Capitalism and Free Trade. In early 1848 a liberal revolution swept through the German states. Leading liberals called for a national assembly, the Frankfurt Parliament, which met in May of the year. Members were elected by direct manhood suffrage and all propertied classes were represented – the crafts and trades as well as landowners, merchants, bankers, and manufacturers. Among other business, a resolution favoring "free trade" was passed by a big majority. There was however a small hitch: The German word for "free trade" (unregulated trade) also meant "freedom for the trades" (regulated trade). For the crafts and trades (or small producers), "free trade" meant "freedom from competition" while for the bourgeoisie the same expression meant "freedom to compete." These slogans logically translate into "freedom from the bourgeoisie" and "freedom from the trades," respectively. "Freedom from the trades," in turn, translates into "freedom by the force of superior size or competitive strength to put the small producers out of business, then buy up their assets at a fraction of their old value, thus overcoming society’s taboo against theft," which doesn’t sound half as nice as "free trade."

The meaning of free trade in capitalist society appears to be contradictory because capitalist economic thought, including legal doctrine, fails to distinguish self-earned property from capitalist property (between Uncle Bob’s family roofers and GE). This is so despite the fact that family business is typically a subsistence unit while capitalist business is an accumulating unit. The former makes money to meet costs and life expenses while GE makes money to make more money to make more money, ad infinitum. Marx called the employment of money to make more money the "self-expansion of capital," which he demonstrated to be the basic imperative of the capitalist mode of production.

Fair traders such as Ralph Nader ascribe the making of money to make more money and so on, to infinity, to "corporate greed." This is not true and true at the same time. "Corporate greed" as a concept in social theory explains nothing. For example, it doesn’t explain the globalization of capital ("greed," corporate or otherwise, has been around for a long time). But corporate greed is definitely a social phenomenon, a datum, hence while it explains nothing corporate greed itself has to be explained. One explanation is that greed is the subjective result (or side) of capitalist self-expansion. The expression spotlights the kind of personal or subjective experience that the self-expansion of capital both causes and presupposes. While King Midas was greedy for gold, there came a day when he possessed all the gold in the world (if memory serves). By contrast, GE is greedy for more profits, which means more growth, which means more profits, and so on. GE is greedy for market share, which defined in absolute terms in a perpetually expanding capitalist economy, is in (bourgeois) principle limitless. Greens of course oppose perpetual economic growth, which is why they typically call for local enterprise and small-scale production, that is, an up-to-date version of the "freedom for the trades" voiced in Frankfurt in 1848.

It is sometimes charged that the difference between self-earned property and capitalist property is that the former spends or consumes its capital while the latter saves and invests theirs (making economics into a Sunday School lesson). The fact is, however, that small producers don’t have any capital to consume or invest: Their business is based on the labor of family and friends, not primarily on wage labor, the only form of labor that is able to produce surplus value or profit, the form of capital that "greedy investors" seek.

Capitalism does have a special place in its heart for self-earned property. Important financiers like to think that they became billionaires as a result of their own hard efforts. In fact, the nostalgic and tender feelings that capitalist apologists express for the small producers – for example in the Jeffersonian or Jacksonian "ideal" and during the New Deal’s flirtation with small farmers and small business in the 1930s – arise because of the peculiar way capitalism defines itself. The economist defines capitalism as an economic system with "private property in the means of production" and "production for the market." There are two ways to look at this definition – one formal, legal and idealistic, the other historical, materialistic, and practical. Formally or legally, capitalism is an economic system in which anyone is free to purchase and own means and objects of production. This definition is strictly legalistic in the sense that you and I are not free in any meaningful practical sense to own more than a handful of shares of GE, which might yield some speculative returns in the stock market but which confer no power to direct GE’s research and development, make investment decisions, hire and fire workers, or reorganize production in the South or the North or on the moon. These days Aunt Ellen’s ten shares of IBM or Microsoft are in the nature of lottery tickets.

