Abstract

There is a close but hitherto little-studied relationship between globalization and privatization. This article explores the connection between them from a political economy viewpoint. On globalization, it identifies several theoretical approaches to understanding the phenomenon,

notes the various ways in which the word is used, and considers causes and consequences. In exploring the connection with privatization, it is essentially concerned to view the privatizations of the later 20th century as a strategic instrument of the globalization of capital, and a number of reasons are advanced to support this view. The article then looks at the implications of what has gone before for the education of public managers, which has also reflected these late 20th century tendencies. It seeks a reorientation of such education, as we move into a new century, to restore the spirit of public administration as an agent of "public trust".

Introduction

Globalization and privatization have been the subject of innumerable studies in the last two decades. A monstrously growing body of knowledge has emerged about both, through research and scholarship in all areas of social sciences--economics, political science, sociology, and public management, to name a few. However, while most of these studies overlap in themes and explanations, very few, if any at all, offer new insight on the interrelationship between globalization and privatization. This neglect is unfortunate, for both have significant implications for governance and public management in the new century.

Most of the studies on privatization have focused on the commonly argued and frequently rationalized reasons familiar to students and scholars of economics, political science and public administration. Useful as many of the available explanations are, they are inadequate in explaining the two phenomena in a broader context, and offer very little to inform us deeply on the political economy of the interrelationship between privatization and globalization, or to identify the interests that are primarily being served.

This article addresses this neglect in scholarship and argues that the phenomenon of privatization should be understood in a direct correlation with globalization of capital under late capitalism. It argues that privatization has been conceived by design, and not by chance and haphazard events, and that its implementation has been pursued purposely, deliberately, and vigorously around the world as a strategic instrument for promoting the globalization of corporate capital. This has been happening despite clear evidence of extremely successful experiences with public enterprise management and government-owned enterprises around the world.

With sweeping privatization of public enterprises and other major governmental functions, the capacity and ability of governments in public management are seriously diminished even as challenges and crises multiply in both number and intensity. Globalization has not ended the state and public administration, but it has caused a major qualitative change and alteration in the nature, character, and role of the state and public management; in fact, state continuity persists because it is instrumental to the functioning of capitalism. A key feature of this qualitative change has been privatization, which has resulted in a paradigmatic shift in the nature and role of the state from the former welfare-administrative state to a "corporate/coercive-administrative state" supportive of corporate capital.

To understand this direct relationship between privatization and globalization, we must first understand what globalization means, and then explain its corollary strategy of privatization worldwide. The novelty of this argument and such a theoretical presentation is many-fold, as for the first time it employs a new political economy approach in order to explain the relationship between the two phenomena. In addition, this approach and the novelty of the analysis produces discussions that put the phenomenon of sweeping privatization in a much broader, macro context of analysis at a global level. This global macro-level of analysis is essential to developing a better understanding of the multidimensional features and challenges of globalization worldwide. Such an understanding also suggests far-reaching implications for the theory and practice of, and especially for education and training for, governance, public administration and public management in the 21st century.

Understanding Globalization: I

Change and Continuity

It is important at the outset to elaborate on the relevance of the changes that have been sweeping through governments, economies, and societies around the world. Change has always been a dialectical feature of human progress and natural history, providing dynamics to the continuity of living systems. Not all changes are, however, progressive in a qualitative sense. Qualitative changes are long-term, transformational, and bring about social-system change in all aspects, including government, administration, economic systems and social relations. But not all change is qualitatively progressive in this way. Simple policy actions such as workforce downsizing, organizational structure alteration, government reorganization and the like can produce reversals with negative social effects. This appears to be happening now, with global capital imposing major setbacks on century-long progress. But there is reason to believe the reversal will not last too long, as the internal contradictions within global capitalism will cause its own breakdown from within.

Progressive/qualitative change occurred over the centuries it took for feudalism to break up into mercantilism and capitalism. Similarly, it took centuries for colonialism to be broken up into nation-state organization, albeit with the continuing effect of neocolonialism dominating world systems for much of the 20th century. In between such major qualitative and historical changes, other changes occurred, some with positive social effects, such as the abolishing of slavery in the US along with some formal relief for the blacks or reduction of working hours as a result of the intensive struggle by the labor movement during the late 19th century and the 1930s.

None of these quantitative changes replaced the capitalist state; indeed the capitalist state persisted with continuity, but its character and role experienced some alteration in favor of a balanced welfare state caused by internal pressures of the labor militancy and regulatory and other reform movements as well as the internationally emerged global power of the socialist system, under the leadership of the USSR, as an alternative social system spurred on by the 1917 Bolshevik revolution--itself a major historical qualitative change. Both domestic and international factors caused a major qualitative change in American social and political system in which the continuity of the capitalist state persisted but its character and role were moderated by the necessity of the welfare administrative state, which functioned as a tool of social control and a lubricant of the wheels of the corporate state in America and around the world. With the fall of the world's leading socialist system and expanding neo-colonization of the third world countries, the leading corporate power structure did not see a need for the welfare state any more and abolished it altogether in favor of a shrunken state with the core functions of protecting and promoting the corporate capital, of maintaining social control, and of establishing order out of market-produced disorder and chaos--for example, unemployment, massive poverty, environmental degradation, labor exploitation, racial and ethnic violence, class and gender repression, and the like. It is arguable that the result has been a major qualitative change, but not a progressive one, in the character and role of the state with unprecedented expanding power of the police, security, and other repressive forces to maintain law and order in order to protect and promote the interests of the globalizing corporate capital around the world.

Thus the world is now experiencing major changes at the turn of the new millennium. A great transformation is taking place and a new civilization appears to be dawning, while the established and traditional industrial civilization fades. The term "rapture" has replaced "rapid" to describe change, which has become constant. Rapturing changes are extremely difficult if not impossible to predict, and they have potential consequences for both devastation and development. They are full of surprises and potentially chaotic consequences.

