CHAPTER ONE

INTRODUCTION
Capitalism is a world historical phenomenon and its uneven development
means that individual nations cannot be at the same level of economic
development at the same time.
Antonio Gramsci, The Return to Freedom . . ., Avanti!
(26 June 1919)

1.1. Objective of the Study

This is a study of Antonio Gramscis theory of hegemony and counter-hegemony. It will
elaborate on the significance and relevance of his theory in the understanding of
international relations. The study will depict Dr. Mahathir Mohammads prime
international agenda covering both his critique of international financial order, the
returning gold dinar exchange economy and war as an international crime, all as major
parts of an international hegemony move.
This study attempts to apply and expand Gramscis concept of hegemony.
Hegemony is defined as the leadership of any given dominant social force through the
consensual and coercive means within a given historical bloc, which explains further the
relations among the social forces which are mainly depicted with the concept of
hegemony and counter-hegemony. Furthermore, at the national level, hegemony is
exercised by the dominant class.

The international relations is recognized as the

competition of national dominant class in order to establish a certain of global historical

bloc that consists connections of national politico-economy formation (the national

class struggle) with the development of international context; in this term in the
development of international capitalist regime. Therefore, this study engages at two
levels of hegemony; which involves national and international level.
The Mahathirs international agenda connects the Gramscis thesis at the early
period of international capitalist development to the current transnational capitalist
development in the form of neoliberalism. Mostly Gramscis observation was
emphasized on the early stage of development of capitalism at the national formation of
Italy and the emergence of American mode of production through Fordism as the
moment of the birth of the international hegemony of Anglo-Saxon capitalist bloc.
Besides, under the plank of Americanism and Fordism, Gramsci devotes his analysis
on the introduction of mass-production techniques and scientific management processes
on a world scale. The United States was described as the supreme arbiter of world
finance, whereby trying to impose a network of organizations and movements under its
leadership (Gramsci 1992, 1996). During the Gramscis time, capitalism was on
growing process and today, certainly it is well developed. The most leading sector of the
current capitalism constitutes the rising of the finance as the new mode of production in
extracting the wealth and absorbing the wealth of peripheral or subaltern classes to the
core. The architecture of hegemonic bloc since the post-world war II and post-Cold War
are being shaped ideologically by neoliberalism.
Based on Gramscian lenses, neoliberalism should be defined holistically in its own
form of ideology, institutions and mode of production. Ideologically, it is the ideology of
market that posit market as the core institutions of modern capitalist societies which
constitutes both domestic and international level; a set of policy strategies is composed
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by the several pillars that insists to construct the market oriented of society by the
institutions and practices at national and international level. In term of a set of global
policy strategies, it manifested on the practical policies of International Financial
Institutions (IFIs), World Trade Organizations and the others multilateral organizations
that centered in the Anglo-Saxon world. Neoliberalism is manufactured and
universalized within the global civil society through the academic institutions and
international institutions. The construction of neoliberal global common sense could also
be seen within the scientific doctrines and the practically concretize in form of policies.
In term of mode of production, the most leading sector of the current capitalism
constitutes on the rising of the finance as the new mode of production in extracting the
wealth which dominated by the Anglo-America capitalist class.
In the modest way, Dr Mahathir Mohammad observes the current form of
Fordism in a new guise at a new level. He sees international financial order as an
instrument of Anglo-American hegemony. He observed that the returning gold dinar
exchange economy as a counter-hegemony move. He further argues that the spreading
wars nowadays are being linked to the Anglo-American Financial hegemony through its
banking networks, petrodollar and international institutions policies. He therefore saw
war as a crime agenda part of his counter-hegemony move.
Those moves stated above have linked Dr Mahathir Mohammad with the
Gramscis thesis of hegemony at the initial period of the capitalist development. He
organizes two level of counter-hegemony program. First, he is against the predominance
of global finance capitalism. He stood at the forefront, resisting all of the treatment and
prescription provided by the global capitalist regime. In other words, he broke the rules
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of the new constitutionalism of disciplinary neo-liberalism. The new constitutionalism

is defined as the political project of attempting to make transnational liberalism
acceptable, and if possible liberal democratic capitalism as well. Meanwhile, the
accountability of governments is to markets, to abide to mainly to material forces and
sentiments of investment managers in the bond markets (i.e., of institutional investors
such as pension funds, unit trusts, insurance companies) and to the conditionality of the
Bretton Woods organizations.
Secondly, Dr Mahathir Mohammad, as the founder and chairman of the Perdana
Global Peace Organization, organized a global movement to criminalize wars. Worldprominent professionals, intellectuals, authors, statemen and the international nongovernmental organizations were brought to the world conference, uniting them into one
single movement to world towards making wars as a crime against humanity. For
Mahathir, war has multi-facet objectives, which constitutes crime against humanity. For
instance with its political economy dimension such as the arms business, the natural
resources exploitation), involving the clash of identities and the imperialism characters.
In this respect the anti-war movement is accounted as the transnational civil society
movement against a new form of imperialism.
This study argues that the saturation of hegemonic world order aims to correct,
critic, resist and remove through the sustainability of counter-hegemony program.
Mahathirs strong stance is against the domination of Anglo-Saxon capitalism on the
united front of finance and war. To summarize, this study will strive to reinterpret Dr
Mahathir Mohammads counter-hegemony movement within the Gramsci theoretical
framework of hegemony.
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1.2. Problem Statement

The ascendancy of finance-war historical bloc has subjugated and subordinated the mass
of developing countries. It attested to the rapid circulation of financial crisis. On the
other hand, the developing countries insisted to compel the disciplinary of neo-liberal
which is institutionalized at macro-level of power in the quasi-legal restructuring of state
and international political economy forms. It constituted the new constitutionalism the
trinity of IMF, World Bank and World Trade Organization and the accountability of
governments to markets which indicated by the material forces and opinion of
transnational capitalist class, particularly institutional investors, again such as pension
funds, unit trust, insurance companies and speculators. The wealth of developing
countries were manipulated and absorbed through the unregulated of global finance and
increasingly the debt bondage. On the other hand, war remains as the instrument of
imperialist to extract the wealth of the peripherals and dismantle the humanity on the
behalf of interests of the hegemon.
Thus, it needs concrete strategies of counter-hegemony as the alternative of world
order to dismantle of finance-war historical bloc as what Mahathir have started and it is
an ongoing or continuous process through a tireless campaign against Anglo-Saxon
economic domination who assiduously courted American and European anti-war
movement activists. The dialectic struggle between the finance-war hegemony with the
Mahathirs movement will be analyzed within the framework of international political
economy both in term of theory and praxis.

1.3. Research Questions

Departing from the problem statement above, this study attempts to answer the guiding
questions below:
a) How relevant are Gramscis writings in illuminating the current international
political economy dynamics?
b) What are the trajectories of historical movement in the finance-war hegemony of
the neoliberalism?
c) What are Mahathirs strategies in countering finance-war hegemony both at
intellectual and praxis level?
d) What is the alternative world order propagated by the counter finance-war
hegemony of Mahathir?
1.4. Objectives
The general objectives of this study are to establish the theoretical and practical
connections of capitalist finance and capitalist war within Gramcian hegemony
construction; as Antonio Gramsci observed it happening in Italy-Europe international
ecology and as Dr Mahathir Mohammad observing it happening during the Asian
financial crisis and its aftermath. This study, therefore, has the following objectives:
1.1.To interpret and expand Gramscis thinking in contemporary International
Relations and International Political Economy area, facilitating an understanding
of how the hegemonic order has evolved and its impact on peripheral countries.
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1.2.To establish a comprehensive understanding to the connections of finance and

war hegemony as the pillar of contemporary global hegemony.
1.3.To identify Mahathirs strategies as a concrete historical movement within the
Gramscian perspective.
1.4.To analyze the alternatives of world order, particularly on the international
political economy in the future, in light of an articulation of Mahathirs counterhegemony.
1.5. Significance
Three contributions both on theory and praxis can be identified,
a) The study will contribute to enrich the Gramscian school of thought on
hegemony in current international political economy and its extension to include
the problematic of global financial crisis and wars. Applicated Gramscian
dialectic theory will be analyzed on its implication for the sub-ordinates that
affected of the marginalization processes such the financial crisis.
b) The study on the Mahathir case will significantly contributes to the distinction of
the application of Gramscian dialectical theories on hegemony to Mahathir
Mohammads articulation in his counter-hegemony which defined in his financewar dialectic.
c) This study of Third World leaders responding to globalizing capitalism may be
useful for other Third World leaders to ponder and adopt.

