Globalization as an Extension of Capitalism: The Case of the Developing World


By Jonathan K. Weedor

Globalization is conventionally defined as the integration of National economies into the International economy through trade, foreign direct investment, capital flows, and the spread of technology. However, in reality, globalization is not new. It is the innate drive of capitalism to search for new markets in order to maximize profit both geographically and technologically.

It is a trade system characterized by the free movement of skilled labor and goods enhanced by lower tariffs as international trade is the exchange of capital, goods and services across international borders or territories. Trade generates incredible wealth, and links the lives of everyone on the planet. However, millions of people in the developing world are losing because rules controlling trade heavily favor Northern Nations that set the rules.

The prevailing trade system represents a major contradiction in relation to Dani Rodrik’s observation in his classic “ONE ECONOMICS, MANY RECIPES (2007, p.213), that the first substantive paragraph of the agreement establishing the World Trade Organization (WTO) states, “Raising the standards of living , ensuring full employment and a large effective demand, and expanding the production of goods and services, while allowing for the optimal use of the world resources in accordance with the objective of sustainable development , seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with the respective needs and concerns, at different levels of economic development.”

Moreover, Rodrik further observed that “it is clear from this preamble that the WTO’s framers placed priority on raising standards of living and on sustainable development. Expanding trade was viewed as a means towards that end, rather than an end in itself.” As earlier indicated, the reality is far inconsistent with the foregoing stated objective of the WTO. Rather than development being the lens through which trade is perceived, trade is the lens through which development is perceived. In other words, integration into the world economy through trade liberalization is a prerequisite, and not an outcome of economic growth.

Developing Nations are being pressured to open their markets notwithstanding the fact that countries dismantle trade restrictions only as they get richer. Today’s rich countries, with very few exceptions, embarked on modern economic growth behind protective barriers, but are now waving the flag of free trade. There are numerous means through which the economic growth of developing countries are being retarded through trade:

1. REGIONAL TRADE AGREEMENTS (RTA) – between equal partners, RTAs can be beneficial to both but between a rich and poor economy, the rich economy always benefits the most. A regional free trade agreement removes all barriers to trade and foreign Investment, meaning that poor economies are not allowed to use import tariffs to protect their infant industries or their farmers from a flood of cheap imports. A Free trade agreement also includes additional rules on investment that pose potential threat to poor people access to public services. The United States and the European Union are pressing ahead with this piecemeal approach to trade;

2. LABOR RIGHTS – Globalization and trade have drawn millions of workers including women in developing countries into paid work. Their labor is contributing to the rising profit of Multinational Corporations. But workers are systematically being denied their fair share of the benefits from their labor. Companies demands for faster, more flexible, and cheaper production in their supply chains are undermining the very labor standards that they claim to be promoting. Workers including women and their families, pay the price. Many face insecure contracts, intense production pressure, and intimidation in the work place. Government in developing countries, competing to attract investment and boost exports, too often exacerbate the problem. Instead of strengthening protection for labor rights, they have simply traded them away. As Marx observed in the Communist Maunifesto (1844, p.21) “the Worker need not necessarily gain when the Capitalist does, but he necessarily loses when the latter loses.”

3. FORCED LIBERALIZATION – millions of poor farmers in developing countries cannot earn a living because of cheap, often dumped, food imports. Rich countries have long used the IMF and the World Bank, and aggressive bilateral trade deals, to push open the door of poor countries markets to a flood of cheap products. Moreover, rich countries are currently planning to use the binding rules of the WTO to kick down the trade door of developing countries altogether;

4. MARKET ACCESS – IF Africa, East Asia, and Latin America each increased, their share of world exports by just one percent, the resulting gains could lift about 120 million people out of poverty. Rich countries, despite the free trade flag being waved by them, limit and control poor countries share of the world market by charging high taxes on imported goods. As a result, many poor countries can only afford to export raw materials, which give far lower returns than finished products. For example, the rich countries buy cheap Cotton and Cocoa and turns them into finished goods in the form of clothes and chocolate, and re – sell them to the developing countries at very high prices, reaping massive profits. At the same time, poor countries are threatened with having loans withheld unless they open their markets to rich countries’ exports;

5. DUMPING: The countries of the North tell the countries of the South to get rid of subsidies but continue to spend US$1 billion a day subsidizing its own farmers. Towards this end, the countries of the north dump their subsidized products on countries of the South, driving down the price of local products, with devastating effects on the local economy. This very unbalanced playing field has made many poor farmers across the developing world even poorer, or forced them out of farming completely.

