Institution-formation theory and principles of its construction. Globalization and the main mechanisms of the development of society

1.1 The emergence of globalization and the unified global economic system

In addition to its functional dimensions – economic, social, political, etc. – globalization also has a temporal dimension.

Globalization as a trend is not new: interstate, inter-civilizational, and trade relations and interactions have played an essential role throughout human history, which has gone through several globalization-localization cycles.

For instance, in the era of Hellenism and the domination of the Roman Empire, the tendency toward globalization (more precisely “ecumenization”, given the isolation from the interacting areas of the New World regions of Europe, the margins of Eurasia and Africa) prevailed. Meanwhile, the Middle Ages had regionalization and fragmentation of feudal and religious enclaves as the core tendency1.

The Age of the Great Geographical Discoveries was a new turn towards globalization, which included previously isolated territories of the New World, Africa, and Asia in the global historical and economic processes. However, when it comes to the degree of globalization involvement of elites and local societies, including those in Europe, the trade was no more than a few percent of domestic production up until the twentieth century. Transcontinental migratory flows also affected a negligible share of the population. The depopulation of metropolitan areas during the Spanish-Portuguese colonization of the New World and the flows of Spanish gold that poured into Europe represented a singular and exceptional phenomenon for that historical period.

The forerunner of the modern age of globalization was the age of industrialism, which began with the creation of the railway network, the steam fleet, the telegraph, etc., which qualitatively changed the artificial habitat of the homo sapiens species, such as it was created under feudalism. The whole way of life changed fundamentally.

Typically, the starting point of globalization is traditionally considered to be the struggle of colonial empires for the partition of Africa, followed by the Anglo-Boer War2, which opened the period of a global struggle for the redivision of the world, including the two World Wars. Thus, by the beginning of World War I, the concept of imperialism, initially directed against the dominance of the British Empire, had been formed and had become a generally accepted political term.

Lenin’s famous work Imperialism, the Highest Stage of Capitalism (1916)3, which emerged from the Russian Marxist school of thought, was by no means the first attempt at constructing a “theory of imperialism”. It was created based on a polemic with the earlier work of Karl Kautsky4. It also contains references to earlier works by German, French, and British authors, in particular to J.A. Hobson’s Imperialism5.

Evaluating this work post factum, a century later, we can state that Lenin, as a representative of the Marxist paradigm, was indeed successful in identifying the essential signs of the new stage of the development of capitalism, which are fully manifested today. These included more than just the tendency to monopolize markets, which had replaced “free competition” a century earlier, a notion that had become an ideological construct. Another factor was the leading role of financial capital, the flow of revenues from the real economy to the financial economy, the rapid development of capital exports, the transformation of metropolises into “rentier states” (Rentnerstaat), and the new role of banks as centres of economic management. The role of joint-stock companies and subsidiaries, which form, in the contemporary vernacular language, transnational networks, was emphasized. These structures later became one of the key phenomena that determined the development of globalization as a qualitatively new stage of socio-historical development of humanity.

Lenin also noted that German capital tended to be exported to the British colonies “over the head” of the metropolis, bypassing colonial affiliation, that is, the tendency of financial capital to jointly exploit third countries, which fully manifested after World War II, at the neocolonial stage.

As we can see, the theory of imperialism created within the Marxist paradigm of the early twentieth century already contained all the features typical of the late twentieth and early twenty-first centuries, that is, it was able to define the main features of globalization a century before it happened. Only a chain of terminological innovations prevents us from seeing behind the “globalization” of the twenty-first century a direct continuation of the “imperialism” of Cecil Rhodes’s times6, which, as we are convinced today, was appropriately viewed by contemporaries from a theoretical standpoint.

However, at the end of the twentieth century, the formation of such a systemic phenomenon as globalization took place against the background of the struggle of socio-political systems. Some countries preferred capitalism. This implied that the society would develop with an emphasis on economic and social organizations, which acted separately from the state. Other countries preferred socialism, which implied the strengthening of the state and largely planned development of the national economy. Globalization as a phenomenon, which determined the further course of social development, emerged, first of all, based on the non-state economic structures of Europe, the USA, and other countries that had close economic and political ties with them. Correspondingly, the ideological support of this process emerged within the framework of the scientific and ideological paradigms of the Western world. As a consequence, the theory of imperialism, which had emerged within the ideological paradigm of Marxism, and had been quite established and quite adequate for social practice, was undeservedly forgotten. Globalization seemed something fundamentally new.

