Fernando Alcoforado*
This article aims to demonstrate that contemporary globalization is rapidly heading towards collapse and to propose new directions for the future of the world economy. It is worth noting that globalization from 1980 onwards meant the breaking of tariff barriers, quotas and other commercial restrictions, thus allowing multinational companies to operate freely and transfer their investments to areas with cheap labor in order to increase their profitability. The assumption was that this would lead to global expansion and the harmonious development of the productive forces and the growth of the world’s resources, which, in fact, did not happen. Signs of the collapse of contemporary economic and financial globalization were already appearing as of 2010 when the relationship between world exports and Gross World Product (world GDP) fell by around 12%, a decline not seen since the 1970s. In Figure 1, It should be noted that world exports grew from 1870 to 1914, declined between 1914 and 1945 (between the world wars) and resumed growth from 1945 to 2008. From 2008 onwards, world exports began to decline with the drop in the ratio between exports world and Gross World Product.
Figure 1- Ratio between total exports and Gross World Product between 1870 and 2007
Source: https://aterraeredonda.com.br/acabou-o-impulso-de-globalizacao/
The tendency for economic and financial globalization to collapse is demonstrated not only by the drop in the relationship between world exports and Gross World Product, but also as a result of the drop in the global profitability rate as shown in Figure 2.
Figure 2- Average profit rate of G20 countries (%)
Source: https://aterraeredonda.com.br/acabou-o-impulso-de-globalizacao/
Michael Roberts, economist, co-editor, among other books, of “The Great Recession: a Marxist View”, “The Long Depression” and “Marx 200: a Review of Marx’s Economics 200 years after his Birth” and author of the blog “The Next Recession” (https://thenextrecession.wordpress.com), he states in his article Acabou o impulso de globalização? (Is the globalization impulse over?), available on the website <https://aterraeredonda.com.br/acabou-o-impulso-de-globalizacao/>, that the last wave of globalization began to wane shortly before the beginning of the 2000s, when global profitability began to decline, as shown in Figure 2 above for the average profit rate of the G20 countries, which is made up of countries of the European Union, in addition to the following countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom and United States.
Michael Roberts states in his article Acabou o impulso de globalização? (Is the globalization drive over?) that, in the 1990s, world trade grew by 6.2% per year, foreign direct investment (FDI) increased by 15.3% per year and global GDP increased by 3.8% per year. But, in the long depression of the 2010s, trade grew just 2.7% per year, slower than global GDP at 3.1%, while FDI increased just 0.8% per year. The result of globalization has been the destruction of all previously established national industries and in the place of former local and national self-sufficiency interdependence between nations has been established. The interdependence between nations, which was one of the strengths of contemporary globalization, now constitutes its opposite by contributing to its end.
Signs of the collapse of contemporary globalization are also manifested in the downward trend in the world profit rate (Figure 3), the fall in the profit rate in the United States (Figure 4) and the fall in the growth rate of World Product Gross (Figure 5).
Figure 3 shows the world profit rate from 1869 to 2007 with a clear downward trend in growth.
Figure 3- World profit rate
Source: <https://contrapoder.net/artigo/a-taxa-e-a-massa-de-lucros/>.
In Figure 3, one can clearly see the precipitous drop in the world profit rate from 1965 to 1983, when there was a small recovery in the profit rate after the adoption of the neoliberal model at the global level from 1983 to 1995. However, from 1995 to 2007, The fall in the global profit rate points to the threat of a crisis that occurred in 2008 and a depression that did not evolve because governments acted to avoid the debacle of the global capitalist system.
Figure 4 presents the profit rate in the United States, whose downward trend from 1946 to 2012 is similar to the downward trend in the world profit rate shown in Figure 3.
Figure 4- Profit rate in the United States
Figure 5 presents the real growth rate of Gross World Product and Financial Products (derivatives). It shows a downward trend in the growth of Gross World Product from 1961 to 2007.
Figure 5- Real growth rates of Gross World Product and Financial Products (derivatives)
Source: BEINSTEIN, Jorge. Faces of the crisis: Reflections on the collapse of bourgeois civilization. Available on the website <https://www.marxists.org/portugues/beinstein/2008/10/31.htm>, 2008.
Figure 3 shows the evolution of the profit rate of the world capitalist system from 1869 to 2007, indicating its decline in this period. If the evolution of the profit rate of the world capitalist system from the period 1869- 1947 is considered and the downward trend of this profit rate in the most recent period, 1947- 2007, is maintained, the profit rate of the world capitalist system would tend towards value equal to zero in 2037. Figure 4 shows the evolution of the profit rate in the United States from 1946 to 2012, showing its decline in this period. If the downward trend of this profit rate continues in the coming years, the profit rate in the United States will reach zero in 2043. Figure 5 shows the evolution of the Gross World Product from 1961 to 2007, indicating its decline in this period . If the downward trend in the growth rate of Gross World Product continues in the coming years, this rate will reach zero in 2053. These estimates were obtained based on the statistical least squares method.
