Transnational Capital and Transnational Labor

An Interview with William K. Tabb | November/December 2017

This article is from Dollars & Sense: Real World Economics, available at

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This article is from the November/December 2017 issue.

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William K. Tabb is an economist and author of The Restructuring of Capitalism in Our Time (2012), Economic Governance in the Age of Globalization (2004), and The Amoral Elephant: Globalization and the Struggle for Social Justice in the Twenty-First Century (2001). He spoke with Dollars & Sense in July 2017 on the global economic crisis, its causes and consequences; the transnational capitalist class and neoliberal globalization; and the prospects for resistance and alternatives to capitalism now and in the future. —Eds.

Dollars & Sense: If we look at a world map showing GDP growth rates in 2009 or 2010, during the Great Recession, we see most of the high-income countries of North America, Europe, and East Asia with negative growth rates. Meanwhile, we see some of South America, much of Africa, and most of South Asia and East Asia still with positive economic growth. Why would the wealthiest and most powerful countries be at the epicenter of a global economic crisis?

William Tabb: The crisis was triggered in the financial sector, and while that didn’t cause the problem, it brought the economy down. The financial crisis itself was created by the over-indebtedness in the richer countries and the extent of leverage, that is of borrowing, mostly by the private-sector, actually, and the slow rate of growth in their economies. They dealt with the slow rate of growth in the economy by offering people the chance to borrow more money. And they did. As they borrowed more and more, they reached the point that they couldn’t pay it back, especially the mortgages and, within that, the subprime mortgage in the United States. But that same property crash happened in a number of other advanced countries. The other thing that was behind the borrowing was the stagnation of income for working classes across the advanced capitalist world. Slowing growth in the real economy and rapid growth in the financial economy came from increased unequal distribution of income, where the 1%—in Occupy Wall Street’s terms—accrued more and more of the surplus created. They put it into finance because there was no point in producing more goods and services, investing in the real economy, because most people didn’t have the money because of the stagnation of incomes. So you had the slowing down leading to the financialization.

The other piece of that was the globalization of the economy, in which industry or deindustrialization had killed so many of the good and many unionized jobs, which added to the stagnation pressures.

D&S: Just to follow up on that, do you think it’s useful to talk about a possibility where—even if the crisis detonated in the higher-income countries—they might have offloaded more of the fallout onto other countries? People talk about Germany “exporting unemployment” to other countries, but these were mostly countries in the European periphery. Is it possible to imagine the high-income countries doing something similar on a global scale?

WT: To begin with the German case which you raise: It’s an important one, because what the Germans succeeded in doing was holding down the wages in their own country, so that they could continue to export. The rest of Europe became less competitive, with the euro, since they were all tied to the same currency. The German economy grew basically by exploiting their neighbors in Europe. As far as the developing countries are concerned: many were commodity producers, and with the downturn, commodity prices fell and they were damaged heavily through that.

I also wanted to go back to the way that finance hurt Latin America and Asia in earlier crises, where the same form of borrowing was interrupted by the United States’ monetary policy. The countries that had borrowed first in the Latin American debt crisis of the 1980s and then in the Asian crisis of the ’90s, suddenly had to pay back debt that they couldn’t pay back because of the suddenness of the change.

In the current period, or the period since 2007–2008 with the downturn, something similar happened, in which the developing countries did suffer the consequences of the slowdown in the core. The extent to which this was the higher-income countries “putting it on them” rather than merely co-suffering—it’s a harder one for me to answer.

D&S: You mentioned the Latin American debt crisis, which served as the lance point, in many countries, for the imposition of “neoliberal” economic policies. The United States government was certainly in the forefront of spreading this “free market” or “neoliberal” economic policy paradigm to other parts of the world, in Latin America and elsewhere, and giant U.S. corporations have certainly been major beneficiaries. Is the hegemonic position of the United States in the capitalist world economy dependent on the continuation of this paradigm?

WT: It certainly is important to transnational capital, and especially to U.S.-based transnational capital. But one of the things to think about is that the nationality of capital has become more internationalized. For many major U.S. corporations, or major German or French corporations, the stock is owned much more widely, so that their headquarters may still be in the country of origin but capital has become more internationalized in terms of ownership and control. So, yes, for American corporations it is very important, but it is important for all transnational capital.

The Evolution of Imperialism

A century ago, it was clear that the division of labor was the Global South producing raw materials and the “core” countries of the world system producing industrial goods. The peripheral countries produced raw materials which were sold at low prices because of the lower cost of reproducing labor power in those countries as well as the military stronghold the colonial power had, and their ability to appropriate land and labor from the peoples of the Global South. That was first called “colonialism,” later “imperialism.” Some of these countries got their independence—became formally independent—but the economic relationship continued, and the countries of the core continued to exploit them basically in the same manner.

You did have a period of national development, of autocentric development, at the end of World War II. This was a strategy where national elites, pushed by progressive movements in these countries, tried to pursue a different form of development. Even groups like OPEC [the Organization of the Petroleum Exporting Countries] trying to raise the price of oil by coming together. The Bandung Conference of 1954 of progressive Third World leaders—called the “Third” World between the Soviet system and the Western capitalist system—trying to negotiate a better deal for their countries.