1.6. Scope
The study will be at two levels, the first will be to identify Gramsci main theoriticalpractical level of his hegemony at both finance and war dialectic. The second level will
be Gramscian application on Mahathir Mohammad understanding of the AngloAmerican capitalist hegemony and Mahathir Mohammad is seen as global justice and
peace advocate rather than as a Malaysian politician. Thirdly, in term of time period
concerned, this study covers Mahathirs movement since the Asian financial crisis and
aftermath situations.
1.7. Theoretical Framework
This section examines the theoretical ground referred to in this study. Reference will be
made to Antonio Gramsci writings on both the pre-prison writings and Prison Notebook
to neo-Gramscian school of thought such as Robert W Cox (1987, 1996, 1992, 2002,
2005, and 2006), Stephen Gill (1993, 1998, 2003, 2005), Randall D Germain (1997),
Kees van der Pijl (1998), Marx Rupert (2000, 2003, 2005), William I Robinson (2006).
Gramscis conceptions will be assessed in international relations area. Gramsci in his
writing proposed a comprehensive analysis on the culture, politics, economics,
philosophy, language, religion and social aspects, and this study will reflect their
concretization in the concepts of hegemony, passive revolution, historical bloc, counterhegemony and organic intellectual.
Antonio Gramsci (1891 - 1937) was known as a leading Italian Marxist. He was an
intellectual, a journalist and a major theorist who spent his last eleven years in
Mussolinis prisons. During his life, he completed 32 notebooks containing almost 3,000
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pages. These notebooks were smuggled out from his prison and published in Italian after
the war but did not manage to find an English-language publisher until the 1970s. The
central and guiding theme of the Notebooks was the development of a new Marxist
Theory applicable to the conditions of advanced capitalism. Gramscis thought departing
from his critique on Machiavelli and his idea of unification Italy at that time expanded to
cover historical materialist of Marx and to dismantle the hegemony of Italian capitalism.
The asymmetric relation of the uneven development and developed capitalism is
the departing point for Gramsci in examining the form of domination and exploitation
via hegemony over the subaltern class. In some aspect of the Southern Question
represents the national conditions of Italy with an imbalance relation among the social
class forces, the urban capitalist class and the urban working class, the landowning class
and the peasantry class; with Italian manufacturing capitalism shaping its nation building
process of the post-risorgimento and post-Russian Revolution delivering Gramsci with a
depth observation of the growth of hegemony and the prospective struggle and the
search of an alternative order. Gramscis thought developed in his involvement as a
socialist journalist, then as a political militant and a leader, and finally as a political
prisoner which dismantled his role as an activist. To summarize, he was a man of action
but caged.
The relevance of Gramscis writing to the current international political economy
sphere is to persist, that there are the connections of national politico-economy
formation (the national class struggle) with the development of international context; in
this term concerning development of international capitalist regime. As Morton (2007)
argued that the concept of organic and conjunctural historical movements, in the passive
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revolution movement, contained similar concept but at different level. The relations
within society (involving the development of productive forces, the level of coercion, or
relations between political parties) constituted hegemonic systems within the state, and
were inextricably linked to relations between international forces (involving the
requisites of great powers, sovereignty and independence); the combinations of states in
hegemonic systems (Gramsci, 1971, p.176). It could be said that, in the international
sphere, competition, the struggle to acquire private and national property, creates the
same hierarchies and system of slavery as in the national sphere (Gramsci, 1977, p.69).
Broadly speaking, Gramsci offered the concept hegemony and the moment of
hegemony as both the consensual and coercive means exercised by the dominant social
class forces in constructing a historical bloc. In terms of the consensual instrument, the
expansion of American capitalist mode of production provided Gramsci with a sharp
observation on the raising of a new world hegemony after the decline of British
hegemony. Under the plank of Americanism and Fordism, Gramsci devote his analysis
on the introduction of mass-production techniques and scientific management processes
on a world scale (Gramsci, 1971, pp.279318). The United States being described as
the supreme arbiter of world finance, was trying to impose a network of organizations
and movements under its leadership (Gramsci 1992, 1996). In other words, Gramsci
observation was emphasized on the early stage of development American mode of
production as the moment of the birth hegemony of Anglo-Saxon capitalist bloc.
In terms of the coercive instrument, Gramsci aggressively opposed colonialism
with most the European capitalist states occupied the extra territories over their national
territory in order to fill their home industrial capitalist needs. The colonial war regarded
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as the greedy of the capitalist states, which exploited and absorbed all of resources of
colonies to feed capitalist ambition of accumulating capital. By his metaphor, Gramsci
argued that for several years we Europeans have lived at the expense of the death of the
coloured peoples: unconscious vampires that we are, we have fed off their innocent
blood (Gramsci, 1971, p.113). For him, the colonial war is the class struggle between
the coloured peoples against the white exploiter and murderer as he wrote:
But today flames of revolt are being fanned throughout the colonial world.
This is the class struggle of the coloured peoples against their white
exploiters and murderers. It is the vast irresistible drive towards autonomy
and independence of a whole world, with all its spiritual riches. Connective
tissues are being recreated to weld together once again peoples whom
European domination seemed to have sundered once and for all. (Gramsci,
2000, p. 113)

Gramsci specifically provided the evident that the world hegemony lied on the
power of colonialism and imperialism within the global politico-economic system of
Anglo-Saxon capitalism and his focus on dimensions of Anglo- Saxon world
hegemony (Gramsci 1977, pp. 7982, 8993). It could be conceived through his
question:
Is the cultural hegemony by one nation over another still possible? Or is the
world already so united in its economic and social structure that a country, if
it can have chronologically the initiative in an innovation, cannot keep its
political monopoly and so use such a monopoly as the basis of hegemony?
What significance therefore can nationalism have today? Is this not possible
as economico-financial imperialism but not as civil primacy or politicointellectual hegemony? (Gramsci 2001,pp.45).

The relevance of Gramscis writings on the present international political economy

