Globalisation: Uneven and Combined Capitalist Development

The need to expand into foreign markets

Although capitalist development gradually created a single world market, this mode of production initially emerged only in a region with certain conditions, the West, where feudalism flourished. It is well known that human history does not have a uniform line of progress. While the feudal mode of production prevailed in the West, the Asian mode of production prevailed in the East. This mode of production, in which there was no private ownership of land, created vast and powerful despotic empires. Unlike the development in the West, these empires lacked the ability to undergo a capitalist transformation through their own internal dynamics. Capitalist relations began to develop in the West, where the feudal mode of production was dominant, and from there spread throughout the world. The spread of capitalism across the world took place in a process based on inequality in terms of time and speed.

The expropriation and expulsion of a significant part of the agricultural population not only freed laborers, their means of subsistence and labour materials for industrial capital, but also created an internal market. While capitalist development continued its progress by abolishing pre-capitalist relations of production and the political and legal forms deriving from this basis, it put an end to the local and closed economic life of earlier periods. By weaving a network of national market, it made possible the formation of national unions and nation-states.

Lenin pointed out that capitalist development brings together small local markets, unites them into a large national market and then into a world market. Thus capitalism, by destroying primitive forms of slavery and personal dependence, by developing in depth and breadth the seeds of contradictions among the community peasantry, was also paving the way for their resolution.[1] This process of transformation, which the petty-bourgeois left regarded as an absolute destruction, actually served a constructive historical function in a sense, by developing and growing the proletariat, which would create a classless and exploitation-free future for human life.

Capitalism cannot be satisfied with progress within the borders of a single sector, region or nation-state, nor with the creation and development of a single internal market. In order to survive, it must have a fluidity that constantly expands its bed. For this reason, the capitalist mode of production has needed to expand beyond its borders from the very beginning of its domination and has raised the question of foreign markets. As a matter of fact, Marx states that capital, trying to protect itself against the tendency of the average rate of profit to fall, would see foreign trade as an outlet for itself. In his words, “…whereas the expansion of foreign trade was the basis of capitalist production in its infancy, it becomes the specific product of the capitalist mode of production as this progresses, through the inner necessity of this mode of production and its need for an ever extended market.” [2]

Capitalism is not a process of simple reproduction based solely on the reproduction of capital itself, but a process of expanded reproduction in which a significant part of the surplus-value created in each cycle of the production process is added to capital. Part of the total value of commodities produced goes to pay for the necessary or luxury consumption of various classes, while another part has to be allocated to new investments. Capitalism proceeds with a tendency towards accumulation that dictates the constant expansion of production. Therefore, the expansion of both domestic and foreign markets is imperative. Capitalism exists in the need to globalize its sphere of domination and to bring non-capitalist countries into the wheel of the world economy.

The problems that arise from such needs have been the subject of various debates among Marxists since earlier periods. For example, it was argued that the domestic market in developed capitalist countries was not sufficient to realize surplus-value. Rosa Luxemburg argued that the part of surplus-value that could not be realized in capitalist countries was absorbed by lands that had not yet been capitalist and that capitalist accumulation could continue on its way.

Rosa Luxemburg’s starting point is that Marx’s models of expanded reproduction are flawed. According to her, the two-class system (bourgeoisie and proletariat) assumed in these models would not work because there would be no demand for the part of production that contains surplus-value, neither from capitalists nor from workers. Luxemburg argues that accumulation is impossible in a purely capitalist environment and that “Capital accumulation progresses and expands at the expense of non-capitalist strata and countries, squeezing them out at an ever faster rate.” [3]

According to Rosa’s assessment, the capitalist system, driven by the search for new markets and the tendency to expand, will eventually absorb non-capitalist countries and regions, and this will bring about the end of the capitalist mode of production. When capitalism dominates the entire world, Marx’s two-class model will become valid, but this moment will actually signify the extinction of capitalism. Once this moment is reached, “accumulation, i.e. the further expansion of capital, becomes impossible”. In sum, in this analysis, thus “capitalism comes to a dead end” and “reaches its objective economic limit.”[4]

It is correct to point out that the capitalist mode of production is historically transient and will lose its potential for vigorous development as it ages. But surely capitalism will not collapse spontaneously in the way Rosa’s statement implies. The exhaustion of non-capitalist spheres, in other words everywhere becoming capitalist, will not simply end the possibility of capitalist accumulation. For despite all the threats and degeneration it poses to humanity and nature, despite the crises of ever-increasing destructive dimensions, capitalism can maintain its cyclical growth. On the basis of the new “needs” it imposes on the masses, it can create new markets, if not geographically, then socially; it can utilize existing markets more deeply. The big capitalist countries have been practicing this for years, both in their domestic markets and in the spheres of influence and foreign markets they control, and they can do so.