This is no exaggeration. The mutual fund "industry" owns about $7 trillion of outstanding equity shares in U.S. business – up from $2.5 billion half a century ago. "Funds now enjoy an unchallenged position of leadership [in the financial services industry]," writes John C. Bogle in the Wall Street Journal (June 20, 2000). Mutual funds have accounted for "70 percent of the $2 trillion that U.S. families added to their savings over the past five years." In the good old days before the globalization of capital, mutual funds exercised stewardship of the peoples’ savings, emphasizing long-term investments. Today the industry is run by speculators. According to Bogle, the rates of turnover of stocks, fund managers, clients and the funds themselves are nothing short of amazing. Short-term and speculative gains are the main goal of most fund managers. The irony that widows’ savings, family savings to put junior through college, and so on, are used for stock speculation is barely noted by Bogle. The irony that these speculative funds yielded an average of 11.7 percent annually over the past 15 years while the Wilshire 5000 index (which has the most diversified stock portfolio of all the index funds) yielded 16.1 percent (both adjusted for costs and taxes) over the same period – that the new speculative mutual fund business has been a failure – seems to escape Bogle.

Yes, Aunt Ellen also "owns" some shares in her retirement account. But if ownership of private property signifies anything, it means, first, the freedom to use one’s property in any legal way and, second, the freedom to forbid other people from using this property. Pension fund stock holdings fail to qualify on both accounts: Ellen can’t unload IBM for Microsoft, she can’t cash in her shares, and she can’t prohibit the pension fund from selling the stock or trading it for another.

The definition of capitalism purveyed by capitalist ideologues conflates self-earned property and capitalist property by defining capitalism in legal terms, not what is possible or likely practically. But here we note an interesting fact: In the epoch of self-earned property or small commodity production (usually called merchant capitalism or the Age of Absolutism – c. 1500 to c. 1800), the legal and materialist definitions of private property often coincided. The majority of the work force in Britain and much of western Europe were free to buy or lease land long-term and own tools and other means and objects of production; and the direct producers also in fact bought or built and owned these means of production, using their own tools or inns or land or horses and wagon or ferry boat to produce goods and services for barter or for sale in local or regional markets (and at the luxury end, in national and international markets). A large class of people who exchanged "labor services" for "wages" made up most of the rest of the work force where serfdom was weak or historically finished. These were called "labor services" because they were performed in a "master-servant" relationship. For example, "wages" were paid to manorial workers for grooming horses, tracking down poachers, sewing m’ladies’ clothing, and what have you. These workers were paid not for their labor power but for the product of their labor (again, in a usually close-knit system of hierarchical master-servant relations).

Believe it or not, economists today define "wages" as "payment for labor services" (just as was the case two or three hundred years ago), not as an "advance of capital for the use of the worker’s labor power," which is the correct definition of wages under capitalism. The same word, "wage," means the same thing now as it did then, for capitalist apologists. But it means something very different for living labor. For example, when you hire someone to paint your house, you’re not buying the painter’s labor power but the painted house. You can’t tell him how to work or how fast to work. You can only inspect the results of his work and ask him (nicely) to do this or that section of the job over. The same painter, employed in a capitalist factory, "belongs" to the factory owner during the work day. He can be ordered to paint this or that, at this or that pace of work, sometimes for longer than the normal work day, and every moment of his efforts may be scrutinized by the boss. When the painter works for himself, he controls his own labor process; when he works for a capitalist enterprise, he works for the capitalist, his labor power is under the control of the boss, and (if he wants to keep his job) he must obey an order to perform tasks other than his specialty (painting), for example, to help at the loading dock. This "variability" (in the qualitative sense) of the worker’s labor power is decisively important. It keeps capitalism on its double helix of money moving upward, compounded quarterly, while labor spirals downward into fatigue, industrial accident or illness, or death.

Capitalist thought (or ideology) appropriates for the present concepts and definitions that fully apply only to the past. It tries to pass off dead practice as living theory. This is true not only of "capitalism" and "wages," but also of other major economic categories, for example, capital and money, production and consumption, distribution and exchange, and so on. So, too, do sociological and political thought try to pass off categories or definitions of words such as class, class struggle, status, power, and democracy that made sense two or three centuries ago as valid and useful in theorizing contemporary capitalism, capitalist society, and the capitalist state. The meanings of words inscribed in economics and social science textbooks today (memorized by generations of bored and bewildered students) correspond to the social and material conditions, social structures and social conflicts which these words were used to describe during the period of small commodity production/merchant capitalism.

