Michael Rowbotham

[The following has been excerpted from pp.149-150 and p.158 of Goodbye America! Globalisation, debt and the dollar empire, by Michael Rowbotham, (Jon Carpenter Publishing, 2000)]

Four aspects of the financial system are particularly relevant to the process of globalisation.

1 The creation and supply of money to national economies As we have seen, the financial system currently adopted by all nations is based on fractional reserve banking. Only the existence of permanent debt maintains the money dock in circulation. Modern debt is therefore, in aggregate, un-repayable.

Furthermore, difficulty is experienced in the repayment of individual debts in all four sectors — private, commercial, government and Third World.

2 International trade imbalances

Chapter 4 of Goodbye America! discussed how, at Bretton Woods, the American delegation insisted that nations with a trade surplus should not be obliged to spend the revenues they thereby gained back into nations with a trade deficit. As a result, countries are under no obligation to maintain a balance of trade with other nations, and are permitted to seek an indefinite trade surplus. This is a key factor in the pattern of trade we see today.

3 Third World debt

The position of acute debt afflicting the developing nations is one of the main ingredients of globalisation. Multinationals operate in the ‘development gap’ between the poorer nations and the richer nations. Backed up by a large capital base, and negotiating with impoverished nations desperate for any influx of foreign currency, multinationals are able to secure valuable natural resources and labour at rock-bottom prices.

4 The international flow of financial capital

During the 1980s, the industrialised nations undertook extensive ‘deregulation’ of finance, dropping barriers to the outflow of money and seeking to attract inflows of foreign investment. The floodgates to international finance were opened. It was subsequent to this deregulation that international money markets began the switch from 95% trade-related exchanges and 5% financial speculative investment, to the current reversed position of 5% trade-related and 95% speculation.

A vast quantity of money now circulates at the international

level in currency deals, stock market transactions and trade settlement. The build up of international capital, coupled with extensive further deregulation, has led to the development of a predatory international financial sector. It has been repeatedly demonstrated that the principal activity of this international financial sector is not maturing, productive investment, but short-term, speculative investment, involving extractive gain. (See Joel Kurtzman, The Death of Money, Simon and Schuster, 1993) These four factors combine to drive forward the process of globalisation. They also produce the ideal financial environment for multinational corporations to prosper at the expense of more resource-efficient enterprises

How Monetary Reform Could Help Stop Globalisation If we want to address corporate power and globalisation, there are many acts of legislation that could be passed at national and international levels. But however important this may be, it is vital to alter the peculiar fiscal conditions that create the drive to export and also grant such an advantage to corporate mass production. This is a matter of addressing causes, rather than effects.

The most important reform is undoubtedly one that would convert our economies away from being almost exclusively based on debt

The creation of financially balanced economies is absolutely vital if globalisation is to be tackled effectively. The dominant effect of a debt-based financial system is to create non-liquidating economies which means that for any given economic area, not all the goods produced can be sold.

Only financially balanced economies can hope to contain globalisation, by iemoving the pressure to export a surplus of goods that cannot be sold at home. If economies were financially balanced, trade between various economic areas would be based on the inherent ability to buy all goods produced, and would therefore represent an exchange of surpluses and goods of marginal value. In Other words, trade for mutual benefit.

The current price advantage enjoyed by multi-nationals in a debt economy, which creates and sustains these inefficient giants, and the pressure towards the exporting and extensive marketing of goods, would both be cancelled.

With the advantage of excessive size and the export imperative removed, the powerful economic impetus behind the globalisation of trade would be tackled at its source.