It is concluded, from the above, that the world capitalist system would become unviable in the middle of the 21st century (2037, 2043 or 2053) when the process of capital accumulation will cease with the global profit and growth rates of the world economy-reaching zero. The decreasing trend in profit rates in the world capitalist system shows the historical, transitory character of the capitalist mode of production and the conflict that is established with the possibilities of continuing its development. Thus, the foundations of Marx’s theory presented in his work Capital are being confirmed. Karl Marx predicted that the rate of profit will tend to fall in the long run, decade after decade. Not only will there be ups and downs in each boom and bust cycle, but there will also be a long-term downward trend, making each boom shorter and each crash deeper.
It can be said that economic and financial globalization and free trade have brought gains to few companies and few countries and their populations. Transnational corporations moved their activities to areas where labor was cheaper and adopted new technologies that require less labor in the fight for profitability. Instead of harmonious and egalitarian development, contemporary globalization has increased inequality of wealth and income, both between and within nations. Under the free movement of capital belonging to transnational companies, as well as under free trade without tariffs and restrictions, the most efficient large capitals triumphed at the expense of the weakest and most inefficient. As a result, workers in these latter sectors were also affected. With the collapse of globalization, it is unlikely that capitalism will gain a new lease of life based on growing and sustained profitability. It is unlikely that capitalism will return to past profitability given the prospect of a deepening current crisis and perhaps more wars in the future. The collapse of economic and financial globalization is inevitable.
Faced with the failure and collapse of contemporary globalization, it is urgent to build a new globalization with global Keynesianism and world government to order the world economy. The Keynesian economic policy adopted in each country and globally and the existence of a world government are the solutions to face the collapse of contemporary globalization and eliminate the chaos that characterizes the world economy. John Maynard Keynes was the greatest exponent of neoclassical liberal economic thought linked to the Swedish Neoclassical School who, with his works, promoted a revolution in economic doctrine, opposing, mainly, Marxist thought and classical liberal thought. His main work was The General Theory of Employment, Interest and Money, released in 1936. Keynes’ economic thought defends the State as an active agent against recession and high unemployment. By demanding a larger government as a decision-maker in a country’s economy, Keynesianism positioned itself against classical liberal thought and other schools of neoclassical liberal thought that defend the smallest state possible.
Keynes believed that capitalism could overcome its structural problems as an economic system as long as significant reforms were made to the economy of each country as he proposed, given that liberal capitalism, which dominated the world economy until 1945, had proven incapable of maintaining full employment and ensure economic stability. Keynes advocated moderate state intervention to achieve economic stability and ensure full employment in a country’s economy. Keynes stated that it is up to the State to encourage the increase in the means of production and the good remuneration of capital holders. Keynesian thinking left some trends that still prevail today in the current economic system. Among the main ones, the use of macroeconomic models, moderate state interventionism and the use of mathematics in economic science.
Neoclassical liberalism was successful with Keynesianism after the Second World War when it contributed decisively to the economic development of most countries in the world from 1945 to 1965, which is called the “golden age”. It is worth noting that in the “glorious years”, unique rates of economic growth and generation of employment and income were recorded in the world economy and the combination of economic growth with a fully employed workforce, with reasonable wages and protected by the welfare state being especially in Western European countries. Keynesianism ceased to be effective in the 1970s with the fall in world economic growth after the so-called “glorious years” (1945/1965), because it was unable to resolve the two oil crises and the debt crisis of a large part of the countries in the world that became insolvent with international banks.
Keynesianism was abandoned as dominant economic thought in the 1980s and replaced by neoliberal economic thought that opposes Marxist economic thought and neoclassical liberal Keynesian social welfare thought and proposes the restoration of classical liberal economic thought based on a vision conservative economy that aims to reduce the State’s participation in the economy as much as possible, not only at the national level, but also at the global level, whose expectation was to promote the resumption of growth in the global profit rate of the capitalist system. However, the neoliberalism that replaced Keynesianism also failed because the global profit rate and global economic growth continued to decline, not preventing the outbreak of the 2008 global crisis and chaos was established in the world economy thanks to the absence of economic and global finance regulation.
