONS BA (cum laude), BA (Hons) French, BA (Hons) English (cum laude), BA (Hons) Philosophy (cum laude) (University of Pretoria), BProc, LLB, LLM (University of South Africa); Assistant Professor of Law, Bond University.
• Published date: 01 December 2012
• Date: 01 December 2012

This article analyses the nature of globalisation and how it has been affected by the Global Financial Crisis. It considers the relationship with imperialism and the Washington Consensus. It reflects on events since 2008, the decline of the West, the limits of global governance and the role of the state and central banks. In this changing world, there is a need for greater leadership, co-operation and an adequate voice for emerging economies in international institutions. This presents challenges for conventional wisdom and requires a broad inter-disciplinary approach.

I. Globalisation

1 Globalisation is a word which has been in circulation since about 19621 and is used to describe complex processes of economic and social change making things global in nature or scope. The emphasis is usually on internationalisation, although sometimes distinctions are drawn between globalised localism and localised globalism.2 Another theme is standardisation, particularly manifest in the ubiquity of US fast-food outlets, which is an example of globalised localism.3 Localised globalism, on the other hand, is the influence of transnational practices

on local conditions.4 Some of the processes involved in globalisation such as international trade are not new.5 Others are, particularly modern communication technology,6 and the overall result is sometimes paradoxical and difficult to pin down. Indeed, it can be argued that there is not one globalisation, but many.7 There has been a tendency in the last 20 years to think mainly of economic globalisation, but social and political globalisation are also important and have deep cultural consequences.8

2 Globalisation has been linked with capitalism and imperialism in the past but the Global Financial Crisis (“GFC”) has thrown that into question. Early views of globalisation in the first decade after 1990 saw globalisation as reducing the significance of the nation state.9 Again, the GFC has cast doubt on that and we have seen the resurgence of the nation state as regulator, investor and sometimes economic saviour.10 At the same time, there has been a need for greater international co-operation.11 Here then are many paradoxes.

3 In this paper, we consider each of the three concepts of globalisation, the GFC and the state and their complex interrelationship.

A. Globalisation of the mind

4 Professor Harry Arthurs, the distinguished Canadian academic, has referred to “globalisation of the mind”. He argues that it “involves a change in our social values and in our fundamental understandings about what role law does play and should play in society. Globalisation is, in other words, an ideology”.12 He argues that beneath this ideology lies a bedrock assumption that governments which interfere with the

free flow of goods, services, capital and information (but not people) impair their capacity to maintain a dynamic economy.13

B. Globalisation and imperialism

5 The complex processes currently summed up in the word “globalisation” have their antecedents in imperialism, another ideology, and some writers see a conceptual overlap.14 Although there were earlier empires, the phrase is normally associated with the colonial expansion of European powers in the 18th and 19th centuries.15 Imperialism was regarded by Lenin as the highest stage of capitalism.16 He relied substantially on the book Imperialism17 by the English Fabian writer, J A Hobson, who had reported the Boer War for the Manchester Guardian.18 Hobson drew attention to the astonishing fact that the UK in the course of a single generation added an area of 4,754,000 square miles and a population estimated at 88,000,000 to its domains.19 He also referred to the actions of other European powers and the late entry of the US.20 The second surprising fact was that the UK's imperial policy had no appreciable influence on the determination of its external trade.21 Indeed, the greatest increase was with its industrial enemies and fellow colonisers.22 The import trade with the US alone was greater than that of the whole of the colonies.23 At the same time, imperialism was an outlet for the migration of populations, but he thought this could be exaggerated.24“The new Empire is even more barren for settlement than

for profitable trade”.25 How then was the UK induced to embark on such an unsound business? Hobson thought that the business interests of the nation as a whole were subordinated to those of certain sectional interest for private gain.26 It was good business for certain classes and certain trades, in particular the City of London and capital investment.27“The growing cosmopolitanisation of capital is the greatest economic change of this generation”.28 Every advanced industrial nation is tending to place a larger share of its capital outside the limits of its own political area in foreign countries or in colonies, and to draw a growing income from this source.29 The modern foreign policy of the UK was primarily a struggle for profitable markets of investment. The same was true of the other countries mentioned, including the US.30