Dani Rodrik (2007, p.217) also asked “what do the facts really show relative to trade liberalization, growth, and poverty alleviation? He answered by illustrating the cases of Vietnam and Haiti.” Vietnam engages in state trading, maintains import monopolies, retains quantitative restrictions and high tariffs in the range of 30 – 50% on imports of agricultural and industrial products, and is not a member of the WTO. Haiti, a WTO member, slashed import tariffs to a maximum of 15%, removed all quantitative restrictions, and earned a rare commendation from the U.S. States Development, “There are few significant barriers to U.S. exports.”

According to Rodrik, Vietnam, which since the mid – 1980s has followed Chinese style gradualism and a two-track reform program, has been a phenomenonal success, achieving not only high growth and poverty reduction, and has also at a rapid rate, integrated into the world economy despite its barriers to trade. As for Haiti, the economy has stagnated, suffered deteriorating social indicators, and made little progress integrating into the world economy even though the country undertook a comprehensive trade liberalization in 1994 – 1995. The foregoing is evidence that integration into the world economy is an outcome, and not a pre – requisite of economic growth. Therefore, pressuring developing countries to liberalize trade is an imperialist policy that must be discouraged. Rather, the founding agreement of the world trade regime, the WTO, that placed human progress at the core of its objective should be prioritized and concretized. In this regard, the WTO must emphasize development as its cardinal objective.

The late Walter Rodney in his Book “HOW EUROPE UNDER DEVELOPED AFRICA,” provided a succinct narrative of the evolution of capitalism: “from earliest times, man found it convenient and necessary to come together in groups for the sake of survival and to hunt. Thereafter came the period of Communalism, where property was collectively owned, work was done in common, and the goods (the product of Labor) was equally shared.

That period was succeeded by slavery, caused by the extension of the domineering elements within the family and by groups being physically overwhelmed by others. Slaves executed varieties of tasks but their main duty in pre – Capitalist Europe was the production of food. The next stage was Feudalism, where agriculture remained the principal means of making livelihood, but the land which was necessary for that purpose was owned by the few, and they took the greatest share or the surplus of labor.

The workers on the land (now called Serfs) were no longer the personal property of masters as was the case during slavery, but were tied to the land of a particular manor or estate owned by a Feudal lord. When the Manor changed hands, the Serfs had to remain there to produce food for the new Feudal lord, keeping the bare minimum themselves. Then came Capitalism, under which the greatest wealth in the society was produced not in agriculture but by machines in factories and in mines.” Like the preceding phase of Feudalism, Capitalism was and is still characterized by the concentration in a few hands of the ownership of the means of producing wealth and by the unequal distribution of the surplus of human labor.

At its inception, the few who dominated this mode of production were the bourgeoisie who originated in the Merchants and Craftsmen of the Feudal epoch, who rose to be Industrialists and Financiers. The Serfs were declared free to leave the land and go in search of employment in newly established capitalist enterprises. Their labor became a commodity – something to be sold and bought.

