Doom's silverish lining

False Dawn
June 26, 1998

This is a bad book by a good author. John Gray has been a stimulating presence on the political philosophy scene for a long time. He has charted for us the intricacies of Thatcherism and Hayek. He has been for some while, and who can blame him, disenchanted of his early enthusiasms. He has begun the search for the philosophical roots of the new politics - of the Third Way and of the rebirth of social democracy. This is a much muddier field than the rigorous plains of the Hayekian Order. But one always has hope that he will turn up with something interesting.

False Dawn is his attempt to mount a critique of globalisation. It is, I am sorry to say, a rather hurried, slapdash affair. Having no clear view on this rather complex and confusing topic, Gray has chosen to take every available position on the subject simultaneously. Thus, globalisation is one of the greatest threats to the moral order but of course as a social experiment it is no more likely to succeed than the attempts to impose a market order in 19th-century England. Mind you, it will still shatter society and especially family life, if it has not already done so.

But then Asian capitalism shows that globalisation is really a mouse and the family will triumph. We are not, however, to forget the disaster in Russia at the present, though it is really only a re-run of another social experiment that the Russians tried under the communists and serve them right. It is all a United States conspiracy for world domination, but then it will ruin the US because that is what globalisation does. Globalisation is evil, destructive, ineffective and bound to fail but can be creative except when it undermines the family. Wow!

If one were to reconstruct the Gray argument "in tranquillity", it has one plank that is easily recognisable. The very first chapter's title, "From the great transformation to the global free market", gives us a clue. Following Polanyi's argument about the market order in the 19th century, Gray argues that globalisation is an attempt to do at the global level what the British state tried in the 1840s. But then two paradoxes arise. The establishment of laissez faire requires a strong state, and we have no global state. More important, Gray argues, the British experiment failed and despite the horrible things it did was reversed after a mere three decades. Arguing by analogy, one could say that global free markets are impossible to create in the absence of a global state; however, any such experiment is bound to fail.

But if these two propositions were correct, why worry? Global free markets are neither possible nor desirable nor even sustainable. Yet the rest of the book is all about noting with horror that global free markets are happening, that they have mostly bad though some good effects. Nor can Gray be confident that global capitalism will self-destruct. He only wishes it would all go away and a moral economy with happy families be restored.

The problem is that Gray has accepted Polanyi uncritically and he has forgotten Hayek. As he labels Polanyi a Marxist, I conclude he has never been at home with Marx either. No state fashions the market. The horror story Gray wishes to tell about the US plotting to make the world a global free market is far too melodramatic. The US has much to worry about from globalisation as politicians like Pat Buchanan, Ross Perot and Richard Gephardt testify. President Clinton has said that when he dies, he wants to be reborn as the bond market. That is after all where power lies.

The second chapter, "Engineering free markets", takes us through the recent history of Margaret Thatcher's United Kingdom, New Zealand and Mexico. In the first two cases, despite the shock-horror story, Gray notes that these radical experiments had democratic support. But though he makes much of the collapse of the Mexican peso in December 1994, you would never know from Gray's book that after one bad year rapid economic growth resumed. The previous debt shock in 1981, pre-globalisation, cost Mexico six years of stagnation. Thanks to capital mobility, the 1994 crisis cost only one year of growth. In the UK as well, new Labour has absorbed rather than rejected the legacies of Thatcherism.

The third chapter "What globalisation is not" rejects the hyper-globalisation model of Kenichi Ohmae as well as the thesis of Paul Hirst and Graham Thompson, who wish to deny the novelty or the scale of late 20th-century globalisation. Gray recognises that global capitalism is a result of recent developments, especially technology and unregulated capital mobility. But in his anxiety to attribute globalisation to technology he ends up endorsing an anti-Polanyi thesis when he says that this globalising technology "will fertilise and strengthen the indigenous economic cultures" of east Asia. But later on in the book, he is worried that market reforms are "challenging traditions of marriage and caste that survived almost unchanged for 40 years following the end of the British Raj". This not only contradicts what he says about east Asia but also reveals how superficially he knows India. Traditions of marriage and caste (hardly worth defending by a rational liberal) are centuries old, and in any case they have been changing for as long as they have been around.

In his desire to spread alarm about global free markets, Gray ploughs on in chapter four by telling us that by a sort of Gresham's law, bad capitalism drives out good capitalism. This is a favourite theme of British authors such as Will Hutton and Gray. They love the corporate capitalism of Germany (though surprisingly not the Scandinavian kind). They fear that evil Anglo-Saxon capitalism will drive out German capitalism but half assert that perhaps virtue may yet triumph.

Gray gets himself into an awful muddle. On page 59 he cannot believe that the responsible stakeholder capitalism of Germany will have any large enterprises that would withdraw from home to migrate to Mexico. But on page 86, we find that one-third of 1,000 medium-sized German companies are planning to transfer to eastern Europe, where wages are lower. This fear is revisited at the bottom of page 95, but only for those on the Czech border. By page 96 Siemens is shown to be doing precisely what on page 59 no large enterprise would do. But by page 97, all is well. "The Mittelstand, or small and medium-sized companies in GermanyI are strong and innovative". All of these things could be simultaneously true, but we need a framework in which to put them.

The last three chapters concern the US, Russia and east Asia. In each of these cases, Gray gets into a similar love-hate-denial argument about free markets. Gray is rightly depressed about contemporary Russia, but he is blinkered about the Soviet Union. He dwells on war communism, but he forgets to tell that war communism was forced on Russia because of a western blockade, a civil war and the extensive damage caused by the Great War. Bad as the gulag was, we must never forget that it was the USSR that defeated Hitler and made the western world safe for democracy and capitalism.

Like many other sentimentalists, Gray loves Asian capitalism. Distance lends enchantment. I, however, prefer the crude linear, monochrome theory of Marx, who mocked German economists of his day for their delusion that Germany was different from England. Once they get used to medium to high incomes the Asian economies will see their pre-modern social bonds crumble. Don't worry, their women too will be liberated one day. Thanks to global capitalism and not to Lee Kuan Yew.

Lord Desai is director, Centre for Global Governance, London School of Economics.

False Dawn: The Delusions of Global Capitalism

Author - John Gray
ISBN - 1 86207 023 7
Publisher - Granta Books
Price - £17.99
Pages - 234

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