These rapturing changes leading to the global transformation have been the subject of many studies, for and against, defying the possibility of any single attempt to comprehensively explain the phenomenon. For example, Huntington (1996) speaks of "clash of civilizations," Fukuyama (1992) predicts the "end of history and man," Korbin (1996) argues about a "return back to medievalism," Korten (1995) refers to loss of citizens' democratic rights, and Picciotto (1991) points to the loss of territorial sovereignty among nation-states. Other concepts that have emerged and become subjects of numerous studies worldwide are those of the "global village" and "world government" with a "global management" (Wilson, 1994), creating a new world order beyond nation-states (Reich, 1991). This new order will be ruled by transnational corporate elites (Korten, 1995) through a "global bureaucratic web-system" (Farazmand, 1994: pp. 78), facilitated by an army of "global soldiers or 'subsidiary agents' of world capitalism" (Farazmand, 1999a). (1)

The hallmark of these rapturing worldwide changes is the process of globalization, through which worldwide integration and transcendence take place. All these related concepts evoke a great variety of responses, both intellectually and practically. The concern here is particularly with those responses which address the assumed impact of globalization on the role of the state. Thus those who support globalization and want more of it tend to see the state as a hindrance to market forces, while many who hate it lament that it is leading to the shrinking of states or making them irrelevant. Those more concerned with the state within the globalizing context either see it positively as the only possible defender of welfare provision and national values, and/ or protector against market-caused chaos; or negatively as a supporter and agent of corporate, globalizing capital.

Three Broad Theoretical Approaches

Three broad theoretical approaches may be detected in this range of views encountered in the current literature on globalization and its implications for governance, self-determination, public administration, and public management. A brief indication of each is given in the next few paragraphs.

The first approach is that which accepts globalization as inevitable, speaks of its many advantages, and urges general acceptance. This camp contains the proponents who argue that the growth of transnational corporations spreads global capitalism--making "states indifferent" or "irrelevant" (Ball, 1967; Naisbitt, 1994), and creating The Borderless World (Ohmae, 1990)--and see qualitative gain in the interdependence, peace, harmony, homogenization, and rule by market that is likely to result.

Thus Freidman, an American legendary proponent of globalization, likens it to a "herd" which sweeps everything on its way, with nothing able to stop it. His response to the critics has been: "What planet are you living on? Globalization isn't a choice, it's a reality"--so let's make the most of it (Freidman, 1999: p. 93). States can defy the "herd," but they will pay a heavy price, as did Thailand, Malaysia, Indonesia, and South Korea (see Waltz, 1999), and to an extent Iran. (2) Similarly, Kenichi Ohmae advises sovereign national governments to abandon their traditional roles as economic managers of their economies because clinging to those roles is "futile"--as national economies no longer exist in the age of globalization. Government administrators and bureaucrats are advised to yield to the inevitable and accept the fact that government is obsolete and all should be left to corporate capitalism (Ohmae, 1990).

These and other proponents (Fukuyama, 1992; Mueller, 1989; Keohane and Nye, 1977) project a borderless world in which peace, market prosperity, democracy, and interdependence will prevail, and war would become rare. However, speaking from the dominant tower of the American global perspective, even these proponents can not rule out altogether the necessity of wars and domination to control the world for peace in the West: "War becomes rare, but is not abolished because even the strongest economic forces cannot conquer fear or eliminate concern for national honor," admits Freidman (1999: pp. 196-97). It is this latter point of self-determination and national identity that, among other things, prompts the critics of globalization to oppose it.

The second theoretical approach is a highly critical one. Opponents of globalization and skeptical observers warn of the severe negative consequences it may have for national economies, human values, democratic community interests, national sovereignty, and third world countries. For example, Mele (1996), Cox (1993), and Korten (1995) speak of the erosion and loss of community and urban power structure in favor of globalizing corporate elites, Rifkin (1996) speaks of the loss of work, Kregel (1998) points to the exacerbated problem of dependency and fiscal crisis in developing countries, as well as the deepening crisis of governability, while Brecher and Costello (1995) discuss the notion of "global pillage." A play on "global village", this notion sees the globalization of capital forcing millions of hardworking people--including professional middle class people--into "a race to the bottom," while the economic and political power of the rich corporate elites skyrockets. For such critics, globalization will eventually sweep away entire systems of checks and balances in nature, in the economy, and in governance, causing crises of legitimacy and system collapse.

Elsewhere a warning has been given of the severely negative consequences of the globalization of capital and of the change in the character and role of the traditional capitalist state from the welfare-administrative state to a "corporate-coercive administrative state" (Farazmand, 1999b). The association is thus with critics who see the world turning back to the medieval system in which barons ruled and serfs had no way out of the bondage of economic and political dependency and exploitation. The argument is that the whole concept of the ancient "mercenary system" of economic and social organization is returning with "wage slavery," economic dependency, and loss of political freedom and human dignity (see e.g. Korbin, 1996; Farazmand, forthcoming).

Coming from a third or middle-ground theoretical approach, some social scientists make the point that the effects of globalization have been exaggerated and that states remain strong in crucial functions of governance (see e.g. Hirst and Thompson, 1996; Zysman, 1996; Boyer and Drache, 1996). Within the international relations context, some realists have argued that "de facto [state] sovereignty has been strengthened rather than weakened" (Krasner, 1993: p. 318). Similarly, some sociologists and political scientists like Michael Mann (1980) and Theda Skocpol (1985), who "brought the state back in" to their disciplines during the 1980s, have maintained their skepticism about the disappearance of the state and national governance from history, the outcome suggested by some of the major critics. However, even the realists agree that globalization has had significant impacts on the nature and character of the state and national governments around the world. These social scientists are joined by others who argue that globalization, especially the changing global economic structure dominated by transnational corporations with enormous financial, political, and organizational power, has had profound implications, both positive and negative, for national economies, democratic governance, and public administration (Mander and Goldsmith, 1996; Farazmand, 1994, 1999b).

Interdependence is one thing, but the ability by corporate powers to dictate to states and influence public policy choices in society is another. It is hard to dispute that globalization and interdependence have benefited the few and most powerful industrialized nations such as the US and some Western European states and Japan, whereas most developing and less developed nations have become more dependent on the former colonial powers and major financing institutions, or that the latest technological innovations have accentuated this widening gap between the two (see Waltz, 1999; also Farazmand, 1999b). Some social scientists have described the "retreating shifts" in the quality and quantity of state power and authority (Strange, 1996; Graycar, 1983; Lipsky, 1984). Similarly, others have remarked on the transitional nature of the state as it moves "from the welfare to the competitions state," or as governments attempt to "respond to, and shape and control, growing international political economic interpenetration," (Cerny, 1995), or alluded to "the hollow state" (Milward, 1994) or "the corporate-welfare state" (Farazmand, 1997).

