Impending Threat of Rent Globalization and the Defence of Capitalism by Labour

Published date01 April 2019
Date01 April 2019
Subject MatterArticles
Impending Threat of
Rent Globalization and
the Defence of
Capitalism by Labour
Hartmut Elsenhans1
It is wrong that globalization necessarily leads to a world system where all
participating economies are capitalist economies. Under the prevailing conditions
of disempowerment of labour, capitalism is too weak to transform rent-based
underdeveloped economies. Globalization is driven by currency devaluation,
which transforms new comparative advantage into cost competitiveness. The major
check on devaluation is full employment. It is often not achieved in countries
engaging in devaluation-driven exports. In order to globalize capitalism, labour
in the South would have to be empowered. At the theoretical level, a neoliberal
understanding of capitalism as against Keynesianism blocks an understanding of
the importance of mass consumption for maintaining capitalism. At the political
level, mass movements where they exist in the South are captured by secular
nationalism or cultural nationalism. An increasingly fragmented multipolar system
emerges where governments promote rent seeking.
Globalization, rent, Keynesian macroeconomics, international relations, class
struggle, development
The central argument of this article is that globalization does not lead automati-
cally to a capitalist world system. Capitalism is defined here as an economic sys-
tem in which production and investment decisions are made overwhelmingly by
entrepreneurs and justified by the profit rate. Profit is a special form of surplus.
1 Professor Emeritus, Political Science, Global and European Studies Institute, Leipzig University,
Corresponding author:
Hartmut Elsenhans, Global and European Studies Institute, Leipzig University, Emil-Fuchs-Straße
104105, Leipzig, Germany.
International Studies
56(2–3) 109–128, 2019
2019 Jawaharlal Nehru University
Reprints and permissions:
DOI: 10.1177/0020881719835986
110 International Studies 56(2–3)
In contrast to rent,1 profit is appropriated by competing capitalist entrepreneurs on
anonymous markets. Rent is another form of surplus appropriated on the basis of
market imperfections—of both the natural and politically created variety. In a
Keynesian–Kaleckian macroeconomic model, the global volume of profit going to
the entrepreneurial class is dependent on their spending on net investment. Only the
share of each entrepreneur in total profit depends on his/her own competitivene ss.
Globalization is the increasing economic interchange through trade and
financial flows inside an ever-increasing part of the world. In contrast to previ-
ous stages of globalization, underdeveloped countries in the global South have
acquired comparative cost advantage in manufactured products—initially in
simple, but increasingly also in technically sophisticated labour or capital-
intensive products. To be sure, productivity in the developing Southern econo-
mies still might lag behind the industrialized West. But even here, through
devaluation, Southern economies can transform comparative cost advantage
into price competitiveness. This might imply a regular fixing of exchange rates
below purchasing power parity. Consequently, additional employment in
export industries requires additional local wage goods production, especially
in agriculture.
There are blockages to globalization in the global South, which preclude the
generalization of capitalism at the world level and therefore the emergence of a
relatively homogeneous capitalist world system. In keeping with the Keynesian
position presented here, one of the social prerequisites for capitalist growth—
namely, the negotiating power of labour—has historically resulted in rising mass
incomes. But the absence of this factor in the underdeveloped economies of the
South and the relatively weak tendency to high levels of employment in the cur-
rent global system significantly compromise labour’s capacity to negotiate rising
mass incomes. The limited growth of additional exports—and thus the transfor-
mation of local structures through scarcity of average skilled labour—keeps
catching up economies from being transformed into classically capitalist ones.
In many countries of the global South, the Green Revolution has allowed for
the creation of a food surplus, which has enabled self-sufficiency in food con-
sumption. As comparative advantage allows for competitiveness without techni-
cal superiority, there is also the possibility of overtaking previous technical
leaders, which are locked into the traditional specializations in which they con-
tinue to ‘enjoy’ comparative advantage. In turn, this enables developing econo-
mies to specialize in new technologies on the basis of their low international cost
of labour (though not necessarily low real wages), even before they are superior
to the more established economies in these technologies.
On this basis, two different scenarios are distinguished: a benign globalization
and a ‘race to the bottom’ globalization. In the second case, governments will
have to intervene in order to protect threatened segments of their populations and
to maintain their capacity for participation in technical innovation. This will fur-
ther intensify rent-based structures.
In keeping with the language of all development theory, the aim is to eliminate
the constituent mark of underdevelopment: labour surplus. This implies the trans-
fer of capitalist structures to the global South—a region still largely characterized

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