Globalized Corporate Warfare on the Middle Classes:

The Age of "Casino" Capitalism

By Dr. Pil-Woo Rhee, Emeritus Professor
Economics Department, Konkuk University Seoul, Korea

1. Prologue

What would be the result of globalization? Good or bad for all people in the world? For whom is globalization taking place? How happy and fortunate are we, if it is for all people in the world. Then there *must be a universal rule to be applied to every nation in the world. This would be transparency and justice and fairness on an international or transnational level. However, this rule seems to be automatically or arbitrary established by itself, not by a third party with coerced measures. Some say globalization will bring about prosperity under freedom all over the world, on the condition that people adjust themselves to help the WTO treaty. Nevertheless, a range of NGO groups in Seattle were shown in harsh resistance against the WTO conference.

They shout : "Not Free Trade, but Fair Trade." Even though the WTO is in its own conceit a great fair figure internationally, however, in reality, the U.S.A. decided to impose on countervailing duty on the semi conductor export from Korea to the States. This is evidently a protection policy for the semi conductor industry in the U.S.A., which the U.S.A. enforces in the Third world to concede the free market system without imposing custom duties to those commodity imports from advanced countries. This fact offers us a negative epistemology that the globalization is unfair, to make people in the Third world poorer. Objectively, however, global society is basically characterized by information technology(IT), by which one gets various information simply by clicking on a PC. That is instant knowledge and information all over the world. The distance of time-space tends to disappear with the spread of I.T. usage in the world. Owing to this IT development, it may be inevitable that the culture of a nation considerably changes. In this section, we are concerned with describing the consequences of this process of globalization, especially dealing with risk, trust, space, Empire and parasite society.

2.  Network Society and Virtual Capitalism

In new millenium the world is characterized to a considerable extent by the network system, as mentioned before. One is in a position to touch with new knowledge and information by clicking a mouse. One need not go to a department for shopping.   

Home shopping is a substitute for it. Also one is able to pay his or her tax liabilities to the tax office online. There is also cyber education. Consequently, one benefits oneself, in utility of use and in exchange.

Being deeply involved in the interactive computer mediated technologies, one tends to be putative beyond the reality toward a utopian dream. For instance, concerning self-actualization, to be a high possessor of power in knowledge, in money, and in politics. This trend is related to so called "virtual society." Especially, it is quite remarkable to note that we are linking in a virtual capitalist society. There must be a virtual corporation, if virtual capitalism is to exist in reality. The virtual corporation concerns those people who pursue maximization of profit. So it is related closely to financial management. Economically they are short term, profit-oriented to make money at the least cost; They are anti-social, anti-ethical, anti-government, anti-competition and anti-production.

This trend in business will lead to a form of "casino economy." In this context, however, one fears that the culture of capitalism, is linking to decay and become extinct, as the "casino economy" prevails. Those people who participated in the casino economy will be severely criticized by the public. They are in nonproductive fields, and very few enjoyed vast profits at the expense of the many who work at manufacturing products and providing services. Thus, it is both meaningless and even dangerous, likely to lead a constant threat to economic stability.   

They actually are opposed to the ethic of Protestantism, which tends to work more and more as an obstacle to profit-making. Effective measures are gradually increasing with the continuous knowledge in managing financial institutions. They are in the form of hedge funds, stock options, and other derivatives, promising to generate quick profits.

There is no doubt that virtual culture collaborated with electronic network and formulated virtual capitalism in the form of "casino economy" are likely to result in the crucial threat to social and economic stability of society.

3.  Risk Society

In the industrial age of the 20th century, scarcity corresponding principally to poverty including the scarcity in consumption, in production prevailed. The main interest at that time was thus in the redistribution of the welfare state. Yet in  the age of information and knowledge in the new millenium, we are now living in a risk society rather than in goods scarcity. The scarcity in the age of industrial society corresponded to material goods or economic variables but that of post industrial society is concerned with the psychological aspect of human beings. That is, an agony or feeling of unrest due to an increase in uncertainty and unpredictability generating risks. A. Giddens in this regard calls it "post-scarcity."

