I enclose here 35 arguments along Aminean and Arrighean lines for our
current debate in the world system network about development theory, which
I rapidly assembled from ongoing research. I hope the technical aspects of
the transmission work.
35 Elements of a theory of decay
by Arno Tausch, Attaché for Labor and Migration, Austrian Embassy Warsaw.
Opinions expressed in this paper, are exclusively those of the author
1) Civilizations as such, recent comparative research teaches us, are
transitory in nature. When there is a 500 year cycle over the last 10000
years, consisting of a 250 years of rise and a 250 years of decline
(Chase-Dunn and Hall, 1997) for civilizations as different as Peru, the
Hawaiian islands, Ancient Rome, why should it be different this time in the
case of capitalism? And what about those destructive forces of
center-periphery relationships, ecological and social constraints brought
about by patterns of exploitation of labor and unequal exchange, mass
migration processes and the inability of systems to defend their outer
borders in the end? Disturbing as such questions may be, they are more
relevant than ever before, when problems like the trilateral relationship
between the capitalist center powers, transnational integration patterns,
geographical shifts in world accumulation, and, finally, threats of global
environmental catastrophes, anarchy in large parts of the world, and mass
migrations are on the agenda.
2) In a way, our theoretical understanding also goes back to the thought of
Giovanni Arrighi, who proposed in his provocative analysis of the 'Long
20th Century' (1995) the thought that the logic of accumulation on a
world-scale is governed by the ups and downs in the succession of
regulation and de-regulation, starting from the Venetian (regulatory) and
Genoese (deregulated) era of capitalism, followed by the Dutch (regulatory)
and British (deregulated) era, and the US hegemony, which - after 1945 -
was a regulatory model. From the late 1970s, however, we witness, Arrighi's
argument goes on, again the renewed rise of a deregulated model of world
capitalism. The often bemoaned end of the Keynesian era has its real basis,
Arrighi's argument goes, in the shifting accumulation pattern of world
capitalism. We agree with Arrighi that the rise of financial capitalism and
the decline of productive capitalism are always connected to major shifts
in the location of the centers of world capitalism, first from Venice to
Genoa, followed by the shift from Genoa to Amsterdam, from Amsterdam to
London, from London to New York, and from there on to the capitalist
archipelago of East Asia today (Arrighi, 1995). Arrighi also introduced the
important notion, that there is a certain coexistence in the
time-perspective between the 'different logics', so that elements of the
waning and elements of the emerging order might coincide for years.
Arrighi's sequential model of world capitalism is also a historic
interpretation of the old Marxist notion of financial expansion - >
material expansion- >financial expansion (MCM'), and as such radically
challenges the notion of 'unchanging' general laws of rise and decline
under world capitalism. Following Arrighi, we postulate that regulatory
strategies might have been well compatible with growth under the rise of
the Venetian, Dutch, and American era, while at the time of the rise of
'deregulation', such deregulatory strategies and not 'big government' will
be conducive to economic growth.
3) What also should be carried over into the future debate is the pressing
need to focus our research capabilities on the variety of crisis symptoms
that the world is now facing in the process of transition from world
hegemony to system de-concentration. Where the present author especially
agrees with Joshua Goldsteins results is the emphasis on the fact, that the
next 25 years will be determining the issue of war and peace for the next
century. Past history suggests, that - due to the very logic of unequal
development - peace does not occur, and that the underlying tensions in the
capitalist world economy enhance national conflict. All this is compounded
today by tendencies for national disintegration in countries as far apart
as India, Italy, and Russia. So, Sunkel first proposed in his
'Transnational capitalism and national disintegration (in Latin America)'
the still provocative thought, that transnational investment and
integration might go hand in hand, under certain conditions, with an
increasing relative social polarization between rich and poor in the host
countries of the evolving transnational system and on the international
level. For the strategists of European integration, this hypothesis has
many and disturbing implications. Needless to say, this simple statement is
heavy ammunition for the debate that goes on in many parts of the world,
especially in Europe and North America, about the advantages and
disadvantages of accelerating continental integration processes like the
European Union and NAFTA. At that time, Sunkel said:
'The interpretation so far advanced suggests that the international
capitalist system contains an internationalized nucleus of activities,
regions and social groups of varying degrees of importance in each country.
These sectors share a common culture and 'way of life', which expresses
itself through the same books, texts, films, television programs, similar
fashions, similar groups of organization of family and social life, similar
style of decoration of homes, similar orientations to housing, building,
furniture and urban design. Despite linguistic barriers, these sectors have
a far greater capacity for communication among themselves than is possible
between integrated and marginal persons of the same country who speak the
same language (...) Modernization implies the gradual replacement of the
traditional productive structure by another of much higher capital
intensiveness (...) On the one hand, the process of modernization
incorporates into the new structures the individuals and groups that are
apt to fit into the kind of rationality that prevails there; on the other
hand, it expels the individuals and groups that have no place in the new
productive structure or who lack the capacity to become adapted to it. It
is important to emphasize that this process does not only prevent or limit
the formation of a national entrepreneurial class, as indicated by Furtado,
but also of a national middle class (...) and even a national working
class. The advancement of modernization introduces, so to speak, a wedge
along the area dividing the integrated from the segregated segments (...)
In this process, some national entrepreneurs are incorporated as executives
into the new enterprises or those absorbed by the TRANCO (i.e.
transnational corporations), and others are marginalized; some
professionals, forming part of the technical staff and the segment of
employees are incorporated, and the rest are marginalized; part of the
qualified labor supply and those that are considered fit to be upgraded are
incorporated, while the remainder are marginalized.
The effects of the disintegration of each social class has important
consequences for social mobility. The marginalized entrepreneur will
probably add to the ranks of small or artesanal manufacture, or will
abandon independent activity and become a middle class employee. The
marginalized sectors of the middle class will probably form a group of
frustrated lower middle class people trying to maintain middle class
appearance without much possibility of upward mobility and terrorized by
the danger of proletarization. The marginalized workers will surely add to
the ranks of absolute marginality, where, as in the lower middle class,
growing pools of resentment and frustration of considerable demographic
dimension will accumulate (...) Finally, it is very probable that an
international mobility will correspond to the internal mobility,
particularly between the internationalized sectors (...) The process of
social disintegration which has been outlined here probably also affects
the social institutions which provide the bases of the different social
groups and through which they express themselves. Similar tendencies to the
ones described for the global society are, therefore, probably also to be
found within the state, church, armed forces, political parties with a
relatively wide popular base, the universities etc.' (Sunkel, 1972: 18-42).
The relative polarization effects along the welfare borders of the world,
which happen to be the outward borders of the economic integration zones,
built up by the rich countries, are the basic conflict that confronts the
process of transnational integration, and especially European integration
today. The second basic conflict is the tendency towards increasing social
exclusion in the trasnationally integrated core areas and in the
semi-peripheries and peripheries themselves. Suffice to look at
contemporary Mexico after NAFTA to find preliminary evidence that speaks in
favor of Sunkel and against the optimistic predictions of the
integrationists. In the words of contemporary journalists:
Le Monde Diplomatique for April 97 reported the latest research into
the incredible pace of the concentration of Capital. This is leading
to what Le Monde calls a "A Global Government of the Multinationals".
It reports that, Eastern Europe and the Former Soviet Union have been
"colonised" in the name of "the glories of the free market" and
that, inspite of 41 million unemployed in the advanced capitalist
countries, "the manufacturing industries worldwide (excepting those of
China) only operate at 70-75% of their capacity". "The top 200
companies are conglomerates whose planetary activity cover all sectors
without distinction, the primary, secondary and tertiary, the grand
agricultural exploiters, the manufacturers, financial services,
commerce, etc. Geographically they are divided between ten countries:
Japan (62), the United States (53), Germany (23), France (19), Britain
(11), Switzerland (8), South Korea (6), Italy (5) and the Low
Countries (1)." Their turnover at 7,850 trillion dollars was equal to
30% of world GNP in 1995. Le Monde Diplomatique explains that in
reality the concentration is even greater than the figures indicate.
For example the world's number one company Mitsubishi owns five
companies in the top 200. Their empire pays 37% of the funds of the
Liberal Democratic Party of Japan thus completely corrupting the
political system. In South Korea, 6 of whose companies leapt into the
top 200 between 1985 and 1995, Daewoo the largest, now has a turnover
of over $ 52 billion (US), ahead of Unilever and Nestle. The largest
30 company groups in South Korea have a turnover over 4/5ths of the
country's GNP. These companies support the, "ruthlessly repression of
the working class and the liquidation of the rights of the
individual", says the report. Such dictatorial concepts pervade in the
older centres of world capital as well. The Director General of
Nestle, Helmut Maucher presides over the European Round Table of
Industrialists, the elite club of 47 companies. "An implacable
opponent of the European Social Chapter, he is an militant fighter for
the flexibility of work, like all the members of this caste". Le Monde
Diplomatique explains that the "Global Government of the
Multinationals" is run by "Totalitarian Structures". This latest
evidence of the increasing concentration of wealth and their
dictatorial hold on political and economic life, comes after the
shocking United Nations Human Development Report 1996. This revealed
that, "the assets of the world's 358 billionaires exceed the combined
annual incomes of countries with 45% of the world's people." (p2) The
UN Report showed that the idea that, "the only way to finance growth
would be by channelling the initial benefits into the pockets of rich
capitalists"...has ..." been disproved by recent evidence of a
positive correlation between economic growth and income
equality"...(p6) If there is not a radical shift towards
egalitarianism and control of the major corporations in the interests
of working people, then the predictions of the UN, of a "world
gargantuan in its excesses and grotesque in its human and economic
inequalities", will become a terrible reality. Trade Unionists and
Socialists worldwide must make it their responsibility to combine
together through computer networks which will link the unions in the
largest 200 companies together. In this way we can act to defend the
workers, protect the environment and the consumers. Unions monitoring
the activities of these companies will be able to shatter their
"Totalitarian Structures", establishing in their place direct
democratic control over decision making processes through worldwide
workers' councils.
(WNR Editorial 28-4-97) heiko@easynet.co.uk
4) Living and working in Eastern Europe one cannot but remember the
important lessons of dependency and world system research for an
understanding of what surrounds us. Income poverty has spread to a third of
the population of the region - 120 million people below the poverty line of
$4 a day (UNDP, 1997). Pressure towards peripherization in Eastern Europe
builds up, thus vindicating the more pessimistic prognosis voiced by Samir
Amin (1997) about the 'Latin Americanization' of Eastern Europe
5) Transnational corporations and their foreign investments are the
cornerstone of the international system, as Osvaldo Sunkel so correctly
foresaw in his penetrating analysis a quarter of a century ago. The outward
stock of foreign direct investments of 39000 parent firms in their 270000
affiliates reached $2.7 trillion in 1995. The gross product of foreign
affiliates amounted to 8.7% of home country GDP in the countries of the
European Union in 1991, the last year with available data. In North America
this ratio stood at 6.4%, in the LDCs at 6.5%, and in Central and Eastern
Europe at 1.3%. On a world level, the TNCs control 6.4% of the world gross
domestic product. In Eastern Europe, too, this relationship is on the rise,
with the transnationals now controlling - through their FDI stock - up to
15.6% of the GDP of Eastern Europe, like in Hungary, 1994. The sales of
foreign affiliates amounted to 116% of the total of world exports of goods
and non-factor-services in 1982; this ratio now has risen to 127.9%
(UNCTAD, 1996). For ages, economists have warned repeatedly against the
danger of monopoly capitalism. Kalecki and Rothschild should be specially
mentioned in this context here. An ever larger proportion of world trade is
nothing but trade between the affiliates and headquarters of transnational
corporations.
6) The international system, in addition, is not only a system of social
and economic polarization, it is also a system of recurring international
long-run tensions, that erupt along these socio-economic conflict lines.
Ever since the days of Akerman's pioneering study, published with
Macmillan's before the Second World War, social scientists have studied by
quantitative methods the connection between economic long cycles and major
wars, among them Modelski, 1987, and Goldstein, 1988. International tension
has characterized the world system since 1450 in ups and downs, that have
led the world to three catastrophic world wards (Goldstein, 1988). Whether
there is room for optimism now, after the end of the so-called Cold War,
will be finally decided, among other factors, by the growing tension
between the human species and the environment. Each day, 140 species are
condemned to extinction; the CO2-content in the atmosphere is 26% higher
than at the beginning of the industrial age; the earth surface was warmer
in 1990 than at any point since the middle of the 19th century, when
measurements began; each year, a forest area of the world as big as Finland
is being destroyed, and each year, another Mexico is being added to the
world's population (World Watch Institute Report, 1992).
7) Rather than predicting the end of history, the acceleration of history -
might loom ahead. Our work shows that there is strong evidence to believe
that transnational capitalist penetration in the end leads to
disintegration, and conflict, and not towards integration and peace. We use
up to 19 indicators of social change since 1980 to show precisely that.
Sunkel foresaw then, from the viewpoint of his structural economic theory,
many of the problems that seem to beset the post-1989 world. At the time of
writing this analysis, Central Africa is being plunged into chaos, drug
lords dominate de facto a number of countries south of the 23rd parallel
and north of the 23rd southern parallel, civil wars and refugee crises
dominate the international headlines of stations like BBC and CNN, which
present to their listeners more than the usual parochial and limited
information that is in reality so common today around the globe. Instead of
heralding a better and more peaceful future, recent tendencies might imply:
(i) an ever greater ecological danger for the future of our globe,
stemming mainly from the rapid depletion of the ozone layers, now also over
the northern hemisphere
(ii) the rapid destabilization of large parts of West and Central Africa,
which in turn might increase the migratory pressure to Europe and North
Africa, which
(iii) in turn might finally bring to an end the present regime of 'West
Rome'
8) A look at recent UNDP and UNCTAD statistics gives us a more than
alarming picture of the reality of transnational integration and national,
economic, social, ecological, and spiritual disintegration. In 1993, 76% of
the stock of world-wide foreign direct investments were still anchored in
the old industrialized countries, and only 23% in the developing countries.
Although 40% of all investment flows between 1990 and 1994 went to the
LCD's, 4/5 of which to the top ten among the semi-industrialized or newly
industrialized nations (China, Singapore, Argentina, Mexico, Malaysia,
Indonesia, Thailand, Hong Kong, Taiwan and Nigeria), European leadership
towards growth for the European East in an ecologically sustainable way is
one of the main tasks of rebuilding the world-economy. Between 1990 and
1994, the share of the 'triad'(US+CND; Japan; EU) in world GNP rose from
50.3% to 50.7%; the share of the rest of Asia rose from 17.2% to 23.1%,
while the participation of Eastern Europe and the ex-USSR in the world
economy was nearly wiped out and reduced to half in less than a decade -
from 10.9% to 5.3% of world GNP. Will Europe be able to lead to growth for
the East, or will - what a bleak, though nonetheless realistic scenario,
the stagnation of the East between 1990 and 1994 become the future of the
West of the continent (our compilations from Stiftung, 1993, and 1996)?
9) The wealth gaps between the rich center in Europe and the surrounding
peripheral and semi-peripheral areas are part of the economic, ecological
and social history over the last 500 years. They continue to exist today,
and if anything, have deepened since the 1980s. In terms of most wealth
indicators, as calculated by the UNDP, the East (Eastern Europe and the
former USSR) and the southern rim of Europe (the Arab world), are as
distant from 'us', the European Union, as the 'Haves' and the have-nots are
divided from each other at any welfare border around the world, be it on
the shores of the Rio Grande or across the China Sea. However, it would be
wrong to be mislead by wealth statistics alone. In terms of life
expectancy, only 7% separate Poland, say, from Austria, while in terms of
real purchasing power, the differences are estimated to be 1:4. But wealth
differences create political tensions of their own, and wealth and
consumption differences lead to 'catch-up' processes, with a structurally
unbalanced development in the semi-peripheral and peripheral societies
resulting in the end. Thus, from ancient societies onwards, wealth and
consumption differences have lead towards a polarized form of development
in peripheral societies (Chase-Dunn and Hall, 1997).
At the same time, the population balance, and the balance of military
forces shifts in favor of the poorer nations, that surround the rich man's
land, the European Union, beset by a growing number of internal problems,
like unemployment, drugs, crime, environmental decay, and aging
populations.
10) The East's challenge to the aging north-west is its population and
thus migration potential, its high military personnel ratio, but the East's
unease number one is its low share in world total GDP and industrial GNP.
The South's challenge in military terms has been building up over recent
years, combined with a rapid population growth and still existing
large-scale poverty. Let us hope and work for peace in the Middle East; but
if that is not achieved quickly, and development in the Arab world does not
reach down to the poorest strata, centuries of unequal exchange, foreign
rule and neglect could combine with the archaic weight of religious
tradition - then the Dar al harb, the world of war and disbelief will be
held responsible for 80 million illiterates, for the 73 million poor, for
the 12% of resources, spent on arms, for the scarcity of water that affects
55% of the Arabs. If the balance will not be achieved by political and
economic means within the next 25 years, then migration and the military
expansion of the desperate nations will attempt to redress the balance.
This scenario is all the more likely, since migration pressure from the
decaying center of Africa will start to push northwards in the coming
years.