context is persist, nurturing, significant debates on his thinking and how it illuminates
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the international political economy struggle in a changing ecology of the twenty first
century. This study concurs with the argument of Stuart Hall (1988) who endorses
thinking in a Gramscian way about the history of ideas and present-day problems rather
than simplistically believing that Gramsci has the answers or holds the key to particular
problems. In addition, Morton (2007) argue that there is much in Gramsci that can help
us to think through the particular issues of hegemony and passive revolution in the
global political economy. For instance, in comparing the world order at the Gramscis
time with the current, the starting points of the outward expansion of American
capitalism to the entire world as defined by Gramsci and the trajectory of historical
movement have attested by the emergence of neo-liberalim as the historical bloc of the
twentieth first century. Since its birth, American capitalism has evolved and developed
in the advanced character and justified itself as a universal mode of production of the
entire world, particularly, since the collapse of Uni Soviets communism as the
contested ideology of capitalism. The thrust of capitalism has again been seen as the
mode of production or as ideology of the day. Therefore, the architecture of hegemonic
bloc since the post-world war II and post-Cold War are being shaped ideologically by
neo-liberalism (Cox, 1996; Gill, 1993; Murphy, 1999 & Worth, 2005).
Gramsci was not concerned as an abstract theorist with building a system of
political analysis that would stand the test of time. He was concerned with the
possibilities to changing his world. Cox (2005) suggests that any development of his
thinking should keep that goal to the fore and should thus both arise from reflection on
the condition of the world as it is, and serve as a guide to action designed to change the
world so as to improve the lot of humanity in social equity. Civil society, in Gramscis
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thinking, is real in which the existing social order is grounded; and it can also be the
realm in which a new social order can be founded. His concern with civil society was
first, to understand the strength of the status quo, and then to devise a strategy for its
transformation. The potential of emancipatory of civil society was the object of his
thinking (Cox, 2005, p. 97).
Although, most of Gramscis work deals with on the national formation of Italy
but in some part of his writing, Gramsci also examined the international relations milieu
at his time. In relation to this, we can begin with this passage to apprehend the
international relations by Gramscis perspective;
Do international relations precede or follow (logically) fundamental
social relations? There can be no doubt that they follow such relations.
Any organic innovation in the social structure, through its technicalmilitary expressions, modifies organically absolute and relative relations
in the international field too.However, international relations react
both passively and actively on political relations (of hegemony among the
parties). The more the immediate economic life of a nation is
subordinated to international relations, the more a particular party will
come to represent this situation and to exploit it, with the aim of
preventing rival parties gaining the upper hand (Gramsci, 2001, p. 398).

He asserted that the basic change in international relations, which are observed as
changes in military, geopolitical and economic aspect. The Party (in this context is the
projection of the State) will utilize its resources to dominate the form of interstate
relations in order to prevent the rival parties attaining the higher position in international
level. The state is the basic entity in international level and the place where social
conflicts and development of dominant group take place. Furthermore, international
forces as referred in the notes were about great powers, on the combinations of States in
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hegemonic systems. Hence referring to the concept of independence and sovereignty as

far as small and medium powers are concerned and relations within State concerning the
degree of development of productive forces; and relations of political force and those
between parties (hegemonic systems within the State); and to immediate (or potentially
military) political relations (Gramsci, 2001, pp. 397-398).
Gramsci contend that a State is an organ of a particular group. The relations of
force within the State will be engendered by a dominant or hegemony group. This group
will expand its influence to the other States by co-operating or collaborating with the
general interest of subordinate state. The development and expansion of a particular
group can be conceived as universal expansion. The well developed of the dominant
group within a state will spread on its own particular ideology, norm, which values less
to the developed countries (subordinate state). These interaction followed by the
constructing of the new pattern of interaction that corresponded by its own organized
economic and political expression in international relations. Gramsci was defining
international relations as the intertwine of the internal relations of nation-states, creating
new, unique and historically concrete combinations. A particular ideology, for instance,
born in a highly developed country, is disseminated in less developed countries and
impinging on the local interplay of combinations. This relation between international
forces and national forces is further complicated by the existence within every State of
several structurally diverse territorial sectors, with diverse relations of force at all levels
(Gramsci, 2001, pp. 406-407).
In the context of the combination of relation between local (domestic) and
international, Gramsci rendered that international organizations had significant role to
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construct the new form of interaction. Gramsci offered concrete example of the interrelationship of international relations with internal relations of nation-states:
Religion, for example, has always been a source of such national and
international ideological-political combinations, and so too have the other
international organizations- Freemasonry, Rotarianism, the Jews, career
diplomacy. These propose political solutions of diverse historical origin,
and assist their victory in particular countries- functioning as international
political parties which operate within each nation with the full
concentration of the international forces. A religion, freemasonry, Rotary,
Jews, etc., can be subsumed into the social category of intellectuals,
whose function, on an international scale, is that of mediating the
extremes, of socialising the technical discoveries which provide the
impetus for all activities of leadership, of devising compromises between,
and ways out of, extreme solutions (Gramsci, 2001, p. 407).

In Gramscis perspective during that time, what occurred in Italy was affected by
the external power. In this case, the French revolution has undergone profound social
and economic revolution which has lead to the outcome of the revolution in form of state
and of social relations. France emerges as the great power and well developed country
during that time. This condition made France having relative freedom to determine its
foreign policy in order to fulfill domestic interest and this can simply create a terrain of
more favorable condition to the dissemination of certain modes of thought, and certain
ways of posing and resolving questions involving the entire subsequent development of
national life. The mode of thought, pattern of social relations, economic system and
ideology of France penetrated into Italy through the international institutions such as
trade union and Freemasonry. It enters to the social fabric in Italy by harmonizing the
interest of France and particular group in Italy. Those interactions engendered the rule,
custom and pattern of interaction legitimizing domination of France in Italy with what in
Gramsci sense called as domination in the consent way.
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The emergence of Gramscian works in International Relations was pioneered by

the work of Robert Cox, Gramsci, Hegemony and International Relations: an Essay in
Method in early 1980s that published in Millennium. His work considered as the
introduction of the application of Gramscian concept to the international level.
Subsequently, the scholar who applies and expand Gramscian framework in
International Relation is called as the neo-Gramscian school of thought. According to
Femia (2005), the application of the Gramscis concept in International Relations and
International Political Economy as the result of interpretation of Gramscis work on the
hegemony and civil society is internationalizing idea. The concepts that are developed
by the neo-Gramscian scholars as a result of reinterpretation, expansion and
internationalization of Gramscis ideas in analyzing the hegemony in International scale.
The basic assumption of Gramsci which is the problem that faced by every society
is different, however surprisingly for Gramsci the content is the same. The content is the
dialectical process between hegemony influence and the subordinate groups. The basic
element of politics is the existence of two social groups; the few of ruling group and
majority of ruled group or the leader and the led.

As a result, from these stated

conditions, Gramsci departed to analyze how the rulers managed and led effectively by
diminishing the resistance of the ruled. This concept can be effectively applied in
analyzing international relations which constitutes the two forces of hegemony and
subordinate state. This can be conceived when we analyze the stratum in IR that consist
of the division of Sate; the core and periphery, developed and developing countries.
Hegemony keep retaining and maintaining its influence in International Relations and

16

make all endeavor to prevent the subordinate State gaining the power to challenge its
domination by all its resources.
Behind the Gramscian lenses, hegemony at international level can be seen as the
domination of the powerful states in economic, politic, ideology and culture that
universalized through the global institutions. The hegemony in global scale is based on
the consent and consensus rather than coercion. A world hegemony derived from the
expansion and dissemination of the internal (national) hegemony that established by a
dominant class within a state beyond its boundaries or global scale. Therefore, an order
was generated in which penetrates into all countries and accepted as the global order.
Cox (1996) argues that
World hegemony can be described as a social structure, an economic
structure, and a political structure; and it cannot be simply one of these
things but must all three. World hegemony, furthermore, is expressed in
universal norms, institutions, and mechanisms which lay down general
rules of behaviour for states and for those forces of civil society that act
across national boundaries, rules which support the dominant mode of
production (Cox, 1996, p. 137).