In this connection, one is not sure when will be unemployed due to structural adjustment policies, and also not certain when one's life will be at stake due to disease or illness. Furthermore, one is apt to feel uneasy about the food one needs to take at dining table everyday whether it is good or bad for health. Concerning environments, one is also uncertain when the water or air is polluted by industries. Especially, when one invests in the stock market, one feels in unrest, because the price of stocks fluctuate unevenly. So as an ordinary citizen, one must bear great risks.

Specifically, in the process of golobalization, a large number of venture firms that are keen to create innovation to promote profits. We have already seen many venture firms bankrupted in Seoul S. Korea recently.

By and large, these owners of firms are at risk all the time, feeling he or she will face bankruptcy instead of success in business. We must concede regarding this question that this risk society is originally rooted and is brought about from the free market system. To make money, one is allowed to use his/her greedy mind and his or her actions to seek profit maximization seems to be rampant and fanatical. Earlier days in industrial society for solving this kind of risk was to rely on welfare policies to redistribute income and wealth. This was possible because the society at that time was related to poverty and shortage of goods. However, facing the affluent post-industrial society, the risk is related to psychological aspect of citizens corresponding to unrest about the future.

The welfare policy of the state apparently must choose to limit risk with effective risk policies. Moreover, if we look at the responsibility for risk, we find quite different views compared to the industrial age, in which it was up to society. Therefore, the welfare state manipulated redis tribution policies to make a more even income level for the low class to work hard with a robust atmosphere. This can be interpreted as the socialization of individuals, as sociologists postulate. However, in the age of post industrial culture one concedes the responsibility for generating unrest comes from individuals, not society or the state. The individualization of social issues is now taking place. In this new millenium age, individuals are not responsible for family or firms, any more. They no longer have morality or tradition in social life, because the frame work for  responsibility of individuals seems to have gradually disappeared.  

Instead, life styles nowadays are more and more individualized so that, theoretically, the framework for responsibility in an ordinary life goes to individuals but not society, family, firms or even the state. Sovereignty in life, this means, lies in the individual and deembeddness tends to occur from the social structure to generate individualization of society. Thus, according to some economists like Marshall, this risk must be born in equity. That is not distributive equity in wealth, but equity in risk bearing. Evenly distributing this risk is a desirable policy in the future, if post-industrial society maintains peace and prosperity. The presumption for this kind of policy is from self-transformative citizenship in post-modern society.

In this regard, we may expect positive activity of NGOs in close cooperation with citizens and states in the world. In addition, risk originally occurs owing to the impossibility to predict future events. We are now in an unstable and vulnerable situation in financial markets because one is not confident with the financial movement by financial capitalists in advanced countries. When and where hedge fund enter into the domestic market and suddenly with draw and generate another financial crisis. If this kind of financial disaster is to be eradicated, I would suggest some organization of international world financial order, which must be fair to all countries in the world.

So, by and large, financial crisis cannot occur because of domestic failures in financial markets but because of mismanagement of international financial markets. This principle must be applied to the WTO : it must abandon the proposition of free trade : it is despotic absolutism, because the strong country, with hegemony, forces the weak one to keep free trade, on the one hand and paradoxically the strong country maintains protection in trade with the weak country on the other hand. Soros also agrees with the statement that individual economic crisis occurs not due to the domestic fault but the fault of international systems. Concerning monopoly, it needs to establish guarantees  for a fair competitive order organized by a world organization.

4.  Distrust Society

According to Oxford Dictionary trust is defined as a  firm belief in a person who may be relied on: confident expectation : responsibility(The Little Oxford Dictionary of Current English 7th edition, Clarendon Press, Oxford, 1996). It closely adheres to honesty, responsibility, mutual cooperation, reliability, based on commonly shared norms.

In the process of Globalization, heavily accessing networks for information, we are severely damaged by utilizing wrong information in managerial work. The global business world is actually characterized by infinite competition among strong competitors in the global world. We must consider those people who deliberately give faulty information to win. In fact, we are openly left to the chaotic world without any defense. In this situation a distrust society emerges, spreading over all fields of society.

