As this book was being written, a new nation state was born. After a long, bitter and courageous struggle, East Timor had won its independence from Indonesia. The history of this new state encapsulates the development of imperialism, from its non-capitalist origins to capitalist `globalization': colonization of Timor by Portugal in the sixteenth century, for the usual reasons, such as access to resources and slave labour; conflict between Portuguese and Dutch colonial interests, ultimately leading to division of the island between the imperial powers in the nineteenth century, with the east remaining in Portuguese hands; the replacement of direct European colonization in the late twentieth century by a local dictator, Indonesia's Suharto, who was useful to the West and supported by Western states, particularly the US, in his murderous oppression of East Timor; and finally, an independent nation state, won by bloody struggle and already, even while still in gestation, subject to new pressures from the West.
It remains to be seen how imperial power will impose its imperatives on the tiny new state. But the very conditions that should make it capable of some independence from those imperatives, and free of the debt which is the principal instrument of the new imperialism, are the very ones that make it vulnerable to imperial pressures: large oil and gas reserves, under the sea between the island and Australia. We can be sure that Australia, with the help of the US, will do all it can to ensure the most favourable conditions for the big oil companies and imperial economies; and the likelihood of East Timor remaining free of debt must be very much in question.
As East Timor was emerging into statehood, the UN set out to negotiate on its behalf a new energy treaty, to extract better terms than Indonesia had obtained years before from Australia and the major oil companies. The US government, in the person of Vice-President Dick Cheney, an oilman himself, stepped in to warn against going too far. This is only a hint of things to come, as East Timor finds itself forced to navigate in a world dominated by the massive economic and military power of the US. The new Timorese government has already been forced, by a threat from Colin Powell to withhold US aid, to give a written promise not to prosecute US citizens for crimes against humanity in the international criminal court.3
East Timor is only the latest example, on a very small scale, of the new imperialism's preferred strategy. The current imperial hegemon has been able, increasingly since World War II, and certainly since the collapse of Communism, to dictate its conditions to the world, not without military coercion but certainly without direct colonial rule. It has found various ways of imposing its economic imperatives on ostensibly independent states.
The formal beginning of this new imperial order can be dated quite precisely, during and immediately after the war. The US asserted its military supremacy with its atom bombs in Hiroshima and Nagasaki, and its economic hegemony with the establishment of the Bretton Woods system, the IMF, the World Bank and, somewhat later, the General Agreement on Tariffs and Trade (GATT). The ostensible purpose of these agreements and institutions was to stabilize the world economy, rationalize its currencies by making them freely convertible against the US dollar, and establish a framework for economic reconstruction and development. But these objectives were to be achieved on very particular terms. The goal was to open other economies, their resources, their labour and their markets, to western, and especially US, capital. This was to be accomplished by the simple means of making the reconstruction of European economies and the development of the `third world' dependent on their compliance with conditions imposed in the main by the US. These global economic institutions were accompanied by a political organization, the United Nations. Designed to have little effect on the global economy, the UN would play a part in maintaining some semblance of political order in a system of multiple states, its very existence discouraging forms of international organization less congenial to the dominant powers.
At this stage, with a booming economy in the US, the imperial power was interested in encouraging a kind of `development' and `modernization' in the third world, as a means of expanding its own markets. When the long postwar boom ended, its requirements changed, and the objective of expanding markets was overtaken by other needs. While the general purpose of the postwar economic order, up to and including -- or especially -- the recent phase of `globalization', has remained essentially the same, the specific rules of the world economy have been transformed, in keeping with the changing needs of US capital. The Bretton Woods system was abandoned in the early 1970s, to be replaced by other principles of economic order, in accordance with changing imperial needs.