Re-reading Osvaldo Sunkel's penetrating analysis, one is struck by the
parallels between the Latin America of yesterday and the Eastern Europe of
today. One of the most recurrent predictions of structuralists as Osvaldo
Sunkel, Raul Prebisch, and many others would be that a country,
specializing in investment goods and other manufactures has a much better
chance for long-run and stable development than nations, specializing in
raw materials and semi-finished products. Samir Amin and other critics of
the Union have maintained, that the structure of trade relations with the
outer rim of the Union favors unequal specialization, and prolongs the
periphery's trade in raw materials and semi-finished products.
11) While other regions could advance and received a fairer share of the
world market, Eastern Europe was increasingly marginalized at the very hour
of liberation in 1989. More and more, there seems to be a 'legal' and a
parallel illegal core of the world economy. What the legal economy cannot
redress, the illegal economy will. The Mafias around the world have a
turnover of more than $ 500 thousand million a year alone from the
narcotics' trade. Each year, $ 85 thousand million in drug profits are
'laundered' through the financial markets. The new, speculative character
of the global market economy dictates, that even legal transnationals have
to earn much of their profits from speculation on the international
financial markets. With that, the basic instability of the international
system increases (UNDP, 1994, 1995; Stiftung Entwicklung und Frieden,
1996). Among the most powerful groups, threatening the very fabric of legal
society in western countries today, are the following large illegal
transnational corporations (with their estimated turnover)
La Costa Nostra (USA) 100 thousand million $
Colombian cartels (Colombia) 15 thousand million $
Italian organized crime (Italy) 100 thousand million $
Cosa Nostra
Camorra
Ndrangheta
Sacra Corona Unita
Yakuza (Japan) 120 thousand million $
(Source: our compilation from Raith, 1995)
Newcomers, like the Russian Mafia groups, and formally regional groupings,
like the Chinese triads, are expanding rapidly as well into the core areas
of the world-wide market. By the year 2020, the expansion of these and
other criminal corporations will be not a threat, but a reality,
practically subverting entire states of even the developed capitalist
centers (Raith, 1995). The logic of accumulation of these large,
transnational criminal corporations seem nowadays to reflect the growing
weight of 'flexible specialization', while the earlier, post-1932 model
reflected 'corporatist structures' (Behan, 1996). The 'neo-corporatist'
structure of the classic Sicilian mafia is more and more superseded by
flexible newcomers like the Camorra and the drug cartels of Latin America
and Eastern Europe. In terms of profits, the Asian gangs seem to be on the
ascent. Indeed, a relevant issue for future world systems research: the
interaction between long economic and civilizational cycles and patterns of
the criminal underworld. The question cannot be neglected any longer by
world system research: in the 1970s and 1980s, reported crimes increased
worldwide by 5% per annum, in the US alone, there are now 2 million victims
of violent crime every year (UNDP, 1997). The rise of crime is going
parallel with the destruction of the family. Killings of minors increased
in many developing countries by more than 40% in the 1990s. A third of
married women in the developing countries are battered by their husbands
during their lifetime. Dowry deaths in India are put at least at 5000 a
year. In the US, every year nearly 3 million children are reported to be
victims of abuse and neglect. 75 million children in the developing world
are working in slavery, prostitution and hazardous conditions; among these
1 million girls, mostly in Asia, are forced into prostitution each year. In
the OECD countries, there are now annual 129000 reported adult rapes; the
prison population has increased from 80 to 88, there are now 4.8
intentional homicides, committed by male persons per 100000 inhabitants,
1020 annual road deaths per 100000 inhabitants. The suicide rate is at 21
(males) and 7 (females); 34 annual divorces per 1000 couples.
12) The core of the transnational economy, Sunkel and many others observed,
used to be the legal transnational corporation and the legal transnational
bank. From 1991 to 1993, the following growth rates were observed:
world GDP +1.6%
world trade +3.1%
world-wide stock of FDI +8.0%
sales of the foreign affiliates of transnational corporations +20.0%
Source: our own compilations from Stiftung Entwicklung und Frieden, 1996
13) More than $ 1600 thousand million are shifted around each day by way
of international financial markets. The cumulative debt of the developing
countries reaches the staggering proportion of $ 1945 thousand million, and
will tend to grow by around 1998 to $ 2600 thousand million dollars
14) The problem of international development, to a large extent, is also
the problem of underdevelopment and poverty, in which a large part of the
malnourished children of this world grow up - 11 - 19 countries, which, in
addition, have to shoulder a large part of the world refugee problem as
well:
estimated number of poor people according to the
capability-poverty-measurement-scale
Mexico
14,5847
Brazil
15,16
Turkey
12,1264
Thailand
11,6894
South Africa
11,8256
Philippines
18,3744
China
204,8725
Iran
17,8502
Algeria
12,672
Indonesia
79,3971
Morocco
12,7729
Egypt
23,4232
Pakistan
73,872
India
530,5605
Tanzania
10,5986
Zaire
17,2542
Nigeria
57,8436
Bangladesh
89,5116
Ethiopia
36,0314
Rest
172,2797
Source: our own calculations from UNDP, 1996 and the data-base of this work
15) Globalization negatively affected the lives of around 1.5 thousand
million people on earth, whose per-capita incomes were lower than in
earlier decades. These 1.5 thousand million people live in around 100
countries; while 15 nations experienced rapid capitalist development over
the last decade. Among the world's desperate nations, 43 countries had a
per-capita income which was lower - in real terms - than that of the 1970s.
The poorest 20% of the world saw their share in global product reduced from
2.3% to 1.4% over the past 30 years. The incomes of more than a billion
people have fallen below levels first reached 10, 20, sometimes 30 years
ago (UNDP, 1997). Between 1987 and 1993 the number of people with incomes
of less than $1 a day increased by almost 100 million to 1.3 billion, and
the number appears to be growing in every region except East and South-East
Asia and the Pacific. In the past year, the Human Development Index dropped
in 30 countries (UNDP, 1997). The share of the richest 20% in world incomes
rose from 70% to 85%, with the differences between these two rising from
30:1 to 61:1 in 1991, to reach 78:1 in 1994 (UNDP, 1997). The share of the
poorest 20% of the world's people in global income now stands at 1.1%, down
from 2.3% in 1960. Even in the developed core countries of the world
economy alone, 80 million people are categorized as poor with less than
$14.40 a day in 1985 PPP$ (the US poverty line), and 30 million are
homeless. On a world scale, at least 100 million people are homeless. In
the United States of America, 47 million people have no health insurance.
In Eastern Europe, the introduction of capitalism brought about 2 million
extra deaths, caused by violence and the sharp increase in cardiovascular
diseases. In the Federal Republic of Germany alone, 900000 people are
homeless, more than 5 million people officially have no job, and 7.5
million are poor (Orientierung, 60, 1996: 204). Between 1989 and 1996 the
number of billionaires increased from 157 to 447. The net wealth of the
richest 10 individuals on our planet is 1.5 time greater than the total
annual income of all the least developed countries of our globe with 534.2
million inhabitants. The richest single individual in Mexico had a bigger
wealth than the annual income of 17 million of his compatriots.
Nollert (1990), based on Berry et al., has shown, that the share of the
bottom 60% in world consumption, after due consideration to income
distribution within the nations of the world, is 11.9%, while the share of
the top 10% is 50.5%. The wave of the world recession - or as we prefer to
say, the Kondratieff B-phase - first hit Africa in the 1970s, and rolled on
to hit Latin America and the Arab world in the 1980s and Eastern Europe in
the 1990s. Even in the highly industrialized countries, capitalist
development became more and more
(i) jobless: in the countries of the European Union in 1993, there were
16.86 million unemployed people. In the industrial countries as a whole,
there are 30 million people out of work.
(ii) ruthless: global GNP grew by 40%, but the number of poor grew by 17%.
In the European Union, the ratio between the richest 20% and the bottom 20%
is now 7.5 in France, 9.6 in the UK, 7.1 in Denmark, 5.8 in Germany, and
6.0 in Italy. Each year, damage to forests due to air pollution leads to
economic losses of about $35 billion - about the annual GDP of Hungary. In
Europe, the number of poor people increased within half a year from 50
million to 80 million (Afheldt, 1994)
(iii) voiceless: human and political rights performance on a global scale
has deteriorated in many countries according to the well-known Freedom
House data series (Stiftung, 1996); even in the countries of the European
Union, the following performances in 1993 were below the maximum value '1'
Germany: civil rights 2
France: civil rights 2
Greece: civil rights 3
Great Britain: civil rights 2
Northern Ireland-political rights 5
civil rights 4
Irish Republic: civil rights 2
Italy: civil rights 3
Spain: civil rights 2
The poorest 40% in the EU countries receive only 18% of total incomes.
Women receive on average only 2/3 of the income of males; and hold only 12%
of parliamentary seats
(iv) rootless: 10000 cultures of humans and millions of species are on the
verge of disappearance world-wide; local human dialects, cultures and
accents, disappear also in Europe at a rapid pace. Nationality conflicts
and regional conflicts have increased in many countries of Europe over the
last decade. Low-quality satellite TV more and more substitutes national TV
output; the transnational economy dominates more and more domains of radio,
TV, and the press. Even in EU countries, nationally made films amount from
only 2% (Greece) to 34.9% (France) of all films shown in cinemas. The US
film industry holds a market-share of 2/3 or 3/4 and more. The US exports
more than 120000 hours of television programming a year to Europe alone
(UNDP, 1997). At the same time, social deviance increases in the age of
rootless growth or stagnation. In the European Union, there were 77
prisoners per 100 000 people in 1987; now there are 87. The intentional
homicide rate is Union-wide 7.7 per 100 000. 44% of all male EU adults
smoke (women: 25%), alcohol consumption is 9.6 litters per capita and year,
and the male cancer rate is 235, the female cancer rate is 171 Union-wide.
Television takes up now some 40% of the free time of the average American,
and participation in voluntary associations such as the Red Cross has
declined by 25-50%. The basic networks, necessary for the functioning of
democracies, are on the retreat around the globe. Trade Union membership
rates declined in the Netherlands from 39% in 1978 to 25% in 1991; from 30%
to 15% in the USA et cetera. In the Union as a whole, trade union
membership declined from 37% in 1970 to 33%; in Austria and in many other
countries, the decline was even more dramatic (from 62% to 46%). Nearly
130000 women are reported annually to be raped in the industrial countries.
(v) futureless: annual fresh water withdrawals amount to 862 m^3 in the
Union. Commercial energy use in oil equivalents is 3588 kg per capita in
oil equivalents, and each year, the Union produces 15.13% of the world's
greenhouse gas emissions, 3373 metric tons of heavy metal from nuclear
reactors, 48220 tons of hazardous highly-toxic waste. The average Union
citizen produces 399 kg of municipal waste a year, and recycles only 45% of
his or her paper and 52% of his or her glass. 2 million people are already
affected with HIV.
16) More than ever before, economic growth tends to be concentrated in some
regions of the world system, most notably East and Southeast Asia and the
Pacific, while other regions tend to be excluded. Not only the world's
South, but also the extreme North seems to be put at increasing risks.
Among the nations, that reached their present-day real per capita income
level already back in the 1980s, we find - perhaps to our surprise - the
'northern democracies' Canada, Finland, and Iceland, among a total of 31
nations. In all, these three OECD democracies, 7 'other Asian' nations, 14
Arab countries, 20 Eastern European and CIS countries, 22 Latin American
countries and 35 countries of Sub-Saharan Africa were, in per capita terms
- richer in earlier decades. China, India, 20 OECD democracies, 2 Arab
countries, 12 Latin American and Caribbean countries and 8 Sub-Saharan
African nations, together with 21 'other Asian countries', increased their
per-capita income over the last decades (UNDP, 1996). In the developing
countries, despite the increases in life expectancy over 1960-93, the
specter of poverty is still overwhelming. 1.3 billion people are to be
classified as poor, 800 million people do not eat enough food, and 500
million are chronically malnourished. Each year, 20 million hectares of
tropical forests are degraded or completely cleared; there are now 11
million refugees in the developing countries, and entire regions are
affected by destabilization and war, most notably the lake region of
East-Central-Africa, wide areas of Central Asia, and some countries of West
Africa.
17) Instead of an end of history, global or regional anarchy in countries
like Kampuchea, Somalia, Yemen, Afghanistan, Tajikistan, Georgia, Albania,
Liberia, Sudan, Rwanda, Burundi, Angola, and Mozambique seems to be likely.
A global financial crash cannot be ruled out entirely. In a very brilliant
commentary, Rudi Dornbusch thinks that another Mexican crisis - or rather
Peso disaster for the world economy - is likely (Dornbusch, in Business
Week, November 25th , 1996). Recent experience in Brazil, Indonesia,
Malaysia, the Philippines and Thailand, where the negative current account
balance went out of proportion, underlines his point. The ghosts of this
'tequila effect' or 'caipirinha-effect' walk around Eastern Europe, too.
18) The capacity of the US to act as a global policeman under such
circumstances is severely constrained by the secular balance of trade
deficit of the US economy, not being offset by an enough positive balance
of services and payments. Indeed, the outflow of hegemonic capital after
each hegemonic period in the history of world capitalism is a well-known
phenomenon and in the end explains very well, why American capital today
will have no tendency to restore the US economy at home. The comparative
characteristics of hegemonic decline were always, Chase-Dunn and Hall teach
us, secular balance of payment deficits. America is no different from
Britain, the Netherlands, Genova and Venice before.
Hundreds of millions of human beings are unemployed or under-employed on a
world scale. In the industrialized countries alone, more than 30 million
people are looking for work. Even in a highly social-policy-oriented
country like Austria, which ranks 13 among the 174 nation list of human
development and the 137 nation list of gender development, and 10 among the
104 nation list of gender empowerment, net earnings from profits and
property are now 29.4% of national income, the state withdraws and has a
share of 27.7% in net national income, and net total wages are now 43.3%
(Federal Ministry of Labor and Social Affairs, Social Report Austria,
1995). This tendency for relative wages to fall in relation to profits,
property and the state, seems to be universal. There are reliable income
distribution data available from 68 countries. In 29 nations, the ratio of
the top 20% to the bottom 20% exceeds 10 to 1; in 17, 15 to 1; and in 9, 20
to 1. At the same time, a considerable percentage of people even in the
'advanced countries' in Europe lives in poverty, and are thrown into
poverty by the workings of the process of globalization. In the European
periphery, full employment is more distant than ever before. Nations like
Spain or Ireland have not only very high official unemployment rates; even
worse, their labor force participation rates are very low indeed. In Spain,
more than 40% of young people under 25 years are out of work. True enough,
socio-religious patterns probably determine employment rates via their
effects of gender empowerment and gender development.
The contradictions of capitalism itself today are truly global: during
1965-90, world merchandise trade tripled, and financial cross-border flows
exceed a trillion US $ a day.
19) Poverty and backwardness in poor countries is caused by the peripheral
position that these nations have in the international division of labor.
Ever since the capitalist world system evolved, there is a stark
distinction between the nations of the center and the nations of the
periphery. Hirschman, Kaldor, Kalecki, Mandelbaum, Rosenstein-Rodan,
Rothschild and many other prominent economists, who knew the Eastern
European region very well, were all very much aware of the problems of
monopoly power and structural imbalances that are to be observed under
conditions of 'market imperfection'.
At a time of the retreat of the idea of 'national sovereignty',
'independence' and 'socialism', the re-discovery of dependency theory might
sound as a provocation. Critics will say - look at the famine in North
Korea and what has become of 'Juche' - and compare the trajectory of North
and South Korea. The argument, presented here, is different. Rather than
following the path of 'Juche', the essence of the argument will consist in
inviting comparisons between, say, Southeast Asia and Latin America.
Cardoso summarized the quantifiable essence of dependency theories as
follows:
(i) there is a financial and technological penetration by the developed
capitalist centers of the countries of the periphery and semi-periphery
(ii) this produces an unbalanced economic structure both within the
peripheral societies and between them and the centers
(iii) this leads to limitations on self-sustained growth in the periphery
(iv) this favors the appearance of specific patterns of class relations
(v) these require modifications in the role of the state to guarantee both
the functioning of the economy and the political articulation of a society,
which contains, within itself, foci of inartuculateness and structural
imbalance (Cardoso, 1979)
Already the classics of political economy provided a framework of
quantifiable dependency theory. Let us recall that for Marx and his labor
theory of value, total product consists of constant capital, c, variable
capital (labor), v, and surplus, s. Rate of surplus value, s', the organic
composition of capital, q, and the profit rate, p, are hence:
(2.1) P = c + v + s
(2.2) s' = s/v
(2.3) q = c/(c+v)
(2.4) p = s/(c+v); hence, after some transformations:
(2.5) p = s'(1-q)
Class relationships of a rising power of labor in the centers determine,
that, in the end, long-term fluctuations notwithstanding, cheaper raw
materials and exploitation of the periphery become one of the cornerstones
of a strategy to halt the fall in the profit rate. Among others, migration,
unequal exchange, and a new international division of labor are key
elements to increase, at least temporarily, s'. Kalecki adapted political
economy to the age of monopolization. Let gross production be P, W are
wages, M are the payments for raw materials. The monopolization factor is
k. We are in a situation of less than full employment. Costs for wages, W,
and raw materials M, are multiplied by a factor of k (k > 1) to arrive at
prices. The gross value of production of an enterprise is thus
(2.6) P = k * (W + M)
(2.7) if M/W denote the terms of trade, j, between the raw material
producing sector of the economy and the rest, then we arrive for the
determination of the share of wages, w, by the following formula: w =
1/(1+(k-1)*(j+1))
A rising degree of monopolization in the leading center countries over time
determines, that, in order to keep the share of wages at least constant, a
rising exploitation of the raw material producers sets in to offset the
balance. There is now a massive, internationally published evidence that
speaks in favor of dependency theory. Other formulations of dependency
insisted on 'unequal exchange' which, according to one such formulation,
hampers development if double factorial terms of trade of the respective
country are < 1.0 (Raffer, 1987, Amin, 1975). Labor in the export sectors
of the periphery is being exploited, while monopolistic structures of
international trade let the centers profit from the high prices of their
exports to the world markets in comparison to their labor productivity.