Nevertheless, despite the first manifestations of globalization, the impressive growth of international trade in terms of quantity and finance, nation states and regional blocs of the age of imperialism and industrialization generally maintained a closed-off economic, political, and informational space. In this situation, internal ties prevailed over external interactions. The state could be viewed as a closed, self-regulating system, with adjustments for foreign trade. The world, in this case, could be studied as a sum of its parts, the description of which did not require their consideration in the context of a global supersystem.

The globalization threshold was reached at the moment when the leading states of the world, preserving nominal sovereignty, de facto turned into open socio-economic systems. Their dependence on the global supra system, including international political and financial institutions, increased significantly and rose to a qualitatively new level. The influence of these structures on the economic, social, and cultural life of the population has become comparable with the influence of national governments.

However, one can legitimately talk about globalization as a leading trend in world development only starting from 1991, from the moment of the collapse of the Soviet Union. At that time, the forms of social life that were characteristic of Western civilization received an impetus for spreading globally. The crucial importance of that year lies not only in the political elimination of the USSR but also in the fact that the countries that appeared on the territory of the Soviet Union and its former allies became involved in the “global community” and the global market economy (which significantly strengthened the connectedness of the world system).

From that moment onward, a wave of similar and almost simultaneous liberal economic reforms took place both in the West and in developing and post-socialist countries. The reforms included the privatization of crucial state monopolies – railways, energy, communications, education, and medicine. That was the beginning of the crisis and the dismantling from above of the classical industrial-era bourgeois state and its social institutions. The stage of “privatization of the welfare state” and the strengthening of the role, the “revenge”, of the elites began. During this period, the state lost its role in the economic and social sphere of social life and, increasingly, became a tool that served the situational interests of large economic entities.

Up to a certain time, there was no unified socio-economic environment in the world, but only some large and, as a consequence, politically, ethnically, and culturally heterogeneous states (including empires) with comparatively closed economies. They were included in a rather limited number of local or regional trade and economic systems.

At the same time, any imperial-type state, be it the Roman Empire or Genghis Khan’s state, the Arab Caliphate or China, aimed at maximum possible spatial expansion and the acquisition of new subjects. They sought to reach the natural geographical limits of territorial growth – the seas and low-productivity mountainous and desert areas devoid of population and communication routes. Sooner or later, however, empires reached the peak of their expansion, after which there was a political crisis caused by limited internal ties, fragmented imperial elites, and growing borders in need of military protection.

The crucial change in world history came at the turn of the fifteenth and sixteenth centuries, the age of the Great Discovery. Since then, an increasing number of western European countries (first Spain and Portugal, then England, France, and Germany) have been guided by economic considerations. As Europeans established a monopoly on direct maritime communications with other continents, a system of world trade relations began to develop, gradually embracing the whole known world of the time. The dominant positions in this global trading system were taken by those who created it, namely the Europeans. They were the ones able to extract, from trade operations with Asian, African, and American countries, not just profits but super-profits due to the non-equivalent, i.e. unequal nature of this trade exchange. Thus, a phenomenon that had never existed before in human history – the global economic system (also known as “the global capitalist system” or simply “the modern world system”) – emerged.

From the point of view of the systemic approach, the end of the modern era represents nothing less than the first signs of the emergence and development of the world (global) economic system. The most important feature of the global economic system is that, firstly, it functions precisely as a market, i.e. as a system of trade exchange, and secondly – and this is particularly important – it does not relate to any external social systems. At the same time, local economic and social systems, while continuing to retain their subjectivity, are becoming increasingly open to external factors, rather than being self-sufficient. In other words, the global economic system is a system of economic entities whose development is less and less limited by geographical, political, and legislative frameworks, and unrestrained by political regulations of the state.

Globalization differs from the earlier periods in the formation and presence of a single economic space. As a result, one of the objective trends in the development of society is the general commercialization and digitalization of the entire world, including the commercialization, mechanization (industrialization), and unification of all areas of social life that were not involved in market relations in the past.