Hegemony assembled upon the complex interconnection of economy, politics and

social architecture that developed by the powerful state and accept as the global norms
and values. The exercising of hegemony in world order, Cox (1996) divided into three
periods which are, first period 1845-75, British as the center of world economy or Pax
Britanica. Economic doctrines which are consistent with British Supremacy. However
in universal context in the form of comparative advantage, the gold standard spread
gradually outward from the Britain. Britain ruled supreme at sea and had the capacity to
enforce obedience of the peripheral countries to the rules of the market. The second
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period (1945-65) was the decline of British hegemony brought about by the two world
wars in Europe, free trade was replaced by protectionism and the gold standard was
abandoned. United States emerges as the new hegemony or Pax Americana which
similar in the basic structure that dominated Britain in middle of the nineteenth century.
Hegemonic world order was established by institutions and doctrines adjusted to a more
complex world economy. The third period (1965-present), US-based world order was no
longer working well. During 1965 to early 1970s, there were structural transformation of
world order opened up and increased fragmentation of the world economy around the
big power centered economic spheres (Cox, 1996, pp.135-136).
A hegemonic order thus emerges out of the successful formation of an
international historic bloc of social forces that in turn is premised upon the articulation
of a dominant ideology that accepted by subordinate classes. The hegemonic world order
(intellectual and moral leadership in international system) is created by the interactions
between the dominant state and dominant social forces with the subordinate states and
social forces. In other words, it is a product of a universal dominant society and
civilization. For example, during the postwar years, a neo-liberal form of State took
shape in the European countries based on a negotiated consensus among the major
industrial interests, organized labor, and government. The neo-liberal historic bloc is
represented by the G-8 countries and the IFIs (Ozcelik, 2005 & Cox, 1996).
Coxian understanding of hegemony implies that the necessity of global structural
change and world order in terms of the dynamics and dialectics of their normative
(ethical, ideological, practical) as well as their material dimensions (Gill & Law, 1993).
Coxs theory emphasizes the structural and macro level of variables to understand the
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triad relationship of social forces, form of state, and world order. In Cox' point of view,
the creation of world order is a result of hegemon and the formation of a historic bloc.
A historic bloc is organized around a set of hegemonic ideas a dominant ideology
that forms the basis for an alliance between social classes. Therefore, a successful
historic bloc is organized through the exercise of intellectual and moral leadership and
forms the organic link between political and civil society (the extended or integral state)
(Cox & Sinclair, 1996).
According to Gramsci, civil society constitutes of the formal and informal
networks, institutions and cultural practices which mediate between the individual and
the state. The formal (state apparatuses) and informal institutions/civil society (church,
education system, media, etc) play a significant role in establishing and maintaining
hegemony position. There is no distinction between the political and non-political
institution in analyzing the raising of hegemony. In order to apply the original concept of
civil society that suggested by Gramsci in global society, we can consider that the
political institution (State) that exercises coercive means as nation-states. On the other
hand, international regimes or international institutions can be considered as the nonpolitical institutions that play a role as consenting way in order to establish the voluntary
of the nation-states to maintain and to preserve the position of hegemony.
In order to expand the Gramscis notion on the function of organization and
institution in the context of international , international organizations have the function
through the process which involves the institutions of hegemony and thus ideology are
developed. Murphy (1994), sees the history of international organization driven by the
cosmopolitan bourgeoisie and its class allies. Among the features of international
19

organization which express its hegemonic role are the following: (1) the institutions
embody the rules which facilitate the expansion of hegemonic world orders; (2) they are
themselves the product of the hegemonic world order; (3) they ideologically legitimate
the norms of the world order; (4) they co-opt the elites from peripheral countries; and (5)
they absorb counter hegemonic ideas (Cox, 1996, pp. 137-138).
We can conclude that the hegemonic condition emerge when a state or a group of
state is established, thus promoting and to universalize certain ideology. Majority of
others accepted its ideology as global norms and value which implement in the
international institutions as guidelines and regulations. Therefore, hegemony appears in
the subtle form which does not directly exploit others but certainly an order which most
other states could find it compatible with their interest. It means that hegemonic order
exercise the consent way to preserve the position of hegemony, and to maintain its
interests and further exploits the subordinate states in the subtle way through the
establishing This will create universal norms and values which include global
institutions and global mechanism or world order.
The architecture of hegemonic bloc since the post-world war II and post-cold war
were shaped ideologically by neo-liberalism (Cox, 1996; Gill, 1993; Murphy, 1999 &
Worth, 2005). The hegemonic project that most orthodox International Political
Economy (IPE) theorists believed stemmed initially from the oil crisis in the early 1970s
materialized into coherent set principles, norms and practices that were consolidated
through institutionalization (Worth, 2005). One aspect of neo-liberal dominance is the
growing structural power of capital, relative to labour, and states. This neo-liberal shift
involves the growing strength and positional power of neo-liberal ideas, their application
20

in the practices and organizational forms of key social institutions (for example, state,
market, international organization), and the reconfiguration of material power relations
and a redistribution of wealth ( which results in the growth and power of the capital,
relative to labour) (Gill, 2005a).
Within the Gramscian lense, neoliberalism is conceived as the ideology of market
that posit market as the core institutions of modern capitalist societies both domestic and
international level. Mainly, it could be identified as a set of policy strategies and the
popular common sense. Neoliberalism as a set of policy strategies is composed by the
several pillars; first, it insists to construct the market oriented of society by the
institutions and practices; secondly, it encourages the behavior of people from all social
class in form of individualistic culture or market oriented behavior; thirdly, the national
governments and international institutions should develop the conduciveness of market
milieu through national and international policies such as privatizing social and public
services, promoting international competitiveness, deregulating and liberalizing specific
markets or sectors, using international aid and regulation to promote marketization
through conditionality. Finally, the related to the trade and capital flows should be
increasingly eliminated (Cerny & Soederberg, 2005).
Ideologically, the neoliberalism is nothing than as the scientific doctrines and
social mythologies. The construction of neoliberal global common sense could be seen
within the scientific doctrines and the practically concretize in form of policies. The
given economic and social problems are prescribed within the uniformity of theoretical
foundation through the propaganda of there is no alternative. They produce the
theoretic sophistication that epistemologically is derived from a logically exact,
21

mathematical economic science backed by quantifiable, truthful, empirical evidence

(Peet, 2003). The main objective is to modify the states policy in regarding to the
control of the market and to sterilize the market from the intervention of state.
Consequently, the capitalist classes persist to secure their economic interests beneath the
scientific doctrine of neoliberal or in the other words, neoliberalism is considered as the
scientific superstition of economism in the advanced form, as Gramsci asserted that
historical sedimentation of popular common sense is not something rigid
and immobile, but is continually transforming itself, enriching itself with
scientific ideas and with philosophical opinions which have entered ordinary
life. [It] is the folklore of philosophy . . . (Gramsci, 1971, p. 326).

Furthermore, the common sense of neoliberalism is manufactured and

universalized within the global civil society through the academic institutions and
international institutions. In regard to the intellectual production, it could be seen within
education institutions of the advanced capitalist society as such the Austrian School of
Economics in Vienna in the early twentieth century, the London School of Economics in
the 1930s, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam
Smith Institute, all in London, the ordo-economics school of Walter Euchan and Franz
Bohm at Freiburg and the Hoover Institution at Stanford University in California (Peet,
2003). In term of a set of global policy strategies, it manifested on the practical policies
of International Financial Institutions (IFIs), World Trade Organizations and the others
multilateral organizations that centered in the Anglo-Saxon world. The media, both
domestic and international, have significant role in constructing the discourses of
market-oriented society as such as newspapers, televisions, radios and also internet.