In fact, capitalism today is properly defined, in materialist/social terms, as a "class monopoly of ownership of the means and objects of production," which does not include Aunt Ellen or Uncle Bob. While one class holds the productive wealth of society, it does so not collectively but in the form of individual and family ownership. This is a departure from some earlier modes of production, East and West, when the relations of production (or ownership and power) were more collective in nature hence more transparent. Capitalist wealth, by contrast, poses a challenge to the student of contemporary history to remember two facts at the same time. The capitalist is an individual or family; the capitalist is also a personification of the capitalist class. He (or she) will act accordingly: Normally individual interests will outweigh class interests; in times of a challenge from below (a union, a strike, a revolution), class interests typically surface and the capitalist ceases to be a person and becomes a personification.

Back to the 1848 Frankfurt assembly: German unity quickly diminished as the language of economic class modified the language of national unity. If a gathering such as that in Frankfurt in 1848 took place today, it might be reported that there was a falling out between the small producers and capitalist business because "the two sides failed to communicate," which would be one indicator of how distant class politics have become from official discourse and the politics of everyday life in our time.

By the time of the 1848 Parliament the German states had learned first-hand of the benefits of free trade. Thirty years earlier Prussia abolished internal customs and formed the North German Zollverein, which in 1834 merged with two other customs unions to become the German Zollverein. Like the European Union today, internal tariffs were abolished and a uniform tariff was raised against non-members. Soon, trade notably increased, as did statistics of industrial production, employment and wages.

Free Trade. Free trade in the Zollverein meant little more than big and small business were permitted to buy and sell goods free from tariffs within the customs union. The trades and small producers typically depended on their combined political influence for exceptions and special dispensations, to avoid being trampled by big business. To this day, there is more fair trade than free trade within certain sectors of small business (e.g., classes of retail trade) and small farmers (e.g., in Bavaria). Political protection from big-time German and foreign competitors – the fight for the "freedom of the trades" – is however a holding action, and is more or less rapidly giving way to capitalist "freedom from the trades." In the 1960s, large numbers of German and French small farmers were wiped out by the superior power of big agriculture and land speculators who saw industrial development, housing, and golf courses where wheat once grew. Competition from U.S. agribusiness and box stores however is still regulated.

At some point German small farming and retail and some other sectors will go the way of the pre-Zollverein trading system. This is so for an important reason. In Germany, France, Japan and some other non-Anglophone countries, center-right governments which promote social conservatism have been in power more often than not. Small farmers and the petty bourgeois are famously conservative and have been an important political constituency for parties such as Germany’s Christian Democrats and Free Democrats and Japan’s Liberal Democrats – center-right parties which "globalization" has thrown into permanent crisis. With the rise of global capital, however, the social democrats, the socialists, and the labor parties (and, in the U.S., the Democrats) have been the main instruments of modernization, meaning "globalization."

The greater is free trade today, the smaller will be freedom for the trades. Without their small business/small farmer political base, every major center-right government in the world will have to either accept the role of permanent opposition or change their colors and join the so-called left parties as modernizing and globalizers to keep their country from sinking into the sludge of second-rate capitalism. In the U.S., at one time small business was politically strong and made a credible effort to make the U.S. an isolationist power. In more and more North countries, the anti-free traders today include the far right, the neo-fascists, those who hate the word "multicultural," believers in racial superiority, which poses difficult questions for those sections of organized labor and the environmental movement which are anti-free trade and pro-fair trade.

Free Trade Today. During the past 30 years, the ratio of world trade/world GDP has been rising at an increasing rate. World foreign investment/world GDP is growing at an even steeper rate. These facts are regarded by globalists with much satisfaction. They are taken as a sign that the macro-economy of world capitalism is basically in healthy shape. They indicate that the bigger and stronger capitals are expanding faster than smaller and weaker capitals. Most importantly, they suggest that world labor, natural resources and energy, technology and machinery, biosystems, and other productive inputs are becoming more integrated into the circuits of global capital (economically) and the structures of TNCs and TNBs (organizationally).

The growing importance of foreign trade and investment for world economy suggests that the issue of free trade versus freedom for the trades today has a different economic and political meaning than in the era when German states were organizing customs unions and moving toward a unified German state under Bismarck.

Global free trade in the 21st century in fact presupposes three fundamental changes in the world capitalist system of a type that Bismarck in 1870 was unable to imagine even in his most creative moments – beyond of course the liberalization of trade itself – which today occurs as a result of GATT, NAFTA, WTO, and other multinational agreements and conventions. These three changes are the liberalization of capital markets and increased capital mobility; the deregulation of industry, commerce, agriculture and other sectors of the domestic economy; and the privatization of state (social or public) property and wealth. These changes are both ideological and practical. They represent a new way of thinking about economy and economics that was once confined to economics textbooks and a new set of political economic practices. Together they are called (we can call them) "neoliberalism."