This was the beginning of the long downturn, which affected all western economies, and the US in particular, until the early nineties (indeed, even till today, although its consequences have been masked by the stock market bubble and the `wealth effect'). The global economy was made to carry the burden of that decline. After the heady decades of sustained growth and increasing productivity during the long boom, the US economy entered a long period of stagnation and declining profitability, a characteristically -- and uniquely -- capitalist crisis of overcapacity and overproduction, not least because its former military adversaries, Japan and Germany, had become extremely effective economic competitors. The problem now was how to displace the crisis, in space and in time .4
What followed was the period we call globalization, the internationalization of capital, its free and rapid movements and the most predatory financial speculation around the globe. This was, as much as anything else, a response not to the successes but to the failures of capitalism. The US used its control of financial and commercial networks to postpone the day of reckoning for its own domestic capital, enabling it to shift the burden elsewhere, easing the movements of excess capital to seek profits wherever they were to be found, in an orgy of financial speculation.
Conditions were imposed on developing economies to suit these new needs. In what came to be called the `Washington Consensus', and through the medium of the IMF and the World Bank, the imperial power demanded `structural adjustment' and a variety of measures which would have the effect of making these economies even more vulnerable to the pressures of US-led global capital: for instance, an emphasis on production for export and the removal of import controls, which made producers market-dependent for their own survival, while opening them, especially in the case of agricultural production, to competition from highly subsidized western producers; the privatization of public services, which would then become vulnerable to takeover by companies based in the major capitalist powers; high interest rates and financial deregulation, which produced vast gains for US financial interests, while creating a debt crisis in the third world (and ultimately, in one of the perennial contradictions of capitalism, a recession at home in the imperial centre); and so on.
That, of course, is not the end of the story, but this is not the place to explore the boom and bust cycles of capitalism or its tendencies to long-term downturn and stagnation. It suffices to say that the kind of control of the global economy enjoyed by the US, while it cannot resolve the contradictions of the `market economy', can be used, and is being used, to compel other economies to serve the interests of the imperial hegemon in response to the fluctuating needs of its own domestic capital -- by manipulating debt, the rules of trade, foreign aid and the whole financial system. One minute, it can force subsistence farmers to shift to single cash-crop production for export markets; the next, according to need, it can effectively wipe out those farmers by demanding the opening of third world markets, while protecting and subsidizing its own agricultural producers. It can temporarily support industrial production in emerging economies by means of financial speculation; and then suddenly pull the rug out from under those economies by cashing in the speculative profits, or cutting losses and moving on. The fact that, sooner or later, the effects of these practices will come back to haunt the imperial economy is only one of the many contradictions of this imperial system. ,
Actually existing globalization, then, means the opening of subordinate economies and their vulnerability to imperial capital, while the imperial economy remains sheltered as much as possible from the obverse effects. Globalization has nothing to do with free trade. On the contrary, it is about the careful control of trading conditions, in the interests of imperial capital. To argue, as some commentators do, that the problem with globalization is not that there is too much of it but that there is not enough, that what poor countries need is truly free trade and access to western markets, is to miss the point of globalization in a fundamental way. If the openness of the global economy were a two-way street, whatever else that might achieve, it would not serve the purpose for which the system was designed; and, in any case, the principal danger to the poor economies is less the closure of imperial markets than the vulnerability of their own to imperial capital.
Let us be clear about what globalization is and, more particularly, what it is not. It is not, to begin with, a truly integrated world economy. No one can doubt that movements of capital across national boundaries are frequent and breathtakingly rapid in today's global economy, or that new supranational institutions have emerged to facilitate those movements. But whether that means that markets are substantially more globally integrated than ever before is another question.
The first and most elementary point is that so-called `transnational' corporations generally have a base, together with dominant shareholders and boards, in single nation states and depend on them in many fundamental ways. Beyond that, some commentators have argued that, according to various measures of integration, globalization is far from advanced, and in important respects is less so than in previous eras -- for instance, in the magnitude of international trade as a share of gross domestic product, or global exports as a proportion of the global product.
But let us accept that the speed and extent of capital movements, especially those that depend on new information and communication technologies, have created something new. Let us even accept that the world is more `interdependent', at least in the sense that the effects of economic movements in the heartlands of capital are felt throughout the globe. There remains one overriding indication that the global market is still far from integrated: the fact that wages, prices and conditions of labour are still so widely diverse throughout the world. In a truly integrated market, market imperatives would impose themselves universally, to compel all competitors to approximate some common social average of labour productivity and costs, in order to survive in conditions of price competition.