July 28, 2001

The myth of the Third Scientific-Technological Revolution in the era of neo-mercantilist empires

James Petras


The 1990s was a decade in which the most influential writers, journalists and academics wrote, spoke and polemicized about two over-riding themes: the "globalization" of capital, and the "New Economy" (NE) based on the growth of information technology (IT), the bio-technical and telecommunications "revolution". The expansion of capital into the ex-Communist countries, the neo-liberal conquest of formerly protectionist Third World Economies and the widespread privatization of public enterprises, North and South, led many authors to write of the global dominance of capital.

However, the large-scale, long-term movement of capital across national boundaries, led many writers to conclude that capital had "outgrown" the nation-state, that the world economy was now based on "global capital", a vaguely defined concept which emphasized capital's dissociation from any "national" or "state" location and its autonomy from any controls or geo-political location.

By emphasizing the movement of capital and its multiple locations, these writers overlooked the structure of capital (its headquarters and its national origins and centers of decision-making) which are decisive in identifying who benefits/loses and the primary organizing centers, where the fundamental strategic decisions about location, profits and sites of accumulation are located.

The claim of a new globalized capital and by deduction a new process dubbed "globalization" came to dominate the discussion of inter-state, inter-regional and inter-economic relations.

Along this same line of argumentation, many economists and journalists argued that this process of globalization was driven by the Third Scientific Technological Revolution (TSTR), which was seen both as a cause of globalization - facilitating the flows of capital - and as an outgrowth of a global economy. The TSTR was seen as inaugurating the emerging "New Economy" (NE) based on the enormous growth of investment in IT, biotechnology and optic fibers and the skyrocketing stock valuations. The NE was credited with ending the business cycle associated with the "old economy" (producing tangible goods and services), promoting unlimited growth, high productivity and the de-concentration of wealth and power. By the beginning of the new Millenium, almost all of the arguments made on behalf of "globalization" and New Economy are suspect.

The counter-thesis argues that while private capital has indeed expanded into new regions, conquering formerly restricted markets and economic sectors in the ex-Communist and nationalist Third World countries, it continues to retain a clear linkage to nation-states - particularly imperial states - in the world economy.

Secondly, the TSTR did not form a new economy. To the degree to which it was divorced from the old economy it was largely a speculative activity, without any solid foundations, i.e. it lacked a marketable product, and little potential for profit.

The Financial Times describes the IT speculative fever as "millennial euphoria", and went on to note, "The NASDAQ Composite Index, beacon of the new economy peaked at 5,048.62 on March 10 (2000). A year later it was nearly 60% lower. The bursting of the bubble was only the start of the trouble. The rout of ... technology, media and telecoms extended to ... established operators". The volatility of the speculative sectors of the economy affect all sectors of the economy as well as the economic foundations of empire. The rise and fall of the speculative economy clearly influences the economic strategies of empire building.

In summary, this paper will argue that the growth and conquest of overseas markets is today a product of giant enterprises linked to powerful Euro-American states and can best be seen as part of an empire-building process rather than anything resembling globalization. The claims of Third Scientific Technical Revolution are very dubious. The IT economy, remains a much reduced economic sector, in which a few giant enterprises emerge from the sharp decline of paper companies. IT is not seen as the dynamic factor accounting for overseas expansion but rather as a source of instability, crises and declining productivity. The expansion of capital is seen more as a product of speculation, imperial conquest and illegal activity.

The Myth of the Global Corporation

A recent empirical comparative study by Doremus, Kelley, Pauly and Reich of U.S., German and Japanese multinationals found that on the vital issues of investment, research and development the great majority of decisions were taken in the national headquarters of the MNCs. With regard to research and development (R&D) of U.S. MNCs they show that 88% of the total R&D expenditures are made in the "home" country, and only 12% by majority owned affiliates overseas. Technology development remains centralized in the national headquarters of the MNCs. In the other key area of MNC strategy, direct investment decisions and intra-firm trade, the authors find that the priorities of nation headquarters predominate. The authors' findings and conclusions refute the myth of the "global" multinational corporations demonstrating their ties to the nation-state and their centralized nation-centered decision-making structure. While the MNCs produce in many countries and divide up operations and production in multiple sites, control and profits are centralized within nation-states. Expansion and control by MNCs has not changed their enduring character as linked to nation-states; nor have their international operations transformed their centralized empire building character.