There is not much room for doubt that the natures of the state, of government, and of public administration have changed, with significant implications for governance and public management worldwide. Globalization has forced nations and their governments to adjust structurally to the increase in global corporate power, and public policy choices of peoples from around the world have accordingly been influenced, shaped, and reshaped to meet the demands of the "herd," which is backed by the military might of the most powerful globalizing power of the world, the United States (Waltz, 1999).

It remains to point out that the negative implications of globalization for governance and public management are no longer a sole concern of developing and less developed nations. They are now also a major concern for communities and citizens in the US and other advanced countries. So far this critical point has been terribly overlooked and understudied. (3)

Understanding Globalization: II

The Process Has Several Dimensions

Notwithstanding that the phenomenon of globalization has generated these various theoretical interpretations, the word itself defies any single attempt at definition. It is convenient to see the process as having several dimensions. Before identifying them, however, it is necessary to make two general points.

First, globalizing pressures are not new; they have been around for many decades if not centuries, and were certainly present in old-fashioned colonialism as an earlier form. What is so novel about the current period is that, for the first time in history, the communities and citizens of advanced industrialized nations of the West, including the US, are facing the challenges and negative effects of globalization.

Second, the dimensions we focus on as individuals are likely to be determined by our disciplinary backgrounds. Thus economists tend to see globalization as a step toward a fully integrated world market. Political scientists tend to view it as a march away from the conventionally defined concept of the state with territorial sovereignty, leading to the emergence of non-governmental power players in the world order (Falk, 1997). Others such as business school academics and consultants see it is a phenomenon driven by private-sector firms, not by governments (Strange, 1996). Notwithstanding these differences, however, all discussions of globalization are likely to connect with the question of borders, territoriality, and legal and economic constraints and opportunities that relate to governance and administration--"the territorial demarcations of state jurisdictions, and associated issues of governance, economy, identity, and community" (Scholte, 1997: p. 430).

One dimension views globalization as internationalization. This notion is not new, as international trade, and political and technological relationships have grown among nations for centuries, and more so since World War II. Internationalization of public administration and governance has become a common issue originating from the West (Riggs, 1998; Waldo, 1980).

Then there is the view of globalization as border openness, which again is nothing new because most nations under capitalism have been relatively open to the world market and global capital during the 20th century. Removal of barriers to trade and protectionist measures of state intervention in the economy and society have been an issue of discussion over building a global government and global culture without border constraints (Scholte, 1997; Brown, 1992). "Thinking globally and acting locally" as well as living in an interdependent world with a "global management" (Wilson, 1994) have characterized this view. But there are limits to how far this is likely to go. There is a long tradition of international relations--relations between states--and that process is unlikely to become redundant (Halliday, 1979).

Another dimension sees globalization as a continuing process of surplus accumulation by monopolistic global capital. This view rejects globalization as a phenomenon, but focuses rather on global capitalism's changing strategies and approaches to surplus accumulation: changes within the broad continuity of the process (Sweezy, 1997: p. 1). Financialization of global capitalism has been a major and rapid change facilitated by technological innovations.

A further dimension treats globalization as ideology--an underpinning of the Western liberal capitalist democracy based on beliefs of freedom, individualism, free enterprise, and plural democracy. This ideological underpinning has been used to drive the economic force of capitalism worldwide--hence globalization (Lindblom, 1977, 1990)--but this sense also has been around for centuries.

Yet another dimension points to globalization as a phenomenon of late 20th century capitalism and of the new millennium. Using a political economy perspective, this view considers a cause-and-effect relationship in the explanation of globalization of capitalism as part of the relentless search for surplus accumulation of capital. It sees what went before as "not so much crossed or opened as transcended ... Here, the globe becomes a single 'place' in its own right" (Scholte, 1997: p. 431). This notion is useful as it brings new elements into the explanation of the phenomenon, but it still is limited in that it does not adequately address all features of it, especially the process part of it.

A final dimension treats globalization as both a process and a phenomenon. Consistent with the last two, it is both novel and comprehensive, and is the one that is personally preferred. It considers globalization as a process of accumulation by global capitalism--"a constant process of expansion into new frontiers and opportunities [without constraints] for increasing capital accumulation at the global level. It also views globalization as a phenomenon caused by the process of capital accumulation--a phenomenon that has manifested its negative and positive effects almost everywhere" (Farazmand, 1999b: p. 512).

In the process of globalization, all countries (developed and developing) have been affected, though in different degrees. The less developed and developing countries and their peoples are the recipients of its most negative impacts. It is this qualitative change, spurred by the new globalization process, that has caused many concerns and sounded the alarms among social scientists, community leaders, civic and grass roots organizations as well as many governmental leaders from all over the world. (4)

Causes

As noted earlier, the process of globalization is nothing new; it has been in the making for a long time. However, the globalization of capital began to accelerate after World War II, and continued at an increasing rate since the late 1970s. Globalization is a key feature of advanced or late corporate capitalism, replacing national and even multinational capitalism. Several main causes of this development are now considered (for fuller discussion, see Farazmand, 1999a).

The economic factors of surplus accumulation have been the most powerful driving force, and globalization has been the central feature of transnational corporations which have for many decades reached developing countries and enjoyed cheap labor and resources. What is new is the rapidity, the high rate of surplus accumulation made possible by a number of mechanisms, as well as the transworld mobility of corporations in a spaceless and timeless global place facilitated by the globalizing state, innovation technologies, and the globally interventionist military might (Scholte, 1997; Waltz, 1999).

Several factors are involved in the global drive for surplus accumulation. The first is global marketing in search of new global markets and for higher profits, which has gone beyond national boundaries and, with the aid of computer technology, has made it possible for the "monied people" to "purchase the same goods at the same time." The coordinated global marketing has created economies of scale beyond the reach of individual corporations (Modelski, 1979). For example, in 1992, almost all of the 40 largest advertising firms in Britain and the US had specialized departments with global commercials and with an advertising expenditures of well over $600 billion (Sklair, 1995; During, 1992: pp. 171-72). Going global was the necessary slogan in world capitalist circles.