It is important to underline that when analysing the bottlenecks of capitalist functioning, one should not establish a one-to-one and mechanical relationship between the problem of foreign markets and the problem of realization. The problem of realization is embodied in the growth of unsaleable commodity stocks, and this problem concerns not only the part of production that supposedly contains surplus-value, but the commodity produced in general. Even if all the possibilities of foreign markets are taken into account, it is known that not all the commodities produced can be sold on a regular basis and that some of them will remain stuck in the circulation process.

The problem of realization, which periodically manifests itself in crises of overproduction, is a problem arising from capitalist functioning, regardless of the distinction between domestic and foreign markets. Involving foreign trade in the analysis of annual reproduction values does not add a new dimension to the problem or contribute to its solution, but only complicates it.[5] This is why Marx says that factors such as foreign markets and foreign trade should be excluded altogether when analysing the problem of realization. Moreover, the boundaries of markets are not determined geographically but by the development of the social division of labour. And technical progress constantly expands markets. The impasse of capitalism is not lack of development, but “excessive”, “unbalanced”, “disproportionate” development. Indeed, Engels addresses this problem and explains that the expansion of markets cannot go hand in hand with the expansion of production.[6]

Lenin also criticized bourgeois economists who explained the cause of capitalist crises on the basis that it was not possible to sell and consume products in the domestic market, and stated that such approaches would lead to completely wrong conclusions. To consider capitalist crises in this way leads to the idea that capitalism can avoid crises if it gains wider foreign markets. Lenin said: “The need for a capitalist country to have a foreign market is not determined at all by the laws of the realisation of the social product (and of surplus-value in particular), but, firstly, by the fact that capitalism makes its appearance only as a result of a widely developed commodity circulation, which transcends the limits of the state. It is therefore impossible to conceive a capitalist nation without foreign trade, nor is there any such nation.”[7]

The basic motive of capital is to find more profitable investment areas wherever it is. The factor that forces capitalism to resort more and more to foreign markets is its struggle with its internal contradictions. The existence of foreign markets, however, does not eliminate these contradictions. Due to the unplanned and anarchic nature of the capitalist mode of production, disconnection between the production process and the circulation process, imbalance and unevenness between production and consumption exist at all levels and at all times. Capitalism carries its own obstacles in its own internal structure. In Marx’s words, “the true barrier to capitalist production is capital itself”.[8] It is not possible for capitalism to escape the crises resulting from the cycle of overproduction.

If we go a little deeper into the question, we find that the need for foreign markets is closely linked to the law of uneven development. As Lenin emphasized, the various branches of industry that serve as markets for each other do not develop evenly, but outstrips one another and the more advanced industries seek foreign markets.[9] The problem of foreign markets, which becomes more acute with time, is a general problem of capitalism. In other words, this problem did not arise specifically with the stage of imperialism. In fact, imperialism is the product of a dialectical process of development, which implies the maturation and crystallisation with seven-league boots of the main features inherent in capitalism.

The law of uneven development of capitalism has a dual function. On the one hand, it ignites new crises; on the other hand, it creates the ground for capital that is blocked in one place to find a new opportunity elsewhere. Capital is always in search of areas where the rate of profit will be higher, and when it finds them, it wants to, and can, flow into these areas. All in all, the capitalist mode of production moves along with a variety of factors and opposing tendencies that have both positive and negative effects.

Although the imperialist stage of capitalism exacerbated the problem of foreign markets, the absorption of new regions and countries into capitalist functioning meant a relative relief in terms of the expansion of the system. Undoubtedly, this relief can only be realized on the basis of uneven development in the various capitalist countries, but it is realized. The fact that such developments bring about new upheavals in the new regions opened to capitalism does not eliminate the tendency to integrate into the capitalist system.

This feature has been proved by many developments since the 60s. Thus, the views that overestimated the significance of national liberation struggles and the claims that the so-called “third world” countries could not be transformed into vast markets for the imperialist powers have also been proved wrong. Despite all the new problems, twists and imbalances it has created, imperialist capitalism has continued and can continue its advance in countries and regions that were not previously integrated into capitalism.

Growing problems

In the “normal” course of capitalism, capitalists seek and find new foreign markets. However, in times of great crises like 1929, the problems created by overproduction grow exponentially and affect the entire capitalist system. Thus, the existing foreign markets also shrink and become inadequate under the impact of the shocking crises. Such convulsive periods are historical episodes that expose the weaknesses of the capitalist mode of production. As more commodities are produced than the masses can buy, millions of people on the planet are sucked into the vortex of poverty and unemployment.

