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GLOBAL CAPITALISM
and the
CRISIS OF DEMOCRACY

Jerry Harris

ISBN: 978-0-9860853-2-1
$23.95 paper 2016













EBOOK:  $19.00
Jerry Harris is National Secretary of the
Global Studies Association, and on the
International Executive Board of the Network
for Critical Studies of Global Capitalism. He is
the author of
The Dialectics of Globalization:
Economic and Political Struggle in a
Transnational Era.
His research on
globalization has been translated into
Chinese, German, Spanish and Czech. He is a
former professor of History at DeVry
University, Chicago.
SYNOPSIS

Democracy is in crisis, from the streets of Ferguson to the struggle in
Greece. Throughout the world millions suffer under neoliberalism and
austerity but are unable to force their governments to address their
needs. Fundamentally, democracy is about the relationships between
the state, markets and civil society. Attempts to artificially repress the
functions of any of these institutions result in political, social and
economic problems that lead to irresolvable contradictions and
eventual failure.  This book undertakes the examination of capitalist
democracy, globalization, and the emergence of a transnational
capitalist class needed to develop a strategy for implementing
democracy beyond its current impasse.

Early capitalism contained the contradiction between property rights
and popular democracy. The American and French revolutions saw an
alliance between the capitalist class, farmers, craft workers and
laborers. Democracy was a class compromise, based on the political
balance between the masses and the new ruling elite.

This tension has set in motion the continual conflict over democratic
rights. As the transnational capitalist class coalesced into a hegemonic
bloc, their project was to re-engineer the national state to serve global
markets and suppress democratic input from civil society. Mainstream
media, and many on the left, still portray the world system in terms of
nationally contained economic units, with corporate champions flying
flags with patriotic colors. But a serious look at the data clearly shows
that TNCs are deeply committed to global production, financially
connected to other global players, and base their corporate strategy on
world-wide accumulation. Such patterns hold true for every major
industry. This is the structural manufacturing basis of global capitalism.

What may be truly different in this era is a historic reversal of human
rights and democracy. This has led to a growing social crisis that
cannot be resolved by global capitalism.

Socialism emerged as the alternative to capitalism, promising
economic equality and social justice. But the Soviet system
centralized power into the state, suppressing both civil society and the
market. This created fundamental economic and social contradictions.
Eventually the failure of an internal transformation led to collapse. As
for anarchism, its theory ignores the role of the state and rejects the
market, creating a limited ideology of social change that fails to create
a viable alternative.

A successor system must recognize the relationships between the
state, markets and civil society, seeking to balance naturally occurring
contradictions through the practice and renewal of democratic
institutions. Conflicts are not an indication of a dysfunctional society,
but of a vibrant, adaptable and open society.

The key is recognizing horizontal democracy as the structure for
resolving conflicts. Worker ownership and cooperatives may be the
first step in constructing such a society, alongside sustainable
economics, protagonistic democracy and governmental public
financing.
TABLE OF CONTENTS

Introduction:
DEMOCRACY IN THE TWENTY-FIRST CENTURY:
STATE, MARKET AND CIVIL SOCIETY / 11
    Market Fundamentalism / 12
    Communist and Anarchist Alternatives / 14

1. THE DECLINE OF DEMOCRACY / 11
    The Revolutionary Origins of Democracy / 19
    The Transformation to Global Capitalism / 24
    Remaking the Working Class / 27
    The Social Impact of Globalization / 32
    Globalism, Nationalism and Remaking the
    Military / 38
    Austerity and Democracy in Europe / 41
    Globalization, Taxes and Mobility / 43
    Gramsci and Class Hegemony / 47
    Conclusion: Capital and Democracy / 51

2. GLOBAL CAPITALISM AND CLASS POWER
    The Transnational Capitalist Class / 59
    Finance and Technology / 65
    Global Assembly Lines and Apple / 75
    GM’s Transnational Production / 80
    Globalization Hits Detroit / 84
    Global Capitalism and Transoceanic Trade / 88
    Trade Deals: Tearing Down Borders / 90
    Conclusion / 97

3. GREEN CAPITALISM, DEMOCRACY AND SOCIAL JUSTICE
    Green Capitalism / 104
    A Green Hegemonic Bloc / 109
    Green Capitalism vs. the Growth Imperative / 115
    Green Capitalism and Economic Recession / 121
    The Global Solar Industry / 125
    A Green New Deal? / 130