The second factor links global production and global factories, which are also powerful forces for increasing surplus accumulation, and therefore globalization of capital. Globalizing corporations decide overnight to move production factories from almost any corner of the global village, say in Asia, to another spot in Africa with cheaper labor resources, and with no environmental constraints. Globalizing finance has made it possible "to produce a product anywhere, using resources from anywhere, by a company located anywhere, to be sold anywhere" (Scholte, 1997: p. 435). Social and environmental externality costs are created for the host countries to deal with. Global commodification and consumption provide another means of rapid surplus accumulation, for they ensure that everything in the world is up for sale and exchange in the global market, including body and soul, cultural heritage and ethnic uniqueness (Mele, 1996).

Another factor is the reorganization of corporate structure through megamergers, horizontal and vertical restructuring, and over-concentration of corporate power at global level; this has also contributed to the rapidity increase in the surplus accumulation and globalization process. By 1995 the number of large global corporations of the previous decades had been reduced to 6,000 with an aggregate scale of US$229 billion, with many more hundreds of billions of dollars in investments that captured over 70% of the world's total foreign direct investments (Dunning, 1993: p. 15; Harvey, 1995: p. 189). Since that time, the number has shrunk to less than 1,000 as the process of large corporate mergers continues, and the trend is likely to continue due to legislation in many countries allowing corporations to monopolize and dominate global markets. With the over-concentration of corporate power structure comes a severe restriction in international free trade, as well as the ability of that power structure to dictate public policies worldwide--a dramatic setback for human rights, national independence and democratic self-determination worldwide. This has created a small but most powerful circle of "global corporate elites" who can dictate policy choices to governments and countries worldwide, with significant implications for governance, administration, and organization theory and practice (Farazmand, 1999a).

An accompanying development, constituting another major source of surplus accumulation and globalization, is the creation of global money and global financialization, accelerated by the "cyberpolitik" which changes the "nature of power in the information age" (Rothkopf, 1998: p. 325). Global finance has no loyalty or attachment to any space, nation, or community of people. It has no father, no sister, no mother, no brother, no friends, and no place of its own. It buys, sells, and disposes anyone and anything in the search for that bottom-line profit.

The role of global states and their administrations has been another powerful determining factor in the globalization process, especially since World War II. Capitalism needs a strong state and a stable environment to prosper. It demands order and social control (Weber, 1947). The US and most European governments have played a fundamental role promoting globalization of capitalism since the turn of the 20th century. They have done this for ideological and political as well as economic reasons. They have intervened militarily in numerous countries around the world and propped up some of the most repressive regimes in developing countries for the purpose of social control and surplus accumulation of capital. Examples are Latin American countries, such as Chile in 1974, the Middle East including Iran in 1953 and Egypt in the 1960s, and elsewhere in Asia, including Indonesia in the 1960s. Their recent military inventions in the Persian Gulf in 1990 and the bombing of Yugoslavia in the late 1990s have to be considered in the context of the globalizing states' pursuit of establishing a global hegemony for social control and surplus accumulation of capital, as well as that of the ideological propaganda of capitalism as the only viable world system (see Ball, 1967; Murphy, 1988; Parenti, 1995; Korten, 1995). Global capitalism can not thrive without globally interventionist military states followed by a web of deadly security-policing bureaucracies spreading and operative around the world (Waltz, 1999; Lindblom, 1990; Farazmand, 1994).

Domestic economic decline, rising human expectations around the world, and technological innovations also played significant roles in contributing to the globalization process. Domestic economic decline in industrialized nations drove more firms to go global for rapid surplus accumulation of capital. Similarly, rising human expectations, especially in the US, led to increasing human and career rights as well as citizens' demands for sharing governance power with elites, and property rights in employment, both of which were considered costly to corporations and unacceptable to corporate elites. Also, technological innovations, especially computer electronic and other communication capabilities, facilitated and accelerated the process of globalization of capital accumulation worldwide.

Finally, supranational organizations, especially the United Nations and its specialized agencies such as the World Bank, International Monetary Fund (IMF) and World Trade Organization (WTO) have contributed significantly to the globalization process and enhanced the ability of global capitalism to dominate the world. They have been key institutional instruments through which global corporations and globally dominant states have dictated their policy choices to developing and less developed nations in the form of structural adjustments, sweeping privatization, and desired market reforms to serve the purposes of global surplus accumulation and political control (see Farazmand, 1999b; Hancock, 1989; Korten, 1995; Gill and Law, 1991; Brown, 1992).

Consequences

The consequences of globalization have been many, some positive and others negative. On the positive side, it has facilitated connection and coordination among peoples, governments, corporations, and non-governmental organizations. Global accessibility has been a giant positive step toward human progress. But globalization is building a new civilization full of paradoxes and unevenness. Not all states and peoples have benefited from it, nor have they become equally affected by it. Globalization has moved much faster in North America, Western Europe, and East Asia, but most other nations have also been impacted by it. Despite the benefits, globalization has had severe negative consequences for developing and less developed nations. As already noted, at the turn of the century it is also affecting negatively the advanced countries of the West, including the US and Europe.

The character of the state and its attendant public administration has changed, with globalization transforming them from a public service state system to a corporate state system characterized by massive coercive military and police-security power, deregulation, and massive privatization. The state and its administration persists, but they have become powerful institutional instruments of globalization and of global surplus accumulation of capital (Heady, 1998; see Farazmand, 1999a for further discussion).

The territorial sovereignty of the state has been threatened, with globalization forcing many governments into the position of subsidiary agents or "practical colonies," or putting governments and their "sovereignty at bay" (Vernon, 1971). With the WTO, World Bank, and IMF acting as institutional conduits for economic and political policy dictation, the globalizing states and corporations are now able to bypass most states, forcing them into compliance with rules and regulations they have had no part in making, and making governments abandon long-held traditions of economy and society. This has crippled the ability of states to reduce poverty; indeed, consultants and leaders of some of the supranational organizations have proven to be the "lords of poverty" (Hancock, 1989), creating a cadre of "global organizational elites" (Farazmand, 1999a: p. 516) and dictating to third-world governments policies that are against their best interests.