Neoliberalism is regarded by globalist ideologues as an indispensable precondition and also as a necessary result of "globalization." Neoliberalism and globalization are each other’s cause and effect (viewed structurally not historically). A discussion of neoliberalism and free trade thus requires we take note of globalization (or globalism) and free trade. Globalism has a multiplicity of meanings, of which I will note two or three of the most important pertaining to the difference between free trade and global free trade. The easiest way to do this is to set up two ideal types, one a model of nationalist development, the other the model of globalist development.

One nationalist development model: A country willing and able to develop a national economy seeks a balanced and integrated industrial/agricultural development generally and capital and consumer goods production in particular. A nationalist economy is oriented to the domestic market primarily and the foreign market only secondarily. Industry and trade are regulated to promote nationalist development. Economic growth is led by domestic investment, private and public, not foreign investment. Nationalist development is guided and regulated by a government sensitive to the needs of the national economy and its national bourgeoisie (or some functional equivalent, e.g., a dictator, the military). In this model, foreign trade and investment have less to do with comparative advantage and economics generally than with the power of the state to develop a national economy to rival those of its competitors. A devotion to nation-building and a nationalist economy is why the structures of the leading capitalist countries today are basically the same (adjusting for difference in size, arable land, climate, and so on). Such devotion also explains why trade between the leading economies today has less to do with diversifying production or consumption baskets (new high tech processes and products excepted) and more to do with the struggles of a few dozen giant car companies to dominate market share and with a battle between leading capital goods industries to accomplish the same end. Both the car companies and the capital goods and services sector understand that not only North markets are at stake, but also and most profitably, the more rapidly expanding markets in the South.

The globalist model. The ideal typical global model is oriented to foreign markets in both the North and South primarily, domestic markets secondarily. In the North, economic growth is led by new investments in new technologies (products and processes) and by modernizing investments in older industries. The market for capital goods and services in the North is increasingly (if slowly) overshadowed by this market in the South. In the South, economic growth is led by exports which in turn are driven by foreign investments and foreign lending, especially foreign direct investment (FDI) in the form of the modernization of existing facilities taken over by North capital or of the development of new productive facilities. In the South, in place of a national bourgeoisie there is what might be called a global comprador bourgeoisie. World economy consists of one global economy instead of many national economies engaged in overseas trade and investment. The global economy is essentially one huge and complex division of social labor and it is dominated not only by "greedy corporations" but also by the U.S. government, U.S.-style consumerism, and the governments of the U.S.’s (very) junior partners.

The division of social labor between North and South in the global economy is in the real world unbelievably complicated (so I have discovered). In the simplest model, the North produces capital goods and exports to the South as well as within the North. The South produces manufactured components and consumer articles (as well as traditional raw material or energy exports) for export to the North. The result is two-fold: first, the South’s nationalist development (if any) is stopped in its tracks as South economies lose whatever coherence they once might have had (become disarticulated, so to speak), and become more integrated into the global circuits of capital and the structures of TNCs and TNBs. Second, South exports to the North cheapen the cost of wages (or the reproduction costs of laborpower) in the North. Ideally, North working classes consume cheap imports (which however may have high quality/price ratios) and also cheap consumer articles produced by the growing class of immigrant (legal and illegal) workers in the North. Consumer goods tend to be imported and consumer services tend to be supplied by those in the world reserve army of labor who are emigrating to the North.

The cost of the average consumption basket consumed by workers in the North therefore falls. Consumer services, soft goods, and non-durables are cheaper (health services and luxuries excepted). If and when the world car industry establishes a stable oligology, workers in the North will pay more for a new car (adjusted for quality improvements and extras). But more consumer electronics, household appliances and other durable goods tend to be imported rather than produced in the home economy because the imports are cheaper and sometimes better. More household furnishings are also imported as are the cooks, janitorial workers, gardeners, yardmen, and others who keep the small shop and household factory humming for small business and the homeowner. Add fast foods, box stores, and cut-price video outlets and one can safely conclude that real wages in the North can systematically increase without any increase in money wages, which has the double advantage for capital of weakening organized labor and "fighting" inflation. In short, the global model is a perfect instrument for the production of relative surplus value (and profits) on a world scale without much inflation and without having to deal with large and strong unions (unlike in the older nationalist models of development in the North).