Rulers of the World Economy

The best source, despite important shortcomings, for understanding the economic forces dominating the world economy, is the Financial Times (FT) listing of the 500 largest companies of the world (FT May 11, 2001). The measure of economic power is based on market capitalization which is determined by the number of shares the company has issued multiplied by the market price of those shares on the day the survey was conducted. The FT study is based on data collected January 4, 2001. There are several important shortcomings of this approach: given the volatility of the market, sharp changes occur in short periods of time, particularly in technology stocks, thus distorting the rankings; secondly the rankings exclude family owned business and state owned business without stock market listings; thirdly foreign buyouts, especially by Euro-American capital of ex-Communist and Third World enterprises continue to be listed by their national location thus underestimating Euro-American power and exaggerating the degree of diversity.

Despite these methodological issues, the ranking by capitalization does provide us with an approximate measure of the concentration of power in the world economy. By examining the top 500 firms, we get a clear picture of which countries enterprises control the biggest share of production, finance and distribution, since most of world production and trade is carried out by large-scale enterprises.

The most striking feature of the world economy is the dominance by Euro-American enterprises: 79% of the 500 biggest multi-nationals are located in the United States or Western Europe. If we include Japan, the figure rises to 91%. In other words, over 90% of the major enterprises dominating the world economy are found in the U.S., Europe and Japan.

Between the competing empires, the U.S. stands as the dominant power: 48% (239) of the 500 biggest firms are U.S. compared to 31% (154) for Western Europe and only 11% (64) for Japan. The combined Third World continents of Asia, Africa and Latin America have only 4% (22) of the largest corporations and most of those have been bought out by Euro-American multi-nationals. If we examine the biggest of the big enterprises the concentration of financial muscle is even more one sided: the top 5 firms are all U.S.; 8 of the top 10 are U.S., and 64% (16) of the top 25 are U.S., followed by 28% (7) are European and 8% (2) are Japanese. In other words, at the pinnacle of global power the U.S.-European MNCs have virtually no rivals. Between 1999 and 2000 the percentage of U.S. firms among the 500 increased from 44% to 48%.

This concentration of world economic power is more akin to world empire than to any notion of globalization in which private corporations are independent of the nation state. The growth and expansion of U.S. and European capital is based on acquisitions, and mergers in the North as well as via the purchase of former public enterprises in the Third World and former Communist countries.

The distribution among the top 25 U.S. enterprises reveals two significant patterns. On the one hand the re-emergence of the old economy - the industrial, banking insurance, petroleum and pharmaceutical enterprises - led by General Electric and the relative decline of the "new economy" - particularly the information technology firms. The data collected in January 2001 underestimates the decline of IT economy during 2001. Given the volatility of share prices and the deepening economic recession, many IT companies suffered severe decline. For example Lucent Technologies once the U.S.'s leading telecoms manufacture has seen its market capitalization fall from $52 billion to $34 billion between January and April of 2001. Similar decline has occurred with CISCO Systems. On January 4, 2001 it was worth $294 billion while at the end of April, it fell to $124 billion. While the giant IT and communication corporation like Microsoft and CISCO are still among the top 10, most of the other IT corporations have fallen out from the top 500 and many have gone bankrupt.

It is more accurate to speak imperialism rather than "globalization" when the owners and directors of the majority of the corporations and banks controlling international flows of capital are U.S. "Globalization" in these circumstances is an ideology that obfuscates the real structure of power and domination.