Faced with the failure of neoliberalism and its inability to deal with the global crisis of capitalism, Keynesianism could be the solution as long as it was applied in each country and globally, that is, it would operate in economic planning, not just at the national level to obtain economic stability and full employment of factors in each country, but also at a global level to eliminate the global economic chaos that currently prevails with neoliberalism. Keynesianism should also be adopted at a planetary level to ensure economic stability and full employment of factors globally. With Keynesianism in each country and globally, there would be the coordination of Keynesian economic policies at a planetary level that could only be accomplished with the existence of a world government. This would be the way to obtain stability in the world economy to eliminate the chaos that characterizes the neoliberal globalization currently dominant throughout the world.
It is important to note that capitalism is a complex, dynamic, adaptive and non-linear system because it has large numbers of elements or agents that interact with each other, forming one or more structures that originate from interactions between such agents. Chaos Theory explains the functioning of complex and dynamic systems such as the capitalist system. According to Chaos Theory, systems enter a state of chaos when fluctuations that were, until then, corrected by “feedback” or self-stabilizing feedbacks become out of control. The trajectory of development becomes non-linear: prevailing trends collapse and in their place various complex developments emerge. Rarely is chaos a prolonged condition. In most cases, it is just a transitional period between more stable states.
To manage a complex system like capitalism, it is necessary to create “feedback” and control mechanisms by the world government to ensure the stability of the economic system. With global Keynesianism adopted in planning the world economy and the existence of a world government, it would be possible to eliminate the uncertainty-generating chaos that characterizes the world economy, subject to constant instability. The elimination of chaos or mitigation of instability and uncertainty with its turbulence and risks in the world economy will only be achieved with the existence of a world government that would act to ensure coordination between Keynesian economic policies adopted in each country and globally. To be effective, the world government should adopt the Keynesian economic planning process that contributes to eliminating instability and uncertainty with its turbulence and risks.
The adoption of these measures with global Keynesianism requires the existence of a world government to coordinate the expansion of the economy in each country and globally. Humanity will only move towards effective economic integration, initially, and political integration, later, between countries as long as there is a world government and a globalized rule of law also operates. There is a need for a world democratic government which can be realized by restructuring the UN, transforming the UN General Assembly into a world parliament and transforming the Hague International Court restructured into the World Supreme Court to make the international system work in benefit all nations, promote the ordering of the world economy and the global environment, end wars and ensure world peace. International Law will only be respected and applied effectively with the existence of an international system that operates with a global democratic Government, a global Parliament and a global Supreme Court.
The ordering of society at a global level could be achieved with the constitution of a world government that would aim not only at the economic ordering and international relations at a global level, but, above all, at creating the conditions to face the challenges of humanity in the 21st Century. To make a world government viable, it is necessary that, initially, a World Forum for Peace and the Progress of Humanity be constituted by Civil Society organizations and governments from all countries in the world. In this Forum, the objectives and strategies of a global movement for the constitution of a world government and a world parliament would be debated and established, aiming to raise awareness among the world population and national governments in order to make a world of peace and progress for all humanity a reality. This would be the path that would make it possible to transform the utopia of world government into reality. Without the constitution of a democratic world government, the scenario that unfolds for the future will be one of economic, political and social disorder and the war of all against all generated by the collapse of contemporary globalization.
* Fernando Alcoforado, awarded the medal of Engineering Merit of the CONFEA / CREA System, member of the SBPC- Brazilian Society for the Progress of Science, IPB- Polytechnic Institute of Bahia and of the Bahia Academy of Education, engineer from the UFBA Polytechnic School and doctor in Territorial Planning and Regional Development from the University of Barcelona, college professor (Engineering, Economy and Administration) and consultant in the areas of strategic planning, business planning, regional planning, urban planning and energy systems, was Advisor to the Vice President of Engineering and Technology at LIGHT S.A. Electric power distribution company from Rio de Janeiro, Strategic Planning Coordinator of CEPED- Bahia Research and Development Center, Undersecretary of Energy of the State of Bahia, Secretary of Planning of Salvador, is the author of the books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua convergência (Associação Baiana de Imprensa, Salvador, 2018), Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019), A humanidade ameaçada e as estratégias para sua sobrevivência (Editora Dialética, São Paulo, 2021), A escalada da ciência e da tecnologia e sua contribuição ao progresso e à sobrevivência da humanidade (Editora CRV, Curitiba, 2022), a chapter in the book Flood Handbook (CRC Press, Boca Raton, Florida United States, 2022), How to protect human beings from threats to their existence and avoid the extinction of humanity (Generis Publishing, Europe, Republic of Moldova, Chișinău, 2023) and A revolução da educação necessária ao Brasil na era contemporânea (Editora CRV, Curitiba, 2023).
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