As indicated above, capitalism is an evolution of Feudalism. Karl Marx, an astute student of capitalism, observed in the Communist manifesto (1844, p.19) that “wages are determined through the antagonistic struggle between capitalists and workers. Victory goes necessarily to the Capitalist because the Capitalist can survive longer without the workers than can the workers without the capitalist. Combination among Capitalists is customary and effective; workers’ combination is prohibited and painful in its consequences. Besides, the landowner and the capitalist can augment their revenue with the fruits of industry; the worker neither has ground rent nor interest on capital to supplement his industrial income. Hence, the intensity of competition among the workers.” Therefore, there should be nothing amazing about capitalism being the exploitation of the weak by the powerful, for that is what the capitalist system entails. Imperialism or the domination of the weaker countries by the powerful countries is merely the usual tendency of capitalism, the only difference being that the exploitations that occurred daily in the factories across the capitalist world are exported beyond borders or territories.

Many decades ago, Marx questioned the exploitative tendency of capitalism, a tendency which model is found in every labor contract that is signed. The worker is not usually contracted for his or her work but for his or her time. Once the worker gets to work, the owner or Manager endeavors to extract more labor from the worker than the amount for which he or she is paid. This extraction of excess labor is the basis of surplus or what is refer to as profit. Marx described the system of extraction as exploitation. It is obvious therefore, that globalization as a dimension of capitalism is embedded with exploitation. Consequently, it would be naïve or utopia on the part of any developing country to believe that globalization is the path to progress.

The structural adjustment program (SAP) was unveiled in the 1980s by the Reagan Administration to “deal” with the developing world debt crisis. That was a crisis caused by the said Administration’s unprecedented increase of interest rate as a core of its Monetarist policy, aimed at controlling US inflation. The SAP consisted of two permanent pillars: (1) Reduction of Government’s role in the economy through privatization and de – regulation, termination of subsidies for key social sectors such as education, health, and agriculture couple with devaluation of the currency, trade liberalization, etc., and (2) Democratization of the developing world characterized by the conduct of regular elections. My discussion in the preceding pages has to some extend been focus on the SAP’s first pillar. My focus, in the subsequent pages, is on the second pillar: Western Democracy.

Western Democracy is an Institution. In other words, it is a concept. Simply put, it is merely the rules of the game. Like globalization, it is equally a dimension of capitalism. The current age of globalization characterized by the intensive drive by capitalism in search of profit would become easy if there were homogeneity across the world. However, this is not the case. Therefore, the effort at democratization, especially of the developing world, is geared toward making the path smooth for capitalist accumulation of profit. With no uncertainty, the push for democracy is a glaring paradigm of this concerted effort. There should be competition in politics, just as there should be competition in the market place. This is the push of the Western world. This demand is the corner stone or the foundation of the struggle across Africa and other areas of the developing world for the establishment of “democracy”.

Daunting challenges confront the efforts to build western democracy across the developing world especially Africa: Cultural Orientation that is more communal, high illiteracy rates, lack of a viable private sector due primarily to the lack of industrialization, are key among factors that ensure the current dominant nature of the state. These challenges are glaring testimonies that the developing world especially Africa is far from the climax of the transformation to capitalism. Far detached from the pretense of the Leaders of many developing countries, the developing world is far from being capitalist.

Capitalism being the individual ownership of the means and distribution of production, it is contingent on the fulfillment of certain criteria. Key among these is industrialization. Defined as the acquisition by a state of the capacity for the internal production of finished goods or the stage at which a country graduates from the category of a mere supplier of raw materials and a market for finished goods, industrialization is a fundamental pre – condition for the building of western liberal democracy. Africa being of a cultural orientation that is more communal, the efforts at building western democracy must be preceded by the building of a viable capitalist society evidenced by industrialization. Regrettably, the western crusade for democratization across Africa does not seem to realize this fact. Hence, Africa like other parts of the developing world, is confronted with a situation of placing the cart before the horse. The trappings of instability cloud this reality because universal application of western democracy irrespective of the context is a recipe for chaos. For Europe and North America, industrialization preceded democracy. Why not Africa? The question then arises how one can build democracy in a non – industrialized society. Indeed, industrialization is the building block of democracy for it gives rise to capitalists. Capitalists constitute the crucial middle class that usually protects a liberal democratic system.