The concentration and centralization of capital - the growth of mega-mergers is managed by key financial and investment institutions. Among merger and acquisition advisors world wide, 11 of the top 15 firms are U.S. owned and based. One of the most revealing aspects of U.S. dominance is found in the unprecedented concentration of profits in the hands of U.S.-owned MNCs; in 1990, U.S. MNCs received 36% of the world's profits, while in 1997, U.S. MNCs increased their share to 44% of world's profits.

The most striking evidence against the notion of an "interdependent global economy" and in favor of the notion of imperialism is the nature and consequences of the economic crises of 1997-99 (and continuing). While Asia, Latin America and Africa suffered severe recessions and declining living standards and catastrophic increases in unemployment, the U.S. MNCs expanded their influence and reach. What was an economic crises in the Third World was a boon to U.S. overseas firms, benefitting some U.S. enterprises to an unprecedented degree. Over $50 billion in U.S. funds was directed at buying up enterprises in South Korea, which were previously owned by Korean investors.

While the U.S.-European MNCs dominate the world economy, they do so on the basis of weak foundations. Much of their growth is based on mergers and acquisitions, 4 of the top 25 are in effect "merged corporations," facing debts and shrinking markets. Secondly, the giant oil and pharmaceutical companies are based on "monopoly prices" rather than any great innovations or increases in productivity. Pharmaceuticals monopoly profits are based on intellectual property patents, and oil companies' profits based on oligopolistic structures and practices.

Thirdly, while the U.S. MNCs have a dominant world position the U.S. national economy is increasingly vulnerable due to its soaring trade deficit. According to the U.S. Commerce Department the trade deficit for the year 2000 was over $435 billion - the largest annual deficit on record. Foreign savings have bridged the gap - making the U.S. economy vulnerable to sudden shifts in foreign investors. Most economists do not think this level of deficit is sustainable.

The Myth of the Third Scientific Technological Revolution

The claims of the ideologues of globalization who argued that the new technological revolution was no longer subject to the cyclical crises have been proven wrong on several counts. Beginning in late 2000 and continuing in 2001 a deep recession has affected the IT companies leading to widespread bankruptcies and a vertical decline in market capitalization.

Japan which early on "robotized" its factories and engineered and applied many of the new IT products has been stagnant (average growth of about 1 percent for the past 11 years) and entering a deep recession in the second quarter of 2001). The U.S. manufacturing sector has been in negative growth since July 2000 and continuing beyond the second quarter of 2001. The economy as a whole entered in a recession in the first quarter of 2001 and is expected to continue for an uncertain period - estimates run from 1 to 3 years. The IT growth rate went negative in the first quarter of 2001. The prospects for an early recovery are dim as negative savings rates, huge deficits, a strong dollar inhibit domestic or export powered growth. As structural and cyclical crises coincide it is highly likely that the recession will continue for some time ahead. The recession totally undermines the IT ideologues who declared that the "New Economy" has made the business cycle obsolete. In fact, the IT companies have been the hardest hit in the current downturn. Over 80 percent of the dot.coms are not profitable.

Secondly, the IT economy today is less competitive and more concentrated than ever, where a few giants have survived and many have failed. While thousands of dot.coms went under, the top 5 IT companies retained their position among the top 10 rankings world-wide. The productivity revolution - growth of 2.8% - was based on a short interval of four year (1996-2000) and was followed by a decline in productivity to a negative 1.2% during the first quarter of 2001. Looking at the big picture productivity was higher prior to the "information age" than during it. Between 1953-72 productivity grew on average of 2.6% compared to 1.1% between 1972-1993. The problem of measuring productivity is further complicated by the exclusion of illegal migrant labor, amounting, according to some estimates of 5 million workers who produce goods and services which are attributed to the official lower count of the labor force.

There is a widespread consensus today that the productivity arguments and claims of the "New Economy" ideologues has little merit. The exception is Alan Greenspan who, in a speech in New York in late May 2001 is quoted as saying "There is still in my judgement, ample evidence that we are experiencing only a pause in the investment in a broad set of innovations that has elevated the underlying growth rate in productivity."