It goes without saying that trust is so significant for society to be run in an orderly way, that in a world without trust there is no longer accomplishments by human beings and nothing for civilization. In the new millenium, dependence of individuals, firms, and states upon others are increasing more and more. Philosophers emphasize in this epoch, on the dialog among individuals and communities.  Especially as nation-states lose their power to govern society with the accelerating process of globalization, there arises the power of NGOs to govern citizenship-oriented democracies. In this situation, trust should be conceived as a core for dialog, disputes, and finally coming to consensus among people. Trust in essence is a community virtue.  It helps mutual cooperation, and enhances contracts needed for business performances, corresponding to the growth of an economy.

Especially in this context, a remarkable case in that the people in the Third World tend not to believe in the WTO, who allows the countries with hegemony to maintain protection policies in trade with the Third World, which is coerced to impose a high level of customs duty. Internationally, distrust in globalization emerges and is being spread over the world. It would be of value in this context to bear in mind that Confucius preaches in the Analects that one significant factor vital to govern the people in nation is not military force, not food to feed the people, but trust for peaceful governance. It makes the state being able to govern the people in peace. People in the East Asian region including China, Korea, and Japan are traditionally and culturally in favor of respect and obey the authority of the state.

However, it seems that globalization, with its individualized rationality of self-interest, is infiltrating this region, and tends to inhibit this kind of trust mostly based on community, like units such as the family, alumni, or birth place. Individualism-oriented trust in a free market society is basically founded on self-interest seeking mentality to maximize profit in the market. 

This kind of trust is seen out of humanistic world but within material and physical mechanistic world. F. Fkuyama asserts in this connection "trust is not reside in integrated circuits or fiber optic cables.'  Trust does not reduceable to information." Firms receive abundant information through network wires about supplies and contractors. But if they are fraud firms, they will be damaged. Without trust, globalization will be in danger, inevitably resulting in the instability of society and chaotic disorder.

5.  Parasite Society

Concerning this subject of parasite, first of all, how beautiful and happy we are, if one is supposed to take his or her moral duty and socio-economic share in accordance with what he or she beforehand contributed to the production of goods and services. So wage or profit in market must be paid according to their marginal productivity of labor and capital. However, in reality especially one frequently finds extraordinary cases of taking a high level of excess profit by big enterprises. The former refers to economic subjects belonging to the fairly established market order, while the latter refers to the monopoly which tends to hamper fair and free market order, consequently becoming a parasite in society.   

At this stage, we explore how parasite in reality occurs and generates relying on Brudel's approach to market order as well as capitalism. He views the world by representing three grand conceptualities : material civilization, economy and capitalism as shown in title of his book. Well, straight forwardly speaking, his conclusion is that capital formulating capitalism through the mechanism of its accumulation is in a position to hamper market order, and consequently a monopoly is conceived as a parasite on the weak participants in the market as a whole and on the community as well.

What he argues in this regard is that the material civilization is completed by the application of innovation to production on the basis of community needs, reciprocity and mutual cooperation embedded in social and cultural structures with face to face work committment. So he is similar with Ploanyi's approach in his study.  

However, coming to market order, his approach is a bit different from Polanyi's, since he suggests the market order to be perfect in competition and in technology like the Neo-Classical approach. Scale of firms in the market are to be small for all firms, thereby there is no longer a monopoly firm. However, in reality, there arises a monopoly or oligopoly.

Capitalism at present actually is featured by a form of monopoly or oligopoly. One should with certainty understand that market as a social order conceptually differs from capitalism, although they are closely intermingled with each other in reality. The market order comprises price function determined by supply and demand. Somehow, the market shows a faceless work committment, referring to an objective impersonal mechanism. In principle, small scale firms are unable to influence changes in price in the market, but a monopoly with big capital is now able to change the price in the market so as to make excess profit. This excess profit is realized by the monopoly firm at the cost of small scale firms as well as a large number of workers in industries. So the monopoly firm is parasitized on the market order composing a large number of small scale firms.  