Neoliberalism basically undid that. So we move from the earlier period, of 100 years ago, of straight, exploitative, military, violent control, to informal control. When the colonial powers left a particular country, they tried to leave in place leaders who had been educated in the colonial country, chosen by the foreign ministries of the colonial powers, to be cooperative in a period when the former colony had become formally independent. That was challenged by some of the important leaders in the postwar period—Nehru in India, Sukarno in Indonesia, and others—who tried to negotiate in a very meaningful sense for the Global South. They were succeeded, unfortunately, by leaders who were more in favor of the later development of transnational control. —WT

What neoliberalism does is force the countries of Latin America or other developing countries to hold their own wages down in order to be competitive in the global marketplace. Capital is mobile, and transnational capital will buy from the lowest cost sources, given that their supply chains can alter where production is taking place. It gives them bargaining power for lower taxes in the countries of the Third World, lower wages for the workers in those countries, and incentives to in fact locate there. So a great deal of the profitability of transnational capital comes from this greater bargaining power over both the workers of the world and the countries of the world, especially the less powerful countries that are more dependent on transnational capital.

D&S: How far do theories of a “transnational capitalist class” and “transnational capitalist state” get us in understanding the restructuring of the capitalist world economy in the late 20th century? Do those ideas help us explain the transition from the clashing colonial empires of a century ago (each seeking to carve out exclusive access for their own capitalist companies) to today’s global regime maintaining global access (to markets, natural resources, labor, etc.) for transnational capital?

WT: I had earlier been skeptical of the theory, because all of the actions of local capitalist classes—in terms of protecting their interests—were strong going into the 1980s and the 1990s. But we did see a major change, a change that actually originated earlier, as national development strategies gave way—with elites, instead of trying to follow autonomous development and trying to protect themselves from foreign capital, becoming instead junior partners foreign capital and giving up the national independence and autonomous development.

When that happened, they became junior partners for transnational capital and to a much greater extent were integrated into the global capitalist class. This was a significant change from the era of national Keynesianism of the postwar period into global neoliberalism, where transnational capital is able not only to penetrate these countries, but the elites of these countries see their interests in working as part of a global capitalist class. I think that the theory, as it has been developed, is now much more convincing and the evidence for it is much greater.

D&S: How do you see the prospects for a new anti-capitalist politics, meaning a politics that aims at the replacement of the capitalist system with a new form of economic organization on a world scale? Does the globalization of capital undermine the viability of the “working class” as a driving force of social change, or could it foster (as one of its contradictions) a truly “transnational working class” that could be an agent of a global economic transformation?

WT: One of the things Karl Marx saw in the 1840s, when he and Frederick Engels were writing the Communist Manifesto, was that capitalism was a world system (which was pretty impressive insight back then) and that the global working class had nothing to lose and much to gain by uniting against capital. The idea that this might happen was dismissed by many people, but Marx just keeps coming back. In the current period, as global capital gets more and more control, it becomes more and more clear what is really going on. So in the United States, we have a situation where a little over half of young people are anti-capitalist and prefer socialism. This is a major change. The other change, speaking for the moment about the United States, is that surveys are showing that people identify not as middle class (because they are being pushed out of the middle class and people who are coming into the economy have not been given a chance for a middle-class standard of living) but as working class.

The rise of the right is the same thing as we saw in the 1930s: When the left becomes stronger—the progressive movement, the workers movement becomes stronger—it’s only a violent, racist, xenophobic, Trump-like administration that can try to contain what in our country would be the base of the Democratic Party, the trade union movement, young people, Black Lives Matter, the fight for the $15 an hour minimum wage. These movements are getting stronger, and organizing at the local level is important. We’re seeing the same trends, not only in the other advanced countries—in England especially, with [Jeremy] Corbyn—but in the countries that have been hardest hit by the crisis. We’re seeing strong left-wing movements in Greece and Spain. Latin America has become more complex, as the left-wing governments that came in had trouble delivering on what they wished to deliver, given that they were part of a global system. They were unable on their own, even though they were able to improve conditions, to fundamentally challenge capitalism.

I think the idea that capitalism will be challenged—it will be challenged in the advanced countries and perhaps in China, where the number of strikes and the extent of unrest is really quite substantial, although the Communist Party power remains very strong. As the Chinese economy slows down—and their financial system, the overextension of debt, their banks getting in trouble—I would not rule out a serious change there as well. It is true, in the short run, that neoliberalism and transnational capital have restructured the economy, but it is not a sustainable model. The model cannot produce growth that is ecologically sensible in this period, which becomes much more of a challenge and people around the world are much more aware of that. So I am actually encouraged that—maybe not tomorrow—but that we’re moving into an era where class analysis becomes more important, Where resistance to capitalism, which ten, 20, or 30 years ago would’ve been considered beyond the conversation, now becomes part of the conversation.

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