1.2 The emergence and development of globalization

The modern stage of economic globalization is characterized by the widespread commercialization and privatization of state monopolies (housing and utilities, energy, transport, the military-industrial complex, etc.), which are carried out according to the same template across the entire world. Commercialization and privatization have also affected other initially non-commercial areas and institutions of social life (education, science, medicine, culture). At the same time, even today, at the peak of corporate globalization and “privatization of the welfare state”, the objective tendency of expansion of capital and relations that are based on commodity and currency is not absolute and is always restrained by certain limits of a non-economic order.

These limits can be physical (space and resource limitations), political (state organizations and structures, borders, etc.), technological (transport, communications, etc.), the requirements of social stability (social stratification is simply the reverse side of the concentration of capital), security, and the long-term needs of modernization and infrastructure construction, which require long-term investment.

Therefore, economic globalization with its ultra-liberal economic model should not be seen as an irreversible process, as neoliberal thinkers typically do, but as a reversible and even cyclical shift in the balance of power and interests among various elites and other social groups.

The objectivity of economic laws does not mean that restrictions of a non-economic order must be abolished since it is the non-economic limitations of law that allow human societies to exist. The presence of a permanent tendency does not mean the abolition of forces opposed to it, either objective or subjective. For example, the objectivity of the law of universal gravitation affects evolution, but by no means does it impose a ban on terrestrial life forms that exist in the constant struggle with the force of gravity.

Liberalization and commercialization cause the degradation of vital – especially in the long term – non-commercial spheres of social life (science, culture, education, marriage, and family relations), which constitute an essential part of human existence.

Probably, the crises in the world economy and the domestic politics of individual states caused by liberalization, commercialization, and deregulation will in the future lead to the opposite movement, namely to a natural deliberalization and regionalization, and the reincarnation of such social institutions as nation states and nations.

At any rate, we have the example of Roosevelt’s New Deal, which replaced the decade of post-war liberalism of the 1920s. Moreover, there are many other examples of successful deliberalization and deprivatization, most notably the creation of the European model of the “welfare state”7 and the construction of a range of viable models of socialism and compromise social models based on several civilizations and cultures.

In the economy, there have been global changes linked with the emergence and growth of transnational corporations (TNCs) and globalized banking and financial structures.

Manufacturing has long ceased to be only national; it is increasingly transnational as individual countries are responsible only for certain stages of producing a product, which travels a long way from raw material to being ready for use through the production cycles of many countries. This is the type of production carried out by TNCs, but they do not focus on a single industry or product.

Thus, in the 1990s, the combined sales of the world’s 500 largest TNCs accounted for more than a quarter of global GDP, more than a third of global manufacturing exports, three-quarters of trade in goods, and four-fifths of trade in technology. At the same time, about 40 per cent of world trade happened in the trade flows within TNCs8.

However, these same figures show that, when taking into account national markets, including some sectors of the economy that are purely local yet quite large (housing and utilities and infrastructure) and the presence of a fairly significant natural economy, no more than 30 per cent of the economy is globalized. At the same time, its knowledge-intensive and technological part, which is not connected with the necessities, and the financial sector with its specifics are globalized.

The limited natural resources of the world have led to the formation of a vertical structure of the world system, divided into a “core” and a “periphery” both spatially and socially. This leads to the strengthening of the power of elites and desocialization of the “middle class”. Similarly, the unevenness of development increases in all spheres of life, both globally and locally. The growth of disparity, including social differentiation, is both the cause and the result of increased competition for all kinds of resources.

The global economic system consists of fundamentally unequal interacting components, which are the “core” and the “periphery”. The “core” of the global economic system consists of countries that benefit from economic interaction with other states (these are the so-called “developed countries”). The “periphery”, on the other hand, consists of states that lose out in economic cooperation with countries that are part of the “core” economic system. These components finally took shape in the twentieth century.

Over the past two centuries, the average per capita income of 20 per cent of the world’s population, i.e. for the inhabitants of the “core” or “golden billion” countries, has risen in real terms by a factor of about 50. At the same time, 80 per cent of the population saw it grow in the best case three to five times, and in some cases remain at the level of the Middle Ages or even decrease, compared with what it was before the emergence of the global economic system9.

In addition to the “core” and “periphery”, the system often distinguishes a third zone, the so-called “semi-periphery”, the most mobile element. Its presence is a kind of constant, while the position of an individual state in it is a variable conditioned by the acute and continuous competitive struggle.