Some commentators believe that the logic of the global model of economic development backed by U.S. foreign policy, cultural exports, and the Pentagon leads inexorably to the Americanization of the world. If so, we can say goodbye to corporatist German capitalism, collectivist Japanese capitalism, and nationalist economic, political, social, and cultural characteristics just about everywhere. Or at least these practices will become subordinated to Americanist practices, for example, a reliance on financial markets rather than bank loans and the triumph of shareholder over "stakeholder" capitalism. Certainly the U.S. today is exporting more than GM grains and soy beans, hormoned beef, pop music and Hollywood melodramas, and the like. With the help of the IMF, World Bank, and WTO, tens or hundreds of thousands of technicians circle the globe teaching the peasants how to live American. The Bank’s job is to Americanize world practices in such fields as environmental regulation and health and education practices. The South is being taught that human health and well-being and education are components of "human capital," that the environment is "natural capital," and that community is "community capital." The IMF’s job is to perform essentially the same tasks in the economic and financial fields, for example, to globalize U.S. accounting practices, U.S. tax policies, and the like. The WTO’s job at the moment is to develop definitions of health care (type, quantity and quality), social services, and the like that will work on a global level, not just in the hegemon itself. American neo-imperialism also teaches the world how to police itself, how to handle street violence, how to fight the "war against drugs," how to torture political opponents without leaving any obvious marks of brutality. In the war against Serbia, at first we thought that NATO had taken over from the UN, until we learned that the Pentagon had taken over from NATO, including day-to-day tactical practice. The Europeans also learned that it was their job to clean up the subsequent mess in Kosovo. In sum, one can guess that neoliberal policy and practice imposed by U.S. neo-imperialism, or U.S.-style individualistic hypercapitalism, is essential to the whole globalist project. Seen this way, it becomes clear that the innocent phrase "free trade" is loaded with all kinds of (often unexpected) meanings. Free trade is the exchange of goods and services between countries undergoing politically directed nationalist development. Global free trade is antithetical to nationalist development and oriented to the model of global capitalist accumulation, economic growth, and socio-economic development under the hegemony of the U.S. government and state and its main, often reluctant, allies in Europe and Asia. Free trade promotes nationalist development and the creation of a national economy, the material base for an independent country able to follow an independent foreign policy. Global free trade subverts the nationalist project and increases the dependency of the South and the North (and arguably of Europe and Japan on the U.S.): Free and independent nation-states need not apply (this was also true during the Cold War, for somewhat different reasons). Nation-states which renounce their nationhood and state-ness are welcome. Global free trade is thus indispensable for the model of globalist capital accumulation because it is the link between the orientation of production in the South favoring exports of components and consumer goods to the North, on the one hand, and the orientation of production in the North favoring capital goods for export within the North and to the South, on the other. While the South produces wealth in the commodity form, the North produces wealth in the "capital form" – which is why means of production, technological systems, and so on are called "capital goods" in the first place.

Liberalized capital markets. I have tried to sketch the meaning of "free trade" versus "global free trade" by contrasting a model of nationalist development with the model of globalist development organized by the U.S. and its friends. Next I offer another sketch, this one of the connections between global free trade and neoliberalism. This sketch, like the first, is more an exercise in the logic of the structure of neoliberalism and global free trade than historical narrative. I have tried to include enough history to make the structural analysis plausible, as well as to breathe a little life into what would otherwise appear to be an approach to history based on a structuralist logic (dialectical or otherwise) alone. Like every episode of capitalist history, social conflict and nationalist, class, and other struggles articulate in various ways with economic and social structures and systemic forces. Put simply, the historian of capitalism, like Marx in Das Kapital, which is simultaneously theoretical and narrative history of the best kind, does well to pay equal attention to social structure and systemic forces as to human meaning, human need, and human agency.