Since double factorial terms of trade are simply net barter terms of trade
weighted by productivities (F) of X, exports, and M, imports, the formula
(2.7) ((PX * FX)/(PM*FM)) = 1 denotes the conditions of 'equal' exchange as
opposed to unequal exchange:
(2.8) ((PX * FX)/(PM*FM)) = < 1.0 while nations with
(2.9) ((PX * FX)/(PM*FM)) = > 1.0 are the countries that benefited from
unequal exchange.
Since the early 1970s the least developed countries have suffered a
cumulative decline of 50% in their terms of trade. If terms of trade in
1987 are 100, the 1994 values indicate
Sub-Saharan Africa 95
South Asia 97
East Asia 104
South-East Asia and Pacific 94
Latin America and Caribbean 96
least developed countries 91
Industrial countries 104
For the developing countries as a whole, terms of trade losses between 1980
and 1991 amounted to $bn 290 (UNDP, 1997). Real commodity prices were 45%
lower than in 1980 and 10% lower than the lowest prices during the Great
Depression, 1932 (UNDP, 1997). Interest rates for credits of the developing
world were in effect four times as high as those charged rich countries
during the 1980s. Goods from the developed countries enjoyed much greater
tariff reductions in the Uruguay Round than those from developing countries
- 45% compared with 20-25%. The least developed countries face tariffs that
are 30% higher than the global average (UNDP, 1997). Tariff escalation
forces developing countries into primary commodities, whose real prices are
declining. For developing countries, tariffs will be higher for final
products. The discrimination of LDC textile exports continues, while
subsidies to agriculture in the rich countries keep world prices low and
exclude the Third World from the food markets of the rich countries. It
confronts domestic food producers in the poorer countries with cheap food
imports, which reduce the incentives for local food production and destroy
the livelihoods of millions of peasants (UNDP, 1997). A reduction of
agricultural subsidies by just 30%, LDCs could earn an extra $bn 45 a year.
Unequal access to trade, labor and finance costs the periphery up to $bn
500 a year, 10 times the amount of the yearly foreign assistance (UNDP,
1997, 1992). Intellectual property rights increase the price of technology,
while the USA in the 19th Century and Japan in the 20th Century enormously
benefited from the free flow of ideas (UNDP, 1997).
20) The second 'Great Transformation' of our century, that from socialism
back to the world-wide market economy, can be seen in the perspective of
the specific globalization aspects also inherent in the writings of Karl
Polanyi: a Polanyian world view would hold, that authoritarian socialism in
Eastern Europe crumbled like the old Hapsburg empire back in 1918 under
pressure of the world market, that democracy had a chance in the region, as
it had from 1918 onwards, but that this new chance, as the one in 1918 is
now being at stake. For followers of the globalization school, Polanyi's
anthropology in a way foresaw the destabilization, the nationalist warfare,
the unemployment, the international conflict, the social decay, and the
more than 800000 excess mortality cases since the transformation in the
whole of Eastern Europe and the former USSR, as Cornia's UNICEF study so
aptly put it in 1994. These phenomena also, the argument goes on, imply why
in the East the lessons of 'critical' development theory should remain on
the agenda. Political turmoil continues in some regions of Eastern Europe
and the former USSR 7 years after the transformation, and transnational
crime from the East and the South has become a very serious negative factor
in international relations. Indeed, it is even plausible that the old
big-power rivalries will continue under the new banner of culture and
nationalism. Only four of the seventeen countries that adopted democracy
during the Kondratieff cycle B-phase between 1915 and 1931 could save
democracy; and today, freedom in the world is again on the retreat while
violence and repression is on the increase. At the end of 1993, only 57.5%,
that is, 107 out of 186 UN member countries had competitive elections and
various guarantees of political and human rights (Lipset, 1994: 1).
21) Mass demand as the motor of capitalist development is seriously
underminded by ongoing globalization. Linnemann and Sarma developed a
model, whereby the linkages between external and internal constraints
become clear. Let CA denote the current account balance, NFP net factor
payments, NTR net transfers, C consumption, I gross domestic investments, S
gross domestic savings, T government revenue, G government expenditure, X,
exports, M, imports, NFA net foreign assets, DS foreign debt, K reserves, L
liabilities, let DYN symbolize growth, GDP gross domestic product, GNP
gross national product, let the suscript g denote government, p, the
private sector, f foreign countries, so we have
(2.12c) CA = (GDP + NFP + NTR) - (C + I)
(2.12d) CA = (C + S) - (C + I)
(2.12e) CA = ((Cg + Sg) - (Cg + Ig)) + ((Cp + Sp) - (Cp + Ip))
(2.13f) (T - G) + (Sp - Ip) = (X + NTR + NFP) - (M)
(2.14g) (T - G) + (Sp - Ip) = DYN NFA
(2.14h) DYN DS = DYN K + L - If - CA
Privatising rapidly public enterprises might lead reform countries - given
rigidities of supply - even to higher inflation rates, while the effects of
the liberalization of prices and the cut-back on government subventions
will be only a more short-term improvement in the current account balance.
Reconstruction makes necessary investments which by far exceed savings, and
hence, the current account balance will deteriorate again.
Ever since the classical political economy of J.S. Mill, socio-liberal
reformers (who would add in the above equation inequality as an additional
predictor of stagnation, thus distinguishing themselves from the
neo-conservative currents who think the contrary holds) have maintained the
compatibility of social reform and market economic/capitalist growth. The
official social doctrine of the Christian Churches, in Latin America
especially the Catholic Church, in some aspects is using similar arguments
- from Pope Leo XIII to John Paul II, with liberation theology at any rate
advancing the viewpoint of non-violent salvation and liberation, justice
and community (Brackley SJ, 1996: 117). In a world, where structural
adjustment, Maastricht and other similar concepts dominate (or should we
rather say: 'doom-inate?') the scholarly horizon, at least in the West,
liberation theology with its emphasis on the two millenia old beatitudes of
the Sermon of the Mount, on Yahweh, the God of the poor, and the Hebrew
concepts of hendiadys (steadfast living-kindness) and sedeq (justice for
the oppressed) turns development theory on its head (Brackley SJ, 1996:
129). The rich literature of liberation theology, draws parallels between
the LDCs today and landlessness, debt, unemployment, heavy taxes, hunger
and malnutrition suffered by the mass of the people in Galilee two thousand
years ago. It is a conscious effort at re-discovering the social commitment
of these traditions; non-violent protest movements, that empower people,
are certainly corresponding to the spirit of liberation theology and the
Judeo-Christian gospel (Brackley, 1996: 153-155). The Catholic Church
magisterium (official teaching) has been more in line with traditional,
'top' to 'bottom' visions of the state and of organizations as actors,
delivering and inter-mediating goods and services in favor of the poor,
although recent pronouncements were also very frank and forwardlooking in
defending landless laborers and the poor in general (see especially John
Paul II, 1988, 1991a and 1991b).
Already in his famous macro-economic model, Nicholas Kaldor explained the
conditions of growth of a capitalist economy in the postwar-period. Let
total product Y be the sum of wages, W, and profits, P, let there be the
identity between savings and investments, I = S, and let us divide the
savings rate S into savings out of workers' incomes and out of profits, and
let savings of workers Sw be proportional to wages and savings of profit
income recipients Sp be proportional to profits, we arrive at the final,
but still tautological formulation, that profits are a function of
investments:
(2.13) Y = W + P
(2.14) I = S
(2.15) S = Sw + Sp
(2.16) Sw = sw * W
(2.17) Sp = sp * P
(2.18) P/Y = f (I/Y)
At given propensities to save out of profits and wages, the profit rate is
a function of investments. On the way to a model of the real economy in the
postwar period, Kaldor now says, that real wages have to be above
subsistence wages, the profit rate must not fall below a certain minimum,
the share of profits is institutionally determined at least at a certain
minimum, and the capital output ratio must not be influenced by the profit
rate. Only these conditions, Kaldor thinks, assure that the clear causal
relationship between investment and profits holds. Else, especially, when
wages fall down to the subsistence level, the Keynesian mechanism to
guarantee full employment will not be in force anymore, output will be
limited by available capital, and not by labor, and finally, the classic
and not the Keynesian adjustment mechanism will be in operation: the
surplus, available for investment, determines investments, and not
investments savings.
Capitalism must have a long-term interest in wages in order to survive.
This is also the reason, why, of lately, there is a growing concern in the
international press about the effects of globalization on mass demand.
22) Arrighi (1995) indicated, that the basic movement of the capitalist
world economy during the 1980s and 1990s is the geographical shift away
from the Atlantic region towards the Pacific. 'Hard' data about
international capital movements support Arrighi's hypothesis. Our basic
hypothesis is, that West European capital flows out, partially to Eastern
Europe, but also to the United States and the Pacific theater, while the
long-term tendency for the balance between outflows and inflows in both
North America and Japan decreases, indicating the international production
capital shifts to the Pacific region. At the same time, the rise of China
as a haven for transnational capital continues.
23) Apart from the USA, the LDCs - especially in East and South Asia and
the Americas - will become the major investment areas of the international
order, while Europe as a whole loses (with shifts between Western and
Eastern Europe still being likely). Thus, Eastern Europe could become again
a contested zone of influence - in between the eastward expansion of west
European, Asian and North American capital and a newly asserted Russian
power projection.
24) Western Europe could be tempted, in order not to fall behind rising
Asia, to overexploit Latin America and Africa, and to try to shift the
present favorable East European and former Soviet balance in its favor,
while North America's negative balance with Asia is also an expression of
the dramatic shifts in the production of multination US corporations.
Although some dependency authors, most notably Chase-Dunn, 1984, dismissed
the 'new international division of labor' approach, millions of jobs,
especially those of women, were lost in Northern manufacturing over recent
decades and were 'exported' to the East and the South. There are very clear
trends towards peripherization and marginalization of entire regions,
social groups and industrial sectors in the developed countries. Ross and
Trachte were among the most prominent authors to voice such concerns in the
USA; in Europe, the 'Starnberg group' authors Froebel, Heinrichs and Kreye
advanced this point in a systematic fashion. Mass migration, as Amin (1997)
reminded us, is part and parcel of this process of transnational capitalism
25) The market economies of western Europe first imported labor; now, with
the transfer of production away from the European central zones, foreigners
become increasingly marginalized. In the inner cities of countries like
France, Germany, and Britain, real 'ghettos' develop, a process that began
in the United States of America three or two decades ago. Women also have
to suffer from these tendencies, as their jobs are being exported away to
the still much-lower paid labor power of the periphery and the
semi-periphery (Stiftung Entwicklung und Frieden, 1993). Migration is even
part of the five pillars of international inequality (Amin, 1997):
(i) unequal exchange: the gaps in wages are much greater than the gaps in
productivities
(ii) capital flight from the peripheries to the centers
(iii) selective migration from the peripheries into the centers
(iv) the monopoly position of the centers in the international division of
labor
(v) the control of the centers over the earth's natural resources
26) There are signal crises of world capitalism, and there are terminal
crises of the world system, like the great crash of the early 1340s, which
marked the beginning of the Genoese age, the 1560s, which marked the
beginning of the Dutch era, the 1750s and 1760s, which marked the beginning
of the British era, and the 1930s, which were the terminal crisis of
British world capitalist dominance. Regulation can be successful, like
after 1560, and 1930, and deregulation can be successful, like after 1340,
1760, and - most probably - the 1980s (compiled from Arrighi, 1995).
Macroquantitative research about the determinants of world development has
to be conscious about the time horizon, in which the research design is
situated. Bornschier (1988) found out that state sector expenditures in 21
western democracies correlate with economic growth in the following
fashion:
1950-60 r = + .41
1960-75 r = - .07
1974-77 r = - .72
(Bornschier, 1988: 309)
Thus, the growth efficiency of public expenditures has drastically declined
over recent decades. If the post-war period was regulatory, the post-1968
period decidedly is anti-regulatory (Arrighi, 1995; Bornschier, 1988).
Studies about world development throughout the entire period 1960 - 1997
might be misleading, because the time period would reflect the 'logic' of
the waning 'regulatory' cycle, the economic global crisis of the 1970s and
the early 1980s, and the ascent of financial capitalism and the East Asian
archipelago of the 1990s. Thus, the beginning of the 1980s serve as our
'cutting point'.
27) The long cycle literature, largely overlooked by macroquantitative
development studies, tells us, why there is a recurrent pattern of
instability in the social orders both at the level of national society as
well as at the level of the international system. It also explains the
often puzzling aspect, how different studies, using different time
perspectives, reach different results. Long cycles by themselves are quite
a strong argument in the debate about the long-run viability of the
world-wide market economy: the recurrence of cycles, depressions and wars
was thematically portrayed, amongst others, by Goldstein (1988) and Arrighi
(1995) in ver y far-reaching empirical studies of world development from
1450 onwards.Ample empirical evidence supports Arrighi's and Goldstein's
theories. The recurrence of major power wars in the capitalist world
economy from 1495 to the present is one of the most intriguing features of
the international system. Each world political cycle up to now corresponded
to a 'W'-pattern of war intensity. From Goldstein's data series, it is
possible to derive - without any smoothening of the data - the following
cycles of war in world society since 1495, using 6th order polynomial
expressions. The R^2 for the test series is between 31% and 91%; no further
transformation of the data was performed. The W-structure of conflict
emerges neatly from all the tests. And each time, the challengers for world
hegemony of a dominant sea-power were former members of the ruling
coalition (France, Germany, Russia + China?), while the challengers in the
world wars (Thirty Years War, Napoleonic Wars, German Wars of our century)
always were continental powers (the Hapsburgs, France, Germany) (see also:
Modelski, 1987; Goldstein, 1988, Arrighi, 1995). Thus, there is some
support at least for the hypothesis about the sequence of world politics,
leading from global wars to hegemonies, to the de-concentration of the
international system, to the de-legitimization of international leadership,
and finally, to new global wars.
28) Ever since the days of Schumpeter, economists and sociologists were
inclined to see also more short-term cycles at work, namely the Kitchin
cycles, lasting three and a half years, the Jugar cycles lasting 8-10
years, and the Kuznets cycles between 18 and 25 years. The intense
controversy about cycles should only be mentioned briefly here; for the
policy-maker perhaps more important is the fact, that after the economic
crisis of 1825, the stock exchange collapse of 1873, the Black Friday of
1929 and the world recession starting in 1973/75, world capitalism has
experienced quite severe downswing-phases, that hit with elementary weight
especially the countries of the periphery and the semi-periphery. The
Kondratieff cycles of approximately 50 years duration and the Kuznets
cycles, 20 years long, are especially relevant for our understanding of the
ups and downs of world economics and politics: our data series, constructed
from Goldstein's original data, is explained quite markedly by the
application of the Kondratieff and Kuznets-cycle hypotheses, even when
there are now data filtering or smoothening operations being performed. And
thus, we have to disagree in one fundamental aspect with Chase-Dunn and
Grimes, 1995. Among the main theories, that explain these Kondratieff
cycles, the following schools stand out (Bornschier and Suter, 1992):
(i) economic factor theories, that again have to be broken down into the
sub-categories of innovation theories, capital accumulation theories,
sector theories, and terms of trade approaches
(ii) socio-cultural factor theories, that explain from the viewpoint of
quantitative and historical sociology the long cycles by the social
structure of accumulation, by the modes of regulation (regulatory
approaches), by technological styles, by employment processes, by social
inequality trends, by social movements and conflicts, by cycles of order,
or by societal structural change
(iii) hegemonic cycle theories of the discipline of quantitative
international relations, that link Kondratieff cycles to international
instability, war and peace
For Bornschier's sociology of the long cycle, there are the following
phases
(i) upswing
(ii) prosperity
(iii) prosperity-recession
(iv) crisis
(v) temporary recovery
(vi) depression
The question is not to choose between Kondratieff and Kuznets cycles, the
research strategy should integrate these two concepts by properly applying
more long-term moving averages that filter the shorter-term fluctuations.
The 'filtering' of the very short-term economic fluctuations plays an
important part in the debate about the existence of Kondratieff-cycle
fluctuations. It should not be denied here, that Kondratieff cyclical
movements in the world economy are seen to be highly controversial, with a
large tradition in economic literature, like Eklund and Kuznets, denying
the existence of such cycles. Other social scientists from a variety of
theoretical camps, only some of them, like Mandel, Marxists, others, like
Forester, W. W. Rostow, also took up the challenge of long-wave research.
Filtering out the very-short-term Kitchen-cycle fluctuations by applying 5
year moving averages and then to explain these moving averages by a
Kondratieff cycle hypotheses from 1756 seems to be a reasonable new
research strategy.