The multi-billion dollar investment in IT drained investment from more productive uses, led to vast overcapitalization in one sector that had low returns and little spill-ver effects. Moreover, the biggest boost for IT came from the Y-2 scam - the hype of a system breakdown, with the onset of the new Millenium. Hundreds of billions were spent on IT between 11996 through 1999 to avoid a dubious project with virtually no long term effects. No serious critical evaluation and comparative analysis was conducted between countries like Russia, China, Finland and a few others which spent a fraction of what was spent in Europe and North America on Y-2, without suffering a "catastrophic breakdown." Raising the question whether the IT bubble was itself an artifact of a massive promotional fraud. In any case, the data base for IT claims of a productivity revolution are extremely limited and problematical.

A recent study by Paul Strassman, a leading critic of IT ideologues, based on a study of 3,000 European companies demonstrates no relationship between investment in computers and profitability. Thus the three basic claims of the IT revolution, that it has put to rest the business cycle, has generated a sustained productivity revolution and produces high profits are not in accordance with reality. In fact, the irrationalities of capitalism have been amplified by the IT bubble: the business cycle operates in full force, productivity tends to stagnation and there is a tendency for the rate of profit to decline.

A recent article by Robert Gordon which analyzes the increase in productivity (between 1995-99) raises serious doubts about the claims of the TSTR. He argues that almost 70% of the improvement in productivity can be accounted for by improved measurements of inflation (lower estimates of inflation necessarily mean higher growth of real output, thus productivity) and the response of productivity to the exceptionally rapid output growth of the 3 year period. Thus, only 30% of the 1% increase in productivity (or .3%) during the 1995-99 period can be attributed to computerization of the so-called "information revolution" hardly a revolution.

Even more devastating from the advocates of the TSTR, Gordon provides a convincing argument that most of the increase in productivity attributed to computerization is in the area of the manufacture of computers! The dramatic improvements in productivity claimed by the TSTR apologists is largely in the production of computers - with little effect on the rest of the economy. According to Gordon's study, productivity growth in the production of computers has increased from 18% a year between 1972-95 to 42% a year since 1995. According to Gordon, this accounts for all the improvements in productivity growth in durable goods. In other words, the computer has brought about a "revolution" in the production of computers - having an insignificant effect on the rest of the economy. The basic reason is that computers have simply substituted for other forms of capital. According to a recent study, growth in computer inputs exceeded those in other inputs by a factor of 10 in the 1990-96 period. The substitution of one form of capital for another need not raise productivity in the economy as a whole. The basic measure of a technological revolution is what the authors call the "multi-factor productivity," the increase in output per unit of all outputs. The basic question posed by TSTR is not over whether computers have revolutionized the production of computers but how the so- called information "revolution" has effected the other 99% of the economy. According to Gordon's longitudinal study of technical progress covering the period between 1987-1996, the period of maximum technical progress as manifested in annual multi factor productivity growth was in the period between 1950-64, when it reached approximately 1.8%. The period of lowest multi- factor productivity growth in this century was during 1988-96, approximately .5% growth (a half on one percent)!

It is clear that the innovations in the early and middle 20th century were far more significant sources of economy-wide productivity improvement than the electronic, computerized information systems of the late 20th century.

Computer manufacturers account for 1.2% of the U.S. economy and only 2% of capital stock (1997). While corporations spend substantial amounts on computers it is largely to replace old ones. There is no evidence to back up the claims of the advocates of TSTR. There has been no such thing as the Third Scientific Industrial Revolution - at least by any empirical measure of increased productivity in the U.S. economy. Despite the vast increase in the use of computers the productivity performance of the U.S. economy remains far below the levels achieved in the pre-computer age of 195-72, in fact, annual multi factor productivity growth (AMPG) between 1988-96 is the lowest of the last 50 years. Even more significantly the rate of growth between 1950-1996 has been steadily declining: between 1972-79 it grew 1.1%, between 1979-88, .7% and 1988-96, .6%.

The claim of the TSTR of a new capitalist era has no basis in any purported Third Scientific Information Revolution.