Globalization has also been a threat to democracy and community, causing a detriment to people's democratic right to self-determination (Mander and Goldsmith, 1996; Mele, 1996; Korten, 1995). By turning human beings into commodities, and by operating through the global factories, globalizing corporate elites are recreating the "mercenary labor system" of the middle ages and ancient periods, as well as forcing billions of people around the world into "wage slavery" (Farazmand, 1999b) and "the race to the bottom" in the "global pillage" (Brecher and Costello, 1994). Interestingly, and sadly, all these changes are occurring in the name of self-declared global ideals of exporting democracy, the market, and individual freedom, whereas in reality the market and democracy do not always mix. As Heilbroner (1991: p. 105) notes, it is " foolish to suggest that capitalism is the sine que non of democracy, or to claim that democracy and capitalism are the same." The market breeds inequality, favors the wealthy and empowers super rich business elites, leaving the masses of people ruled and dominated by whatever money can buy, including votes, bodies, and souls (Lindblom, 1990; Parenti, 1995).

In addition, globalization promotes corruption and empowers powerful elites. Opportunities for wealth accumulation create opportunities for accession to power, and enhance the ability to corrupt officials and to promote "political elites," including governing, administrative, and "organizational elites" (Farazmand, 1999a) who can "impair" policy processes and outcomes in favor of the wealthy and at the expense of the poor and average working people (Lindblom, 1990).

Finally, globalization of capital requires, and pushes for, sweeping privatization of public enterprises, regular governmental functions, and public services. This effect of globalization needs to be analyzed closely at macro as well as micro levels, because privatization is a powerful and necessary strategic tool of globalization. Privatization is addressed below as a strategic tool devised for promoting the globalization of corporate capitalism, thus explaining the blistering pace of the late 20th century movement.

Privatization as a Strategic Instrument of Globalization

The following discussion makes no attempt to reference the monumental literature on the pros and cons as well as causes of privatization. This is done at some depth in previous works (e.g. Farazmand, 1996, 2001a), so it is assumed that readers have some familiarity with that body of knowledge. The focus instead is on the functional instrumentality of privatization as a powerful and necessary strategy promoting globalization of capital.

The Privatization-Globalization Connection

The ideology of privatization in all forms--contracting out, outsourcing, and complete privatization through various enterprise divestment schemes--is grounded on acceptance of the supremacy of the market as an all-encompassing institution for a functioning society, as well as a highly viable and functioning institution of the economy. It is this ideological underpinning that has driven both naive optimists and idealists into buying the corporate concept of the market as the ultimate force for running society and governing its economic institutions. The claim has now reached the highest level of governing and managing the entire globe as a village where the market can and should operate as the only acceptable institution; no alternative is claimed to be acceptable and any deviation would have to meet its generally accepted--or dictated--parameters (see Frank, 2000).

Therefore, no tolerance for alternatives in designing and managing a society in this global village of self-declared ownership by corporate capitalism seems to be permitted. However, as will be seen below, and as argued elsewhere (Farazmand, 1989, 1994, 1999b, 1999c, 2000), this ideological claim of privatization is flawed with misleading assumptions, impractical suggestions, and massive social and economic problems as well as with adverse political consequences for many societies. Even Drucker, a leading proponent of corporate capitalism, and a celebrated American business scholar, has recently admitted that: "We are learning very fast that the belief that the free market is all it takes to have a functioning society--or even a functioning economy--is pure delusion" (Drucker, cited in Korten, 1998: p. 151). And the authors of the highly celebrated book Reinventing Government have admitted clearly that those who try to convince us that privatization is the best policy are actually selling "snake oil" to the public: "Those who advocate it on ideological grounds--because they believe business is always superior to government--are selling the American people snake oil" (Osborne and Gaebler, 1992: p. 45). As one observer of globalization notes,

   In the 1980s capitalism triumphed over communism. In the 1990s it
   triumphed over democracy and the market economy. For those of us
   who grew up believing that capitalism is the foundation of
   democracy and market freedom, it has been a rude awakening to
   realize that under capitalism, democracy is for sale to the highest
   bidder and the market is centrally planned by global
   mega-corporations larger than most nation states (Korten, 1998: p.
   1).

Privatization has come to mean corporate market supremacy, growth of rugged self-interested individualism, and chaotic social and political as well as economic conditions. Conservative mainstream economists and policy advocates may see this as part of the inevitable business cycles of capitalism, but experts on "long-waves" of contemporary/late capitalism see it differently. They believe that this new global paradigmatic and qualitative change of globalization, pushed through sweeping privatization, has long-term adverse consequences for society, individual freedom, and governance and management of public organizations around the world.

The concept of "long waves" in corporate capitalism was first advanced by Kondratieff, a former Deputy Minister of Food in Kerensky's Provisional Government before the triumph of the Bolshevik Revolution in 1919. He founded the Moscow Institute of Conjunctural Research, which proceeded to collect materials for his own "theory of long waves" (see Mandel, 1999: p. 126 for details). Following Kondratieff's theory, Schumpeter in his Business Cycles (1939) investigated most thoroughly the issue of "long waves" in the economy, and his findings have been very helpful, with mistakes acknowledged later and corrected by others (Mandel, 1999: p. 137). Basically, the theory of "long waves" sees the capitalist economy as moving through four stages: (a) accelerated capital accumulation, (b) over-accumulation, (c) decelerated capital accumulation, and (d) under-investment. The underlying factor in determining changes in the long-waves is the "rate of profit or surplus accumulation": "The rise, fall and revitalization of the rate of profit both correspond to, and command, the successive movements of capital accumulation" (Mandel, 1999: p. 110).

This central driving force of "profit rate" has become the central force driving privatization in aid of the process of globalization of capital, as explained earlier. The "relative" rate of profit or surplus accumulation of the 1970s has now been replaced by the outward, globalizing corporate capital enjoying massively an "absolute" rate of profit or surplus accumulation worldwide--in Africa, Asia, and Latin America. Therefore, privatization became an engine of globalization worldwide, to the point that under, US Treasury Department guidance, the IFC has reportedly provided US$200 billion to the Third World in the next decade [current decade] to "promote the private sector" (Millman and Lundsted, 1994: p. 1667). Unlike the previous business cycles or changes in the long waves, the new wave of globalization is an "epochal" one, a much longer wave with far-reaching consequences for societies, peoples, and governments as well as economies. It is not a temporary one, as some may expect, because it has aimed at the heart of the world system by breaking all conventional traditions and expectations (see below). Thus, promotion of the private sector is functional to the process of globalization of corporate capital.