22

The hegemonic project that most orthodox International Political Economy (IPE)
theorists believed in stemmed initially from the oil crisis in the early 1970s that
materialized into coherent set principles, norms and practices that were consolidated
through institutionalization (Worth, 2005). One aspect of neo-liberal dominance is the
growing structural power of capital, relative to labour, and the state. This neo-liberal
shift involves the growing strength and positional power of neo-liberal ideas, their
application in the practices and organizational forms of key social institutions (for
example, state, market, international organization), and the reconfiguration of material
power relations and a redistribution of wealth (with the growth in the power of capital,
relative to labour) (Gill, 2005a). The current global order precisely has attested what
Gramsci wrote more than 70 years ago that:
not only a unison of economic and political aims, but also intellectual
and moral unity, posing all the questions around which the struggle
rages not on a corporate but on a universal plane, and thus creating
a hegemony of a fundamental social group over subordinate groups
(Gramsci, 1971, pp.1812).
What is the difference of the feature of world capitalism at the Gramscis time
with the current? At the Gramscis time, capitalism was on growing process and today, it
is well developed. The most leading sector of the current capitalism constitutes on the
rising of the finance as the new mode of production in extracting the wealth and
absorbing the wealth of peripheral or subaltern classes to the core. The rapid
development of financial capital has erased the national border of the entire world into
the integration of single capitalist system. Susan Strange (1986) illustrated the mobility
of finance as the casino capitalism. On the other perspective, Richard OBrien (1992)
argues that the global financial integration is the end of geography. The financial
23

capital flows are unrestricted and unregulated from the one country to other countries
which promise the maximum profit. The question is on who controls the financial capital
and gains the benefit from the capitalist financial system. The current global financial
system has dominated by the transnational capitalist class demonstrated by the
increasing of private credit to the ratio of public credit in an approximately 1:1. Between
1972-6 this was transformed to roughly 2:1, and by 1992-3 stood at 83 percent private
and 17 per cent public (Germain, 1997, p.119). Most credits are used in the financial
activities of speculation such as in joint stock exchange and currency trading.
The financial capitalist system is facing an endemic crisis. Capitalism now refers
to permanent instability. The tendencies resulting from this competition of capitals,
together with the evolution of the social relationship of forces (between capitalists,
between capitalists and the dominated and exploited classes, and between the states
comprising capitalism as a world system), can account as a posteriori for the movement
of the system from one disequilibrium to the next (Amin, 2005).

Therefore the

contemporary financial order is crisis-ridden. Prior to the Asian crisis, a study by an IMF
economist found that out of the Funds 181 member states, 133 had experienced
disruptions to banking practices between 1980 and early 1996. Overall from the findings
it was classified 108 instances of disruption as significant, and 41 instances in 36 states
as a crisis. In many instances of crisis, disruptions generated a sizeable reduction in
GDP. Both the high frequency of crises and the extent of their detrimental consequences
for economic growth were found to be worse than for any similar period since the Great
Depressions of the 1930s. More significant in our terms, the contemporary financial
order itself has lurched from one major crisis to another (Langley, 2002).
24

Historically, crisis was born in the same time with the emergence of capitalist
system. Charles Kindleberger (1996), the economic historian, on his work Manias,
Panics and Crashes: a History of Financial Crises provides the deep historical
observation of crisis within capitalist system. As being one effective pathway to
examining the patterns of continuity and change it is worth examining earlier financial
upheavals. Charles Kindleberger concludes that ever since the Tulipmania in Holland
(1636-1637) and the South Sea Bubble in Britain (1711-1720); financial crises have
followed a common pattern. Tulips arrived in Holland with extended trade and became,
in the early-seventeenth century, a luxury good is sold to courtiers and country
gentlemen. Speculation in common bulbs started in November 1636, and prices crashed
in February 1637. The name South Sea Bubble is given to the economic bubble that
occurred in Britain through overheated speculation in the South Sea Companys shares
during 1720 (the company was granted exclusive trading rights in Spanish South
America in 1711).
The asymmetric relations of the hegemonic state with the peripheral is not only
within the mode of production of the finance capitalism, instead, it is also in the form of
coercion. The hegemony also exploits the peripheral through the war/imperialism in
order to maintain its domination. Currently, imperialism defined as a machine of global
striation, channeling, coding, and territorializing the flows of capital, blocking certain
flows and facilitating others. The world market, in contrast, requires a smooth space of
uncoded and deterritorialized flows (Hardt & Negri, 2000). In fact, by the end of Cold
War, In the 1990s the US ruling elite immediately began using this strategic asset to
redraw the imperial map of the world, first in the Gulf War and then in the Kosovo war.
25

Secondly, as the unilateral response on the attack of World Trade Center in 2001, US
launched the invasion of Iraq and Afghanistan. Those imperialist war is a product of the
neo-liberal period of capital accumulation beginning in the late 1970s combined with
the reordering state system started with the end of the Cold War in 1989 (Rees, 2006).
War is not for free and war has multifaceted objectives. For instance, Stiglitz &
Bilmes (2008) counted that the upfront cost of the wars in Iraq and Afghanistan, the
amount Congress has appropriated and the military has spent, now exceeds $800 billion.
That number - the one most often discussed in the news media includes the presidents
current request for approximately $200 billion to wage the war in 2008, plus more than
$645 billion in funds that Congress has already appropriated for Iraq and Afghanistan
since 2001. This money covers funding for combat operations, transporting troops,
deploying, feeding, and housing them, deployment of National Guard and Reserves,
food and supplies, training of Iraqi forces, purchasing and repairing weapons and other
equipment, munitions, supplementary combat pay, providing medical care to troops on
active duty and returning veterans, reconstruction, and payments to countries such as
Jordan, Pakistan, and Turkey for their logistical help.
Due to the wage of war being costly; imperialist power should afford at all cost
and make capital or money with it. For instance, at the Balkan war, according to the
Financial Times, to develop the areas rich oil and gas deposits to the exclusion of
Russia. As Rees (2006) wrote that there was and is a rich prize at stake in the Caspian
Sea region. Its proven oil reserves are estimated at between 16 and 32 billion barrels,
comparable to the USs reserves of 22 billion barrels and more than the North Seas 17
billion barrels. Chevrons Tengiz field is the largest oil reservoir discovered in the last
26

25 years and contains 6 billion barrels. A 1 billion barrel field is now considered to be a
big, world class find according to the Financial Times. Furthermore, war also involves
numerous corporations in support of the war operations. As a good example, a 2006
survey by US Department of Defenses central Command showed that the United States
is employing more than 100,000 private contractors; this number represents a tenfold
increase over the use of contractors during the Gulf War in 1991 (Stigliz & Bilmes,
2008).
The privatization of warfare cannot be separated from the neoliberal policy agenda
particularly at US since the Clinton administration. The military privatization is derived
from the logic that the monopoly of public sector should be dismantling by the
engagement of private sectors (Ortiz, 2010). Moreover, Verkuil (2007) asserted that the
private military is one consequence of the privatization movement. In addition, the
energy corporations also have significant role in deploying the private military
companies to protect their interest on the certain countries.
To summarize, the objective of imperialist war is nothing more than to maintain its
capitalist class in engineering the accumulation of capital and to maintain the stability of
hegemonic status of US as the speech of the US energy Secretary Bill Richardson said,
this is about Americas energy security . . . Its also about preventing
strategic inroads by those who dont share our values. We are trying to move
these newly independent countries toward the west. We would like to see
them reliant on western commercial and political interests (Richardson, New
York Times, 8 November 1998 quoted in Rees (1999))

27

In describing the recent complexity of global politics, Cox furthermore asserts that
the states act increasingly as a facilitator for transnational capital and investment. The
state has become an agent or transmission belt for the global economy in reshaping the
domestic economy (Cox, 1992). The form of global economy is institutionalized in the
form of global institutions. States are forced to abide the regulation and norms that
constituted in the global institution. Besides that, these conditions penetrated to domestic
society within state by the propaganda of the opening national economies, liberalization,
and privatization. In other words, the policy of the neo-liberal that initiates opening of
national economies, liberalization and privatization, Cox called as global perestroika.
That means a process somehow coordinated by a global nebuleuse of dominant state
actors and agents in global capitalism (Cox, 1992).
Furthermore, Gill (2000a) called the recent hegemonic bloc as the new
constitutionalism of disciplinary neo-liberalism and market civilization. The
development of international institutions and transnational firms can be described and
portrayed as disciplinary of neo-liberalism. First, the concept of discipline is the
combination of macro and micro-dimensions of power: the structural power of capital;
the ability to promote uniformity and obedience within party, cadres, organizations, and
especially in class formations associated with transnational capital. Thus, disciplinary
neo-liberalism is a concrete form of structural and behavioral power; it combines the
structural power of capital with capillary power and panopticism. In other words,
neo-liberal forms of discipline are neither necessarily universal nor consistent, but they
are bureaucratized and institutionalized, and they operate with different degrees of
intensity across a range of public and private spheres.
28

