Michel Chossudovsky, Third World Network; Penang London
Zed Books;, Reviewed by Ziad Ghanem
Chossudovsky’s latest book is essential reading for anyone who is striving to understand the unfolding worldwide economic crisis. This text, which is the result of more than a decade of research by one of the world’s foremost experts on the International Monetary Fund (IMF), the World Bank, and the international financial markets, is basic reference material for understanding the workings of the new global economy. In it, the author has gathered many of his previously published articles, which focus on the impact of globalization on specific countries in major regions of the world. Accompanying these case studies, the first part of the book provides a general theoretical perspective to these developments and a detailed description of the policy instruments utilized by the international financial institutions as the main levers of regulation of the world economy.
In clear, uncomplicated language, Chossudovsky provides a comprehensive, scientific description of the international economic system. His work uncovers the falsity of neo-liberal arguments and demonstrates how beneath all the talk about the so-called ‘free markets’ and deficits, lies the destructive global rule of the transnationals and the financial oligarchies of the advanced capitalist countries. Dissecting the activities of international finance capital, Chossudovsky shows how both in the underdeveloped and advanced economies: “The movement of the global economy is ‘regulated’ by ‘a worldwide process of debt collection’ which constricts the institutions of the national state and contributes to destroying employment and economic activity” (p. 15).
Since the debt crisis of the early 1980s, which was the result of merciless economic warfare and deliberate manipulation of the world financial markets, many underdeveloped countries have come under the direct tutelage of the financial institutions of the advanced capitalist countries, and more specifically, of their main representatives, the IMF and the World Bank. This book fundamentally highlights the process of economic restructuring imposed on developing countries by international creditors. Today, this restructuring forms the basis of international macro-economic management which “‘regulate(s)’ the process of capitalist accumulation at a world scale” (p. 15).
Chossudovsky’s Marxist analysis of the world capitalist system and of its growing economic crisis is centered on the contradiction between the constant striving to minimize production costs which undermines purchasing power and the constant search for new markets. Thus, the IMF-sponsored reforms which have played a decisive role in dramatically increasing unemployment and reducing wages in many countries have contributed to a spiraling crisis of global overproduction and declining consumer demand in both the underdeveloped and the developing economies. “The global economic system is thus characterized by two contradictory forces: ‘the consolidation of a global cheap-labour economy’ on the one hand and ‘the search for new consumer markets’ on the other” (p. 17).
In a system that generates overproduction, transnationals can only expand their markets by concurrently destroying most domestic production geared towards the internal market of the developing countries. The destruction imposed on the real economy, however, is intertwined with the growing instability of the global financial system. Compounding the situation, the ongoing wave of corporate mergers and amalgamation of financial activities has
paved the way for the consolidation of a new generation of financiers... While these ‘money managers’ play a powerful role in financial markets, they are, however, increasingly removed from entrepreneurial functions in the real economy (In fact), the daily turnover of foreign exchange transactions is of the order of $1 trillion a day of which only 15 per cent corresponds to actual commodity trade and capital flows. (p. 20)
The extremely profitable activities of these financiers include speculative transactions, which can overnight collapse any underdeveloped country’s currency, siphon off its foreign exchange reserves, bring its economy to a halt, and precipitate into perpetual debt bondage its most valuable wealth-generating resources.
The roots of the present economic crisis in the underdeveloped and the former socialist countries can be traced to their integration into the international market as debtor nations. Today, their cumulative long-term debts exceed US$2 trillion dollars and have relegated these countries to a form of debt slavery, with devastating impacts on their economies and populations. In placing these consequences in a more general historical perspective, Chossudovsky writes:
In both the South and the East, the compression of living standards since the early 1980s ... has been considerably greater than that experienced by the rich countries during the 1930s. The globalization of poverty in the late 20th century is unprecedented in world history. This poverty is not, however, the consequence of a ‘scarcity’ of human and material resources. Rather it is the result of a system of global oversupply predicated on unemployment and the worldwide minimisation of labour costs. (p. 26)
The austerity measures and compression of domestic consumption imposed around the globe in order to free up resources for the servicing of foreign and domestic debts have generated a vicious circle. On the one hand, the contraction of purchasing power in most countries of the world is creating a worldwide economic recession. While on the other hand, the deregulation of financial markets and the recessionary wave are aggravating debt-servicing burdens and increasing financial instability. The demand for exports from all the major centres of world capitalism is now more difficult, which is impacting on the profitability of most major transnationals, and slowly but surely bringing the most advanced capitalist countries into recession.
Recently, many economists and policymakers in the West have begun to realize that the growing global recession is intertwined with the speculative activities of the financial markets and the unmanageable debt burdens of most countries around the globe. Pressures for reforming the international financial system are mounting, however, Chossudovsky is correct to warn those still holding on to liberal illusions that: “There are no ‘technical solutions’ to this crisis,” and, “meaningful reforms are not likely to be implemented without an enduring social struggle.” For in the end, it is not the mismanagement of world capitalism that is the problem but fundamentally, “the massive concentration of financial wealth and the command over real resources by a social minority” (p. 27).
Chossudovsky’s book is an invaluable contribution toward clarifying the issues that surround the present global economic crisis. It is an essential addition to any Marxists library.