Mechanisms of the Privatization Strategy

How does privatization promote globalization? Several of the ways and means by which privatization functions as a strategic instrument of corporate capital are now discussed. (5)

Most obviously, privatization expands the private corporate business sector at the expense of public sector, public enterprises, and traditional governmental functions, including police protection, jail and prison systems, health and security systems, and of course military and defense systems. The expansion of the private corporate sector broadens and extends the fields of operation for corporate and corporate-led business enterprises, often with little or no regulation or control from government. Similarly it extends the area of the market used for surplus capital accumulation worldwide. Privatization, therefore, takes away from the governmental field and hands the gains to the globalizing corporate capitalist world. Once privatized, an enterprise is out of the control of government and becomes a commodity for exchange in the global marketplace. It feeds into globalizing capital.

Through the restructuring and downsizing that so often occurs, privatization contributes to the creation of fresh "industrial armies": worldwide, it lays off workers, eliminates their benefits and makes them available for privatized enterprises and corporations as temporary and cheap workers and employees. Contracting out and outsourcing are two major forms of this strategic organizational and managerial shift. The privatized enterprises and established corporations running those former governmental functions are aided because their industrial workforce is put on a temporary mercenary basis; the employer no longer has any serious obligation to workers. This "industrial reserve army" helps private corporate managers to manipulate and exploit even further the workers and employees by making effective use of threat of unemployment. The threat functions as a strong motivation for employed workers to run faster and work harder and longer in order to keep their jobs and still be grateful to the private enterprise employers. With drastic cuts in wages and benefits already low, this adds significantly to the absolute rate of profit and the surplus accumulates even faster.

Workers are thus forced to fend for themselves in an anarchic, chaotic marketplace where monopolistic corporations and their subsidiary agents (more on this later) relentlessly hunt citizens for services they claim to offer with aggressive marketing strategies, with many "exclusions" often published in small print to be ignored by readers; then, after a while, they change the rules and raise the prices and premiums unilaterally. This is what working-class people, including the middle-class, have to face now and in the future. Their jobs have become "temporary" in nature, with no obligation or compensation by either corporate capitalism or by the state that now supports and promotes it. This temporary nature of employment is a great harvest of privatization, for it increases the absolute rate of profit and enhances the process of globalization of capital by promoting the volume of capital accumulation while decreasing its costs associated with production, operation, employment, and environmental protection.

Following from the last, privatization pushes the absolute majority of the world population into a "race to the bottom" far worse than the systems of "medieval serfdom" and ancient as well as modern "state slavery" and "mercenary labor." In both historical cases the village feudal lord and the state of earlier times, as well as the slave-owning "masters" of the middle period, had, by tradition, the obligation to provide for the peasant servers and slaves basic shelter/housing, minimum food at a subsistence level, and protection against external threats. With sweeping privatization, both the modern capitalist state and the globalizing corporations have washed their hands of this obligation and now refuse to provide any of these basic necessities to the working citizens, either blue-collar workers or white-collar middle-class employees.

The upper class has no worry; it can afford everything it wants and desires. But the poor and the hard-working middle-class worker must strive harder first to keep a job if employed at all, and second to fend for himself/herself in the jungle of the marketplace, which is full of crooks and exploitative corporate agents. These corporate agents manage to avoid delivering what they have promised when they catch their prey through aggressive marketing or through "contracts" with state organizations under "managed care" and "managed employee benefits" and the like. They do this too by using bankruptcy laws to protect themselves at the expense of citizen investors or consumers. The result is an immense amount of benefit to globalizing corporate capital which enjoys a much faster increase in the absolute rate of profit or surplus accumulation.

In a kind of chain reaction, the degrading of the workforce and the coercive marketing strategies combine with other globalizing factors already noted to create an ideological culture of individualism, consumerism, and market preference, and to reduce citizens to the role of market commodities. So privatization tends to promote individualistic self-interest and to atomize populations by breaking community structures; it creates citizen consumers whose constant and relentlessly growing consumption habits are both encouraged and required for the rapid rate of profit accumulation, so that they contribute to achievement of the goal of globalization of capital. Through the media, the mass of commercials, and government policies that project corporate capitalism as the only viable system, these forces have psychological as well as economic effect as they penetrate deeply into the minds and souls of the general public. This culture is being pressed onto citizens who are expected to internalize its values and be institutionalized into it by taking part in its various functional processes, whether they like it or not (Macpherson, 1987).

Turning to the role of the state, privatization reduces this role to that of maintaining law and repressive social control over the potentially explosive segments of the populations being hurt economically, socially, and politically. The state has now become a forceful facilitator and promoter of corporate capitalism's quest for rapid accumulation of profit at home and abroad. The traditionally balanced welfare-administrative state has been replaced by the new corporate/coercive state charged with policing the population for social control and for providing the safe and favorable environment for globalizing corporate capitalism. An example of the latter is the recent US legislative approval to reform the banking laws and regulations to enable financial institutions to operate more freely in the globalizing world. As Chairman of the Federal Reserve Board Greenspan stated in a speech in favor of such reform, "the present banking regulatory schemes constrain American financial domination of the global money market; we must remove these constraints and enable the banking institutions to operate globally without viable competition." The result has been a blistering growth of mergers and mega-merges by corporate giants.

The notion of subsidiarity has become popular among some scholars and conservative policy advocates of the "new public management" (or "NPM": see e.g. Hood, 1991). It is beyond the scope and purpose of this article to discuss this new political economy fad, but it must be noted clearly that it is a new intellectual creation of globalizing corporate capital that has the political and economic effect of neo-colonization. Subsidiarity means becoming an "agency" of an upper-level hierarchical authority, of a centralized economic and political organization at the international or global level. What is significant here is the way in which states and governments are becoming agencies of global capital.