Disciplinary neo-liberalism is institutionalized at the macro level of power in the

quasi-legal restructuring of state and international political forms: the new
constitutionalism. The discourse of global economic governance is reflected in the
policies and regulation of the Bretton Woods organizations and the multilateral
regulatory framework of the WTO. New constitutionalism is a macro-political
dimension of the process whereby the nature and purpose of the public sphere in OECD
has been redefined in a more privatized and commodified way, with its economic
criteria defined in a more globalized and abstract frame of reference. New
constitutionalism can be conceived as the political project of attempting to make
transnational liberalism, and if possible liberal democratic capitalism, the sole model for
future development (Gill, 2000, p.1234). New constitutionalist offers the policies often
implicit rather than explicit that stressed on market efficiency, economic policy
credibility and transparency. Governments are required to provide the transparency data
and base on that reason, governments need to global supervisors to prove its
transparency. It can be achieved through the supervising process by the IMF, World
Bank and BIS.
The new constitutionalism seeks to reinforce a process whereby government
policies are increasingly accountable to (international) capital, and thus to market forces
(especially those exercised in and from the financial markets). Sovereignty, political
associations and forms of state are redefined to reflect this new categorical imperative.
State policies thus become more regulated to the imperatives of global economic forces,
in the context of the new ideologies of competitiveness and human capital. Credibility

29

with the financial markets is, for government, becoming more important than credibility
with voters (Gill, 2005a, p. 59).
According to Allison Bailin (2005), there is transformation process from the single
or traditional hegemony to the group hegemony. The process of formation group
hegemony begin the when the financial crisis hit international economic system that
caused by the inability of US to maintain international monetary system based on
Bretton Woods system and the US deficit in national budged and international trade in
goods which caused by the cost of war in Vietnam. Consequently, it affected the global
economic by the overvalued of dollar in the mid 1970s. In order to solve the economic
problem in 1970s, US initiated to develop a group of international economic managers
that called as G7 and the G7 intended to replace American predominance with collective
leadership. This group includes Britain, Canada, France, Germany, Italy, Japan, and the
US. The US, however, is not alone responsible for concentration of power, since its
relative economic superiority has declined, whereas the G7s powers remain constant.
Based on the construction of G7 that transform the single domination of US to the
collective leadership, Bailin in his study proposes the theory of group hegemony. The
theory of group hegemony asserts that the liberal economic order will be maintained
despite the absence of a single hegemon and individual changes of economic power but
only as long as a small group of powerful nations benefit from the system, the group is
the main provider of open markets and foreign investment, the majority needs these
goods, and the group organizes itself for effective, collective crisis response.
Subsequently, liberal economic order consists of three subsystems: monetary, trade and
foreign investment. The monetary subsystem involves the provision of liquidity and the
30

management of exchange rates. Open trade and investment flows ensure open markets
and capital (Bailin, 2005).
As to maintain and preserve the hegemony interest, hegemon will be expanded
into the capitalist world-system. It requires other actors or states to comply with global
economic order. According to the Gramscian ideas, hegemony emphasizes to exercise
the consent way than coercion. There are three basic methods of hegemonic persuasion
are as follows such as the hegemon uses its capabilities as inducements or threats.
Secondly, the hegemon shapes the interests and policies of other states by establishing
institutions and norms of behavior. The third method involves hegemonic emulation that
means the hegemon creates a global order in its own image. As a group hegemon, the
G7 maintains the liberal economic order and manages international economic crises. The
G7 is able to act as a group hegemon because of its members enormous economic
power and its institutional features. As a financial support, manage exchange rates,
provide large open markets, and supply foreign investment (and development assistance)
(Bailin, 2005).
From the standpoint of the scholars as stated above have formulated theoretical
ground in analyzing analyze global hegemony. We can conclude that the global
hegemonic bloc architecture since the post cold war is shaped by the capitalism or neoliberalism idea. Those ideas were applied on the international mechanism, principles and
multilateral regulation and accepted as the global consensus. International institutions
considered as the instrument to implement the idea of neo-liberalism that construct by
the collaboration of transnational capitalist class and most powerful state. The
international state structure is centralized on the heart of central government agencies of
31

the most industrialized economies, together with key multilateral agencies such as IMF,
the Bank for International Settlements, the Trilateral Commission and the G-7
secretariat. The role and function of international institutions in world order can be
analogues with what Gramsci argues on the function of civil institutions such as church,
school, university and newspaper to build the consciousness of society. Then, global
hegemony has transformed on the collective leadership to support and preserve the
capitalist historical bloc.
Jammes H. Mittelman and Christine B. N. Chin (2005) in their paper
Conceptualizing Resistance to Globalization argue that what Gramsci wrote in his
prison under the authoritarian of Mussolini in Italy remains relevance to the recent
global civil society. The process of establishing hegemony can never complete because a
hegemonic project presumes and requires the participation of subordinate groups. While
hegemony is being implemented, maintained, and defended, it can be challenged and
resisted. Forms and dimension of resistance to hegemony are categorized under the
rubric of counter-hegemony.
Gramsci categorized the form of counter-hegemony in two groups, first, wars of
movement are frontal assaults against the state and second, wars of position can be
conceived as nonviolent resistance such as boycotts (Gramsci, 1971, pp.299-30). The
possibilities to transform and replace the domination of particular class over the
subordinate class in certain historic bloc can be conducted through what Gramsci called
as the war of movement and war of position. In proposing the strategies that utilized in
the counter-hegemony programs, Gramsci argues that the success of counter-hegemony
actions whether conducted by war of movement or war of position depend on the social
32

structure form that has established. Then, he provides an example the appropriateness of
the counter-hegemony strategies, in the East (Russia) which the social structure form
was traditional; war of movement can be conducted. But, in the West which the social
structure was complex, war of movement is inappropriate, and counter-hegemony can be
conducted by war of position.
The question is how we can apply the concept of counter-hegemony to
International Relations? Does war of movement or war of position can transformed and
replaced the domination in international relations? According to Cox (1996), the
analysis of Gramsci toward Italy is even more valid when applied to the world order;
only a war of position can, in the long run, bring about the structural changes, and a war
position involves building up the sociopolitical base for change through the creation of
new historic bloc (Cox, 1996, p. 140). The structure of global order is more complex
than the structure what Gramsci call as the West. The actors and institutions that involve
in world order at present are complicated and inter-related each others. Hegemony has
solid in the almost all of the international regimes or institutions form. For a more
concrete conceptual understanding of counter-hegemony, we can turn to Mark Ruperts
(2003) interpretation of Gramsci:
At the core of Gramscis project was a critical pedagogy which took as its
starting point the tensions and possibilities latent within popular common
sense, and which sought to build out of the materials of popular common
sense an emancipatory political culture and a social movement to enact it
not
simply
another
hegemony
rearranging
occupants
of
superior/subordinate social positions, but a transformative counterhegemony (Rupert, 2003, p.186 ).

33

Thus, counter-hegemony movement can be defined as the movements whether it is

systematic or unsystematic, short run or long run and local or global level which the
main purpose is to criticize, transform and replace the domination and marginalization
process in global order through developing consciousness and a new common sense in
order to build a new alternative of world view. The counter-hegemony in the term of
resistance to neo-liberalism can be seen as attacks on capitalist relation of production.
According to the study conducted by Worth (2005), there has been a lack of
research projects that provide an in-depth study of the nature of resistance and counterhegemony within neo-Gramscian studies. Most of scholars in studying the counterhegemony movements (Gill & Law, 1993, Gill, 2000a, 2008; Drainville, 2002; Hard,
2002; Birchfield & Freyberg, 2005; Murphy, 1991; Deak, 2005; Worth, 2004; Eschle &
Maiguashca, 2005) encompassed on the movement that organized by the transnational
pressure groups, international forum and local groups. Gill & Law (1993) articulate that
the movements can be considered as the counter-hegemonic bloc, and he give some
example the movements potentially as part of counter-hegemony movement:
organizations and movements that might form part of a counter-hegemonic
bloc include[ing] Amnesty International, green parties and ecological groups,
socialist think-tanks like the Transnational Institute, peace groups, such as
Oxfam, and religious organizations such as the World Council of Churches
(Gill and Law,1993, p.122).

