THE SHADOW OF 9/11 OVER GLOBALISATION

By Rubens Ricupero and - - Reprint | | Print |

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GENEVA, Sep 1 2004 (IPS) - One of the consequences of the September 11 attacks was to stall the process of globalisation, writes Rubens Ricupero, Secretary General of the United Nations Conference on Trade and Development (UNCTAD). In this analysis, Ricupero writes that underlying the logic of globalisation was the idea that national borders were losing relevance as the quantity of cross-border transactions rose dramatically. Since September 11 there has been a reversal of this idea. National boundaries are again a central concern. Worldwide, there are many more obstacles to the movement of the people and goods and even services. In the long and middle term, globalisation and the reinforcement of national boundaries are incompatible. The latter tendency, of course, is a mere three years old, so it is premature to predict that it will bring about the end of globalisation. We are seeing to some extent in the US the emergence of a new war economy, like that of the Vietnam era when the combination of a war economy with considerable pressure on oil –which we see today as well– led the Federal Reserve to increase interest rates, setting off the foreign debt crisis. While it cannot be argued that the same is going to happen now –largely because in contrast to the 1970s we no longer have high inflation — nonetheless there are elements which are disturbingly similar.

One of the consequences of the September 11 attacks was to stall the process of globalisation. In the 1990s, globalisation was largely carried forward by the growing movement of convergence of basic political values and the resolution of many long-standing political problems, from the division of Berlin, of Germany, and indeed of Europe into communist and capitalist camps, to the end of apartheid in South Africa.

Underlying the logic of globalisation was the idea that national borders were losing relevance as the quantity of cross-border transactions rose dramatically not only in trade and merchandise but also in services, financial operations and investments. Moreover, an increasing share of these cross-border activities were not physical but electronic, which rendered the border more and more obsolete.

Since September 11 there has been a reversal of this idea. National boundaries are again a central concern. One concrete example is that entering the United States is much more difficult now than it was ten years ago. Worldwide, there are many more obstacles to the movement of people and goods. Because of the fear of terrorism, there are customs inspections and a panoply of new laws, like those regulating biological products, which are extremely strict. New barriers have been raised even to financial transactions as a result of the heightened vigilance regarding the financing of international terrorism.

In the long term, globalisation and the reinforcement of national boundaries are incompatible. The latter tendency, of course, is a mere three years old, so it would be premature to predict that it will bring about the end of globalisation.

What followed 9/11 was not a total reversal of globalisation but rather a loss of its momentum: it simply became far more difficult for it to proceed. A clear indication of this is the fact that the Bush administration never speaks about globalisation. The reason, of course, is plain to see: the Bush government is essentially concerned with national issues, and such pursuits are not compatible with globalisation.

The second area in which we feel the stalling of globalisation is that of security. Today security has become a priority concern of many countries. Fears about international terrorism and the proliferation of weapons of mass destruction have led to an massive entrenchment of the State against the market and against civil society. What was a basic presumption during the 1990’s — namely that markets would become more and more important in relation to the State — has now been reversed. Now it is the State that is important. This started in the US, and is most vividly demonstrated by the fact that Americans are no longer paying much attention to the budget deficit. Indeed, Congress is able to make enormous increases in the security budget because when you are in the grip of war — of total war, as the Bush administration sees it– cost ceases to be a concern.

To some extent we are seeing the emergence of a new war economy in the US, like that of the Vietnam era, when military expenses were so high that in 1971 the United States had to abandon the two pillars of the Bretton Woods monetary order, in place since 1944: the convertibility of the dollar into gold, and the pegging of the currencies of the other signatory countries to the dollar. The soaring inflation generated by the Vietnam War and the ballooning federal deficit, among other factors, made it impossible for the US to remain in the Bretton Woods system. Inflation continued to rise even after the Vietnam War ended in 1975-1976, reaching double- digits in the late 1970s and early ’80s — a situation that was further aggravated by the two oil shocks.

This combination of a war economy with considerable pressure on oil prices –which we see today as well — finally led to the decision by Paul Volcker, then chairman of the Federal Reserve Board, to increase interest rates, which in turn set off the foreign debt crisis. While it cannot be argued that the same is going to happen now –largely because in contrast to the 1970s we no longer have high inflation — nonetheless there are elements which are disturbingly similar, particularly a war economy with a very high pressure on oil prices. Vigilance is needed. (END/COPYRIGHT IPS)