It can be said in this context that monopoly with the power of capital associated with political power and extending to a whole concept, capitalism by itself paradoxically bites the market order. The capital of monopoly is und acertain and must take a heavy risk owing to innovating activities. But this risk in physical and financial investments is securend hedged with certainty. They used to make speculation with this hedged mechanism. In globalization, this kind of parasite by big financial power occurred in 1997 in the financial crisis in the East Asian region, including Thailand and S. Korea.

6.  Epilogue

 

At the moment, we are living in a great epoch, in which the world becomes closer to each other, especially through mass media and electro technical machines like personal computers, internet e-mail, fax, homepage sites, etc. We are living in the age of knowledge and information, which enhances the circulation of information and know-how scientists, students, businessmen, simple workers, medical doctors, cooks in restaurants, politicians, social workers, some other specialists in society, benefit from this knowledge age.

Not only information and knowledge, but also materials, goods, commodities, money, capital funds, and human being including workers, well, go around the world beyond the nations border freely. This whole process we call globalization.

How does globalization go on in relation to culturally, institutionally and world wide politics? What are its traits and what are the consequences of globalization?

What are its impacts on market order nationally and internationally as well? Finally, what should we do, if we want to have market order for whole world, for every person in the world? In this regard we prefer to realize equal opportunity and improvement in economic lives and harmony in human relations as well as in international relations with foreigners in the process of globalization.

I am not basically against globalization, but have to be against its adverse effects as well as the injustice to inferior groups or persons in society. My simple and logical argument on this matter is concerned with the application of Confucian virtues in morality in terms of holism with justice and grant economy rather than individualism with efficiency and profit maximization.

The Capitalism, supported by the market system, won over communism urged by marxism school by breaking the socialist way of thought in economics. As far as the economic system is concerned, the free market system led to symbolize capitalism stays alone without any rival, as it comes to dominate the world economy. This event is called the globalization of free market system all over the world. This movement was initiated by the United States of America, which possesses the mighty force of market system with its competence resulted in a position to exercise the power of hegemony to a large extent, dominating all over the world.

Looking at this in terms of visible phenomena there is a limitless circulation of man and worker, goods and services, money and capital funds and even knowledge and information beyond the boundaries of nations. Thus "nation" ends with the expansion of globalization.

If we trace back to the origins of globalization, we have to be concerned with the modernity, which pursuing object is the achievement of higher standard of well being and economic lives. It tended to concentrate, in the course of history, on two aspects in society the materialistic life equivalent to economic life, and individualism. The thought of modernity went hand in hand with enlightenment in the 17th century.

After one century, that is in the 18 century, there emerged capitalism supported by A. Smith stating that the right of individual to seek self interest with prudence was appreciated and to be guaranteed legally and morally in general. He believed in the value of frugality to endure suffering from deficiency at present and to save more for the betterment of life in the future. Max Weber supplemented this thesis with the Protestant ethic and the value of asceticism.

The society at that time maintained by traditional agrarian sector with low-productivity in labor and production changed to the industrial sector, which brought high productivity in economy with the development of technology and know-how in production. This event was historical and revolutionary. The existing agrarian society was rejected by the industrial system. The production factors like labor, land and money were allowed to merge through the exchange of sellers and buyers, formulating naturally the market system.

This event, Karl. Polanyi called the "transformation". Since the beginning of industrialization, some parts of the world, like, America, West-Europe, and Japan, were blessed with well being, while the rest of the world are still in poverty, such as most African countries and some East European countries. East Asian and South Asian countries are desperately striving to chase the advanced countries.

However, at the moment what the world faces is globalization. Industrialism in the 20th century was confined, for the most part, even regarding international trade to a certain nation and people residing in a certain region. But in the matter of globalization, spreading to the whole world, we find some new fresh reflection with the limitless circulation and allocation of goods and services beyond the nations, widening the free trade system, which will increase the well being of the whole population in the world. However, there are  some negative consequences of globalization.