4. THE CONFLICT IN UKRAINE: BETWEEN TWO WORLDS / 143
    The National/Transnational Conflict / 144
    Thing Fall Apart / 147
    The Neo-Fascist Threat / 150
    Outside Interference / 152
    Transnational Bonds and Influence / 158
    Between Two Worlds / 165

5. CHINA: THE STATE AND GLOBAL CAPITALISM / 170
    State Transformation and Remaking the
    Working Class / 172
    The State and Transnational Integration / 176
    Inward Bound Capital / 185
    The Private Tech Sector / 189
    Outward Bound Capital / 193
    The EU and the US / 201
    China’s Dream: Socialism or Capitalism? / 206

6. THE FAILED ALTERNATIVES / 214
    The Socialist Experience / 214
    Is Socialism Dead? / 222
    The Anarchist Vision / 227
    Anarchism and the Occupy Movement 234

7. DEMOCRACY BEYOND CAPITALISM / 242
    Protagonistic Democracy / 246
    Economic Democracy / 252
    Workers Cooperatives in Italy and Venezuela / 257
    Horizontal Democracy in Argentina / 261
    Power in Bolivia and Greece / 264
    Post-Liberal Democracy / 268

Index /
What fate democracy in a corporate-restructured world?
REVIEWS

"Most of the book is devoted to helping the reader better grasp what Harris argues is
the historical transition—underway—from capitalism centered around the nation-
state to global capitalism. This work is successful, enlightening and engrossing ... an
exceptionally thorough and thought-provoking work"  
Bill Fletcher, In These Times


"Global Capitalism and the Crisis of Democracy is a seminal work which addresses
the major questions raised by the vast critical literature on neoliberal globalization. It
addresses markets, the state, civil society, the transforming working class, the
environment, and the draconian reversal of the historic drive to create real
democracy. It accumulates a dense collection of data on financial speculation,
investment, and trade to demonstrate the growing network of cross-national ties that
bind a new transnational capitalist class.

This volume should be read and used in classrooms and study groups to stimulate a
conversation about the new era of neoliberal globalization and the prospects for
building twenty-first century socialism."
Harry Targ, Portside

"Jerry Harris is a preeminent scholar on global studies, particularly on global
capitalism and transnational class theory."
Marek Hrubec, Director, Center of Global Studies, Academy of Sciences, Prague

"This is an excellent book, packed with meticulously-documented facts, indicating the
disastrous direction that global capitalism, dominated by a new transnational
capitalist class, is taking us.  But, Harris argues, “another world is possible”--a
genuinely democratic, economically viable, ecologically sustainable world. Highly
recommended!"
David Schweickart, Loyola University and author of Beyond Capitalism

"There is a vast literature on the contradictions and evils of global capitalism, but
relatively little on progressive non-capitalist alternatives. In this stimulating book,
Harris poses the all-important question: Can the power of democracy overcome the
power of global capitalism? It sounds like a simple question, but Harris, who is one of
the originators of transnational capitalist class analysis, unpacks its multiple
complexities by re-examining the relationships between state, market, and civil
society. This book will spark productive controversy among theorists and activists,
precisely what is required if we are to find progressive non-capitalist alternatives."
Leslie Sklair, London School of Economics & author of The Transnational Capitalist
Class


"This wide-ranging book makes a critical contribution to understanding the times in
which we live and possible solutions to the increasingly acute crisis of global
capitalism.  Harris critiques with great perspicacity the ideology and destructive
practices of hegemonic neo-liberalism as well as the failure of 20th century socialism
to provide a viable alternative and the limitations of anarchism.  All three ideologies
are found wanting in the quest for human liberation.  In this new globalized
information age our emancipatory potential, he suggests, lies in freeing democracy
from the constraints of capitalism through a more balanced relationship between the
state, market and civil society.  Harris’ ideas should be widely studied and debated."
William I. Robinson, University of California at Santa Barbara.
author of Global Capitalism and the Crisis of Humanity
EXCERPT FROM CHAPTER TWO