Let Xtn+1 be the index value of world production from Goldstein's world
production series for tn+1; Xtn index value of world production for tn
Xtn+1
(3.1.1) DYN = _______ - 1
Xtn
The R^2 for the Kuznets cycles with unfiltered growth rates, calculated as
above, are:
1741-1756; R^2 = 23.5%
1756-1774; R^2 = 36.1%
1774-1793; R^2 = 34.8%
1793-1812; R^2 = 39.7%
1812-1832; R^2 = 16.4%
1832-1862; R^2 = 25.7%
1862-1885; R^2 = 36.3%
1885-1908; R^2 = 56.2%
1908-1932; R^2 = 44.2%
1932-1958; R^2 = 19.1%
1958-1975; R^2 = 68.8%
10-year moving averages from this data series now achieve the following R^2
for the Kondratieff dating scheme:
1756-1832; R^2 = 53.3%
1832-1885; R^2 = 20.2%
1885-1932; R^2 = 51.2%
1932-1975; R^2 = 49.0%
29) Decay is also present in every serious formulation of the development
level development performance trade-off. The curve-linear function of
growth, being regressed on the natural logarithm of development level and
it's square, is sometimes called the 'Matthew's effect' following Matthew's
(13, 12):
'For whosoever hath, to him shall be given, and he shall have more
abundance: but whosoever hath not, for him shall be taken away even that he
hath'
Social scientists interpreted this effect mainly in view of an acceleration
of economic growth in middle-income countries vis-à-vis the poor countries
and in view of the still widening gap between the poorest periphery nations
('have-nots') and the 'haves' among the former Second and Third World
(Jackman, 1982):
(3.2b) economic growth/adjustment success = a1 + b1* ln (PCItn-1)-b2*
(ln(PCItn-1))2
The same function is also applied to income inequality, following a famous
essay published by S. Kuznets in 1955. Redistribution gets underway after
1000 $ per capita income is reached; the share of the richest 20%
diminishes from approximately 55% to around 40%. Growth and adjustment
accelerate with redistribution.
Now, we should turn to basic human needs satisfaction and hence, life
expectancy: it is very difficult to arrive at valid propositions about
social conditions and development as a dependent variable on the basis of
income distribution data alone. There are comparable World Bank income
distribution data for only 65 countries, while basic human needs
satisfaction data are available from many more countries. Studies about the
determinants of basic human needs satisfaction, and hence, poverty are of a
more recent date (Stokes and Andreson, 1990; Tausch and Prager, 1993;
furthermore: Moon and Dixon, 1992; Ragin and Bradshaw, 1992, just to
mention a few). The idea to link life expectancy to energy consumption
levels or dollar income levels, that is to say, to patterns of
civilization, that exploit mother earth and lead to the self-destruction of
life chances of the human species, is still somewhat revolutionary,
although there has been quite an extensive debate among different
researchers from the ILO, the World Bank and other researcher institutions,
most notably Goldstein, 1985b and Russett, 1983b, on the proper
specification of the development-basic-human-needs trade-off. Among the
decision makers of our time, US vice-president Gore formulated such 'green'
philosophical apprehensions in the most stringent fashion (Gore, 1994). It
is difficult to design a single indicator of the civilisational malaise
constituted by the environmental crisis caused by the industrial mode of
production. But the energy consumption-life expectancy trade-off offers a
very clear, mathematical expression. The prime success measure of a society
should be, how much energy can be saved in achieving a given quantity of
life of the population and to avoid premature death. The limited resources
of our planet, so clearly foreseen by Polanyi, dictate, that as little as
possible energy is being used. The social demands and moral convictions of
civilizations dictate, that premature death should be avoided. Thus,
eco-social reasoning taking into account the performance scores of the
energy consumption-life expectancy trade-off would hold, that the energy
consumption of a society should be minimized and life expectancy maximized.
One recent formulation of this position, reported in Tausch and Prager,
1993, that contains a reference to the extensive earlier debate at the
World Bank and at the ILO about this trade-off, arrived at the conclusion
that using very common deviates of the natural constants e (2.7) and pi
(3.1) reproduce this important trade-off in an optimal fashion, although
most other published mathematical formulations boil down to similar strong
curve-linear functions. It is also imperative to consider the effect of
already achieved levels of life expectancy on the subsequent life
expectancy increase: a poor society with, say, 40 years life expectancy,
will find it easier to expand the well-being of the population to 50 years
average life expectancy than a society that already reached the level of a
75 year-average.
To avoid problems of collinearity, increases in life expectancy over time
are being calculated by differences in logarithms 10, i.e.
(3.3) DYN LEX = ((log 10 (LEX tn)-log 10 (LEX tn-1)) * 100
Let LEX denote life expectancy or other basic human needs indicators, PCI
per capita incomes, ENCONS p.c. energy consumption rates per capita and
year in kg oil equivalent, and DYN rates of increases of basic human needs
satisfaction. On a world scale and for different groups of countries,
levels of human development and increases in terms of human development,
reductions in infant mortality et cetera will always significantly
correspond to the following function and the first derivative:
(3.4) LEX = a + b1 * (ENCONS p.c.)^(1/(e^2)) - b2 * (ENCONS p.c.)^ln(pi)
R2 = 72.4%; F = 157.63; df. = 120; alpha (one-tailed) 5% > 1.289
(3.5) DYN LEX(tn) = a - b1 * LEX (tn-1) +-
b2 * (PCI)(tn-1)^((1/(e^2))-1)-b3 * (PCI)(tn-1)^(((ln(pi))-1)))
R2 = 69.8%; F = 91.85; df. = 120; alpha (one-tailed) 5% > 1.289
predictors b2 and b3 only: R2 = 43.3%; F = 45.89; df. = 120; alpha
(one-tailed) 5% > 1.289. Formulation also possible with ENCONS p.c., but
the PCI data series is more complete
Based on UNDP (1993) data for all the countries that report economic growth
rates for the periods 1965-80-90, equation (3.4) explains 72.4% of total
variance of life expectancy; equation (3.5) - even without life expectancy
in 1960 as an additional control variable - explains 45.9% of total
variance.
Equation (3.2) can also be applied to human development, the world gender
issues and democratization:
(3.6a) human development or gender development or gender empowerment = a1 -
b1* ln (PCItn-1) + b2* (ln(PCItn-1))2
or
(3.6b) political rights violations or civil rights violations = a1 + b1* ln
(PCItn) - b2* (ln(PCItn))2
Human development, and the growing participation of women in society, are a
clearly rising function of achieved development level, while political and
civil rights violations decrease along the course of development. No result
is weaker than roughly 2/5 of variance explained; and all results show -
per se - an optimistic perspective for human development, gender justice
and democratization: the human development index, the gender development
index, the gender empowerment index (ranging from 0.0 to 0.999 each),
political rights violations and civil rights violations (ranging from 1.0
to 7.0) are all to be represented as a function of achieved development
level in 1990 (expressed in purchasing power parity rate). For the
calculation of the gender empowerment (GEI) function, the following
procedure to estimate missing data was followed: means of country groups
with available data were taken to substitute missing values. The following
groups were used: industrial countries (UNDP definition, 1993; GEI = 0.56);
developing countries with a higher human development index (UNDP 1993 list
- Barbados through to Saint Lucia; GEI = 0.391); developing countries with
medium human development (UNDP 1993 list - Turkey through to El Salvador;
GEI = 0.347); developing countries with low human development (UNDP 1993
list - Maldives through to Sierra Leone; GEI = 0.27). The following
statistical properties of the functions hold:
human development index R^2 = 82.4%; F = 281.0
gender development index R^2 = 80.1%; F = 240.8
gender empowerment index R^2 = 60.0%; F = 90.0
political rights violations R^2 = 38.0%; F = 36.8
civil rights violation R^2 = 40.0%; F = 39.9
(3.6a) might be formulated, however, by function (3.6b), applying model
(3.4). The function is:
(3.6b) Human Development Index = a + b1 * (real purchasing power
p.c.)^(1/(e^2)) - b2 * (real purchasing power p.c.)^ln(pi)
30) The following elements of a theory of decay emerge from a serious
analysis of post 1980-capitalist development on a world scale: MNC
penetration in the present Kondratieff cycle period significantly blocks
adjustment, growth, the political and human rights record, human
development, gender development, gender empowerment, life expectancy, a
reduction of maternal mortality, and the protection of the world forests.
MNC penetration increases significantly poverty, as measured by the new
UNDP 1996 CPM poverty measure. International system participation age is
an important control variable in the whole process of the explanation of
post-1982 growth and development/stagnation. It significantly enhances the
increase of life expectancy over time, gender empowerment, and the
educational and employment record of a given country (the strong points of
belonging long enough to the de-facto distribution coalition of
long-standing UN members), while it significantly fails to block the
deforestation process, especially due to the divergence between professed
ideals and dire realities in the long-standing UN member-nations in Latin
America and in Eastern Europe. Terms of trade have a significant effect in
the expected direction on the process of maternal mortality, and life
expectancy. The most important further results are:
(i) militarization is still one of the main development blocs in the
period after 1980, with 5% significant results regarding adjustment,
growth, employment, income redistribution, the greenhouse effect, and
further notable effects on the two deforestation indicators. The main
theoretical thrust of our new results with MNC penetration during the 1980s
points, however, in the following further directions:
(ii) fertility is negatively related to redistribution, employment and
human capital formation, but there is perhaps somewhat surprising ceteris
paribus positive effect on gender empowerment, mainly due to the relatively
good gender empowerment performance of countries with a relatively higher
historical fertility rate like Barbados, Bahamas, China, Ireland etc.,
whose gender empowerment is higher than that of nations with a historically
low birth rate like France
(iii) The small and open economies in the world society also tend towards
gender political power sharing and towards a better employment situation. A
world economically open society with a high proportion of foreign trade per
total product is also more likely to have - ceteris paribus - a lower
greenhouse-index. To further support the predictions about the positive
effects of trade dependency on development, developed by Katzenstein, one
should emphasize also the positive effects on human capital formation and
employment. But trade dependency also works as a classic transmitter of
mechanisms of dependency by the effects it wields on life expectancy,
maternal mortality, and the coverage of a nation with forests.
(iv) Government activity is not significantly related to adjustment and
growth; but a government-controlled economy increases also in this research
design in a negative way the performance of a country regarding the
political and human rights record. On the other hand, strong, and not weak
government, enhances the human development index, the gender development
index, the human capital formation record of a nation, and government
significantly reduces the amount of absolute poverty measured by the new
UNDP CPM-measure to be found in developing countries. The effects of
government or - more specifically - the social welfare state (social
security index) on the indicators of the situation of the world woodland's
are however not giving reason for optimism. The relative strength of the
social welfare state has - like so many explanatory variables - positive
and negative effects on the process of world development: it has a negative
effect on employment, and it has a negative effect on human capital
formation (mean years of education), while welfare states - ceteris paribus
- still tend to behave in a protective fashion regarding their ecological
systems (% forest coverage).
(v) Established feminism (representation of women in parliaments and in
the work force) emerges as the main loser of the world economic changes
that have taken place since the 1980s. States with a high feminist power
base at the one hand were - as in the above research design - successful
in still increasing the feminist power base (gender empowerment index); and
were performing relatively well on the forest protection front; but even
the gender development index could not be affected in an upward direction
by established feminism; and ceteris paribus, states with a well-developed
feminist power base were performing very badly regarding adjustment,
growth, life expectancy increases, political and civil rights performance,
the human development index.
31) It is to be expected, that world capitalism is on its way towards an
anti-egalitarian, and de-regulatory phase which will do away with many of
the social advances that characterized the corporatist economic cycle of
the post-World-War-II period. A recent analysis by Deininger and Squire
compares the evolution of the GINI-coefficients of inequality in the
different regions of the world from 1960 onwards and comes to the following
results which I presume to be known here. From these data it is also
possible to arrive at the following projections of inequality until the
year 2000: South Asia's and Latin America's inequality will decline, while
in Sub-Saharan Africa, in the industrialized countries, and in Eastern
Europe inequalities will increase considerably, and in the Middle East and
North Africa there will be only a slight reduction of inequality rates. The
growth of inequality in Eastern Europe, in Sub-Saharan Africa and in the
industrial countries might herald the advent of a 'Latin-American'-style
capitalism of the 1960s and 1970s, that goes hand in hand with the growth
of transnational corporations penetration, short-term spurts of growth and
long-term stagnation, and protected markets and economic distortions. The
imperative of 'balanced budgets', 'financial markets' and 'de-regulation'
might, in the end, undermine the very logic of economic growth that the
anti-Keynesianism of the 1990s maintains to uphold. Comparative data for
the 1980s and 1990s show, that inequality - as in the past - has no
positive relationship to economic growth, and that, rather, the opposite is
true. Samir Amin and Giovanni Arrighi most vocally proclaim today the idea
that there has never been any 'catching up' of the semi-peripheries and
peripheries, and that there is a fairly constant real gap between the rich
and the poor regions in the world system. Apart from that dire enough fact,
matters are - Amin's argument goes - made worse by adhering to
neo-conservative strategies in precisely those countries that would need a
new political project. Such a socio-liberal interpretation of dependency
theories also receives qualified support from a careful analysis of
existing UNDP data about the determinants of absolute income growth from
1960 onwards. 58 nations experienced an absolute, not only relative,
decline, of their real per capita incomes in the 1980s (Nohlen, 1991).
While the monopoly position in the international system, as expressed by
years of membership in the UN, together with the social security effort are
a significant positive contribution to growth, human rights violations and
population density rates are significantly blocking long-run economic
growth. Whatever methodological preference we have, our analysis confirms
the shape of distribution, expected for the dependency model of global
polarization, and certainly not the modernization hypothesis, which clearly
would expect a closing of the gaps. Our results also show, that the
W-shaped international distribution with strong semi-peripheries, expected
by the world system approach (Arrighi, 1996a), has become weaker over time,
resembling more and more the distribution, expected by dependency theory.
32) Our analysis also shows the effects, that transnational migration has
on the sending and on the receiving countries in the context of overall
dependency mechanisms across long cycles. The hope of many semi-periphery
and periphery nations to change their weak position in the world-wide
structure of the division of labor by mass migration to the developed
countries is not realistic. These findings could have an implication not
only for the social scientific, but also for the political debate in
Europe. At present, 'green', 'alternative' and socialist-left-wing groups
claim that Western Europe should allow more immigration from the South and
the East. But migration greatly increases inequality in the migration
recipient countries. In the migration recipient countries, environmental
decay, as measured by the UNDP greenhouse index, increases. For us,
migration is - above all - an expression of a peripheral position in the
world economy. At first sight, migration has practically no positive or
negative effect on economic growth. The dominant countries, like Japan or
the United States, send their managers abroad, but not their workforce. It
is a sign of world economic weakness to be a net exporter of labor force.
Poor and peripheral countries, like Jordan, Pakistan, Ireland, Portugal, or
nowadays Poland, send their workers abroad, and import their managers. In
the old colonial days, priests and soldiers were imported, timber, ivory,
copper, slaves and bananas were exported. Still, the structure exists, but
at a much higher level. Interestingly enough, the effect of government size
on growth becomes significantly and highly negative, once we consider for
the effect of migration on development. Introducing the variable: 'worker
remittances per total GNP' into our growth equations, we come to realize
that migration conserves economic structures that inhibit world economic
adjustment. The effect is significant at the 12.5% level and narrowly
misses the 10% mark. 61.4% of economic growth are explained by our
equation. Although the small and open economies - especially in Europe -
tend towards a higher economic growth rate and a less painful structural
adjustment towards the realities of the evolving post-1982/89 world
economic and social order, it stands out very clearly, that under due
consideration for the effects of migration on growth, the critique of the
state sector and an excessive social security burden becomes relevant.
33) Over recent years, there has emerged a new sub-field of development and
transformation theory, that is sensitive to the concerns of 'the new social
movements' around the globe (Bello, 1989; Friberg, 1988; UNDP, 1993, 1994;
Woehlke, 1987, 1993). The situation of women and the situation of the
environment emerge as one of the prime issues of development (Benard and
Schlaffer, 1985; Betz and Bruene, 1995; L. R. Brown, 1992; Dubiel, 1993;
Frank and Fuentes-Frank, 1990; Leggett, 1991; Saffioti, 1978; Seager and
Olson, 1986). Cross-national analysis about economic and social
preconditions and the quality of the environment are relatively new
(Beckerman, 1992; Shafik and Bandyopadhyay, 1992). In the former or
continuously communist countries of Eastern Europe and the
USSR-successor-states, environmental quality poses indeed one of the main
concerns of development planning nowadays (World Resources Institute,
1992). Eastern Europe's transformation could be again seen as a testing
ground for various development paradigms and strategies. The globalization
argument would emphasize, that, contrary to the optimistic expectations
about an improvement in the environmental situation due to the new presence
of transnational capital, the adoption of an energy-consuming 'US-style'-
model would mean a significant long-term increase of various emissions.