"Agencification" (6) of national governments and their economies, as well as their public management, creates a global colonization and deepens the dependency of third world countries on the globalizing corporate elites and those governmental elites--both elected and appointed--who represent them and enforce their dictates. NPM has been wrapped in deceiving gold-color papers with the smell of money and is being sold to--and forced upon--governments and non-governmental elites through seminars, workshops, and conference presentations around the world. But the fact of the matter is that NPM is nothing but a new intellectual fad in public administration, with a mission to transform governance and public administration into subservient agents of globalizing corporate capitalist elites, who are building brick-by-brick a new colonizing "global empire" under the new "world order" (Farazmand, 1994, 1999b; in support of NPM, see Hood, 1991; Barzelay, 2001; and for its critique, see Peters, 1996; Politt, 1993; Wettenhall, 2000, 2001).

What emerges is a global army of corporate mercenary soldiers, who receive dictates from global corporations and operate as their agents in a relentless process of rapid accumulation of capital. The underlying theoretical notion of "subsidiarity" is that the governments and their host economies no longer need to operate independently with their own assets and equipment or their own investments. Through privatization of virtually all their industries and service organizations, they can become agents of global corporations and receive commissions and fees for their services from this global center. This subsidiarity is exemplified by the insurance agents of a few giant corporations, such as State Farm Insurance, All State, Prudential, and others. These subsidiaries have no independence in policy and management decisions, and act on behalf of centralized corporations around the world.

Turning local, domestic economies and governmental organizations into agents of trans-world globalizing corporations destroys or abandons indigenous local autonomy and indigenous economic bases in favor of the global corporations whose only interest is to serve their own interests. Local and national interests are displaced as these corporations pursue their goal of rapid profit-making and surplus accumulation of capital; the local institutions have thus become politically and economically colonized by the globalizing corporate imperialism.

What we now see is a global organizational network in the form of a global army of soldiers functioning in the interests of globalization of capital worldwide. This global army invades national boundaries through business operations backed by threat or reality of military interventions from the global corporatist state. Privatization contributes to this neo-colonization of the world in the age of globalization. If we continue as we have been moving through the later 20th century, the entire planet earth will be colonized by the global corporate-state imperialism, leading the world and its people into new bondage, slavery, and serfdom; surely this prospect must be vigorously resisted and opposed by all national governments and those in control of economies and political organizations of governance and administration worldwide.

In short, political elites have become agents of globalization. Privatization has promoted a network of political and governing elites who come from business elites and are supported by them, and they operate as agents of corporate capital by passing laws, legislation, and regulations in favor of privatization and globalization processes. These political elites operate as translators of the goals and policy preferences of the globalizing corporate elites worldwide. In turn, they receive privileges, tenure and continuity in office, and opportunities for financial and political gains. They form the "second stratum elites" (for more on this concept, see Zonis, 1975; Farazmand, 1989: pp. 21-27) whose mandate is to translate the dictates and wishes of the powerful corporate elites into operational reality. Through privatization, these political elites not only turn over the national and local economies into the hands of private corporate elites, they also act as agents of implementation in the globalization process and serve the interest of rapid accumulation of capital.

So privatization deprives citizens and societies of their most valuable national assets and puts governments and countries at the risk of manipulation, abuse, and dictation by global corporate elites, a phenomenon that will lead many counties to potential bankruptcy and bondage, as noted above. As strange as it may seem, governments do go bankrupt (Rose and Peters, 1979). If the new global order is accepted, the present and future generations will have to face the prospect of accepting the political and economic bondage imposed upon them by the contemporary global elites and the governmental agents who carry out their dictates. With sweeping privatization and loss of national assets, a culture of begging and dependency will flourish, as peoples and organizations are forced to ask for funding from monopolistic business corporations who give money with conditions attached that ensure the promotion of the culture of globalization of capital and its goal of rapid surplus accumulation.

This it how it seems at the turn of the century. Perhaps, however, the globalizing/privatizing process will not endure indefinitely. States and peoples still have some capacity to defend their own interests, and they may be able to exploit some of the contradictions within the corporate capitalist system.

Conclusion: Implications for Public Management Education

Several general consequences for governance and public administration of globalization and of privatization as a strategic instrument of globalization have been noted here. To conclude, it is worth considering some implications for public management education worldwide as we move into a new century.

Positive Implications

There is a positive side. With the aid of technological innovations, globalization of capital has promoted interconnectedness among peoples and markets--even though the authoritative flow of information and communication has been mainly unidimensional, emanating from the industrialized, globalizing powers. And, as part of this promotion, the profession of public administration in general, and public management in particular, has acquired new skills to facilitate more efficient and more flexible functioning in decision-making, in managerial processes, and in ensuring that performance is based on results and outcomes--even though this is often at the expense of quality, equity, and procedural due-process of fairness and accountability.

Also, globalization and privatization have forced public administrators and managers to appreciate what they have and not to take things for granted. A degree of chaos and uncertainty has helped to introduce new blood into sluggish administrative systems; there has been a wake-up call for many in the bureaucratic systems of administration worldwide. Moreover, a flow of new knowledge and information generated by the worldwide debate on market-oriented reforms has been injected into public administration education systems around the world; undoubtedly some new skills have been injected into public management.

Moreover the idea of "thinking globally and acting locally" has spread worldwide to link local problems to global ones and vice versa. Building such a global consciousness is both important and helpful in enlightening narrow-minded and parochial thinkers in public administration, not least in the US and Western European nations.

Negative Implications

Clearly, however, there is also a negative side. The globalization threat to democracy, self-determination, independent governability, and state sovereignty noted earlier has a significant impact on public administration education around the world, especially in the developing and less developed nations. The latter group of nations, as well as the former Eastern European socialist counties, are now being forced to adopt structural adjustment policies and programs that include redirection of their public management goals and objectives and their educational curricula. The funding that comes to them supports globally oriented public administration and management programs.