Biotechnology industry, along with IT and optical fibers were seen as the three driving forces of the Scientific Technological Revolution driving the New Economy. The biotechnology industry is over a quarter of a century old and it has yet to deliver a consistent flow of new treatments and profits. According to Arthur Levinson, Chairman and Chief Executive of Genetech, the biggest and most successful of the biotech companies - "there has been no revolution in medicine in the past 25 years." According to another CEO from another biotech company, Kevin Sharer of Amgen, of the billions of dollars invested in the sector, only 63 new drugs have been brought on the market. Market analysts point out that just 25 of the U.S.'s 400 plus biopharmaceutical companies will make money. Most groups founded over a decade ago have yet to achieve profitability. Most biotechnology groups of the 1980s no longer exist. All the promotional publicity surrounding human genome sequences currently attracting more billions are likely to be disappointed according to Levinson. Like the IT scam, the biotech revolution attracted billions of dollars, deflecting investment from productive uses, while leading many down the road of bankruptcy.

In the 1990s President Clinton and Western European leaders, investors and academics saw a bright future for optical fibers - the third force in the Scientific Technological Revolution. Between 1999-2000, over 100 million miles of optical fiber were laid around the world as companies spent $35 billion to build internet inspired communication networks. Today only 5% of the fiber on the ground is "on", but the astronomical costs of lighting and delivering it to the end user has led to a dramatic decline in investment in the communications industry. As in biotech, the collapse has had an impact on the rest of the economy: billions invested in telecommunication companies appears to be wasted. The drying up of capital investment is one reason that the economy has come to a stop. The grants in communication equipment like Lucent Technologies and Nortel have reported losses in the billions, Nortel announced a $19 billion loss in the first quarter of 2001. In the first half of 2001 companies defaulted on $13.9 billion of telecommunication bonds resulting in investor losses of $12.8 billion. Once again the Technical Scientific Revolution ended up bursting like a speculative bubble.

U.S. and European "global supremacy" is built on 3 unstable and unsustainable legs. On one leg it rests on a highly vulnerable and speculative sector prone to great volatility and entering into deep recession. The second leg is the high level of transfers of profits, interest payments and royalties from their respective colonized areas. In the case of Latin America alone over $700 billion was transferred as payments to Europe and U.S. banks and multi-nationals from 1990-98. The third leg of the empire is political power (including the power to print money to cover deficits) and the security that Euro-U.S. states provide to foreign nationals who transfer funds to the U.S., including billions illicitly secured from their home countries. Political power and the security of the imperial states depend on the acquiescence or consent of strategic economic sectors who are vulnerable to free market competition by rival imperial and non- imperial countries. For example, because of the strong dollar, U.S. steel corporations are having a hard time exporting goods or even competing in the U.S. market.

The problem for Euro-U.S. rulers is how to manage their empires in the face of a growing recession, a deflated IT sector and rising unemployment in economic sectors which are not competitive in the world market?

The New Imperialism: From Neoliberalism to Neo-Mercantilism

Free Market or neo-liberal imperialism was always a myth: the imperial states have never completely opened their markets, eliminated all subsidies or failed to intervene to prop up or protect strategic economic sectors, either for political or social reasons. Neo-liberal imperialism always meant selective openness to selective countries over specified time periods in selective product areas. Markets were opened by the U.S. government to products produced by U.S. affiliates in overseas countries. "Free trade" in the imperial country was not based on economic but political criteria. On the other hand Euro-U.S. policymakers and their employees in the IMF-World Bank preached "market fundamentalism": to the Third World, elimination of all trade barriers, subsidies and regulations for all products and services in all sectors. Imperial states' selective free market practices allowed their multi-nationals to capitalize on market opportunities in target countries practicing market fundamentalism while protecting domestic economic sectors which included important political constituencies. Major conflict erupted when the two imperial rivals, the U.S. and Europe (both selective free marketers) attempted to pry open the others' markets while protecting important political constituencies.