The global atmospheric carbon dioxide concentration increased from 280 ppm
in pre-industrial times to 315.8 in 1959, to stand at 354 in 1990. World
carbon dioxide emissions increased from 6.002 thousand millions of metric
tons in 1950 to 21.863 thousand millions of metric tons in 1989. In 1995,
CO2 emissions reached 23.1 thousand millions of metric tons (Fischer
Weltalmanach, 1997). The United States are responsible for 4.88 thousand
millions of tons, followed by China (2.67 thousand millions) and Russia
(2.1 millions), followed by Japan (1.09 millions), Germany (0.88 thousand
millions), India (0.77 millions). Desertification, storms, flooding in many
parts of the world during the winter seasons, as well as famine and
droughts during the summer months could be the results of these recent
increases in carbon dioxide levels and are indeed already a reality in many
parts of the world. There were 16 major disasters in the 1960s, 29 in the
1970s, and 70 in the 1980s. Natural disasters now strike 120 million people
each year (UNDP, 1997). Since 1967, 1.3 million people died from droughts,
800000 in cyclones, 600000 in earth quakes and 300000 in floods (UNDP,
1994). The last time, that a carbon dioxide concentration as high as around
300 ppm was reached in the earth's history was around 130000 before our
time; from that moment onwards, global temperatures and carbon dioxide
concentration ratios fell to 20000 before our time, when a level of just
180 ppm was reached. And again, the poor have to pay the bill: Bangladesh
produces only 0.3% of global greenhouse emissions but could see it's land
area shrink by 17% due to global warming (UNDP, 1997).
An important question is, whether or not the recurrence of major floods
and hurricanes in our age is coincidental or connected to global warming.
In the summer of 1997, Europe again was hard-hit by extensive floods, just
as in summer 1996. In 1996, the Netherlands were hardest hit, and in 1997,
Poland and the Czech Republic. Apart from the social aspects of these
disasters, which bring to the surface the vulnerability of the social
structures of people living in poverty, there are severe ecological
implications. The delicate long-standing oscillations in the velocity and
temperature of Oceanic currents intervenes. Precisely this delicate balance
seems, one could tentatively argue, to have been upset now in a fundamental
way: already in 1991 it was discovered that the velocity of the Gulf stream
northeast of Iceland decreased by 80%, thus affecting the delicate
equilibrium between the salt-content of the Oceanic waters, the velocity of
Oceanic circulation, and the cold winds from the North Pole (Gore, 1994). A
huge, powerful current usually carries warm water from the vicinity of
Florida to the coast of Ireland before turning westward, cooling, sinking,
and going back south near Labrador. Deep-lying parcels of unusually warm
water move continually through that pipeline, alternating with cooler ones,
along with the rhythm of sun-spot activity. Each parcel takes about 20
years to travel from the tropics, around the North Atlantic circuit to
Labrador. Sea-surface temperatures rise and fall in concert with the
movement of these parcels (New York Times, March 18th, 1997). Since the
1970s, the North Atlantic oscillation and a similar oscillation in the
Pacific have made the continents of the Northern hemisphere unusually warm,
during winter and spring (New York Times, March 18th, 1997). 'El Nino',
that vast pool of unusually warm surface water that comes and goes every
few years in the eastern tropical Pacific, and first discovered around
Christmas by Peruvian fishermen 200 years ago, is a similar phenomenon (Los
Angeles Times, May 16th, 1997), that, in the past, was followed each time
by 'La Nina', the corresponding pool of cold water in the rhythm of two to
seven years (NY Times, June 3rd, 1997):
In their search for convincing evidence of global warming, scientists have
been puzzling over shifting tree lines in the Sierra Nevada, dying coral in
the Caribbean, melting alpine glaciers, and seasonal temperatures so
extreme that the 10 warmest years of the past century have occurred in the
last 15 years.
When malaria-infected mosquitoes recently turned up in New Jersey and
tropical microorganisms were discovered poisoning shellfish as far north as
Monterey, climate experts were quick to wonder whether they had detected
evidence of climate changes.
In each case, pests once confined to the world's hottest regions appeared
to be moving into new territory--evidence, perhaps, of formerly cool zones
warmed by greenhouse gases.
Now some researchers believe that they have detected the distinctive
signature of global warming in the infamous Pacific Ocean current known as
El Nino, a seasonal upwelling of warm seawater that has been implicated in
disastrous droughts, torrential rains, killing heat waves and other
distortions of the daily weather from Southern California to South Africa.
The El Nino current arises from the dance between order and chaos as the
ocean and the atmosphere interact to balance the Earth's thermal energy. It
is the heart of a complex system called the El Nino Southern Oscillation,
which is so delicate that even a subtle alteration in temperatures can
affect its seesaw, annual rhythms.
Global warming should make El Nino effects stronger and more frequent, said
Kevin Trenberth of the National Center for Atmospheric Research in Boulder,
Colo. And, as if to prove his point, the most recent El Nino, which some
scientists say lasted from 1990 through 1995, is the longest in 130 years
of record-keeping (Los Angeles Times, May 16th, 1997)
The emerging pattern seems easy to predict: milder and drier winters in
Alaska, Canada, and the Pacific Northwest, cooler in the Southeastern
United States and wetter in the US Southwest. Powerful west-to-east winds
across the Atlantic brings more oceanic warmth to Northern Europe and Asia,
making for milder winters there. Northern Europe gets more precipitation,
while Southern Europe and the Middle East less. Until now, the oscillations
in Oceanic currents caused ups and downs in world weather cycles, causing a
shift of the westerly winds to the European South, making Northern Europe
much colder and drier and bringing more warmth and precipitation to
Mediterranean Europe, Africa and the Middle East. The Medieval warm period
and the Little Ice Age were all - current opinion goes - a consequence of
previous such oscillations (New York Times, March 18th, 1997). The question
is of course, whether or not we're in for a more secular change, that seems
to be directing towards more hurricanes in the Southeastern US, more
torrential summer rains in Europe, and Western Latin America, and more
droughts in many other parts of the world, among them Australia and many
parts of Asia. It might also well be that the 'peaks' in the common
re-occurence of the 'El Nino' phenomenon get larger, up to five years (Los
Angeles Times, May 16th, 1996). Several meteorologists, among them Timothy
Barnett at the Scripps Institution of Oceanography, rule out the connection
between 'El Nino' and global warming, however. Their arguments say that
similar prolonged El Ninos were observed during 1911 to 1915, and that
volcanic eruptions, deep-sea thermal events or the 11 to 22 year sun-spot
cycle may cause the phenomenon. Indeed, they'd argue that up to 50% in
global temperature rise since 1900 must be attributed to a rising sunspot
activity, and not to Carbon Dioxide levels (LA Times, ibidem). Fairly safe
predictions estimate however, that up to a third of the world's glaciers
will melt away over the next decades, together with a 2-6 degrees
Fahrenheit rise in average surface temperature and a rise in the sea levels
up to three feet during the next 100 years (LA Times, ibidem). Such huge
fresh water supplies from the Antarctic to the South-east Pacific, and from
Greenland and the Arctic to the North Atlantic would in turn explain, why
less salt water submerges and becomes colder in the process, moving
southward along North Americas coastline. However, there seems to be rising
consensus that severe hurricanes will continue to develop in the Atlantic
arena over the next years (New York Times, June 3rd, 1997). The hurricanes
are facilitated by the warming up of the tropical zones of the Atlantic,
but expected to be kept in check at least in part by the El Nino
phenomenon. The coincidence of the cold La Nina in the Pacific and higher
Sea surface temperatures in the tropical Atlantic, which have risen since
1955 in almost continuous fashion, would however combine to create terrible
hurricanes that will hit the Eastern USA (NY Times, ibidem). It should be
recalled, that wet weather and low pressure areas in Africa's Sahel zone
are the at the root of hurricane embryos, kept in check by high-level
westerly winds blowing from the Eastern tropical Pacific, and caused by El
Nino (NY Times, June 3rd, 1997). One plausible hypothesis is of course:
One of the most powerful indicators, according to the new study by Dr.
Saunders and Andrew R. Harris, climate scientists at University College
London in Britain, is the Atlantic sea-surface temperature. Their
statistical analysis found that while most of the relevant factors were
indeed favorable for hurricane development in the banner year of 1995, the
dominating influence was the unusually warm ocean. The temperature in the
region where hurricanes develop was 1.2 degrees Fahrenheit above the
1946-1995 average, a record. The development region was 0.36 of a degree
warmer than average last year and is about 0.9 of a degree warmer now.
This, said Dr. Saunders, presages another active season. His study appeared
in the May 15 issue of the journal Geophysical Research Letters.
The researchers suggest that warmer seas cause more water to evaporate from
the surface. With evaporation, latent heat is released in the atmosphere,
and the researchers believe that this is what imparts more energy to the
embryonic storms coming out of Africa, making it more likely that they will
develop into hurricanes. "It seems that this is a stronger effect that any
other mechanism, like El Nino or the monsoon in the western Sahel," Dr.
Saunders said.
The question, he said, is whether the rising sea temperature is a natural
expression of the climate system's variability, independent of any
influence from a warming atmosphere. Dr. Gray, for his part, says he
believes the warmer ocean temperature is "a manifestation of a major change
in North Atlantic ocean circulation." Stately currents in the North
Atlantic undergo periodic shifts on decadal time scales. Dr. Gray said he
believed that a new pattern was in place, and that it was likely to presage
a decade or two of above-average hurricane activity.
"This is the greatest fear we have," he said, "that we're entering a new
era. I believe we are." (New York Times, June 3rd, 1997)
In the northern hemisphere, regions north-east of the warming Ocean regions
receive above than average rainfalls, while in the southern hemisphere,
regions south-east of the 'El Nino' area receive the highest rainfalls. On
the western shores of the Pacific and the Atlantic, severe droughts can
develop during the summers, in regions as far apart as North Korea,
Australia, and Eastern Canada. Severe storms are to be expected in
countries or regions like Western Mexico, Peru, and Chile (Reuters, North
America News Report, July 15th, 1997). World poverty and environmental
degradation in marginal lands are closely inter-linked with such phenomena.
During the last El Nino, which happened in 1982-83, hundreds died in Peru
in flood and landslides, and tens of thousands were left homeless. Colombia
braces itself for a severe drought, starting in February 1998, in turn,
while Brazil and low-lying areas of Argentina expect heavy rainfalls, and
the Argentinean Andes will receive unusual amounts of snow. The last cold
'La Nina' water conditions lasted only 2 years, while a new 'El Nino' has
already begun:
Chicago--Jun 27--The current El Nino has been one of the fastest
growing El Nino weather events this century, and sea surface temperatures
are expected to continue rising into the fall and winter, Smith Barney
weather analyst Jon Davis said in a special report.
Pacific Ocean surface temperatures began to rise at the beginning of
the year and have continued to climb at a steady pace ever since, Davis
said in an El Nino update.
"The increase in SSTs during the past 6 months has been the most
dramatic of any 6-month period since the late 1970s," he said. "In fact,
this is one of the most dramatic warmings over such a short period of time
this century."
The La Nina--colder-than-normal water temperatures in the Pacific--
ended in March, with the 1995-96 event lasting a little more than 2 years.
By early May, sea surface temperatures had risen enough to declare an
El Nino event. The continued rise in those temperatures in the past 6 weeks
has been enough to classify the event as moderate, with current
temperatures about 1.5 degrees Celsius above normal.
"If the current rate of change continues at the same magnitude, the El
Nino event will be ranked as a strong one within a matter of months," Davis
said.
(...) Areas that normally see dryness and heat during El Nino events
include
China, India, Southeast Asia--Indonesia, Malaysia, Thailand, Philippines--
and Australia.
The problems in Asia mostly are due to a lack of irrigation caused by
poor summer and fall rains. Australia also typically sees very dry
conditions in El Nino years.
"The more that SSTs in the Pacific warm up, the more likely it is for a
major drought during the spring and summer (Oct-Feb) across the continent,"
Davis said.
Along with these potential problem areas, the weather event could cause
difficulties in South Africa during that region's corn planting season in
October and November.
(...) The major robusta coffee growing areas are west Africa, Indonesia and
Vietnam, and all these regions tend to have drought problems during El Nino
events. Problems for the arabica coffee crop, grown mostly in Central and
South America, are less defined than those for the robusta crop.
(...) The strengthening of the event decreases the chances of an active
hurricane season in the Gulf of Mexico and Atlantic, Davis said.
"Thus, the odds of major disruptions to oil and natural gas production
facilities in the western portion of the Gulf of Mexico and Caribbean (St.
Croix) are lower than in a normal or an active season," he said.
If the sea surface warming continues into the fall and winter as
expected, a warmer 1997-98 winter could result in Canada, the US and
Europe, he said. This in turn could result in lower heating fuel
consumption and costs. Bridge World Markets News
More than 500 million poor people live on marginal lands in the Sahel and
in the upper regions of the Andes and the Himalayas. Their main
preoccupation will not be with the price of commodities that you can sell,
but with survival as such. Dry lands are the home to 1.5 billion people on
earth. Conflicts between farmers and herders are proliferating in Africa
and in Asia (UNDP, 1997). The tragic events in Rwanda and Burundi cannot be
separated from two processes a) these conflicts b) the structure of land
intensive raw material exports, like coffee growing, imposed by the
structures of world tariffs and world trade, on Africa (Amin, 1994). The
water supply per capita in developing countries today is only a third of
what it was in 1970. More than 55% of the people in the Arab world suffer
from serious water shortages. Over the past 50 years, 65 million hectares
of productive land have become desert globally (UNDP, 1997).
World pollution is even a clear statistical function of the ups and downs
of the longer swings in the world economy, most notably the Kuznets cycle
and the Kondratieff cycle. The World Resources Institute has provided
information on the basis of the Carbon Dioxide Information Analysis Center
about CO2 emissions in the world from 1950 onwards. The growth rates of CO2
consumption clearly correspond to the Kondratieff and Kuznets cycle
analysis about economic growth, which we introduced above. About 700
million people, mainly women and children, inhale indoor smoke from burning
biomass fuel. Air pollution causes losses of $bn 35 a year in Europe,
costing farmers $bn 4 in Germany and $bn 2 in Poland. The smoke-stack
landscape of north-central Europe, that ranges from Northern England, via
Belgium, northern France, north-eastern Germany to Poland, the Czech
Republic, Slovakia, the Ukraine and other parts of east-central Europe
presents a high concentration of SO2 emissions, rapid defoliation and
scarce water resources. Table 5.1 and Map 5.1-5.2 now summarize the most
important environmental and social indicators for the region before or
during the start of the transformation process. Defoliation and forest
destruction in turn increase the probability of flooding, because the water
masses, pouring down with the rains, cannot be properly soaked into the
earth anymore. The short-run prediction thus points towards more severe
flooding in Eastern Europe over the next years, to be followed by
desertification, should the El Nino phenomenon grow worse. Forests have the
unique capacity of attracting rainfalls by emitting terpenes (C5H8) and
dimethylsulphides (Gore, 1994).
Deforestation in Eastern Europe and the former USSR is already more severe
than in most parts of Western Europe. Defoliation is a more than serious
problem in North-Central Europe, where water scarcity is also extending. To
this we must add, that in a country like Poland environmental concerns do
not receive the priority that they should receive. Only 34% of the
population is served by waste water treatment plants (EU average 70%);
municipal waste services reach only 55% of the population (EU average: 96%;
our own compilations from UNDP, 1995). The basic argument of a
globalization-oriented explanation of environmental quality on a world
scale (Launer, 1992; Woehlke, 1987) would run as follows: dependent
development not only leads to social strains and imbalances, with all it's
economic dynamics that it might initiate at the same time; it also means a
further strain on the natural resources and the environment by the energy-,
space-, forest- and individual-traffic intensive life-style that the
world-wide market economy, especially in it's North American variety,
brings about. Although some forest-, energy- and emission-saving might be
the initial consequence of the introduction of more modern and western
technologies, the basic problem of dependent and polarizing development
would remain on the agenda. Profit-oriented development between unequal
partners will always, globalization theory argues, lead to forms of
'unequal exchange'. Concretely, the world-wide market economy and the new
international division of labor will (i) transfer energy and pollution
intensive industries to the countries of the periphery and the
semi-periphery (ii) industrial waste from the centers will be increasingly
attempted to be deposited in those regions (iii) export-intensive
industrialization and the debt crisis will mean an almost reckless use of
remaining natural resources, especially forest areas, for export purposes
to earn badly needed foreign cash, or to destroy forests to gain land for
tropical and sub-tropical export agriculture. International tourism
(including it's 'soft-body'-component), air traffic, individual traffic and
the 'western' lifestyle, that begins with the plastic bag, ranging over
well-known soft drinks - preferably from the tin-can - to equally
well-known western TV-serials, will in the end more than negatively
compensate the initially positive contributions, that economic
transformation, market mechanisms and the recession of the 1980s will have
meant for the countries of the periphery and the semi-periphery of Eastern
Europe and the countries of the South in terms of the environment. Poland
produces today more waste per inhabitant already (1500 kg per year) than
Spain, Italy, France, the UK or Germany (1021 kg) (Wprost, 20.09. 1995:
52). Poland might have new factories for paper recycling with western
technology, but the raw material - old paper - is being imported from
Western countries.
In addition, regional development authorities throughout Eastern Europe and
in other semi-peripheral regions will hope to attract foreign buying power
in exchange for local property rights in environmentally still undamaged
regions. Insert here what you like: Caribbean island coasts, still
untouched regions in Eastern Europe, like the Mazurian lakes, the Tatra
mountains, et cetera. They will share the fate - dependency theory would
tell us - of the sell-out at the Spanish Mediterranean coast, wide areas of
the Austrian Alps and many other places in Europe. In other zones, unabated
deforestation will develop, not unlike many Third-World countries. Unequal
environmental exchange will increasingly affect (semi)peripheral regions in
greater geographical distance from the centers; mass tourism to the
tropical zones of the world will cause a tremendous increase in
air-pollution from air-traffic that these 'island get-aways' bring about.