"Real capitalist history" including the history of the neoliberalist and globalist project, is both crisis-ridden and crisis-dependent – where crisis means both systemic and closely related social/political turning points in history. The world financial crisis in 1997-1998, for example, was partly the result of systemic forces beyond anyone’s control and partly the effects of social and political actors or agencies "beyond the reach" of these same systemic forces. The actors at the U.S. Treasury and IMF pushed a policy of austerity as a condition for handing out balance of payments loans; politicians, labor leaders and others in Southeast Asia pushed a Keynesian policy of deficit spending to increase aggregate demand the moment that their economies began to spiral downward into a deep slump (a policy finally provisionally backed by the IMF itself). The result in most of Southeast Asia was a short-term recovery – but a recovery based on exports to the high-flying U.S. economy of the late 1990s. When fast U.S. economic growth slackened earlier this year, the Southeast Asian recovery was thrown into question. In July it was not clear whether the region would be playing a positive or negative role in world economic growth in the foreseeable future.

My point is that neither the IMF nor the governments in the region borrowing from the IMF to restore their external balances and to save foreign investors nor the unions and other groups in the region which rejected IMF-imposed austerity (and the austerity imposed by their own governments as well) – no one got their own way. No one was able to identify the tidy cause and effect logic that each might have expected. The sign that system and social crises are at work at the same time is that nobody gets what they want and, at the limit, everybody gets just the opposite of what they expect. (In the "real world" of House Organ, I am making the arbitrary decision to work through the logic of neoliberalism, globalism, and global free trade first, then examine the anti-free trade or fair trade movement [which is also in some quarters an anti-corporate movement] and its contradictions in House Organ, December issue.)

International capital movements in the modern sense were the exception not the rule within the German Zollverein. Loans were typically on public account (banks loaned states money to pay for wars, railroads, and the like) although within particular states banks played the key role in financing and developing private industry. Historically, the international bond market and overseas investments were as much about maintaining empires (e.g., Indian railroads), consolidating the power of the capital city (French railroads), and preparing for war (Russian railroads) as they were about exploiting raw material production, shipping and export (Indian railroads, Cuban railroads). Britain in particular was a master of using her colonies to strengthen British rule as well as British economy. U.S. railroads (and later the freeway system) were built for every conceivable reason, including to put other railroads out of business. U.S. national power was perhaps the most important reason.

Today free capital mobility and a developing world financial market have less to do with foreign trade as a means of nationalist development and more to do with the transformation of many nationalist economies into a single global economy. Without liberalized capital movements it would be difficult to imagine a world of tax-free production zones and export platforms, virtual corporations which contract work to sub-contractors in low wage regions and countries, and various kinds of foreign direct investment which once were the functional equivalent of free trade but which today function to widen and deepen the global development model. Today the most important foreign investments within the North are made to edge closer to a company’s market (e.g., Britain as an export platform for Japanese industry) and nail down a desired market share. In the South the most important kinds of foreign investment including infrastructure are to construct or expand and modernize export platforms of various kinds, to better insert a country’s production and foreign trade into the globalist development model. Private bank and other loans perform similar functions albeit in indirect ways. The global (and imperialist) nature of the system is indicated by the declining proportion of multilateral and North government foreign aid and also of portfolio investments (which give investors no control of production and markets) and the increasing proportion of FDI and private loans. The 1997-1998 financial crisis, especially in Southeast Asia, was the perfect moment for U.S. and other capitals to buy up cheap local infrastructure and especially export production facilities.

In sum, capital mobility and fast-growing world financial markets are oriented not mainly to nationalist development (as were the big four banks of the states of the Zollverien) but to the globalist project and the new global division of social labor. Capital mobility and capital markets make global free trade possible; they also facilitate the expansion of global free trade. Conversely, without global free trade, global financial markets (and systems of bank loans) would not be as liberalized as they are today. This helps to explain why the U.S. Treasury and the IMF refuse to reform the international monetary system, for example, by reapplying controls on short-term capital movements: Such a step backward would slow down or otherwise harm the globalist model of capitalist accumulation.

Liberalized capital movements thus push the world’s "real economy" further into the globalist model, which in turn strengthens the tendency for the creation of a single world capital market. But they also change the way that the world’s "financial" or "money economy" works. Take the example of a single global stock market, a practical project now on the horizon which will realize the dream of every investor. Every capitalist in the world, including corporate and institutional investors, will be able to participate in the growth and profits of every single successful capital unit in the world – in accordance of course with the absolute size of the capital invested (which is the definition of capitalist democracy). Investors will be able to buy into low tech and high tech in every country in the world. If someone invents a new paper and pulp process in Thailand, anyone with money will be able to buy a piece of the technological rent that it generates. If new industry promises fast growth of both productive capacity and profits – investors North and South will be able to share in the founders’ good fortune. Bank loans will become relatively scarce as bankers tell new hot companies to go public in order to give investors the world over the opportunity to exercize their natural-born right to buy some shares in the company.