With the advent of the triple crises of recession, speculative collapse and intensified competition, the imperial countries have resorted to greater state intervention in a multiplicity of sectors: increased agricultural and other state subsidies - $30 billion in the U.S. in 2001; increased resort to interfering in trade to impose "quotas" on imports (Bush's commitment to the U.S. steel industry) and intensified exploitation of Third World regions to increase the flow of profits, interests and trading advantages (the U.S. "Free Trade of the Americas" proposal).

State managed trade that combines protection of home markets and aggressive intervention to secure monopoly market advantages and investment profits defines the content of neo-mercantilist imperialism. Neo-liberal imperialism with its free market rhetoric and selective opening of markets is being replaced by a neo-mercantilism that looks toward greater monopolization of regional trading zones, greater unilateral political decisions to maximize trade advantages and protection of domestic producers and greater reliance on military strategies to deepen control over crises ridden neo-liberal economies run by discredited clients.

Just as the U.S. was the leader in developing its neo-liberal empire and Europe was a follower region so with regard to the transition to a neo-mercantilist empire the U.S. plays a leading role.

In substance, if not in style, the transition to neo-mercantilism began during the Clinton regime and became the dominant strategy of empire building during the Bush Administration.

During the Clinton era, the U.S. "shared" the takeover of Latin America markets and enterprises with the Europeans. For example U.S. banks, energy and telecommunication companies competed with Spanish multi-nationals in the buyout of formerly public enterprises and national banks. The Clinton regime however, sought to weaken European and Japanese competition by signing the North American Free Trade treaty which privileged U.S. business in Mexico. Washington's success in monopolizing the Mexican market contrasted with the relative decline of its share of newly privatized Latin American enterprises and markets.

Clinton's proposal to extend U.S. monopoly control via Free Trade Area of the Americas (FTAA) was given greater impetus by the Bush Administration - particularly at the Quebec summit of the Americas in April of 2001. The purpose of FTAA is to privilege U.S. companies and exporters operating in Latin America while restricting Latin American access to U.S. markets. While FTAA is presented as a reciprocal trade doctrine, the Bush Administration refused to concede any concessions regarding the so-called anti-dumping regulations which are habitually evoked to restrict entry of competitive Latin products which would take market shares from U.S. companies. Moreover "reciprocity" is a meaningless concept when the two trading regions have such vast inequalities in productive capacity and size in many economic sectors and when infant industries are forced to compete with established grant enterprises. In these circumstances "reciprocity" becomes a formula for U.S. takeovers and the bankruptcy of Latin American enterprises. As we have seen U.S. enterprises in banking, energy, telecommunications, mining, and transport industries have a massive advantage which they have used to displace Latin American competitors. FTAA will decisively obliterate what remains of the Latin American national economies and impose an economic decision-making structure which will be centered in the headquarters of the U.S. multi-national banks and corporations.

Equally important the U.S. state will dictate the rules and regulations that govern trade, investment and patent laws which will reign in the Americas. This will enable the U.S. government to be in a position to combine protectionism at home, European exclusion in Latin America and free markets in Latin America.

A clear example of the protectionist elements of the neo-mercantilist empire is the White House promises to protect U.S. steel plants from overseas competition - including Brazil. In the first week of June (2001) the Bush Administration launched action (a Section 201 investigation into "unfair trading practices") to protect U.S. steel producers from overseas competition. Both Donald Evans the U.S. Commerce Secretary and Robert Zoellick the U.S. Trade Representative publically defended state intervention to protect uncompetitive U.S. steel producers form "unfair trade". The real reason for loss of competitiveness of U.S. manufacturing is the strong dollar and the higher operating costs in the U.S. As the U.S. National Association of Manufacturers stated in a letter to the U.S. Treasury Secretary [the current levels of the exchange value of the dollar were] "having a strong negative impact on manufacturing exports, production and employment." The letter noted the U.S. dollar had risen 27% since early 1997 thus "pricing products out of markets both at home and abroad."