For these reasons, environmental indicators are so negatively determined by
transnational penetration. An important control variable in our analysis of
the deforestation process is the percentage of total land, devoted to
agriculture. At the one hand, it allows for the fact, that large regions of
the world are affected by a growing desertification; on the other hand,
this control variable duly considers the negative effect, that the
expansion of world agriculture had on the world's woodlands in a historic
perspective.
It is hard to construct a single indicator of the environmental situation
of a country. The following indicators are being used widely: the
greenhouse index per 10 million people, energy consumption per capita, and
the annual rate of deforestation. A fourth indicator, per capita carbon
dioxide emissions, is also available. The greenhouse index measures the net
emissions of three major greenhouse gases: carbon dioxide, methane and
chlorofluorocarbons. The index weights each gas according to its
heattrapping quality in carbon dioxide equivalents and expresses them in
metric tons of carbon per capita. Energy consumption, on the other hand,
refers to commercial forms of primary energy - petroleum (crude oil,
natural gas liquids, and oil from non-conventional sources), natural gas,
solid fuels (coal, lignite, and other derived fuels), and primary
electricity (nuclear, hydroelectric, geothermal, and other) - all converted
into oil equivalents. Energy consumption refers to domestic primary energy
supply before transformation to other end-use fuels and is calculated as
indigenous production plus imports and stock changes, minus exports and
international marine bunkers. The use of firewood, dried animal excrement,
and other traditional fuels, is not taken into account for lack of
international comparative data. Energy consumption per capita can be
considered as perhaps the most important single indicator of the factors,
that lead to global environmental degradation. The two environmental
indicators have a very high positive correlation with each other. The third
indicator, annual rate of deforestation or total forest area (under proper
consideration of arable land per total land), is connected with the first
and the second process in a complex fashion. For the future of the world
environment, deforestation is the most alarming contemporary process of
environmental degradation. Forest burning directly leads to a greatly
increased CO2 emission; deforestation reduces the world's future capacity
to produce oxygen and to adapt to increasing CO2 levels. To put it into a
drastic comparison with medicine: the patient suffers from cancer on the
left lung (the green house-effect), and the doctors decide to extract the
still functioning right lung (the world-wide CO2 --> O2 photosynthetic
regenerative capacity of the world's tropical forests). Due to the
destruction of the outer ozone-layer of the earth, this fatal process will
still be increased. Each second, a rainforest area as large as a football
field, is being demolished on purpose (Launer, 1992).
Among the factors, leading to deforestation, the export-oriented economy,
the use of tropical wood in the world paper and furniture industry, and the
burning of wood for cooking and heating purposes are the three most
commonly mentioned factors. A great number of scholars, among them Leggett
et al., 1991, tried to bring deforestation rates systematically into a
causal relationship with the kind of dependent capitalist development,
analyzed amongst others by Bornschier and Chase Dunn, 1985. The creation of
large plantations in Latin America for meat exports to the United States of
America is often causally linked in the literature to the problem of
deforestation (Launer, 1992). Brazil's supposed role is of special
importance here, because Brazil still has a share of 27.5% of the world's
tropical forests. Indonesia's year-long wood-export drive has often been
mentioned as the most paradigmatic case of the influence of the capitalist
world economy on the rapid disappearance of the world's forests. The role
of the peasantry in dependent capitalism was also often mentioned in this
context. Extensive tropical agriculture, implanted by 500 years of
dependent development, described by the Peruvian Marxist José Carlos
Mariateguí in his classic '7 Essays', and later on analyzed by Feder, 1972,
is thought to be one of the main factors leading to the alarming rates of
deforestation. Small scale peasants - the dependencia argument runs - are
evicted throughout the countries of Latin America, Africa, Asia and the
Pacific from their meager holdings by the land-hungry process of dependent
agricultural capitalism for the sake of export-oriented breeding for meat
production and tropical export crops. But what is already commonplace in
the former 'Third World' could become a rule of the day also in the former
'Second World'. Forests are being cut down not only in Indonesia and in
Northern Borneo at an amazing speed, but also in the Warmia region of the
Mazurian lakes in Poland and in other parts of Eastern Europe. Forest
cutting for export purposes, disregarding the social and ecological rights
of the local populations, could serve, a dependencia-minded argument could
maintain, the short-term profit interests of the old and new
export-oriented elites.
Three measures are used to further test the relationship between
globalization and gender-related human development. One is maternal
mortality, the second is the new UNDP gender-related development index, the
third is the gender empowerment measure. The first and the third index are
more distribution-oriented than the second indicator. Each year, 290 women
per 100000 live births lose their lives in the moment of giving birth. What
is the ultimate moment of happiness in a life for woman and man, to
experience in togetherness the advent of a newly-born life, becomes the
ultimate pain for millions of mothers around the world. They lose their
lives due to the structural violence existing in the world system, they
lose their lives in their ultimate moment of loneliness while giving birth,
desolated and marginalized by a social order on the global level that
produces more and more commodities, services and pollution but that forgets
about the poor backyards, shanty towns and desolate clinics in the world
poverty belts. The distribution conflict evident in the health sector,
often under constraints from 'structural adjustment programs', has a real,
deadly consequence for them. In the industrialized countries of the OECD,
maternal mortality is 11 per 100000. That is to say, at the global level
there is an 'excess mortality' of 279 women per 100000 live births,
considering the progress in medicine reached at the level of the western
democracies. In Eastern Europe, maternal mortality already reaches 66 per
100000 live births, and in the developing countries, 420. All three
indicators of the female situation de la vie are being significantly
blocked by MNC penetration. Our results indicate that dependency is by far
the most important determinant of maternal mortality, and that the two
dependency-related indicators: terms of trade and trade dependency
co-determine the process of maternal mortality in the world system. Our
results also indicate that gender empowerment and gender development are
significantly and negatively influenced by MNC penetration.
34) The emergence of dozens of nations after 1989 makes cross-national
development research in the world of today an especially difficult task. We
present here one of the first analyses of the cross-national determinants
of world development, that integrates these newly independent and or market
economies of Eastern Europe and the former USSR into the world sample of
analysis. Unfortunately, the lack of appropriate data severely limited the
analytical possibilities of this investigation. Nevertheless, some
important conclusions can be drawn in the light of our earlier debate. How
'general' is the 'particular', and how 'particular' is the 'general' path
of world development from the 1980s onwards? Arrighi wrote in 1995:
'Partial as the current revival of a self-regulating world market has
actually been, it has already issued unbearable verdicts. Entire
communities, countries, even continents, as in the case of sub-Saharan
Africa, have been declared 'redundant', superfluous to the changing economy
of capital accumulation on a world scale. Combined with the collapse of the
world power and territorial empire of the USSR, the unplugging of these
'redundant' communities and locales from the world supply system has
triggered innumerable, mostly violent feuds over 'who is more superfluous
than whom', or, more simply, over the appropriation of resources that were
made absolutely scarce by the unplugging' (Arrighi, 1995: 330)
On the other hand, it is clear that
Antigua, Botswana, China, Cyprus, Dominica, Hong Kong, Maldives, Mauritius,
Saint Kitts, Saint Vincent, Singapore, South Korea, Thailand
had a GNP per capita growth rate of 4.5% or more per annum during 1980-93.
The prediction of most world system theories for the future long-term
prospects of the capitalist system are gloomy. Chase-Dunn and Hall cite
especially population growth with its consequence on natural resources and
pressures for migration as one of the elements that will ultimately cause
systemic decline (Chase-Dunn and Hall, 1997: 199). Our reading of the
post-1980s tendencies of world development is now in at least some
accordance with hypotheses, put forward by Amin. Where Amin could be
qualified at least partially, are some of the details, viz. his partial
neglect of the role of human capital formation and population, for example
in his 1975 and 1997 publications. For Samir Amin (1997), ascent and
decline is largely being determined in our age by the following 'five
monopolies'
(i) the monopoly of technology, supported by military expenditures of the
dominant nations
(ii) the monopoly of control over global finances and a strong position in
the hierarchy of current account balances
(iii) the monopoly of access to natural resources
(iv) the monopoly over international communication and the media
(v) the monopoly of the military means of mass destruction
Performance over the last 1 1/2 decades teaches us an important lesson
about the evolving mechanisms of the future Kondratieff cycle, that began -
our reasoning went - in the mid-1980's. Let us recall, that for dependency
and world system theory in the tradition of Samir Amin (1975), there are
four main characteristics of the peripheral societal formation
(i) the predominance of agrarian capitalism in the 'national' sector
(ii) the formation of a local bourgeoisie, which is dependent from foreign
capital, especially in the trading sector
(iii) the tendency of bureaucratization
(iv) specific and incomplete forms of proletarization of the labor force
In partial accordance with liberal thought, (i) and (iii) explain the
tendency towards low savings; there will be
(a) huge state sector deficits and, in addition, the 'twin'
(b) chronic current account balance deficit
in the peripheral countries. High imports of the periphery, and hence, in
the long run, capital imports, are the consequence of the already existing
structural deformations of the role of peripheries in the world system,
namely by
(i) rapid urbanization, combined with an insufficient local production of
food
(ii) excessive expenditures of the local bureaucracies
(iii) changes in income distribution to the benefit of the local elites
(demonstration effects)
(iv) insufficient growth of and structural imbalances in the industrial
sector
(v) and the consequent reliance on foreign assistance
The history of periphery capitalism, Amin argues, is full of short-term
'miracles' and long-term blocks, stagnation and even regression. Dependency
has, according to Amin, a commercial, financial and technological aspect.
'Rent seeking' has its basis in big landholding, which throughout the
periphery was introduced, supported and upheld by colonial and
post-colonial structures. Profitable investments in many periphery
countries are - in part - constrained by the (emerging) unequal income
distribution, which again determines, that the local 'surplus' is being
squandered by luxurious consumption, transferred abroad in the form of
capital flight, or being used for speculation. Just to illustrate Amin's
point: in the newly capitalist countries of Eastern Europe, only the Czech
Republic, Hungary, and Poland attracted $bn 7.0 or more foreign direct
investment. Foreign direct investment in Russia is just $bn 6.5, while
recent poverty data on Russia are just alarming. Russia concentrates within
its borders around half the income poor of the entire region, numbering in
all 60 million poor Russians (poverty is defined here as $4 or less a day).
Another 60 million Russians work in the shadow economy or live from crime,
that now controls 45% of Russian GNP: and these are statements by the
government, and not by Radio Liberty... (Interior Minister Kulikov, quoted
in Agence France Press, 2nd July 1997).
In the entire region of Eastern Europe, income poverty increased at an
alarming speed between 1988 and 1994 - from 4% to 32% of the total
population. 62% of all Russian children and 34% of the aged are poor; the
suicide rate increased by more than 50% and the homicide rate more than
doubled against 1989. 9.6% of all people are not expected to survive to age
40, 38% of Russians are living below the World Bank absolute world poverty
line of a dollar a day, and the Human Development Index has fallen,
compared to 1993 (UNDP, 1997). The poorest 20% have an income of 881 $ per
capita and year in terms of real purchasing power, while the richest 20%
have 12804 $ per capita and year (UNDP, 1997). Past and present foreign
domination and colonialism cause long term structural imbalances. Countries
as far apart as large parts of Africa and Asia, just as Poland from 1795 -
1918, were no national state during the important era of the Industrial
Revolution. Their economies were geared to the needs of others, i.e. their
colonizers. The structural heterogeneity between the different economic
sectors at the one hand and the 'modern', export oriented sector, the
medium sector and the 'traditional sector' in agriculture, industry and
services, becomes one of the main reasons for the unequal income
distribution in the countries of the periphery. Colonial trade, foreign
investment in the 19th Century, import substitution in the first half of
the 20th Century, and the new international division of labor that we
observe from the middle of the 1960s onwards did not really change the
structures of inequality in the world system. While mass demand and
agricultural structures (Elsenhans, 1983) were responsible for the
transition from the tributary mode of production in Western Europe to
capitalism from the Long 16th Century onwards, periphery capitalism was and
is characterized by the following main tendencies:
(i) regression in both agriculture and small scale industry characterizes
the period after the onslaught of foreign domination and colonialism
(ii) unequal international specialization of the periphery leads to the
concentration of activities in export oriented agriculture and or mining.
Some industrialization of the periphery is possible under the condition of
low wages, which, together with rising productivity, determine that unequal
exchange sets in (double factorial terms of trade < 1.0; see Raffer, 1987
and above)
(iii) these structures determine in the long run a rapidly growing
tertiary sector with hidden unemployment and the rising importance of rent
in the overall social and economic system
(iv) the development blocks of peripheral capitalism (chronic current
account balance deficits, re-exported profits of foreign investments,
deficient business cycles of the periphery, that provides important markets
for the centers during world economic upswings)
(v) structural imbalances in the political and social relationships, inter
alia a strong 'compradore' element and the rising importance of state
capitalism and an indebted state class
What tendencies, then, do emerge from the multivariate analysis of
international development in the post-1980/1989 world in 134 countries with
fairly consistent and complete data? Is Arrighi's hypothesis about the
'deregulatory logic' of post-1980 capitalism confirmed by the data? And
what about the other hypotheses of 'world system research'? First of all,
MNC penetration (UNCTAD measure, 1985) significantly lowers human
development, and increases - ceteris paribus - infant mortality. Under
inclusion of the world of former 'real' socialism, the curve-linear effect
of the development level on subsequent economic growth is partially taken
over by variables, pertaining to the employment structure. Both the
saturation effects of 'mature capitalism' with a high labor force
participation rate as well as periphery capitalism's blocked rural
transformation are responsible for slow economic growth. Again, only the
statistically significant effects, that cannot be explained by simple
random, are being taken into account. Countries with a large labor force
participation ratio, and hence, a relatively smaller industrial de-facto
reserve army of employment, grow slower than countries at the middle income
level with a still larger industrial reserve army outside agriculture and a
relatively abundant supply of labor on the labor market. Our results about
the (female) reserve army are again confirmed here, now on a more general
level. One plausible reason for this shift in predictive power away from
the Matthew's effect to the employment structure is the still preliminary
character of income data from Eastern Europe. Wage flexibility in the urban
sector seems to be another of the main underlying processes here. But on
the other hand, predominantly rural societies at the present stage of
globalization are being negatively affected by the ongoing urban bias in
world development (M. Lipton). Above, we already drew attention to the fact
of the structural development blocks in Europe. Seen from the perspective
of Third World development, it is amazing to see how some European
countries repeat the experience of what Armando Cordova and Samir Amin once
called 'structural heterogeneity' and what development sociologists today
also call - somewhat differently from Michael Lipton - structural
disarticulation. Especially those countries, that were once or still are
characterized by big landholding and or extensive agriculture, implanted in
the world system during the Long 16th Century, like most of the nations of
the world's East and South, are still doomed to slow economic growth, slow
human development, and relatively higher infant mortality rates. In terms
of measurement, it boils down to the same effect: disarticulation, urban
bias, structural heterogeneity - they all happen, whenever agriculture has
a much larger share in national labor than in national product, reflecting
the relative discrimination of the rural sector in society. Hence also the
negative effect of agricultural employment on growth. Redistribution of
incomes is significantly affected by the 'Kuznets curve' by the labor
supply rate, and hence, population growth, and by the power status of a
nation in the world economy (market size). Katzenstein's theory is not
vindicated here. The process of bourgeoisie nation formation (Amin does not
use the term 'nation building') before the First World War is also a
crucial determinant of today's growth and development chances in the world
system. Those nations, that were founding members of the UN in 1945 - and
hence have a high UN membership age - disproportionately reap the benefits
of economic growth today. The international system indeed seems to work
like a single, huge, distribution coalition - or to put in Samir Amin's
words - the international system favors at least some of the five
monopolies. Economic growth disproportionately favors countries with a
long-established record of UN-membership. Participation in the
'distribution coalition' of world power allows for a better access to the
distributed goods, while the predominantly rural societies of the 'Fourth'
and 'Fifth' World are being excluded from the benefits. Those, that have
access in the established networks of distribution coalitions, accumulate
even more economic power. The human capital effort, darling of nearly all
contemporary models and speeches of the Western development establishment,
indeed pays off in terms of economic growth, but not in terms of human
development and infant mortality reduction, mainly because of its legacy
under totalitarian structures. And Deutsch's stability theory is again
vindicated here; mainly because a strong state sector role in the economy
and low initial exposure to 'modernization' (high population growth) still
dampen war intensity, while modernization under way (high mean years of
schooling) increase conflict intensity.
State sector size affects growth in a way, as predicted by both
conventional and radical economic theory. But - contrary to Amin's
expectations - the economic burden of the military sector today also
significantly and negative affects economic growth at the level of the 134
nations under analysis. Amin's own theory would allow for such an
interpretation: the state class, bureaucratic all block against
development; militarization, first and foremost, is bureaucratization;
while only a handful of nations might reap (if at all?) the benefits of
militarily controlling the globe. The effect of militarism must be further
qualified: growth is hampered by high military expenditures, but employment
is increased. Thus Amin's hypotheses, derived from his theory, must be
qualified: there is positive employment, but a negative growth effect of
monopoly number five in the world system, militarism. Further research
should also look into the current account balance effects of militarism and
world power political status. High military expenditures are closely linked
to the conflict zones of this world, as measured by the indicator War Years
from 1990 to 1995.
