Ukraine War and Historical Cycles of Globalization and Deglobalization
Decoupling, deglobalization/deglobalization and glolocalization are now on everyone’s lips. Interesting interview with Boris Kagarlitsky, professor at the Moscow School of Social and Economic Sciences and longtime observer of Russian society, politics and global political economy, in which he discusses the consequences of the war for the Russian economy, the country’s financial sector and the Russian elite . In addition, Kagarlitsky analyzes the current crisis of globalization, in particular the sanctions of the West, rising resource prices and the current role of China. Karagrlitsky sees the trend towards de-globalization as already present in the financial crisis of 2008, believes that there have always been cycles between globalization and de-globalization in economic history, that a Russian import substitution strategy cannot work due to the neo-liberal system in Russia with a corrupt state, yes the old dependency theory of the 1970s (Andre Gunther Frank) is becoming popular again. He also sees the emergence of a new faction within the Russian elite that will profit from the war and prevent possible reforms and will bleed the country even more dry. Worth reading: Here are some excerpts:
“The whole world is becoming more like Russia.” A conversation on deglobalization in the wake of the war in Ukraine
„Die ganze Welt wird Russland ähnlicher.“ Ein Gespräch zur Deglobalisierung in Zeiten des Ukrainekrieges
“Ironically, the current geopolitical conflict and sanctions are not the cause, but rather the consequences of a broader process that already began with the Great Recession of 2008–2010. It became obvious that not only globalization and neoliberalism had reached their limits, but all over the world, in the West, in China, in Russia, and in Ukraine, a transition to a new development model became inevitable, yet clashed with the political and social status quo. This constellation has led to the present catastrophe. The current situation is therefore an example of the “dialectics of history”: When there is a contradiction between the objective needs and logic of the process and the subjective interests of the groups in power, catastrophic events, major wars, revolutions, global crises, and so on occur. In the case of Russia, its neoliberal development model was already under distress since the Great Recession of 2008–2010.(…)
I think that import substitution simply will not work in a neoliberal market economy and with a corrupt government. It is not going to work without a “strong state” and capital controls. So far, Russian import substitution has been mainly about receiving subsidies or benefits from government programs, and for this reason producers just had to label their products with “Made in Russia”. The easiest way to do this is to buy foreign parts and assemble them in Russia. Russian import substitution was often about replacing Western imports by Chinese ones. In some cases, this even included fake Russian products. There are jokes about Belarussian prawns. But Belarus has no sea; nevertheless, the country managed to supply Russia with a lot of seafood. Why? Because Belarussians bought products from Poland or from Norway, repackaged them, and labeled them “Made in Belarus” and resold them to Russia.
JP: Do you think that the Russian style “rentier capitalism” (Christophers 2022), based on the ownership of natural resources of a small oligarchy, impedes import substitution?
BK: Yes, exactly! Import substitution can work, but only if the government and the state are not dominated by a neoliberal oligarchy and the export of raw materials. And even if the Russian government were to seriously try now, it would be too late. Today, the government often refers to the Soviet experience of the 1930s, but there is a huge difference: In the 1930s, the Soviet economy was not isolated from the rest of the world, it was not subject to sanctions. On the contrary, it was the Soviet Union’s honeymoon of international trade, because during the Great Depression the whole world was happy to sell their products to the Soviet Union to compensate for the loss of export markets elsewhere. Hence, the Soviet Union benefitted from the massive sale of cheap technology and equipment. Consequently, Soviet industrialization was not only based on collectivization with its many victims, but also on international trade. I have described this process in my book Empire of the Periphery (Kagarlitsky 2008; see also Shubin 2009; Kolganov 2018). Today, Russia’s elite fails to solve the problems of import substitution and re-industrialization for similar reasons as a decade ago, but the situation is getting much worse. The government faces huge financial problems.
The current crisis, the Ukraine war and the rising oil prices, resembles the triggers of the end of the “golden age of capitalism” (Marglin & Schor 1990) in the 1970s in the Western world. The Vietnam War and the oil price shocks of 1973 and 1979 put massive pressure on the global financial system. (…) Well, both the Vietnam War and the Six-Day War between Israel and Egypt, Syria and Jordan led to far-reaching transformations in the oil market. The latter had an even greater impact than the Vietnam War. By the mid-1970s, both the Keynesian model in the West and the Soviet model had been exhausted. The wars and conflicts during this period resulted in a new dynamic which led to the rise of neoliberalism in the early 1980s. I am not saying we will now return to Keynesianism, but today it is clear that the Polanyian pendulum (Polanyi 2001) will swing in the other direction. Of course, there are social forces which oppose this change. Neoliberalism was the triumphant period for the political right and the capitalist class. Perhaps the left and the working class will get their revenge in the long run.
So how can the current crisis be understood from a theoretical perspective?
My personal approach is to analyze the history of capitalism. And as Immanuel Wallerstein (2004) and also the Russian historian Mikhail Pokrovsky (1925) point out, capitalist economies have developed in cycles. There have always been periods of globalization and deglobalization. The periods of globalization have usually been dominated by trade and financial capital. Without using the terms globalization or deglobalization, which was later developed by the Philippine sociologist Walden Bello (2002), Pokrovsky and also Weber (1981) argued that nation-states tend to compete for mobile capital, while industrial capital is fixed and cannot move as quickly. The history of capitalism is thus a history of cycles of globalization and deglobalization, with the alternation of cycles usually also accompanied by major social conflicts and wars. For instance, according to Immanuel Wallerstein, the long-sixteenth century was a period of globalization while in the early 17th century mercantilist Colbert-style economies prevailed in most European countries such as France or Russia.
If we look 10 to 15 years into the future, what could a globalized or maybe deglobalized world look like?
We will definitely experience some form of deglobalization. The role of nation-states will increase, but they will transform dramatically—maybe to the extent that they will no longer be recognizable as nation-states in the current sense. New globalized political formations may emerge that reach beyond the nation-state and are not based on open market policies. What we would actually need is some form of democratic planning and coordination and a new form of welfare state that goes beyond the traditional bureaucratic model. Therefore, we must rediscover democracy. Christopher Lasch (1996) and others have pointed to the fact that many formal democracies have been hollowed out by the elites over the last 20 to 30 years. Rediscovering democracy would include a form of participatory democracy from below, including economic democracy. In my opinion, the European Union in its current form has no future. But maybe a new Europe could emerge from the current crisis. At the moment, we are discussing Ukraine’s possible membership in the EU. Perhaps some kind of new Congress of Vienna is needed, bringing together all of Europe, including Ukraine and Russia, in order to conclude a new treaty for Europe. Instead of a neoliberal treaty, like the Treaty of Maastricht or Lisbon, such an arrangement would prioritize people’s rights over bureaucracies. But everything is open for struggles. It is not about predicting the future, but about fighting for it.