The strong dollar however, is a favored strategy of the powerful financial sector of the U.S. and vital in maintaining the vast flow of overseas capital into the U.S. to finance the ballooning merchandise trade deficit.

Laundering illicit funds by major U.S. banks is an important source of external flows to the U.S. Estimates by a U.S. Senate subcommittee run from $250 to $500 billion a year. Like the earlier mercantilist empire which depended in part on sharing the booty of its pirate predators the neo-mercantilist economy thrives on corrupt rulers who pillage their economies and transfer their illicit funds to Euro-American empires. The strong dollar is one of the attractions of predators and corrupt rulers. It is no surprise that the Bush Administration has significantly weakened its support for an international initiative tightening financial regulation to fight money laundering.

Mercantilist imperialism in which the imperial state combines protectionism at home, monopolies abroad and free trade within the empire is thus the chosen strategy for maintaining empire and sustaining domestic political support at a horrible cost to Latin America and to the dismay of its European competitors. In pursuit of the neo-mercantilist empire, Washington must increasingly rely on unilateral decisions and policymaking. By its monopolistic nature neo- mercantilism depends on excluding competitor allies and maximizing trade advantages via unilateral state decisions.

The Bush Administration's unilateral rejection of the Kyoto agreement, its unilateral decision to proceed with the new missile programs in violation of existing agreements, its increased subsidies to U.S. agriculture, its attempt to accelerate the FTAA are examples of unilateralism at the service of neo-mercantilist empire building.

The U.S. openly confrontational approach toward Western Europe goes beyond its unilateral style of decision making. The Bush Administration's appointment of Richard Perle, a hardline militarist, to head the Defense Policy Board is indicative of the U.S. swing to "mercantilist-militarism". His imperial posturing is evidence in his arrogant rejection of European criticism of the U.S. escalation of the missile race. "We are going to proceed with the missile defense and either they (the EU) can join us in that endeavor or they can sit on the sidelines and complain about it." Washington's anti-European strategy is linked to NATO's enlargement. As Perle describes it, "My solution to NATO enlargement is - by all means let's bring in some new members, and if we lose some old ones, I've got a candidate."

Mercantilism, with its heavy emphasis on monopoly profits, unilateral action and particularly state intervention to favor business interests against external rivals and a vast panoply of domestic classes in Latin America has historically been accompanied by armed conflicts and large military expenditures. Contemporary neo-mercantilism is no exception. Accompanying FTAA is a major increase in U.S. military expenditures in Latin America, new military bases, the colonization of air space, shore lines, and rivers and estuaries. Plan Colombia, the Andean Initiative and related military expenditures to militarize the frontiers of Ecuador-Colombia and Panama-Colombia involves over $1.5 billion and hundreds of U.S. military operatives. The subcontracting of Latin American military officials, paramilitary forces and U.S. mercenaries is an integral part of the protection and expansion of neo-mercantilist empire-building. Worldwide the U.S. policy of provoking China with ostentatious spy plan flights off its coastal waters, and escalating the arms race with Russia are part of a policy of projecting unilateral military power.


It is not a technological-scientific-computers driven revolution that has led to "globalization" but rather a political, economic and military expansion that has created a new U.S. dominated imperial world order.

The driving force opening the doors for U.S.-European expansion is not the so-called TSTR but military power and class warfare "from above." The contemporary world faces two major facts: the unrestrained use of military power by the U.S. in imposing global hegemony and a full-scale Euro-American assault against all socio-political constraints on the expansion of their multi-national corporations.