Small states do not tend, in Katzenstein's sense, towards redistribution
but towards a higher income inequality; the economic burden of
international power is seen in the negative correlation between absolute
GNP and economic growth; or to put it reverse, small markets have only a
partially optimistic growth perspective. Their growth will tend to be fast,
but not egalitarian. Former communist countries could grow rapidly , but
often stagnate, not because they are former communist nations, but because
their human capital effort is too low, because their peripheral state is
too bureaucratic and too big, because their wage flexibility is too low,
because their military burden rate is too high, and because their rural
populations are being discriminated against. But per se, the tendencies of
world society after 1980 during the new cyclical set-up seem to suggest,
that a world political experience as a former communist nation does not
block against subsequent economic growth. Again: absolute market size is
not a precondition of subsequent economic growth anymore, as successful
island nations like Mauritius, show impressively. Our equation determines
46.6% of economic growth from 1980 onwards; the F-statistic for the whole
equation is 8.05, with 120 degrees of freedom. What flexible specialization
has to offer to the megalomania of current European Union thinking, would
be open for a debate.
Human development, on the other hand, is positively determined by a high
agricultural share, and hence the absence of what Michael Lipton once
called the 'urban bias of world development'. It is also being negatively
determined by a high ratio of foreign direct investment penetration. Thus,
recent findings of cross-national development research, most notably Huang
(1995) are being confirmed anew. Our two statements are very well
compatible with the essence of dependency theories. A development, that is
dependent to a large extent on foreign capital, is socially polarizing and
regionally exclusive. The rural regions stagnate relatively, while the rich
urban centers are receiving disproportionate shares of the newly created
wealth. But ceteris paribus, it also emerges, that a concerted effort in
only one area of human capital formation - education - without the proper
health policy effort can be negatively affecting human development. Poland
comes to my mind here: education data for Poland are still better than
health data, where the need for reform is especially dramatic. Highly
repressive totalitarian communist regimes - in the past - had a relatively
good quantitative record in the education sector, that was connected with
severe deficits in other areas of social policy. This same effect also
holds for the determination of infant mortality rates. A policy of high
labor force participation ratios, and hence, full employment, less urban
bias and chances for rural employment all reduce infant mortality rates
significantly, while communist power experience, foreign capital
penetration and a one-sided human capital policy, concentrated on
schooling, all contribute significantly to higher infant mortality rates.
Employment - here labor force participation rates, are being determined by
a Kuznets-type non-linear process. Agricultural structures first block
against higher employment ratios in the formal sector, and later on,
services, rather than industry, are being able to soak up reserves of
unemployment and to guarantee high labor force participation ratios. At
later stages of economic development, population growth is positively
related to employment; without a certain demographic dynamism, mature
societies have indeed to die. Military expenditures are significantly and
positively related to higher labor force participation ratios, thus
repeating the worst fears about 'military Keynesianism' in our age. The war
experience of a nation is only weakly determined in our model (14.9%); yet,
the most significant results are achieved by the state sector and low
social mobilization (high population growth), working against a prolonged
war experience, while military expenditures and mean years of schooling
enhance the conflict potential: the state neutralizes violence potential,
while modernization and social mobilization does. Finally, income
inequality is being determined - in an almost brutal Wallersteinean sense -
(41.3%) - by the Kuznets curve, population growth, and by the absence of a
position of power in the international system (absolute GNP).
35) There is the danger, that Euro-monetarism will accelerate the tendency
of the world system on its path towards financial speculation,
narco-capitalism, and the shifting of resources away from the Atlantic
region towards the Pacific. On the other hand, it is evident that Europe's
long-term ascent from the Long 16th Century onwards from the state of a
former periphery of the world system to a center (Arrighi, 1995; Amin,
1975), which was based on agrarian reform and mass demand, is now
threatening to be reversed by the application of monetary orthodoxy. The
Maastricht debate is characterized by the following basic fallacies:
Fallacy number one: by high unemployment you can control inflation. At the
outset of this technical appendix, we would thus like to state that
unemployment, first of all, is an enormous waste of economic resources.
Thus, only at very small and at very high levels of already existing
unemployment, a 'shock therapy' might work to flatten out budget deficits.
But else, there is an across the board negative correlation between
unemployment and budget surplus, i.e. increasing unemployment still
increases deficits. Savings has limits. And here, the sad story of
Euro-'monetarism' begins (the hyphens are to indicate, that the
relationship between real monetarist theory of the Milton Friedman type to
contemporary European applications is far from certain). And here, we
start:
'Jacques Rueff, fierce 1950s critic of American monetary hegemony, once
said: 'Europe will be built through a currency or it will not be built at
all'. What the ERM story shows is quite the opposite: trying to lock
countries like France and Germany together via their currencies does not
forge one nation; instead it turns domestic monetary questions into
international political conflicts' (Connolly, 1995: 1995)
It is time to stress the fundamental weaknesses of the EMU project from the
viewpoint of world system theory. Up to now, Europe does not form an
integrated economic region with truly European transnational corporations;
Europe forms only a preferential market (Amin, 1997). Secondly, Europe does
not have a continental societal project, that would integrate such areas as
research and development, public markets, and would have a joint commercial
and corporate law, and as yet does not integrate the vital sectors of film
and TV production. Trade union and other social law would have to be
integrated, and Europe does not have as yet a joint project of external
relations with the other regions of the world economy (Amin, 1997). The EMU
project should facilitate a truly common market, the free movement of
capital and stable external exchange rates. As the critics of the project
have shown all along, the project could only function if there is a
parallel economic and social policy in the member states of EMU; that means
harmonization of tax and expenditure systems, the integration at the level
of corporate policy, and the harmonization of trade union policy at the
European level. There would have to be a coordinated European policy not
only of the internal, but also of the external opening of markets -
especially regarding foreign investment and capital inflows from third
countries (Amin, 1997). I would even dare to say that neomarxists like
Samir Amin and neo-liberals like Vaclav Klaus agree on the 'constructivist'
approach of EMU - running counter to the world economic tendencies of
contemporary capitalism. We all know by today the Maastricht criteria
(Rothschild, 1997):
a) in the examination year an inflation rate no more than 1.5 percent
above the average of the three EU states with the lowest price rises
b) a long-term rate of interest within two percentage points of the
average of the three 'best' countries
c) a national budget deficit (covering national, federal and local
governments) less than 3 percent of GDP
d) a public debt ratio which does not exceed 60 percent of GDP
e) a currency for two years within the normal band of EMS
Fallacy number two now arises: that economic theory supports the EURO.
Academic economists found 24 main arguments against the EURO:
(i) external changes and shocks will not be answered anymore by changes in
the external exchange rate. Since the exchange rate is not anymore a factor
of economic policy regulation, either migration, wage flexibility, fiscal
policy or economic transfers from other countries will become the main
regulatory mechanisms in the new, monetarily united Union (Klaus, 1997;
Beirat 1996; Stephen Roach from Morgan Stanley Dean Witter, Neue Zuercher
Zeitung, Monday, 16th of June, 1997: 16). Fiscal policy under Maastricht is
also 'crowded' out, so practically only wage policy and or migration
remains as the economic adaptation mechanism of a country to react to
external shocks (Beirat, 1996)
(ii) but labor is not that flexible; so the result will be - in all
probability - economic transfers within the EMU countries. Economic
transfers are the inevitable result of monetary union (a contradiction,
perhaps spelt out most clearly by the neo-liberal acting Czech Premier and
economist Vaclav Klaus, 1997). This scenario will lead to the inevitable
result of a loss of autonomy of national fiscal policies (Klaus, 1997).
Such a scenario is all the more likely since there is no convergence in the
productivity of labor in the EMU countries themselves. Without a financial
transfer system from the rich to the poor regions, EMU will prove to be not
operational, anywhere up to $bn 1000 DM will have to be transferred
(Borchert, Sueddeutsche Zeitung, 1st March, 1997: 25), thus repeating the
experience of the integration of the New Laender into the Federal Republic
(iii) the problems of the classic 'euro-monetarist' Maastricht package are
compounded by the fact that not governments, but parliaments decide on
fiscal policy in European democracies - thus making the signatures of heads
of governments or foreign ministers under treaties of stability liable to
parliamentary control - or worse - Maastricht would have led to the gradual
erosion of the role of the national parliaments in favor of the executive
branch
(iv) according to the textbooks, the function of financial markets is the
transfer of savings into the financing of real economic investments
(Beirat, 1996). On a global scale, European and Atlantic region savings in
general will be transferred to real economic investments in Asia, the most
dynamic region of the capitalist world economy (Arrighi, 1995). Gross
domestic savings in the European Union are only 20%, and gross domestic
investment only 19% of GDP. In the US, savings (15%) and investments (16%)
are even lower. For the moment, the international system seems to work in a
very simple way: international debts finance the Asian/US economic
compound. On a global scale, East Asia achieves an investment boom (37%
investments per GDP), followed by South-East Asia and the Pacific region
(33%), while Eastern Europe and the CIS stand at 22% savings and
investments each (UNDP, 1996). Only Sub-Saharan Africa has a lower savings
and investments rate than the EU and the USA. At the heart of the
'euro-monetarist' Maastricht prescriptions against the European ills now
lies the assumption, that monetary policy will influence only prices, but
not output and employment. The EMU-optimists hope that the single currency
will be an ideal instrument for Europe to sustain in international economic
competition. But a 'hard' EURO will be of a negative influence on trade-,
and hence, on European current account balances with the rest of the world,
since European exports will become more expensive and European imports will
become cheaper. Until now, de-valuations were a proper economic policy
instrument of the weaker European economies to balance their negative
current accounts, as the example of Spain and Italy over the last years
amply demonstrates. This instrument would now be absent; only migration,
the wage rate and or unemployment would be the only options left for the
European mezzogiorno under EMU (Boyer, 1996). A sinister argument could
even be, that the motives for the EMU project could be rather
inner-European competition. A 'hard' EURO comprising the European
mezzogiorno, would ruin exporters in the South (that made important
headways against the dominance of German TNCs in Europe over recent years)
while cementing the position of German and a few other multinationals -
banks and companies - on an increasingly protected European home market.
Then, indeed, the European Union would become what Samir Amin has
contemptuously called 'The Fourth Reich' (Amin, 1997). Germany, far away
from being Europe's 'growth locomotive', is on its 'best' way to become an
economy, typically characterized by double deficits: total debts of the
public sector exploding since the 1970s (now reaching DEMbn 2133.3);
subventions now standing at DEMbn 116.2; the current account balance
deficit 0.6% of GDP, unemployment, for years cosmetically 'polished up' by
excluding the German East from the country's international statistics, now
at 11.2% and reaching the highest levels since the end of the Weimar
Republic
(v) on the other hand, the 'euro-monetarist' package against future
inflation under EMU, that solely relies on 5 monetary criteria, overlooks
the very plausible role of encompassing trade unions in combating
inflation - an argument, originally also conceded by neo-liberal economic
theory. Furthermore, the 'euro-monetarist' Maastricht strategy, as
envisaged by around 1995-1997, would have brought about a monetary union
between precisely those EU countries that already are in the upper 1/4 or
1/3 of stability on the European continent - with uncertain implications
for the unfortunate rest (Beirat, 1996). The election victory of the French
left on June 1st 1997 is inseparable from the strains that the original
'euro-monetarist' interpretation of the Maastricht project brought about.
The annual rate of inflation in EU-Europe is the minor problem: the real
problem is massive European unemployment
(vi) you cannot exclude an entire region from the project of European
Monetary Union. The Kohl/Waigel strategy would have relied on the European
North, and not on the South. The political backlash against
Euro-monetarism, Frankfurt (Franc fort?)-style, is only too well
understandable, considering the high social costs that French society in
particular would have had to bear. Dramatic words are being used by
European politicians nowadays: the EURO should guarantee peace on the
European continent et cetera. But the reality is different: it creates the
very conflicts between a 'hard' and a 'soft' European economic zone. But
'weak' Euro' would, most probably, also be no alternative: restructuring of
ailing European enterprises will be postponed; with capital markets most
probably reacting by pushing up interest rates (Neue Zuercher Zeitung, 16th
of June, 1997: 9), thus prolonging the vicious downward cycle of the
European political economy. The only real alternative would be to follow a
socio-liberal flexible growth path, Danish, Dutch, Irish or Asian style
(vii) export markets of the 'ins' are heavily dependent on precisely those
European nations, whose participation in the EMU project was long
considered to be doubtful. But currency de-valuations in the 'outs' would
be a high probability during the initial phases of the project, thus making
the employment situation in the 'ins' all the more difficult. Germany and
France lost important market shares in Italy during 1992 - 1994 (Beirat,
1996). The 10 countries which fulfilled two, three or four Maastricht
criteria by 1996 (Belgium, Germany, Finland, Netherlands, France, Austria,
Luxembourg, Denmark, Ireland, United Kingdom) would have had 55 votes on
the EU council, while the 'outs' (Sweden and the European 'mezzogiorno')
would have had enough votes (32) to block voting in the Council (Beirat,
1996; our own calculations from Weixner and Wimmer, 1997). This perspective
could have also blocked the project of extending Europe eastward
(viii) all this will lead to a 'deficit' of democracy in the Union; in
accordance with the liberal doctrine that the weakening of democracy is -
inter alia - the result of the geographical distance between the locality,
where decisions are taken, and the citizens, who are the subject of these
decisions (Klaus, 1997)
(ix) 1996, Portugal, Spain, Italy and Greece did not meet any of the first
four criteria; Sweden missed three criteria; Germany and Austria two; and
the rest of the Union at least one of the criteria (Weixner and Wimmer,
1997). Only Luxembourg meets all the five Maastricht criteria (Weixner and
Wimmer, 1997; Rothschild, 1997)
(x) international financial speculation will prove to be a formidable
factor in the line-up for the realization of the whole project. On 'Black
Friday', July 30th 1993, the Bundesbank had to buy foreign currencies to
the tune of $bn 30 DM under the old EMS (Weixner and Wimmer, 1997). Now,
the political conflict lines in Europe would suggest: either a 'weaker'
EURO against the Dollar and the Yen, which is good for the European export
industries and the European South on the world markets; an option, probably
supported by the new left wing governments around Europe; with the
inevitable flight into real estate and the Dollar by the accumulated wealth
in Germany (and, to a minor extent in the other countries) to the tune of
over DMbn 4000 to DMbn 5000 as the immediate consequence; or Maastricht is
realized at the cost of transforming the European East and South into a
mirror-picture of the process of the integration of the New Laender into
Germany after 1989. The vast size of accumulated savings in Germany,
together with the savings of the European shadow economy, are an immense
pool of potential speculative money, should the EURO project get into real
trouble. Anything can happen: transfers into US $, real estate, Yen, Swiss
Francs, Swedish Crones. Remember in this context, that - compared to these
huge amounts of accumulated legal and illegal wealth - the German currency
reserves are 'only' $bn 80.2: a sustained speculation against the
Deutschmark on the international financial markets could trigger-off a
panic reaction on the part of German wealth-holders, which could mean the
end of the EMU project. Hardly observed is the fact, that German currency
reserves amounted $bn 85.3 in 1996 and melted down to 80.2 in March 1997 .
International currency reserves could melt under such circumstances like an
atomic reactor during a greatest possible accident. Seen in such a way, the
political class that rules Germany knew well enough, why it insisted all
along on a 'hard EURO' - to the detriment of European export industries.