The integration of new regions opening up to capitalism into the system does not mean the simple exhaustion of market opportunities. Capitalism can and must keep markets alive by creating new consumption needs. Thus, capitalism has the chance to create and exploit new opportunities over a certain historical period. However, it is also an inevitable reality that it will eventually lose its former vitality. Above all, the older capitalism gets, the more socialized the productive forces become and the more they come into conflict with the private ownership of the means of production.

As a result, the system is gradually losing its former feverish pace in terms of creating new possibilities. This historical trend does not mean the spontaneous collapse of capitalism or its absolute limits. But as we are experiencing today, it is manifesting itself in crises of such seriousness that even the bourgeoisie is deeply concerned. Global capitalism is being dragged into a situation in which the rivalry between the various imperialist powers is becoming much sharper. As a matter of fact, today’s escalating tension on a world scale and the spread of new wars of division are the realization of all these tendencies.

The widespread layoffs, the fall in workers’ wages and the cuts in investment expenditures, coupled with the successive crises that have erupted today, have a negative impact on aggregate demand and fuel the tendency towards stagnation. Monopoly capitalism tries to intervene in such problems through the widespread credit mechanism. However, the skyrocketing amount of unpaid debts is creating new bottlenecks in capitalist functioning.

Total consumption expenditure is, of course, not limited to the commodities which are the subject of individual consumption and which come to mind first. All commodities that enter the production process as raw materials, auxiliary materials, tools of labour, etc., constitute another important part of general consumption, which we call productive consumption. These productive consumption expenditures, which amount to huge sums, are also the subject of a gigantic credit mechanism and the problem of debts. The problem of debts, which is multiplying and becoming insurmountable, has become the hallmark of global capitalism today.

Capitalism needs to constantly increase productivity in order to increase the surplus-value to be milked from the working class. This means an increase in the amount of dead labour relative to the amount of living labour used in the production process, i.e. an ever-increasing rate of mechanization. It also means a rise in the organic composition of capital and therefore a fall in the average rate of profit in various sectors.

 In an effort to counter this tendency, big capital may flee from advanced capitalist countries to developing regions and countries. This movement may create the possibility of a slight increase in the average rate of profit in certain areas, and may encourage industrialization and the employment of workers in the countries to which capital moves. Such economic mobility has the potential to expand the capitalist market in general and to produce more favourable results in terms of profit realization.

But the realization of this potential ultimately depends on foreign capital’s ability to bear new expenditures and additional risk factors. However, capital is not motivated by a long-term, planned and hard-working course of action, but rather by the desire to make the highest profit in the shortest time and in the most effortless way. Despite all the rosy pictures that are being created about globalisation, it is obvious that capitalism cannot completely get rid of its inherent inhibiting tendencies. Given the problems inherent in the internal laws of this system, there is no reason to believe that globalisation under capitalism will lead humanity to a trouble-free and prosperous future. Moreover, events point in the opposite direction and amply confirm that the true barrier to capitalist production is capitalism itself.

The most striking proof of this situation is the fact that practices that seem to solve problems in one period create new problems in the next. For example, Keynesianism was once put on the agenda in order for the capitalist system to develop an alternative to the statist social security policies implemented in the USSR. In this way, the aim was to revive class-compromising policies, especially in advanced capitalist countries, and to pacify the revolutionary processes developing in Europe.

Keynesian practices, marketed under the labels of “welfare state” or “social state”, had the characteristics of relieving the pressure that the unemployment problem put on the capitalist order and stimulating aggregate demand. Moreover, these practices were compatible with the conditions of capitalism’s post-war boom period. As such, in the eighteen countries listed in the list of advanced capitalist countries, the ratio of total public expenditure to GDP was 11.9 percent in 1913 and 22.4 percent in 1937, while this ratio later climbed to 40 percent. However, the “welfare state”, which had for a while been seen as a positive solution, was to be discredited as the system was plunged into a serious crisis.

The expression of the imperatives of the new era was economic doctrines like Friedmanism, which advocated the abandonment of economic and social life to the jungle laws of the market. It was no coincidence that in 1976 the Nobel Prize in economics was awarded to Milton Friedman, a fervent advocate of anti-Keynesianism. And in fact it was a harbinger of a new era to come. Capitalist statism came to be seen as the creator of problems such as growing debts and budget deficits that were gripping even rich capitalist countries.