The U.S./NATO bombing of Yugoslavia, the continuing air assaults on Iraq, the missile attacks on Somalia and Afghanistan, the expansion of NATO membership to include countries on the Russian border, the incorporation of 23 new clients as "peace associates" of NATO, the unquestioned U.S. hegemony over Western Europe via NATO are indicators of the increasing militarization and unilateral exercies of U.S. world police power. The resurgent imperial power is intimately related to the tremendous growth of U.S. economic domination in the 1990s. Information systems, computerization and the electronic media play an imporatnat and subordiante role in serving the needs of imperial power. Pentagon planners use computer directed bombings (not always very accurate) to achieve military goals. MNCS use computers to relay payments on buyouts of overseas firms. The so-called "computer revolution" is thus nothing more than a new tool in furthering historical, imperial influence. Far form breaking down national boundaries, they increase the imperial reach of hegemonic powers and reinforce the world division between imperial and dominated countries, creditors and debtors, speculators and local producers.

The reach of U.S. global corporations has been aided far more by class warfare against U.S. workers than any scientific-technological breakthrough; welfare cuts, regressive taxation, corporate subsidies, corporate reduction or elimination of health benefits, pensions, diability payments, increased job insecurity, have created unprecedented probitable opportunities for U.S. business profit at home and to invest overseas. The declining productivity of the U.S. economy is highly correlated with imperialism - namely the transfer of economic surplus overeas resulting in buyouts, new investments and speculative ventures. Whatever possible positive impact computerization might have had on increasing productivity is more than offset by the flow of capital overseas, instead of reinvestment in improving productivity in the U.S. Insofar as computerization and th enew information systems are at the service of the multi-national corporations in moving capital aborad, they contribute to lowering producitivty in the U.S.

There is little economic basis fro arguing that a Scientific-Technological-Revolution has taken place. The transformation of communication systems have failed to raise productivity in the overall economy or even reverse the decline in productivity. The myth of the TSTR as the driving force of globalization has served as an ideological cover obscuring the resurgence of U.S. imperialism and the expansion of U.S.-European capital based on class warafre and imperpial wars. The new information systems harnessed to the economic and mlitary institutions of empire have contributed to the movements of capital and the achievement of military goals. In the final analysis it is the economic and military interets and powers that shape the use and application of the information technologies and not vice versa.

Though the U.S. continues to be the dominant economic power in the world today this empire faces competition from Europe and from low cost economic sectors in Asia, Latin America and to a lesser extent ex-Communist countries, particularly in light of the strong dollar.

In defense of the U.S. empire, the Bush Administration has embarked on a highly conflictual new model - a neo-mercantilist empire based on FTAA (Free Trade Area of the Americas) unilateral projections of power, the militarization of Latin America and military intimidation of potential rivals. The neo-liberal empire, seems to have exhausted its historical possibilities, both economically and politically. U.S. trade deficits are ballooning, selective protectionism is insufficient, large-scale social unrest and nationalist resistence is growing, the IT speculative bubble burst and sectors of the domestic economy are under siege. The external growth of the private U.S. economic giants is increasingly based on weakened national foundations. The imperial state has tried to ride two horses: a strong dollar for Wall Street and increasing exports by U.S. manufacturers. This is no longer possible. Mercantilism provides a privileged place for the U.S. exporters, while keeping a strong dollar to siphon financial resources form the rest of the world. The transition to a neo-mercantilist empire however has provoked widespread opposition even among Europe allies/competitors. It has isolated the U.S. in international forums. The militarization of Latin America can only temporarily "hold the line" - FTAA is likely to deepen the crises and increase opposition. Massive popular movements are radicalizing in Colombia, Brazil, Argentina and Bolivia. The public relations spin given by the White House, involving Presidential visits, ministerial consultations and U.S. attendance at international conferences will not convince many governments and provokes public opposition. Nor will or can the Bush regime reverse course.

Given the heightened competition from Europe, the dependence of the U.S. on extracting an ever larger surplus from Latin America in the face of the internal crises and the close ties between the Administration and big business, particularly the extractive sectors, Washington's only solution is to militarize and tighten its control, even if it polarizes and radicalizes Latin America.

In the 18th and 19th century mercantilism led to the revolutionary wars for independence. Will history repeat itself? Will imperial monopolies lead to intensified inter-imperial conflicts? Will nationalist resistence lead to new socialist revolutions? The answers to these questions are of more than academic interests - they shape the contemporary political agenda.