Globalization: evolution of capitalist market economy through “Internalization of the Market”

Abstract

The purpose of this article is to theoretically explain and understand globalization in the course of evolution of capitalist market economy through “internalization of the market.” Globalization can be visually depicted as a simultaneous process of expansion of Market and reduction of State and Community. The ultimate destination of globalization is free investment capitalism with ubiquitousness of Marx’s fictitious capital and Becker’s human capital. Differentiating two tendencies in globalization, “extensive expansion of market” and “intensive deepening of market”, we elaborate how the latter tendency proceeds. Based on the view of exogenous market of Marx and Hicks, three modes of commodification—external (E mode), internal (I Mode) and general (G mode)—are identified with different degree of economic integration by the market. They take place successively in internalization of the market. Using the concepts, capitalist economy is defined as the combination of G mode commodification of general goods and E mode commodification of labour-power. We analyze the transition of three modes of capitalist economy using the simple models of corn and labour-power and have found out that the real wage w tend to increase and the uniform rate of profit r tend to decrease as the capitalist economy advances its degree of commodification of labour-power from E Mode to I Mode and to G Mode. Most advanced G Mode capitalist economy can self-activate by countering the falling rate of profit by introducing process innovation either in corn or labour-power sector.