In the 80s, the “welfare state” was made the target of attack by the new wave of the right wing, promoted by bourgeois leaders such as Thatcher, Reagan, Özal and others. These economic doctrines, called neoliberalism because of their reassertion of the so-called invisible hand of the market, were accompanied not by liberalism in the political sphere, but on the contrary by reactionary and aggressive practices of capital. What were once seen as solutions to unemployment and lauded as positive measures to increase the purchasing power of the masses were to be rolled back one by one through cuts in social funds and privatization.

However, doing so has not helped capital. This time too, capitalism is facing a serious recessionary trend and growing mass unemployment, which it cannot cope with. As a result, capitalism is unable to free itself from the enormous imbalances and inequalities that are ripe for catastrophic crises. Capitalist globalisation is producing all the contradictions and dilemmas of the system at the global level and adding shocking dimensions to the crises at the global level.

Underneath all these developments, in fact, there are some aspects that are of paramount importance for the revolutionary struggle of the proletariat. The progress made in the universalization of capitalist relations has made the fact that the proletarian revolution is a world revolution much more striking than in the past. Global development is making capitalism more and more fragile by making it a much more organic whole and by globalizing crises. The irony of history on the side of the working class is that globalisation, which the bourgeois front presents as capitalism’s elixir of immortality, has strengthened the possibility of the spread of revolutionary situations many times over.

Tendency to stagnation and accumulation

The transition from the so-called free competition period of capitalism to the period of imperialism dominated by monopolization brought with it a rapid pace of development and increasing contradictions. While monopolization leads to enormous economic growth in absolute terms, in relative terms it involves a tendency to stagnation. This is why Lenin described the epoch of imperialism as decay and parasitism. This observation is confirmed by the development tendencies that are making themselves felt in many areas.

The big monopolies that control the world’s investment fields have completely subordinated technological development to their own profit motives. That is why they put the brakes on possible and positive technical transformations, such as the use of solar energy instead of fossil fuels. Since monopolization makes it possible to reach the targeted mass of profits through investments in some limited but highly profitable areas, investments in some areas can be curtailed. Monopoly capitalism expands the rentier class and increases the number of parasitic elements living on coupon incomes. All these factors are tendencies to limit the enormous vigour that capitalism once had.

At the same time, monopolization increases the intensity of competition to such an extent that only powerful and large capital groups that operate more efficiently than others can keep pace. As a result of the tendencies of competition and mergers between different groups of capital, capital is concentrated and centralized in certain hands. Thus, capitalist development acquires a truly monopolistic character not only in the big imperialist countries but throughout the system. But the benefits of this monopolistic development cannot be the same for the economy of each capitalist country. A significant part of the surplus-value created by the working class in developing capitalist countries is transferred to the imperialist countries, which are the major partners of the multinational monopolies. Therefore, the consequences of monopolization are also unevenly distributed.

The capitalist system is a tangle of contradictions. Many economic phenomena are shaped on the basis of the dialectical unity of opposing movements. For example, the tendency to stagnation provoked by monopolization and the tendency of capital to accumulate form a contradictory unity. Therefore, the parasitism and decay caused by monopolization is a historical tendency and does not mean that economic growth will be curbed in absolute terms. Identifying capitalism as parasitic and decaying implies that the obstacles of private property and the nation-state, which impede the development of the productive forces, are becoming increasingly intolerable. The productive forces are still developing, but this development is destined to fall far short of the material and moral level that can be achieved under a community of free producers (communism).

It is known that under capitalism every period of feverish economic development is also a period of overproduction. For this reason, it is obvious that the capitalist economy cannot always grow at the same pace, that it will face bottlenecks, and that sometimes severe crises occur. Indeed, in the period between the First and Second World Wars, capitalism was plunged into a serious stagnation and a great depression that threatened the very existence of the system.

The economic superiority of the USA, which survived the Second World War without suffering destruction, was instrumental in capitalism’s recovery from the great depression and its transition to a new period of ascendancy. The period of economic investment undertaken by American imperialism in the capitalist countries that were defeated in the war and in the former colonial and semi-colonial countries that gained political independence gave the capitalist system a new leap forward. The capital poured into the war-torn European countries by the US under the Marshall Plan and the establishment of the dollar as a stable international currency by the Bretton Woods agreement enabled Europe to recover in a short time.

After the war, policies were put in place to increase aggregate demand and reduce unemployment. On the basis of the increasing intervention of the capitalist state in the economy, there was a significant revival in which social spending and consumption expenditures of the population increased. The credit mechanism, which plays a crucial role in the functioning of the capitalist economy, became the engine of the long post-war boom. Germany and France, recovering from the wounds of the war and once again on the track of vigorous economic development, set about paving the road to the EEC/EU, this time in order to gain competitiveness against the USA. In fact, the objective ground that would confront the capitalist system with another major crisis had not changed, the vortex of overproduction-stagnation had not disappeared. The inherited diseases of the capitalist system were still the same. But for a relatively long period of time, capitalism was once again able to achieve significant economic growth.