But you cannot expect banking capital to rule against banking capital. In a
real battle over international finances, the European strategic currency
reserves are small compared to the rising Asian reserves, brought about by
the enormous accumulated current account balances over the years. In 1997,
Taiwan alone had currency reserves to the tune of $bn 88.0; Japan 218.2;
China 114.0; Hong Kong 69.6, Singapore 77.3; while Switzerland had 35.3;
and the USA only 56.2, with the big European economies like France, Spain,
the Netherlands and Italy holding reserves to the tune of around 25 to 60
billion $ each . Well-established German financial institutes already more
and more propagate Dollar savings accounts - a clear sign how real the
transfer of German savings into US $ already has become. It is significant,
that the European mezzogiorno states Spain (60.6) and Italy (45.4) have
increased their foreign currency reserves by about $bn 30 last year, and
together already have larger reserves than the Federal Republic of Germany
(xi) public opinion in the richer countries of the Union is mostly against
the whole project, with rejection rates in 1996 already ranging from 46% in
Austria to 64% in Denmark (Weixner and Wimmer, 1997)
(xii) the erosion of the EMU-project finds it's counterpart in the erosion
of the state of public finances in the Federal Republic of Germany. The
economic consequences of Mr. Theo Waigel are very clear to judge: he
presided over the doubling of Germany's public sector debt to $bn 1259
during his record tenure as Germany's longest-serving finance minister. Hid
'defiant alchemism' in his bitter dispute with the Bundesbank over German
gold reserves is but the last straw in a long chain of events (Financial
Times, Weekend, May 31st, June 1st, 1997)
(xiii) the shadow economy will partially have to come out from the
darkness, most probably increasing the already existing capital flight into
the Dollar, the Yen, and into real estate. Indeed, considering the volatile
character of international finances, a real avalanche could ensue, making
the EMU-project impossible
(xiv) the Maastricht criteria will prove to be an instrument of
anti-Keynesian global governance (Raffer, 1997). But the reception of
neo-liberal economics by the EU-Commission and the Maastricht heads of
governments was highly selective: while they seem to imply the importance
of 5 monetary criteria, the Union overlooks day by day other neo-liberal
prescriptions in important policy areas - from human capital policy over
trade policy to agriculture
(xv) if General Motors, AT & T, and individual households had been
required to balance their budgets in the manner applied to the Federal
Government (which in the US is under similar pressures as the governments
in Europe), there would be no corporate bonds, no bank loans, and many
fewer automobiles, telephones and houses (Vickrey, 1996). The Maastricht
criteria are part and parcel of the 15 fatal fallacies of financial
fundamentalism
(xvi) a more useful arrangement than Maastricht would have been to achieve
first a certain degree of political cohesion in order to arrive at a more
consensual democratic and better enforceable economic framework
(Rothschild, 1997; Amin, 1997)
(xvii) there are fundamental differences between the 'freedoms' for
capital and labor - the first can be moved without having to learn a
language and without leaving behind friends and a familiar environment -
labor even when organized in a union cannot threaten to transfer as body to
another firm or country. The freedom of labor does not present a
countervailing power to the bargaining power obtained by business through
the complete liberalization of capital movements; on the contrary; that
bargaining power is strengthened by the uninhibited possibility of
attracting workers from low-wage EU countries (Rothschild, 1997). The basic
policy approach of Maastricht and the Commission overlooks this important
fact
(xviii) real outcomes in economic life, such as growth, employment,
productivity, development, income distribution, do not figure at all in the
so-called convergence criteria (Rothschild, 1997)
(xix) full employment is a good precondition against inflation
(xx) the harmonization of social conditions in the Union by the Social
Charta remains one of the most important tasks for an effective, real
monetary union, because this would lay down the conditions for a
convergence in the real welfare conditions of the countries concerned
(Rothschild, 1997)
(xxi) with the Maastricht criteria, Kalecki's prediction, dated 1943,
about a political business cycle with the entrepreneurs losing any real
interest in full employment would come true (Rothschild, 1997; Raffer,
1997)
(xxii) the institutionalized acceptance of neo-classical economics,
inherent in the Maastricht criteria, is only one-sided. The Free Market
optimism which had been developed on the assumptions of atomistic
competition between powerless firms is transferred to a world of
oligolopolies and mammoth corporations (Rothschild, 1997).
(xxiii) the negative attitude to special protective treatment for the
poorer regions and their development is the more astonishing in view of the
fact that the Union is not opening it's own economic frontiers world-wide
(Rothschild, 1997)
(xxiv) the conflict between the 'ins' and the 'outs' would increase
instead of decrease under a scenario of a strict implementation of the
Maastricht criteria. Eastward extension of the Union would be more
important than monetary union (Amin, 1997). Maastricht-style monetary union
would, especially for the new members of the Union in the East, mean a
two-class type of European integration
Fallacy number three now consists in the assumption, that you can exclude
the shadow economy and their accumulated savings from the EURO debate. A
new currency will mean for the gangsters: open the money suitcases and try
to exchange or place any bill that is not yet placed. But for many members
of the huge and growing criminal underworld (there were 87 prisoners per
100000 population in the EU alone in 1993; i.e. a rise against the 77 per
100000 in 1987) the question of EMU is also a fundamental one: emerge with
the cash? Place it somewhere? Exchange it for $ bills? To give an
impression of the size of the criminal underworld, it might suffice here to
state that in EU countries alone, there is a prison population of about
320000 people. Extending the Union eastwards and including the Czech
Republic, the Slovak Republic, Hungary, Romania, Bulgaria and Poland, would
mean adding another 153000 people to this entire army. Just to give an
imagination about the size of the problem, it might suffice here to state
that by comparison, the entire armed forces of the European Union are only
2068000 people (all data calculated from UNDP, 1997). Recently, the
international press has put the existing dangers in such terms:
Rising Wave of Mafia-Style Violence Terrorizes Eastern European Nations
Crime: Police seem helpless to deal with killings and bombings. Transition
from communism to market economy helped create opportunities for gangs.
Los Angeles Times
SUNDAY January 19, 1997
JUDITH INGRAM; ASSOCIATED PRESS
The businessman walked the few steps from home to his Jeep Cherokee before
he was cut down by a bullet through the temple, fired from a
silencer-equipped, large-caliber pistol about three yards away. No one saw
the murder of Jozsef Prisztas, who was allegedly linked to gangsters, on a
residential Budapest street shortly before noon on Nov. 1. At least, no one
was talking.
The slaying was emblematic of the Mafia-style crime wave that has taken
hold across much of post-Communist Eastern Europe--where citizens were
ready for just about everything democracy could bring except the terror of
organized crime. No week goes by without a message from the underworld: a
bus or car bomb here, a grenade there. Robbery, murder, the smuggling of
drugs, arms and people, and money laundering are on the rise. Huge caches
of smuggled weapons have shown up in Slovenia, the former Yugoslav republic
between the Alps and the Adriatic Sea. Bombs have ripped through
currency-exchange booths in Prague, capital of the Czech Republic. A former
Bulgarian premier, Andrei Lukanov, was gunned down in a Sofia street in
broad daylight and the country's underworld was blamed. Across half a
continent, gangland violence has spread fear--and left courts, police and
politicians flailing. "We say that Europe has to unite," said France Bucar,
a veteran anti-Communist dissident who recently stepped down as head of
Slovenia's parliamentary security commission. "But organized crime
discovered this already before. And the victim of all this is the security
of our society. "Eastern Europe's gangs have grown rich on the divide
between their countries and the West, supplying what legitimate businessmen
couldn't: first pantyhose and jeans, then computer parts and drugs, finally
"protection" for money, property and lives. The current gangland wars among
Eastern Europe's underworld princes reflect just how big the stakes have
grown. In Hungary, bomb explosions, hand-grenade attacks and shootings
killed three men and seriously wounded three in November and December. The
toll is not out of line with many Western nations--Budapest reported 60
murders among its 2 million residents in 1995, which compares with 72 in
Berlin with nearly twice the population but 131 in Cleveland with
one-fourth the people. But the bloodshed shocked this normally placid
society because the police seem helpless. "Maybe it's a conflict of
interest or a turf dispute, but we also think that someone made off with
billions of forints, and that there's real estate speculation involved,"
said Laszlo Garamvoelgyi, spokesman for Hungary's national police.
Organized crime spread rapidly in the legal limbo that accompanied Eastern
Europe's transition from communism to a market economy. From restaurants
and entertainment spots, gangs moved into protection rackets, loan-sharking
and the drug trade--especially after the wars in former Yugoslavia shut
down a key east-west narcotics route. In Hungary, illegal oil-importing
schemes have reportedly netted huge amounts of money for the underworld.
Prisztas' killing marked a new, deadly turn in Budapest's gangland war.
Within three weeks, two of his associates were seriously wounded--jockey
Csaba Lakatos, shot near the stables at Budapest's racetrack, and Pal
Totka, a fish wholesaler and former boxer shot in the courtyard of his
apartment building. As organized crime has flourished, officialdom has all
but admitted defeat. In Maribor, a bucolic Slovenian town at the foot of
the Alps, the mayor, Alojz Krizman, says the "mafia" rules in his nation.
Take local anti-hero Maksmilijan Vollmajer. Before his death in a car crash
this autumn, Vollmajer was as well known across the cozy Alpine country of
just under 2 million people as its president or premier. "His name had
become a symbol for the nonfunctioning of the rule of law," said Otmar
Klepsteter, a Slovenian journalist. Vollmajer spent time in prison in
neighboring Austria before rising to notoriety in the post-Communist chaos
of Yugoslavia's breakup. Police and locals say he built a profitable line
in illegal drugs, insurance scams and violent retribution on any foe. In
1994, he was even convicted for some of the 65 crimes police charged him
with. But a liberal justice system--devised by those who wanted to break
the heavy hand wielded by the police under communism--led an appeals court
to overturn the sentence. Police allege Vollmajer took revenge by planting
a bomb that missed the judge who had dared sentence him, but did maim the
judge's wife. That was just one of 12 explosions that "poured fuel on the
fire" in Maribor this past year, local police chief Milan Kus said. No one
was killed. "The aim of these explosions is not an attack on bodies or
life, but to spread fear," Kus said.
Copyright © 1997, Times Mirror Company
Los Angeles Times© 1997 Los Angeles Times. All rights reserved.
DIALOG® File Number 630 Accession Number 2540137
Organized Crime Goes Global While the U. S. Stays Home
The Washington Post
May 11, 1997
Edition: FINAL
By: John F. Kerry
Most Americans still refuse to believe just how well-organized global crime
has become. Such groups as the Russian mafia and the Chinese triads exist
only in the slick fantasy world of television, movies and thriller novels.
Like the dark and powerful men of the "Godfather" trilogy, they may thrill
us or chill us, but we don't recognize them as a serious, unprecedented
threat.Bu t a new criminal order is being born, more interconnected,
violent and powerful than the world has ever seen. To fight it, we have to
make fundamental changes in our legal and law enforcement structure, and
encourage other nations to do the same.
In strategy, sophistication and reach, the criminal organizations of the
late 20th century function like transnational corporations and make the
gangs of the past look like mom-and-pop operations. Today's criminal
cartels use high-speed modems and encrypted faxes; they buy jet airplanes
three or four at a time and even have stealth-like submersibles in their
armadas. They hire the finest minds to provide the kind of complex
accounting procedures any multi-billion-dollar empire requires.
In one sense, this phenomenon can best be understood as part of the same
great process of change that is transforming nearly all aspects of modern
life. As Harvard's Rosabeth Moss Kanter has said, "The world century is
beginning. " And, I would add, the century of world crime. Crime has been
globalized along with everything else -- except our response to it.
America is the great prize for criminals, the prime market for imported
narcotics, weapons and vice. For that, Americans are, in part, responsible:
We create the demand for these products. Individuals must be held
accountable when they buy cocaine, guns and the services of prostitutes.
But we must also recognize that the temptation to purchase is now enhanced
by sophisticated organizations totally focused on the global marketing of
vicious products and violent services, and capable of the wholesale
corruption of governments and societies to protect these enterprises.
As the former director of the CIA, James Woolsey, testified before my
committee: "When international organized crime can threaten the stability
of regions and the very viability of nations, the issues are far from being
exclusively in the realm of law enforcement; they also become a matter of
national security." A decade ago, my committee investigators and I began to
uncover portions of a common international infrastructure for crime. We
interviewed criminals inside various U. S. prisons and found that they had
remarkable access to political figures in countries all over the world.
This work led me to the drug network of Manuel Noriega and eventually to
the place he laundered his money, the Bank of Credit and Commerce
International (BCCI). During the dozens of hearings I held, I was able to
expose a lot about this hidden world. But I felt that in the day-to-day
headlines, some of the scope of what I was seeing had yet to be adequately
described.
The new global criminal axis is composed of five principal powers in league
with a host of lesser ones. The Big Five are the Italian Mafia, the Russian
mobs, the Japanese yakuza, the Chinese triads and the Colombian cartels.
They coordinate with smaller but highly organized gangs with distinct
specialties in such countries as Nigeria, Poland, Jamaica and Panama, which
remains a significant transshipment and money-laundering point even after
the arrest of General Noriega. Various alliances among these groups are
still in the formative stage, but all indications are that those relations
are rapidly becoming more complex and coordinated.
For instance, in the summer of 1992 the leaders of the Russian and Italian
mobs held a series of secret summits in Prague, Warsaw and Zurich. Our
intelligence on these kinds of gatherings is woefully inadequate, but we
can tell much from the results. They decided that rather than compete in
the drug trade, they would form a strategic alliance: The Sicilians now
provide the know-how to acquire and market the drugs, and the Russians
provide security for transit routes and distribution networks throughout
the former Soviet empire.
To see where these interconnections can lead, consider such cases as the
contract hit man who flew in from Moscow to kill an uncooperative store
owner in New York, on behalf of the Organizatsiya. He got his fake papers
by supplying the Sicilian Mafia with Soviet Army surplus ground-to-air
missiles to smuggle into the Balkans to supply the Bosnian Serbs with the
firepower to take on U. N. security forces.
As French journalist Roger Faligot documented in his recent book on Chinese
crime, "The Invisible Empire," Chinese, Japanese and Colombian criminals
are working together in the drug trade: "The Colombian cartels produce the
cocaine, the Chinese take it in exchange for heroin that can then be
smuggled into the U. S. The triads bring cocaine to Japan and distribute it
with the help of the yakuzas. Then the Asian mafiosi launder their drug
money in Europe. " The triads also have spun out extortion and
loan-sharking operations to major British cities such as London, Manchester
and Glasgow; heroin trafficking to Rotterdam; prostitution, gambling,
robbery and contract murder to Germany; money laundering to Prague; weapons
trafficking to Romania, and alien smuggling to Moscow.
In 1995, Italian officials uncovered a sophisticated joint venture between
the Camorra crime group and the Russian mafia. The Russians received
counterfeit $100 bills in exchange for giving the Italians property,
possibly including a large bank, and significant arms shipments. The
Italians also buy large quantities of the synthetic narcotics that are
becoming a major industry in Russia.
There is evidence that the American mafia, perhaps in an effort to
modernize and rejuvenate, is striking similar alliances. Anthony "Gaspipe"
Casso, the former acting boss of the Lucchese crime family in New York, has
told investigators about New York mobsters taking part in scams developed
by the Russians, especially gasoline tax frauds and gasoline bootlegging.
"The Russians supplied the brains and the Mafia supplied the hit men," one
investigator said.
America must lead the world in the fight against these private criminal
enterprises just as we led the world in the fight against public criminal
governments. But we cannot fight alone; we need to create a new
international alliance to meet the threats, like the alliances that
defeated fascism, communism and Saddam Hussein. We need a revolution in the
way we conceive of every aspect of the law, from jurisdiction to
punishment. We need to move beyond traditional notions of national
sovereignty when those notions benefit only the bad guys.
When a Dominican hit man comes to the United States and engages in a
contract killing that winds up also taking the lives of innocent
bystanders, he knows he's scot-free if he can reach Dominican soil before
the United States grabs him. The same is true if he is Panamanian, Costa
Rican, Russian or, for all practical purposes, French. When a Colombian
drug trafficker in a Honduran-flagged boat enters French or Dutch waters
off the Caribbean island of St. Martin, he knows the pursuing U. S. Coast
Guard vessel will have to stop at the three-mile limit.
We have to recognize that the world's patchwork quilt of legal systems is
as much an anachronism as carbon paper. A working system of laws to combat
transnational crime must be hammered out among nations of good will. These
would include:
* Minimum standards of international law. Nations must agree both on a
consistent system of laws and a consistent system of punishment. As matters
now stand, money laundering is not a crime in Turkey or Russia; extradition
is constitutionally banned in Colombia; and illicit financial dealings
still account for too much of the business of banking systems in countries
like Switzerland and Austria.
* Crackdown on money laundering. The dozen or so countries, such as the
Cayman Islands, Cyprus and Vanuatu, that have become centers for laundering
and sheltering money must be made to desist. The United States has the
power: We could refuse to allow pirate financiers to move currency through
the U. S. , or impose customs limitations on their trade and search all
their cargoes, or forbid Americans to do business there.
* Controls on electronic money. We must insist that the electronic movement
of capital be regulated far more strictly. The technology is available to
monitor all electronic money transfers. But bankers, although they pretend
otherwise, aren't doing all they can to identify the sources of money
crossing their threshold. We need to make sure they understand their
obligations as key players in enforcement efforts.
* Global asset forfeiture laws. The personal holdings of criminals are
often located in any number of foreign lands -- yachts in the Caribbean,
homes in the south of France. Each country should have laws allowing
domestic and foreign law enforcement to seize and share the property of
convicted criminals.
* Transnational courts. In partnership with friendly nations, we need to
experiment with a system of special courts to try at home cases involving
victims abroad. In such cases, which would be accepted only by agreement
between both nations, trials could take place wherever the evidence and
witnesses were located, applying the laws of the country where the crime
took place.
* More U. S. law enforcement officers abroad. As FBI director Louis J.
Freeh wrote recently, "If the FBI operates only in the United States, there
is no way we can cope with crime threats of foreign origin that suddenly
arrive full-blown in the United States. " We should add 1,000 officers to
the 2,000 already stationed abroad. Every U. S. embassy should have a law
enforcement team.
The damage done by international crime is rarely as specific and dramatic
as that of a terrorist attack, but in fact it is greater. We cannot see the
billions of dollars hemorrhaging out of our economy. We cannot directly
feel the violation of our sovereignty and territorial integrity by the
smugglers of narcotics and human beings. We cannot easily envision the harm
to our national security through the failure of countries that once bravely
struggled for the dignity of freedom.
If, however, we prove unable to connect the drive-by shooting with the
jungle laboratory and the numbered account, we will fail to understand the
world we live in. Worse, we will fail to meet our challenge at a critical
junction in human history.
Sen. John Kerry (D-Mass. ) chaired the Senate Subcommittee on Terrorism,
Narcotics and International Operations. This article is adapted from his
book, "The New War," to be published next month by Simon & Schuster.
Washington Post Online (c) 1997 Washington Post.