Globalisation

Has globalisation changed the profit system fundamentally, or is it just a variant of 20th century capitalism?

One hundred and fifty years ago, capitalism looked very different from today. Just a few countries in North-West Europe and North America were capitalist, the rest were struggling out of various forms of agricultural pre-capitalist society. Manufacturing was the dominant form of capitalist activity; it was small scale and usually family-owned. Banks were involved with industrial firms only to the extent of providing some finance to cover their operating costs until stocks were sold. Trade was the main form in which the international economy was knitted together. Colonies existed but it was primarily their markets and their raw materials that were exploited, not their productive potential.

By the time the First World War exploded, capitalism had changed completely. It had expanded relentlessly in the 50 years before 1914 and drawn all nations into the market nexus. Leading firms now typically took the form of monopolies, often organised into cartels or trusts, which dominated their market sector. This gave them the power to set prices, dictate to their suppliers and control access to markets. Although they were the product of competition within the market, they were now able to suppress competition and even prevent innovation if it threatened their dominance.

This was a qualitative shift to a new kind of capitalism. The world had been, effectively, divided up between a handful of powerful capitalist nations whose big firms had outgrown the limits of their "domestic economies" and now needed to expand internationally. Increasingly, investment replaced trade as the main form of internationalisation of the world economy, though investment also boosted trade in its wake.

The previous relationship between production and finance was inverted. The scale of the capital required for investments was now so great that individual firms could not supply it from their own resources. Instead, they had to rely on the banks which could extend credit based on the aggregated...

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