Let us underline an important point here again. Capitalism is a system of imbalances. Economic policies that, for example, increase social spending and pump resources into the economy through state loans, put new burdens on state budgets and ferment future devastating crises. But they can also enable dramatic growth until new crises break out. This course of action of capitalism may seem illogical from the point of view of an abstract rationalism, and the tendency to unbalanced growth may be confused with the reality of depression. Yet it is precisely on these “irrational” grounds that economic growth under capitalism can take place.

One should not look for a rationality in capitalist functioning that it does not and cannot possess. Capitalist development is embodied in the midst of a series of inequalities and disproportions by the very nature of capitalism. The petty-bourgeois left, unable to grasp this, is fond of interpreting the crises of capitalism as its inability to develop. Lenin criticized the widespread petty-bourgeois incomprehension of his time: “A large number of errors made by Narodnik writers springs from their efforts to prove that this disproportionate, spasmodic, feverish development is not development.”[10]

In the aftermath of the Second World War, there was a period of disproportionate, tumultuous and feverish growth, just as Lenin’s lines remind us. The factors that made growth possible then created its dialectical opposite, and the system was again shaken by serious ills. Growing budget deficits plagued capitalist states. Likewise, the credit mechanism was the source of an enormous increase in public and private debt. Thus, following a period of feverish growth, the capitalist economy was completely unable to cope with the monster of overproduction that it had created. The volume of world trade contracted, the average rate of profit fell, unemployment rates soared.

It should not be forgotten that during the period of economic boom following the Second World War, the strong hegemonic position of the US in all respects was reflected in the dollar’s status as a sound international currency. At the same time, this situation points to a relatively trouble-free period of the capitalist system. The new and problematic period that began in the 70s finds its expression in the loss of the former dynamism of the US economy and the destabilization of the dollar. As a matter of fact, the convertibility of the dollar into gold was ended in 1971 and the fixed exchange rate system in 1973. But the US is still the engine of the system. It maintains its positions in terms of the political and military pillars of its hegemonic position. However, the problems accumulating on the economic front raise doubts about the future of the US. What is generally striking is that the structural problems that often shake the weaker links of the system are increasingly gripping the advanced capitalist countries as well.

The illnesses of the system had actually started to signal themselves as early as the 70s. Nevertheless, economic vitality and growth were tried to be maintained for a long time at the expense of raising the fever of the sick body. The real state of the capitalist economy, whose sickness deepened the more it struggled, first manifested itself in Europe and Japan with an undisguisable tendency to stagnation. When the crisis broke out in Mexico in 1982, it threatened world capitalism by jeopardizing the payment of foreign debts. Towards the end of the 90s, it brought down one Asian Tiger after another. Finally, the capitalist globe’s hegemonic country, the United States, has also begun to stumble. This shows that capitalism did not make a very bright entry into the 21st century.

Let it not be misunderstood, the process of capital accumulation continues to function under intensified monopoly; otherwise, capitalism cannot survive. However, capital accumulation now proceeds at the expense of system crises, which are making themselves felt more and more violently and for longer periods of time. If it is not overthrown by a massive struggle of the working masses, the history of capitalism in the 21st century will be a history of extraordinarily destructive and protracted system crises that threaten human life.

Today, the capitalist system is unable to cope with the tendency to stagnation. The stagnation brings new debates and polarizations in the capitalist world. The current situation inevitably escalates the rivalry between the imperialist powers and fuels military expenditures. According to 2004 year-end figures, the world spent 900 billion dollars on armaments, equal to the GDP of Turkey (300 billion dollars) and Brazil (600 billion dollars) combined.

Bourgeois circles themselves have begun to complain that this increase in military expenditures will exacerbate the problems of poverty in the world, while social expenditures are constantly being cut. Some far-sighted bourgeois ideologues are once again suggesting that increasing social spending could be the answer to the recession. It is clear how wrong it is to assert that capitalism will never again risk the great wars of division of the past, or that Keynesian practices will never again be resorted to. The bourgeois state’s intervention in the economy in one direction or another is always motivated by the needs of big capital. As long as the political conditions are in its favour, capital can create an economic outlet for itself. Let us never forget that unless it is overthrown by the revolutionary struggle of the working class, capitalism can continue on its way despite its deepening problems and contradictions and the suffering it inflicts on humanity.