For instance, the protests against the WTO in Seattle 1999 which Ronald Munk has
called the beginnings of a global social movement (Munk, 2004, p.1). This first major
demonstration against the WTO gives an example where large group has been
34

marginalized to the extent that they wish for the complete destruction of the WTO.
When the ministerial rounds have been held in accessible areas (i.e. not Doha), these
protests follow suit. There have been a similar series of protests against other trade
rounds (the summit of the Americas in Quebec City) and the annual meetings of
institutions like the IMF and the World Bank, which gives an indication as to the scope
of the problems of hegemony within the international system (Deak, 2005, p. 52).
Subsequently, Bieler & Morton (2004) argue that a host of questions related to
counter-hegemonic forms of resistance are usually left for future research, although the
demonstrations during the Carnival Against Capitalism (London, June 1999);
mobilizations against World Trade Organization (Seattle, November 1999); protests
against the IMF and World Bank (Washington, April 2000 and Prague, September
2000); riots during the European Union summit at Nice (December 2000); as well as
the G-8 meeting at Genoa (July 2001); and protests against the G-8 meeting at
Gleneagles, Scotland (June 2005), all seemingly further expose the imperative of
analyzing globalization as a set of highly contested social relations. , In relation to this it
is also important to problematize the tactics and strategies of resistances to neoliberalism by giving further thought to new social movements, such as forms of
peasant mobilization in Latin America like the Movimento (dos Trabalhadores Rurais)
Sem Terra (MST: Movement of Landless Rural Workers) in Brazil and the Ejecito
Zapatista de Liberacion Nacional (EZLN: Zapatista Army of National Liberation) in
Chiapas, Mexico (Bieler & Morton 2004). Movements at the level global, national,
regional and local that contest these changes can be seen to act as a counter-movement,
which intersect with a larger, democratizing counter-hegemonic project as it seeks the
35

ideological norms and practices that have been embedded through the logic of the free
market (Worth & Kuhling, 2004).
In contrast to the study of counter-hegemony as stated above, this study attempts to
analyze counter-hegemonic movements that conduct by the national leaders in challenge
global hegemony. The counter-hegemonic movement not only exercised by the
transnational groups or non-state actors, but also exercised by national leaders. Rarely,
the national leaders emerge explicitly counter hegemony. They can formulate the
systematic movement by its foreign policy in developing and mobilizing the others to
battle and criticize domination in global scale. National leaders have the ability to
mobilize and develop the consciousness among the subordinate states. This can be
employed by constructing cooperation framework or a new historic bloc that abandons
the ideology of hegemony. In other words, counter-hegemony is not a frontal movement
against the hegemon, but it is also conceived as the smart counter-hegemony
movement in the long-term project.
Following Robinson (2005), there are some prospects of counter-hegemonic
resistance to the hegemonic bloc that come to several quarter which are the anti-globalist
Far Right, progressive elites and nationalist groups in Third World countries and Popular
sectors worldwide, as expressed in the rise of a global justice movement. Robinson
argues that progressive elites and nationalist groups in Third World countries, such as
Hugo Chvez in Venezuela. These elites may well draw on insecurities of vulnerable
sectors but articulate a progressive vision as distinct from the far right. Referring to this
category, which also involves elites from certain countries and regions that have not
been fully drawn into the global economy., This being integrated into
36

a way that is

structurally distinct from that of national contingents of the TCC in most countries and
regions. Here China and Russia, and perhaps India, stand out. Political projects that
emerge could well be one of cooptation or accommodation with the globalist bloc or
heightened conflict with it.
Indeed, this study will explore on the counter-hegemonic program which organized by
progressive elite that being vulnerable in the global capitalist system particularly
Mahathir Mohammad. The form of counter-hegemony program in this context is
requiring the national leaders that have the organic intellectual character. The organic
intellectual attempt mobilizes mass to build the consciousness of mass. They have
specific function in the society which leading and direction the ideas and aspirations of
class. These leaders can be considered as the Modern Prince. Subsequently, organic
national leader will be a direction to questioning the pattern of domination in global
order. Without the existence of organic national leader, it is impossible to conduct
counter-hegemony. In this term, counter-hegemony does not mean vis--vis to the
hegemon. Since, in maintaining and legitimizing domination, hegemony use national
leader that considered as the traditional intellectual to support the idea of hegemon. The
harmonize relations of the traditional intellectual and the hegemon reflect how
domination accept in the term of subtle and this pattern, Gramsci called as the
transformismo. This form of counter-hegemonic movement can be view in the role and
function of national leader in initiating a bloc such as Non Alignment Movement (NAM)
and World Social Forum (WSF). According to Buckman (2004), NAM is one of the
origins of the counter-hegemony movement in the post World War II (Buckman, 2004).

37

1.8. Literature Review

Writers and commentators have been conducting study regarding the topic of the
evolution and determinant factors of Malaysian foreign policy under Mahathir
leadership in the post cold war. Although, many writers and commentators has been
studying Mahathir role in the global stage, but this study focuses on issues of Mahathir
confronting the international monetary hegemonic bloc. The standpoint of this study is
departure from the Gramscis hegemony concept. Furthermore, this chapter will be
showing the proposition which develop from the Gramscis concepts and Mahathirs
itself as the heart of this study.
1.8.1. Mahathir Mohammad: Personality and Leadership
Much of scholars in various academic backgrounds either Malaysian or non-Malaysian
have written on Mahathir. In their papers, researches and published works often
emphasize on the role of Mahathir as referring to his personality, capability and
criticism. It seems, when scholars discussed about Mahathir, at the same time, it means
they also discussing in relation to Malaysia. Mahathir is inseparable from Malaysia. It
seems an inherent between Mahathir as person and Malaysia as leader of a nation State.
Mahathir is well known as the rhetoric, critical, outspoken and loudly sounding the
developing countries aspirations in global arena. Domestically, Mahathir transformed
Malaysia into an economic, political and social stability dimensions.
Importantly, his strong leadership has significance influence on Malaysian
foreign policy and his idiosyncratic dimension to foreign policy-making has been a
greatly emphasized dimension in the study of Malaysian foreign policy (Pathmanathan
38

and Lazarus, 1984; Wariya, 1989; Pathmanathan, 1990 & Singh, 2005). Saravanamutu
(2004) in his paper titled Iconoclasm and Foreign Policy The Mahathir Years;
contended that Mahathir is not like any other non-Western political leaders of his time,
Mahathir resisted global domination. In his paper, Sravanamutu decisively defined the
Mahathirs leadership style particularly in the Malaysias foreign policy as epitomizes
the use of foreign policy for the pursuit of national goals and needs in Mahathirs
characteristic iconoclastic style. Mahathir emerged as a leading world spokesman on
international issues. Iconoclasm refers to the behave of Mahathir in responding the
international issues with put himself as the Third World nations representative to counter
or resist the global domination especially Western domination in the economic, politic,
social and human right issues.
The other commentator, with forcefully comment on Mahathir leadership, is
Yong (1998) in his book, CEO Malaysia, Strategy in Nation-Building. Mahathir is
considered as a catalyst for change, an innovator and a visionary, Dr Mahathirs role as
leader of Malaysia can be linked to that of a Chief Executive Officer (CEO). The CEO
has multi-faceted roles: as a strategic leader and motivator, as a creator and builder, as
an agent of change, as a manager of limited resources and as a master strategist and
planner. Dr Mahathir can truly be described as the CEO of Malaysia Inc.
Khoo (1995) in his comprehensive study of Mahathirs biography, ideology,
political ideas and praxis on Paradoxes of Mahathirism: An Intellectual Biography of
Mahathir Mohammad provides detail and rigorous analysis on Mahathirs leadership
and personality. The starting point of his analysis is that Mahathirs ideas constitute a
relatively coherent ideology which may be termed Mahathirism. It distinguishes five
39

core components within Mahathirism: nationalism, capitalism, Islam, populism and

authoritarianism. This four isms plus Islam cover Mahathirs major ideas on politics,
economics, religion, power, and leadership as he has expounded on them in three books,
numerous essays, many more interviews, and countless speeches. Furthermore, Khoo
argues on Mahathirs diplomacy:
his performances on international forum were articulate and courageous,
intelligent and polished. He had a quick wit and a sharp tongue. He had a
ready opinion on anything and held a strong position on everything. He was
seldom slow to castigate the powerful or to shame the hypocritical (Khoo,
1995, p. 79).