At any rate I would call this event an historical revolution in the sense that the industrial system prevailed in the past 20th century. It has shifted by the digital netizen system, implying the spread of knowledge and IT system. This system is generally acknowledged as the basis of globalization. Thus, in addition, I would call this event the "second transformation" in terms of K. Polanyi's sense.

Regarding capitalism, though it achieved a high level of well being, there remains a lot of problems in cultural lives, which was severely criticized by Daniel. Bell. He criticized it by pointing to hedonism, momentry, and the instinctive bent in  relation to cultural contradiction of capitalism. This view is in contrast to the value of Christian Puritanism postulated by Max. Weber. This negative phenomena of capitalism was not expected by Adam. Smith, who insisted a rational choice of individuals with moral sentiment, especially with prudence.

Earlier, Thorstein Veblen lamented the market economy and capitalism with the concepts of conspicuous consumption and  instincts for of waste. What we have to mention in this regard, is that the self restraint ascetic diligence and industrious spirit, which is to be accepted regardless of history and country as a normal philosophy in ordinary lives, seems to have broken and collapsed. This negative consequence of capitalism is now reflected in the process of global capitalism.

As John Gray points out, the most serious problem, at the moment, of global capitalism is that, the group of new right in Washington intensively pushes the principles of market economy over the culture of other countries. The New Right now tends to destruct and break the traditional culture in respect to relatively less developed or profit in market must be paid according to the marginal productivity of labor and capital. However, in reality on frequently finds extraordinary cases of taking a high level of excess profit by large enterprises. The former refers to economic subjects belonging to the fairly established market order, while the latterrefers to the monopoly which tends to hamper fair and free market order, consequently becoming a parasite on society.

What he argues in this regards is that the material civilization is completed by the application of innovation to production on the basis of communitarian needs, reciprocity and mutual cooperation embedded in social and cultural structure with face to face work committment. So he is similar to Ploanyi's approach in his study. However, coming to market order his approach a bit differs from Polanyi's, since he suggests the market order to be perfect in competition and in technology as well like the Neo-Classical approach. Scale of firms in the market are to be small to all firms, thereby no longer monopoly firm.

However, in reality, there arises a monopoly or oligopoly. Capitalism at present actually is featured by the form of monopoly or oligopoly. One should with certainty understand that market as an social order conceptually differs from capitalism, although they are closely intermingled each other in reality. The market order comprises the price function determined by supply and demand. Somehow, market shows a faceless work committment referring to the objective impersonal mechanism. In principle, the small scale firms are unable to influence the change in price in the market, but the monopoly with big capital is now able to change the price in the market so as to make an excess profit.

This excess profit is realized by the monopoly firm at the cost of small scale firms as well as the large number of workers in industries. So the monopoly firm is parasitized on the market order composing of the large number of small scale firms. It can be said in this context that the monopoly with the power of capital associated with the political power and extending to a whole concept, capitalism by itself paradoxically bites the market order, so that the capital of monopoly is uncertain and must take a heavy risk owing to the innovating activities. But this risk in physical and financial investments is secured and hedged with certainty. They used to make a speculation with this hedged mechanism. In this sense, one is sure to state, that the world is now in crisis with globalization.

We tent to seek our own interests often at the expense of others. However, the way in which the patterns of self-seeking behavior are manifested is moderate in nature. So peace, prosperity and harmony prevail in society which is composed of divergent groups. Even if we seek maximization of our own interests. We envision a utopian world. In reality, ideals are realized, ableit partially, in the form, for example, of home payment. Payment of tax and/or public fees from home, chatting with friends through electronic devices. The development of knowledge and dissemination of information through IT techniques have led to the spreading of the idea of this idea world. There are some negative dimensions of this development. There are newly emerging problems to be found in parasitic society characterized by, among others, lack of trust and increasing uncertainty due largely to imperfect competition in the market. To win in the competitive business world, some people give false information to their competitors. Such a practice used as a strategy results in distortion of fairness in the market order and disfigure just society. Furthermore, in a severely competitive world, people become extremely individualistic and isolated from family, society and state. If we are to develop a viable civil society, we should do away the negative traits mentioned above of mutual cooperation, trust and commiseration particularly for alienated people.