GM’s Transnational Production

If Apple represents America’s electronic technology, the auto represents US industrial might. Cars have a
particularly strong national identity. General Motors, Ford, and Chrysler are seen as uniquely US
corporations. As
The New York Times noted, “GM factories churned out…muscle cars with taut, sculptured
body panels that were rolling displays of American DNA.”(1)  But if GM was once a pure American product, its
contemporary family has become a diverse mixture of global identities. Today GM employs 212,000
employees spread across six continents working in 396 facilities, speaking 50 different languages. As GM
states, “Whether in Detroit, Frankfurt, Sao Paulo or Shanghai our brands make an emotional connection to
our customers.”(2)

When the economic crisis hit in 2008, President Obama moved to save GM and Chrysler. The auto industry
was too important to let fail as had Lehman Brothers. But exactly what is meant by a US auto industry in an
era of globalization? Are we talking about corporations committed to maintaining good paying American jobs?
Newly-hired GM assembly line workers make just $10.50 an hour, barely over minimum wage. Do we mean an
industry pledging allegiance to protect and build the national economy? After the bailout auto employment for
the Big Three plunged from 435,000 to 171,000. Are these corporations expected to depend mainly on their
sales, employment, and assets in the US? Today the balance of these are in foreign countries. Or does the
definition simply mean US headquarters linked to an assumption of national economic loyalty? As so often
stated in the corporate community, loyalty is first and foremost to the stockholders, many of whom invest from
outside the US.

When it came to taking government support GM didn’t limit itself to appealing to Washington. Threatening
plant closures GM pulled in money from seven different governments. The biggest bail-out was from the US
for $49.5 billion, but others included $10 billion from Canada, $5.5 billion from Australia, $3.45 billion from the
UK, over $2 billion from Germany, and more from Spain and Sweden. As for Chrysler, their US bailout turned
majority shares over to Fiat in Italy.

As a leading industrial giant the globalization of GM has had a particularly harsh effect on the US working
class. Of the 300-plus world- spanning facilities run by GM 38 are in the US, and only ten of those are
manufacturing plants.(3)  Blue collar union jobs have always been at the heart of the working class, with auto
playing an outsized historic role. In 2015 GM reported 50,300 US hourly workers, (those most probably in
unions), down from 70,000 in 2009.(4)  On a global scale GM employs 40,000 workers laboring in 35
manufacturing facilities.(5)  But this is only about 25 percent of their global workforce.

Another way to view transnational production is to look at the footprint of foreign car production in the US.
The figures in Table 2.5 are considered “direct employment,” counting workers at assembly, drivetrain,
stamping, casting and tooling plants, and research and design facilities. Most articles on the auto industry
refer to Chrysler as one of the big three US manufacturers. But ownership is in the hands of Fiat, and so in
the table Chrysler is counted as a foreign employer. Chrysler’s successful advertising campaign plays on
their twin identity with the clever slogan, “Imported from Detroit.” Almost a reverse image of GM’s “what’s good
for America” ad, each slogan representing different eras of national and global production.(6)

While GM and Ford retain a larger workforce, the overall picture shows foreign car makers with significant
presence. In 2013 about 46 percent of total US car production was manufactured by foreign producers, and
that’s counting Chrysler as a US company. The majority of foreign production takes place in non-union plants
in the south. Transnational competition not only takes place abroad, but inside the US as well.

It is instructive to look at the global footprint of GM, because it reflects characteristics similar to all auto TNCs.
We can begin in Europe where GM acquired Opel in 1929. Opel produces 26 models in 12 plants located in
Germany, Austria, Hungary, Poland Spain, UK, Italy, and Russia. GM also owns Vauxhall, which originated in
Great Britain and has 24 models. Throughout Europe GM employs 34,500 workers. Germany is the home
base of Opel and employed 25,000 workers before the 2008 crisis. The labor force has now shrunk to
16,000, Germantheir blue collar workers hit as hard as their US counterparts.(7)

China is now the biggest market for GM, and the company has significant facilities throughout Asia and the
Pacific. Starting in China we see GM has ten joint ventures and two wholly owned foreign enterprises, as well
as some 58,000 employees. Models are sold under Buick, Cadillac, Chevrolet, Opel, Baojun, Wuling, and
Jiefang nameplates. The largest joint venture is with Shanghai General Motors Company in which GM allied
with SAICMOTOR. They operate six auto plants producing 20 different models with sales in China going over
1.5 million per year. Another key joint venture is SAIC-GM-Wuling Automobile Company, also with sales
registering better than 1.5 million a year. Besides other manufacturing alliances, GM does research and
development at the GM China Advanced Technical Center. The center is part of GM’s global engineering and
design network, doing work on advanced design, vehicle engineering, powertrain engineering, and at OnStar
laboratories.(8)