One shouldn’t underestimate the revolutionary nature of global free trade and capital mobility in the context of a single global stock market. Each and every investor of means will own a part of each and every company with fast-growing profits and/or productive capacity. This means that there would arise (and is arising) a truly global ruling class which (like the U.S. national security state today) will be less interested in the growth of this particular industry or that particular country and more interested in the growth of global capital as a whole. Corporations may remain anchored in this or that place even as they spread their production and marketing networks across continents and oceans. But investors, the owners of the corporations, will have no home nor any need for a home. This is not brand new: Big banks in the U.S. c.1900 were much more interested in financing the most profitable trade – whether it originated in the U.S. or not – hence were in conflict with the nation-state-based corporation. The nation-state was provincial enough to want privileged access to loans and investment funds for their home companies and national exports. Big investment bankers never had a real home in which they wanted to grow up and grow old. The world was both their wilderness to be tamed and their refuge – in the U.S. to the distress of "patriotic" companies and a flag-waving public.

Economic Deregulation. As noted above, liberalization of capital movements (and of course trade itself) is but one leg of the economic stool called neoliberalism. Capital mobility in turn both presupposes and results in two other legs: deregulation and privatization, both of which articulate favorably (for capital) with global free trade and also with one another.

In the neoliberal era, deregulation of the economy got its first shot in the arm in the 1970s with the publication of a book by ex-Boeing economist Murray Wiedenbaum (who incidentally deregulated your editor out of his job in the economics department of Washington University in St. Louis in 1966, on the grounds that I was "not an economist," the proof being that I didn’t use mathematically grounded production functions in my published work, a proof not so much in the eating as in my disinterest in adding water to the ready-mix pudding of the imitation economics of neoclassicism). In his book, Wiedenbaum "proved" that the "costs of regulation" (of communications, transportation and other industries) for the U.S. economy was so many umpteen millions of dollars a day. This won my tormentor the job of Chair of the Council of Economic Advisors, under Reagan, High Priest to the Great Communicator, as it were. Reagan and company promptly supplied copies of Wiedenbaum’s book, together with the standard gift of an Adam Smith necktie, to relevant administration officials. (To his credit, this expert on Boeing Cold War contracts resigned his Washington post; when a mutual friend asked how come, Wiedenbaum said he was tired of having to lie all the time in press conferences, the resignation being the act of a genuine conservative of a type that has disappeared from Washington, DC.)

Deregulation of markets has the immediate effect of causing more competition, when have-not capitals rush in to grab market share hitherto forbidden them. Prices fall, which forces producers or sellers to raise productivity (squeeze workers) and lower costs, which depresses prices and profits further, which leads to an industry shake-out. The strongest capitals, including at times the capital that originally monopolized the particular market in question, push out the weakest. In the U.S. airlines business, this produced a more or less stable oligopoly. In railroad transport it produced a mess while in telecommunications Reagan’s policy set the stage for Clinton’s big giveaway of the airwaves and the incredible confusion Clinton’s people caused in the electrical power sector in the 1990s. In general, deregulation leads to more capital mobility and at least a short period of freer trade; it also is a logical precursor of privatization, as the social and political distance between deregulating a private "natural monopoly" and selling off a state-owned monopoly isn’t so very great. Oh yes, deregulation did away with countless small capitals in retail and wholesale trade and various service industries, opening more space for larger and stronger capitals to fight it out for market share and investment opportunities.

Deregulation here and abroad has promoted the spread of global capital (hence of global free trade and capital markets) and also recomposed the U.S. owning classes to favor a more globalist, less nationalist, bourgeoisie, one which prizes global over national markets. Need I add, deregulation not only hits small business hard but also weakens organized labor. Economists argue about the effects of deregulation on technological change, depending on the model of industrial structure they use and the kinds of assumptions they make with regard to the importance of technological change for capitalist accumulation. Whatever the case, deregulation has helped to cause technology to go more global.