Robert D. Kaplan in his Article “WAS DEMOCRACY JUST FOR A MOMENT” (1997, vol. 280, PP.6 – 55) observed that “The lesson to draw is not that dictatorship is good and democracy bad but that democracy emerges successfully only as a capstone to other social and economic achievements. Kaplan also quotes Alexis de Tocqueville in his “Author Introduction to democracy in America” that democracy evolved in the west not through the kind of moral fiat that the west is trying to impose throughout the world but as an organic outgrowth of development. European society had reached a level of complexity and sophistication at which the aristocracy, so as not to overburden itself, had to confer a measure of equality upon other citizens and allocate some responsibilities to them: a structured division of the population into peacefully competing interest groups was necessary if both tyranny and anarchy were to be averted. The fact that the west retreat to moral arguments only to justify democracy indicates that for many parts of the world, the historical and social arguments supporting democracy are not just there.”

“It is not amazing that realism has come not from the west because it has failed to realize the relevance of context. Surely, Uganda could still be a Nation of bloodbath without Yoweri Museveni, an enlightened Hobbessian despot whose country has continued to post impressive annual economic growth rates of 10% despite inter-tribal struggles in the country’s north. In 1996, Museveni’s Army captured the Ugandan capital Kampala without looting a shop. Museveni postponed elections and saw that they took place in a manner that ensured his victory. China, under its authoritarian system has dramatically improved the quality of life for hundreds of millions of its people. Evidently, this achievement could have proved almost impossible with western democracy because of the problem of Muslim Turkic Uighurs in western China.”

Kaplan further observed “In Rwanda, the parliamentary system the west promoted was a factor in the murder of thousands of Tutsis by Hutu Militias. Indeed, the west often moralistic attempts to impose western parliamentary systems on other countries are not dissimilar to the attempts of nineteenth century Western Colonialists many of whom were equally idealistic to replace well-functioning chieftaincy and tribal patronage systems with foreign administrative practices.”

Any country with a sensible development strategy has the opportunity to grow its economy with assistance from trade. Developing countries such as Liberia must therefore resist the “big bang” trade liberalization policy that is being push or advocated by the developed world.

A leadership committed to development and standing behind a coherent growth strategy counts for a lot more than trade liberalization. The fate suffered by Haiti should serve as adequate guidance against “shock therapy” liberalization that mostly benefit countries of the metropoles. Chinese style gradualism and its two-track reform program, emulated by Vietnam, must serve as a paradigm for the developing world in order to break the shackles of poverty.

More focus must be placed on addressing the unbalanced “TERMS OF TRADE” instead of directing all attentions to the acquisition of access to the markets of the Northern countries. To achieve progress, the developing world, especially Africa south of the Sahara, must make an unambiguous choice: Political Unification of the Continent or abandonment of the classical Ricardian trade theory and its accompanying comparative advantage in favor of the construction of the “ capacity for internal production of finished goods.”

With reference to democracy, it is an indisputable fact that the effort to give this western concept a universal application must be reviewed. As a dimension of development, democracy must be contextualized since development is a contextualized concept. Election violence that has plagued the developing world in recent times, ranging from Algeria to Ethiopia, Kenya and Zimbabwe, among others, is a clear indication that the concept of democracy must undergo modification in order to make it applicable to other contexts. Ignoring this salient fact, as the west has continued to do so far, will ensure an increase in the rise of what Fareek Zakaria calls “Illiberal Democracy”.

JONATHAN K. WEEDOR earned a Master of Arts (MA) Degree with honors in Sustainable Development with emphasis on Development Management from the Graduate Institute, School for International Training (SIT), Brattleboro, Vermont, USA. He also earned a Bachelor of Science Degree in Forestry with honors from the University of Liberia. During his academic sojourn at the University of Liberia, the Author was a leading Student Activist who served in various positions with the University of Liberia Student Union (ULSU). He was also a ranking member of the Student Unification Party (SUP). Since 2004, he has worked as a Commissioner at the National Elections Commission (NEC), 9th & 10th Streets, Sinkor, Monrovia, Liberia.


Leave a Reply