Other important locations in Asia include India and South Korea. GM produces eight different models of
Chevrolet for the market in India, operating two manufacturing facilities. Additionally GM has a factory making
engines, and a world-class design and engineering center in Bangalore.(9)  In South Korea 16,500 workers
are employed by GM. Operating four production plants, GM makes 12 different models exporting more than
1.8 million vehicles to 150 markets throughout the world. One of every four Chevrolets sold globally are made
in South Korea. Important research and development also takes place in South Korea, where GM’s global
small- and mini-car architectural development teams are located.(10)

GM also has substantial facilities in Thailand, Indonesia and Australia, as well as Kenya and Egypt. Lastly,
Latin America needs to be mentioned as GM has established production plants in Mexico, Argentina, Brazil,
Chile, Colombia, Ecuador, and Venezuela.

Without their extensive global assembly line GM could not exist as an auto manufacturer. Nor
could any major player in the auto industry.
As US and European national car markets went into decline
during the economic crisis, the transnational character of all auto TNCs became even more pronounced. In
Table 2.6 we can see some key figures for major auto producers. The TNI or Transnational Index used by the
United Nations is based on the ratio between foreign assets, sales, and employment compared to national
figures in the same categories. Note that in the years between 2004 and 2008 each auto corporation
increased their transnational character.

Mainstream media, and many on the left, still portray the world system in terms of nationally
contained economic units, with corporate champions flying flags with patriotic colors. But a
serious look at the data clearly shows that TNCs are deeply committed to global production,
financially connected to other global players, and base their corporate strategy on world-wide
accumulation. Such patterns hold true for every major industry. This is the structural
manufacturing basis of global capitalism.


1  Micheline Maynard, “After Many Stumbles, Fall of an American Giant,” New York Times (June 1, 2009).
2 GM, <www.gm.com/company/aboutGM/our_company.html> (2014).
3 GM, <http://gmibm.avature.net/careers/SearchJobsAllJobs> (2014).
4 Nick Bunkley, “Ford tops GM in U.S. factory jobs,” <http://www.autonews.
com/article/20150215/OEM/302169970/ford-tops-gm-in-u.s.-factory-jobs> (2015)
5 GM, <http://careers.gm.com/worldwide-locations/asiamiddle-east/singapore.html> (2015).
6 Kelsey Mays, “American-Made Index: Which Automakers Affect the Most U.S. Workers?” <https://www.cars.
com/articles/2012/07/american-made-index-which-automakers-affect-the-most-us-workers/> (2015).
7 GM, <http://opel.com/facts.html> (2015).
8 GM, “GM Brands Worldwide Locations,” <http://www. Home / Worldwide Locations / Asia/Middle East /
China> (2015).
9 GM, <http://careers.gm.com/worldwide-locations/asiamiddle-east/india.html> (2015).
10 GM, <http://careers.gm.com/worldwide-locations/asiamiddle-east/korea.html> (2015).
EXCERPT FROM CHAPTER FIVE

China’s outbound capital is growing by leaps and bounds. In the first quarter of 2015 it invested in
2,884 overseas-based corporations in 146 countries.(43)  By the end of the year China’s global
investments and cross-border acquisitions had reached a record high of $123 billion.  SOEs
dominate this activity with almost 90 percent of the investments.(44)
In early 2016 Chinese
acquisitions abroad accounted for 47 percent of all cross-border activity, and four of the
top six deals.(45)  Just 110 world-class corporations owned by the central government
have $4.3 trillion in assets abroad.

A historic turning point came in 2015 when China exported more capital than it received by inward
investments. Zeng Peiyan, former vice-premier and top economic policy expert spoke to how China
could now help determine the structure of global capitalism, “The large going-out of Chinese capital
means the country is able to participate in the restructuring of global industrial, supply and value
chains, which are the keys to foster new competitive advantages.”(46)  The Chinese TCC is now an
integral part of the world system. Transnational capitalists from all continents depend on China’s
internal economy, and its outbound capital for growth and stability of the world system. Just as the
Chinese TCC depends on their global relationships for their own power and stability.