6 The US engaged in some of these activities in Puerto Rico, Hawaii and the Philippines but operated under the illusion that it did not “do empire”.31 This was a firm belief of Franklin D Roosevelt who, as a Harvard student, had sponsored the Boer Relief Fund32 and had a deep antipathy to European colonialism,33 unlike his cousin and predecessor as President, Theodore Roosevelt.34 This antipathy strongly influenced his policies in the Second World War.35 Nevertheless, the dominant role of the US in the Cold War after 1945 and particularly after 1990 has represented a hegemony resembling imperialism in some ways.36 It is this latter day hegemony that has led to a US-dominated view of globalisation before the GFC.37 The US legitimated this by asserting that everyone was a winner from globalisation whereas the GFC showed that

there are winners and losers and that the West can end up on the losing side.38 This was obscured for a time by the rhetoric of G W Bush.39 The term “new imperialism” has been used to describe the “Neocon” approach40 of the G W Bush administration after September 11, 2001 and caused the US to lose legitimacy in the war on terror.41 It also contributed to the growth of an anti-globalisation movement.42

7 An interesting recent development has been the communist literature in the West about “The Rise of Chinese Imperialism”.43 It has been argued that:44

… China has turned the crisis of US and EU finance capital and the global recession into an opportunity to export its own finance capital and to establish imperialist spheres of influence. As a result, China is now entering directly into competition with the existing imperialist powers as an emerging imperialist rival, in particular posing a major challenge to the US, the UK, Germany and France and Japan.

8 The advantage of China over rivals is said to be that China is able to develop its imperialist character from its ability to use the Chinese proletariat as a super exploited proletariat.45 The Chinese government rejects these arguments by maintaining that the collective welfare of the country is more important than individual citizen's

rights.46 The party controlled All-China Federation of Trade Unions is supposed to protect workers' rights and independent trade unions are illegal.47 Reforms of workers' rights have been carried out but the enforcement is problematic.48 Nevertheless, there has been dramatic improvement in the lives of hundreds of millions of Chinese.49 To do this in a large developing country of over 1.3 billion is a massive and complex economic and political task. Jiang Zemin said in 2000:50

To raise the living standard of the people constantly is the basic starting point and the final goal of all work of our Party. With the constant improvement of their livelihood the people will support the leadership of the Chinese Communist Party and the socialist system even more wholeheartedly, and devote themselves to the reform and opening-up and the modernization drive with even more confidence, and the ruling foundation of our party will be increasingly consolidated.

C. Globalisation or globalisations

9 The Portuguese lawyer and sociologist Boaventura de Sousa Santos describes the globalisation process as “multifactored phenomena with economic, social, political, cultural, religious and legal dimensions, all interlinked in a complex fashion”.51 He emphasises the paradoxical character of these processes, how they manifest universality on the one hand and localisation on the other.52

10 He argues there are many globalisations and refers to an attempt by hegemonies or social groups or states to dominate discussion and impose their own conception as an inexorable process.53 In this, globalisation has both a descriptive and a prescriptive component.54 The

prescription is anchored in the hegemonic consensus. He refers to the Washington Consensus. This is based on four major ideas: (1) the consensus of the liberal economy, (2) the consensus of the weak state, (3) the consensus of liberal democracy, and (4) the consensus of the rule of law.55

11 The origins of the Washington Consensus seem to be linked with neo-liberal developments from the 1970s onwards and the US's attempts to influence them overseas.56 It is interesting how economic theories of the “Law Matters” thesis reflect this.57

12 Historians differ as to the precise historical sequence of globalisation.58 Some trace it back to the Spanish and Portuguese conquests of the New World and the reaction to the inflationary consequences of importation of gold and silver. There is broad agreement that the industrial revolution led to the second chapter which continued to the breakdown caused by the First World War. The next chapter was from 1945 until the collapse of the USSR in 1990.59

13 This period is characterised by the following diverse phenomena:

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