Globalization has meant the spread of American values and American-type administrative systems by means of both coercion and cooptation. History has shown that this spread can have serious social and political consequences in the long run, as it did during the post-1953 military coup d'etat under the US-imposed Point IV Plan in Iran. Such global standardization tends to destroy, as the Romans did to their subjugated peoples, cultural uniqueness and diversity, and forces nations and their public administrative systems into dictated standards that favor globalization of capital and the ensuing global empire. In an effort to reverse this trend, a first need is for all governments to re-establish and then preserve distinctive public administration education programs that acknowledge diversity and cultural differentiation, even as they adopt new concepts of management as a supplement.

A second need is to correct the adverse effects of the sweeping privatization of public enterprises and many core governmental functions, and of the new public-private sector configuration that has emerged in favor of expanding the monopolistic and oligopolistic corporate sector that is now dominating the world. The shrinkage of the public sector has meant a sudden surge in the ideological element within public administration education that stresses market supremacy and endlessly proclaims government inefficiency. The shrinkage also involves a significant diminution in the capacity and skills of public administration and public management in performing the public's business and serving the public interest. These trends must be reversed, as must the creeping psychological feeling of public sector inferiority as against market-corporate superiority that is being injected into the minds and souls of otherwise competent public administrators. Scholars, policy-makers, and practitioners in public administration must be on a constant vigil to expose and destroy such a psychological cancer, and build an antibody into the educational programs that would neutralize this damage.

The present damaging trends include the restructuring of public management education programs around the world to emulate business schools' curricula and programs of study. It is symptomatic of the general problem that, in the NPM countries, much of the training effort has been contracted out to the "private consulting class" which represents corporate capital and so influences what is actually conveyed in the programs. There has also been a strong trend for existing and future public administrators/managers to go to university MBA schools for their formal academic education rather than the more traditional MPA schools. This new business orientation in public management education must be resisted and reversed in order to preserve the spirit of public administration as an agent of "public trust." Currently, as already argued, public management is being transformed into an "agency of globalizing capitalist elites" whose main interest is to further the absolute rate of surplus accumulation at any cost, and today's public administration education furthers that transformation. The programs need to be redirected to establish a system that educates for "public spirit," "public trusteeship," and professional independence in the service of broad "public interests."

Sweeping divestment of public enterprises, contracting out, and outsourcing have tended to cripple the ability of governments to perform their basic functions of maintaining a balance between society's institutions of market and politics. Governments have abandoned their traditional role of resource allocation, economic stabilization, equitable distribution of national income, and sponsorship of economic growth and development, all in favor of globalizing corporate capital. In the process, public management has been turned into a "public" agency managing private-corporate business interests, and public administration has been transformed from administration of public affairs into coercive "administration of the public" (see Farazmand, 1997). Shifts in the public administration education process have reflected this transformation worldwide, and this trend must now be resisted and reversed.

With more contracting out and other forms of privatization, there is a stronger need for market regulation and contract management. With the erosion of skills and reduced personnel, governments cannot perform this function effectively, and are forced to seek private contractors to manage contracts (Moe, 1996)--just like asking a fox to watch over chickens. An old Persian saying--"we salt everything that tends to rot; what happens when the salt begins to rot?"--applies to the status of government and public administration worldwide. With the vacating of the field of control over market failures and abuses and with the application of market-corporate management concepts, governments are becoming rotten themselves, hence again the degradation of public management to the status of subservient agent of corporate elites. To stop this degradation, changes in the direction of the public administration education process are drastically needed.

Another source of significant cultural promotion of capitalist values and ideologies of globalization is to be found in the growing sector of non-profit organizations and philanthropic management which has accompanied public-sector shrinkage and business/corporate-sector expansion in America and elsewhere. This development has created a heavy and growing dependency on privately owned large corporate foundations and charity organizations, and is reflected in the corresponding expansion of the component of non-profit management in public administration education programs. Consequently, public management curricula are developing and spreading a culture of "begging" to big business corporate organizations for money and contributions." The new century requires drastic reversal here too.

The slogans and ideologies of globalization and of NPM as its intellectual arm contain many contradictions and paradoxes that must be exposed in the educating of public administrators. For example, the idea of decentralization is being preached while corporate mergers and restructuring have produced over-centralization of organizational power; diversity is preached while pressures for conformity and standardization of norms and values are being pushed by globalizing corporate power structures and the governments that represent them; employee empowerment is preached while, in fact, dis-empowerment and elite empowerment have become the norms; de-politicization is preached even as politicization of public organizations has become a dominant reality.

These contradictions and paradoxes have significant implications both for the theory and practice of, and for education for, public administration, because they give contradictory signals to public administrators and confuse programmatic and pedagogical issues. Scholars, educators and trainers in governance, public administration and public management have a professional responsibility to expose the fallacies of this new paradigmatic and destructive trend in their curricula and programs around the world. The least they can do is to present in their classrooms the adverse consequences of both globalization and privatization, as well as the fallacies, inconsistencies, and contradictions of NPM with its potential damage to democratic governance and public administration.

Herein lies one of the greatest challenges for the public administration/public management community as it enters the 21st century. The issue is so important for the future health of the world community that we dare not fail.

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Biographical Sketch

Ali Farazmand is Professor, School of Public Administration, Florida Atlantic University, Fort Lauderdale, Florida, USA.

Notes

(1.) I have written extensively elsewhere on this and related aspects of globalization and privatization. Works bearing particularly on matters under discussion are cited in the text. For more general amplification, see Farazmand 1994, 1996, 1997, 1999a, 1999b, 1999c, 2001a.

(2.) I will be publishing more on the impact on Iran in the near future.

(3.) For a preliminary analysis of the connection between globalization and democratic self-determination, see Farazmand, 2000, 2001b.

(4.) See e.g. the Opening Keynote Speech of the former President of Tanzania, Dr. Julius Nyerere, at the UN-organized Conference on Governance in Africa, Addis Ababa, March 1998; and my key-note speech at the Plenary Session on "Building Partnerships for Governance" at the World Congress on Governance in Manila, 1-6 June 1999.

(5.) I expect to elaborate on these mechanisms in a later work.

(6.) "Agencification" is used here in a sense different from that in much NPM writing, in which the term indicates a shift of governmental functions from central departments to special-purpose executive agencies established in conformity with Britain's by-now well-known "Next Steps" program. The guest editors comment briefly on this latter development in their introduction to this symposium.

Ali Farazmand

Florida Atlantic University

Florida, USA