In examining China’s assimilation into global capitalism a look at some of its main financial
institutions is instructive. China’s sovereign wealth fund, CIC, holds $650 billion in total assets. It’s
best known for its large holding of US Treasury debt and investments in private equity funds with
Blackstone and Morgan Stanley. But with $220 billion in overseas assets CIC has diversified into
long-term investments, expanding its global portfolio. In the United States CIC has shares in AIG,
Apple, Bank of America, Citigroup, Coca-Cola, Johnson & Johnson, Motorola, News Corp., and Visa.
By 2010 CIC had $9.63 billion in equity stakes in more than 60 US corporations and added Morgan
Stanley’s CEO to its advisory council. In Canada it has positions in Research in Motion, the maker of
BlackBerry mobile phones, and a $3.5 billion stake in the mining company Tech Resources.(47)  
Additionally CIC invested $1 billion in Oaktree Capital Management, $1 billion in JSX KazMunaiGas
in Kazakhstan, $956 million with UK’s private equity firm Apax, and $850 million for a 15-percent
stake in Hong Kong’s conglomerate Noble Group. CIC has also bought up European debt,
purchasing government bonds in Greece, Portugal, and Spain. Other holdings in Europe include 10
percent in London’s Heathrow Airport, 9 percent in Thames Water, and 7 percent in Eutelsat
Communications in France.(48)

China Development Bank is larger than the World Bank and already the biggest funder of
global infrastructure project.
“It is responsible for thousands of kilometers of roads and rail in
Africa, its projects keep the lights on in Pakistan and Indonesia, the trains running in Venezuela and
Argentina and it has probably done more to address climate change by building renewables
projects in developing countries than any other bank.”  From 2013 to 2014 China’s development
banks extended almost $700 billion in export financing. That’s greater than the US total for the last
80 years.

China’s banks are among the most significant in the world. In keeping with the policy of outbound
capital, foreign lending by the four biggest banks hit $378 billion by the beginning of 2014.
The
Industrial and Commercial Bank of China (ICBC), is the world’s third-most profitable
transnational corporation, and the largest bank by market capitalization
. In the biggest
foreign acquisition by a Chinese bank, ICBC bought 20 percent of South Africa’s Standard Bank for
$5.56 billion. After the purchase in Africa ICBC proceeded to buy 80 percent of Standard’s
subsidiary in Argentina, where they had previously taken 75 percent of the Bank of Boston. ICBC
has also entered Brazil, Mexico, Peru, and Thailand. The bank’s international strategy is focused on
establishing a presence in countries where Chinese corporations do business. In Argentina over 90
percent of Chinese companies have taken loans from ICBC. The bank is also using its relationship
with Standard to buy its London-based commodity trading business. This will give ICBC a hold in the
global trading of crude oil, copper, and other raw materials, an area where China has minimum
presence despite its need for vast amounts of such commodities.

Although large and profitable, ICBC is still a state-owned bank with significantly lower executive
compensation.
In 2013 ICBC chairman Jiang Jianqing took home about $326,000 in salary,
bonuses, and benefits, compared to the $12 million compensation package of Jamie
Dimon at JP Morgan
. Jiang has never been charged with any unlawful act, but as some Chinese
managers look with jealousy at their Western counterparts, lower wage scales become one element
leading to corruption.





43   Matthew Monks and Annie Massa, “Chicago Stock Exchange Says It’s Being Sold to Chinese-
Led Group,” <http://www.bloomberg.com/news/articles/2016-02-05/chicago-stock-exchange-says-it-
s-selling-to-chinese-led-group> (February 5, 2016).
44  Thilo Hanemann, and Cassie Gao, “China’s global Outbound M&A in 2015,” <http://rhg.
com/notes/chinas-global-outbound-ma-in-2015> (January 4, 2016).
45  Anjuli Davies, “China M&A flurry drives cross-border activity to 11-year high,” <http://www.
reuters.com/articles/us-m-a-data-idUSKCNOVEOZZ> (February 5, 2016).
46  Chen Jia, “Nation to become net capital exporter,” <http://news.xinhuanet.
com/english/business/2014-12/22/c_133870132.htm> (December 22, 2014).
47  David Barboza, and Keith Bradsher, “After Buying Spree, China Owns Stakes in Top U.S.
Firms,” New York Times, (February 9, 2010).
48  Heriberto Araugo, and Juan Pablo Cardenal, “China’s Economic Empire,” Financial Times, (June
1, 2013).
Jerry Harris on Ch 3: Green Capitalism
Global capitalism and
democracy/capitalism dialectic