Privatization. The third leg of neoliberalism – equally indispensable to global free trade and capital mobility and deregulation – is the privatization of wealth in the North and the South. Privatization makes society’s patrimony in the form of useful commons, physical capacity, land improvements, air space, and so on available to global investors – at a price – and is justified (legitimated) in public as a bold move to make economies more "efficient," which is capitalese for more profitable. "Efficient" or not, privatization has been very good to investors in the North. First, the world over it opens up excellent investment opportunities which offset to an unknown degree global capitalism’s tendency toward the overaccumulation of capital (too much accumulated capital relative to the expected rate of profit discounted by some interest rate) plus cost-push pressures. This helps in various ways to prevent local and global economic crises. Second, privatization opens up markets hitherto monopolized by the state for foreign and domestic capitals, which usually creates more competition, more investment chances, and a greater volume of trade. Global privatization opens up more global trade. Not so incidentally, privatization also eliminates or weakens powerful state employees unions, which are typically in the vanguard of militant class struggle (perhaps the most dramatic example being in France in 1968).

In the South privatization has another important function. State revenues from the sale of national railroads, airlines, telephone companies, waterworks, hospitals, and so on have often been used to pay the interest on foreign debt and with any luck some of the principle as well. The North has therefore regarded privatization as a key part of the solution to the South’s debt crisis of the 1980s and 1990s – and also as a kind of gift of nature. This is because foreign debt in the South defrayed by the proceeds from privatizing industry, land and other resources was incurred by recycling petrodollars in the 1970s by U.S. and U.K. banks which had acquired these funds at a low cost and could find no lenders other than in the capital scarce South.

Privatization together with liberalization and deregulation moves the world closer to global free trade. Global free trade has a lot of practical consequences, some of which we have noted above. Another consequence is that investors and big corporations distinguish domestic and foreign investment opportunities less and less, as well as home country and world supplies of laborpower, natural resources and energy. The telos of global free trade is a single world market with a ruling single price for not only standard "commodities" (oil, copper ) but also for many manufactured goods (chips, cameras) and perhaps in the auto and a handful of other industries, a world oligopolistic market structure.

In place of a conclusion. In principle, nation-states can keep domestic economic policy separate from foreign economic policy. But the more developed is global free trade, the more difficult and finally useless is it to keep the home economy and world economy in separate policy boxes. At some point, each and every country begins to collapse domestic and foreign policy in the economic sphere into a single set of policies. Governments then begin to prioritize the global market over the national market – because the former is so much bigger and richer than the latter – thus reversing 200 years of industrial development in the North. This has obvious implications for domestic wages, hours and working conditions. Wages are seen less as income and purchasing power and more as costs of production, which must be constantly checked to stay competitive in the global market game. Fewer hours of work and good working conditions are regarded less as artifacts of social progress and more as underutilized labor power and superfluous costs, respectively.

Organized labor is seen as a key barrier to the successful participation in the global free market and obtains less political influence and power. An alliance with the conservative block – which like blue collar workers tends strongly to be anti-global free trade and also to hold pro-conservative social values – becomes a real possibility. As we learn from week-to-week, there are many problems with such an alliance. Labor puts anti-neoliberal or fair trade sentiment ahead of "family values" and the Right does the opposite. Labor struggles for wages, hours, and conditions of work which the Right opposes (the petty bourgeoisie has often allied with labor against big property but only as a tactical marriage of convenience). Perhaps most importantly, labor is anti-globalist but at the same time pro-internationalist in the sense of aiding in a dozen ways labor struggles in other countries. The petty bourgeois right-wing is not. Class politics thus reappears in a big way, at different points along the global free trade trail. In France, the present "red green" national government has decreed a 35-hour week which can only cost France market share in the world economy even as it improves the conditions of life of the average worker hence supplies some political elbow-room for the government to introduce neoliberal reform piecemeal. That day when global finance capital realizes its dream – our nightmare – of a global capital market, a global stock market, one can imagine a "sell France" panic not unlike the "sell Southeast Asia" panic of 1997 if and when workers and their unions, communities, and allies push successfully for deeper reforms. Something like this happened, albeit "only" on the level of a national capital flight, against the Mitterand government in 1981, which seemed to finish off French socialism but didn’t – quite. (In December’s House Organ, I’ll take up the problems of the anti-globalist, anti-corporate movement in the U.S. and the South, seen not in the context of free trade as such but in relation to global free trade as discussed above.) – July 15, 2000.