Global capitalism hit by chain reaction of crises

Walden Bello, Executive Director, Focus on the Global South, The Nation, Asia News Network, Bangkok

The first meeting of Asian Social Movements took place against a background of what is shaping up as the worst crisis of global capitalism since the Great Depression 70 years ago. Charting our direction for the future is greatly dependent on understanding the nature and dynamics of this crisis.

We are talking about a crisis that is an intersection of four crises.

The crisis of legitimacy refers to the increasing inability of the neo-liberal ideology that underpins today's global capitalism to persuade people of its necessity and viability as a system of production, exchange and distribution.

The disaster wrought by structural adjustment in Africa and Latin America; the chain reaction of financial crises in Mexico, Asia, Brazil and Russia; the descent into chaos of free-market Argentina; and the combination of massive fraud and spectacular wiping out of US$7 trillion of investors' wealth -- or almost equal to the U.S. annual gross domestic product -- have all eaten away at the credibility of capitalism.

The institutions that serve as global capitalism's system of global economic governance -- the International Monetary Fund, the World Bank, and the World Trade Organization -- have been the most negatively affected by this crisis of legitimacy and thus stand exposed as the weak link in the system.

Intersecting with the crisis of legitimacy is a crisis of over-production and over-capacity that could portend more than an ordinary recession. Profits stopped growing in the U.S. industrial sector after 1997, a condition caused by the massive over-capacity that had built up throughout the international economic system during the years of the U.S. boom in the 1990s.

The depth of the problem is revealed by the fact that only 2.5 per cent of the global infrastructure in telecommunications is utilized. Over-capacity has resulted in investment moving from the real economy to the speculative economy, to the financial sector, a development that was one of the factors behind the stock market bubble, especially in the technology sector.

Enormous surplus capacity continues as a global condition and thus the continuing absence of profitability. The global recession is thus deepening. But precisely because severe imbalances had built up for so long in the global economy, this recession is likely to be prolonged and synchronized among the major centers of capitalism, and there is a great chance that it could turn into something worse, like a global depression.

Running alongside and intersecting with these two crises is a crisis of liberal democracy, which is the typical mode of governance of capitalist economic regimes.

In places like the Philippines and Pakistan, popular disillusionment with elite democracies fueled by money politics is rife among the lower classes and even the middle class, being in the case of Pakistan one factor that allowed Gen. Pervez Musharraf to seize political power.

But the crisis is not limited to the South. In the United States, there is widespread popular perception that President George W. Bush stole the elections and, thanks to current revelations about his questionable ethics as a businessman, he serves mainly as the president of Wall Street rather than of the country.

In Europe, there is also much concern over corporate control of political party finances, but even more threatening is the widespread sense that power has been hijacked from elected national parliaments to unelected, unaccountable Euro bodies like the European Commission.

Electoral revolts like the Le Pen phenomenon in France and Pim Fortuyn in the Netherlands are manifestations of deep alienation with technocratic democracy.

The fourth crisis might not be immediately discernible, but it is operative as well. The recent expansion of U.S. military influence into Afghanistan, the Philippines, Central Asia, and South Asia may communicate strength.

Yet, despite all this the U.S. has not been able to consolidate victory anywhere, certainly not in Afghanistan, where anarchy, and not a stable pro-U.S. regime, reigns.

It is arguable that because of the massive disaffection they have created throughout the Muslim world, the U.S.'s political and military moves, including its pro-Israel policies, have worsened rather than improved the U.S. strategic situation in the Middle East, South Asia and Southeast Asia.

Meanwhile, even as Washington is obsessed with terrorism in the Middle East, political rebellions against neo-liberalism are shaking its Latin American backyard.

These intersecting crises are unfolding even as the movement against anti-corporate globalization is gaining strength. During the 1990s resistance to neo-liberalism was widespread throughout the South and the North.

In few places, however, were they able to become a critical mass at a national level as to decisively reverse neo-liberal policies. But they could become a critical mass globally when they came together at certain critical events.

This was what happened in Seattle in December 1999, when massive mobilizations contributed to bringing down the Third Ministerial of the WTO. The other global confrontations of 2000, from Washington to Chiang Mai to Prague, also shook the confidence of the establishment. When the World Social Forum was launched in Porto Alegre in January 2001, with 12,000 people, the ideological challenge became a very real threat to global capitalism.

Today, we may be witnessing a second moment in the trajectory of the resistance as many anti-neo-liberal movements become a critical mass impacting on politics at the national level.

This appears to be the case in Latin America, where espousal of neo-liberal economic policies is now a surefire path to electoral disaster and progressive movements have either won electoral power or are on the cusp of power in Venezuela, Brazil and Bolivia.

The immediate future promises a very fluid situation. The Fifth Ministerial of the WTO in Cancun, Mexico, is shaping up as a confrontation between the old order and its challengers, towards another Seattle.

Because of its decision-making structure, based on "consensus" among all member-countries, the WTO is shaping up as the weak link of global capitalist system. The aim is to launch another ambitious round of trade and trade-liberalization in Cancun that would rival the Uruguay Round.

In the space of just a decade, global capitalism has passed from triumphalist celebration of the passing of the socialist states of Eastern Europe to a fundamental loss of confidence. It is entering a "time of troubles" much like the second and third decades of the 20th century. Its successful emergence from the developing crisis is by no means assured.