According to Faiz (2005) in his study on Malaysia and South-South Cooperation

during Mahathir Era: Determining Factors and Implications explained and offered
some evident how role of the leadership Mahathir in decision making process of
Malaysian foreign policy and Mahathirs position in global arena. Ahmad Faiz argued
that Malaysian foreign policy had shifted from time to time since the first Prime
Minister. Under Prime Minister Tunku Abdul Rahman, the policy was anti-Communist
and pro-West. In the early 1970s, the policy shifted to that of non-alignment, neutrality
and peaceful co-existence under the leadership of Tun Abdul Razak Hussein. The third
Prime Minister, Tun Hussein Onn, consolidated the foreign policy set by his
predecessor. However a major shift in Malaysian foreign policy took place in the early
1980s when Dr Mahathir Mohamad became the Malaysias fourth Prime Minister. He
has transformed and took new direction on position of Malaysia in global issues. World
has been witnessing and recognizing the emergence of Malaysia as the new economic
powerhouse in the South East Asia and entitled Malaysia as one of member the Asian
40

Miracle and it was one of the achievements of Malaysia under Mahathirs leadership.
Liow (2001) in Personality, Exigencies and Contingencies: Determinants of
Malaysias Foreign Policy in the Mahathir Administration, concluded that although
there are several determinant factors of Malaysias Foreign Policy in decision making
process, but Mahathir Mohamads personal influence has come to dominate Malaysias
foreign policy process. Mahathirs personal role and influence has been the penulmate
force behind Malaysias foreign policy of the past since he became as the Prime
Minister.
Singh (2005), in his study titled Malaysian Foreign Policy in the Mahathir Era,
1981-2003 argued that the direction of Malaysian Foreign Policy (MFP) has been
shifted from the traditional to modern in the period 1981-2003. the shift was the result of
the interplay of Mahathirs personality, leadership style, political philosophy and his
brand of nationalism; the domestic political goals of regime maintenance, national
development and integration of its multi-ethnic society; and relevant external events in
particular the end of the Cold War, the spread of globalization, growth of regionalism
and the behavior of select other states towards Malaysia.
Based on the study that have conducted by several scholars above, we can conclude that
Mahathirs strong leadership and personality have contributed much to both the stability
of politics, economics and social aspects of Malaysia and the achievement of Malaysia
in global arena. Significantly, under Mahathirs leadership, Malaysia appeared as the
new economic powerhouse in East Asia and the frontline in refusing and criticizing the
domination of developed countries. Although, the scholars have described Mahathirs
leadership and personality in various characteristics and different perspectives, but, it
41

seems that there is an agreement among the scholars that his personal behaviors and
leadership have dominated the process of decision making and transformed Malaysia
into one of the miracles in East Asia.
1.8.2. Mahathir on the Global Arena: Championing Nationalism and the South
The inequality of North-South relationship has taken attention of Mahathirs
administration. The experience of British colonies and the domination of the few
wealthy North have been marginalizing the South. Mahathir emphasized his concern on
the North-South issues in order to criticize the inequality and strived to provoke the
South should stand on equal rights with the North. When the Mahathir regime assumed
power in 1981, the East-West divide had been overshadowed by the North-South divide.
The global oil crisis, the Latin America debt crisis, NIEO called by UNCTAD, falling
commodity prices and worsening wealth disparities between the developed and the
developing nations undoubtedly become MFPs concerns with the international system.
Mahathir took a higher profile on North-South issues than any of his predecessor. In
1986 he moved for the setting up a South-South Commission (Singh, 2005).
From his study from 1981 until 1996 on South-South cooperation during Mahathir,
Faiz (2005) stated that the priorities of Malaysias foreign relations under Mahathirs
leadership emphasized on the following categories: first, the ASEAN countries, second
the countries of the Organization of Islamic Conference, third, the Non-Alignment
Nations, and fourth, the Commonwealth countries. According to Singh (2005), the major
outputs of MFP that constituted the Mahathir era consist of Buy British Last, AntiCommonwealth, and Look East policy, Third World Spokesmanship, Regional
42

Engagement, Islamic Posturing and Commercial Diplomacy. The list above, decisively
pointed out that Mahathir has given his governments priorities to the developing
countries.
According to Singh (2005), the Mahathir regimes solidarity with the Third World
was seen through four major foreign policy initiatives The Antarctica Policy, its stand
on Apartheid, the Global Environment, as well its push for a New World Order. These
initiatives were backed by the regimes active membership and leadership roles in Third
World oriented organizations such as NAM, OIC, the South-South Commission and
various bodies of the United Nations. The regimes set up new organizations the G-15 whose stated objective was to extend South-South Commission. Taken in totality, these
initiatives provided the regime an opportunity for a Third World spokesmanship, even
though the substance of Malaysian Foreign Policy in terms or actual actions (voting
trends, trade relationship, investments etc) remained in solidarity with the developed
world. It is argued that MFP in this regard was dual track openly championing Third
World issues and discreetly maintaining substantive relations with the developed worlds.
The notion of the equal right to wipe out global domination reflected in Mahathirs
book titled, A New Deal for Asia (1999):
It is no secret today that the net flow of money from donor countries to
developing countries is negative. That is, despite all the talk of aid and
grants, and despite or maybe rather because of IMF and World Bank
interventions, more wealth flows out of developing countries than in. on
top of that, the donors usually expect the recipients to be obedient.
Recipients of aid are basically not allowed to speak out, not allowed to
criticize. If your entire economy, including your food economy, is
supported by foreign aid, it naturally becomes very difficult for a country to
disagree with its supposed benefactors.
43

Khoo (1995) highlighted the effect of Malaysian nationalism under Mahathirism

that could be seen in four aspects which are the Buy British Last; North-South, East
West; Look Out and Look East and The Little Guys Diplomacy. Departing from the
Malaysian experience they embodied issues of colonization by the west and pointed out
Mahathirs stand on the anti-colonial, imperialism and domination by the Western. He
identified himself as the spokesman of the developing countries poor and small
confronting barriers to international trade lacking multiplied opportunities for economic
development, had to face challenges to their sovereignty. On behalf of the Third
World, the South, small countries, and developing countries, Mahathir voices out
against the powerful commercial and financial centers of the world.
According to Saravanamutu (2004), Mahathir has close identification with the
South. The term South refers to a category of developing states lacking economic
ability at the international level. Under Mahathirs leadership, the external economic
orientations were emphasized to these countries. In order to strengthen the economic
cooperation among the Third World, he supported the creation of the South-South
Commission in the Harare Nonaligned Nations Summit of 1986. On the other side,
Mahathir was well known as the outspoken leader in criticizing western domination
especially on the unequal relations within North-South issues. He initiated some of
cooperation framework among the developing countries.
Since Malaysian independence and as the forth Prime Minister, Mahathir shifted
the direction of Malaysian foreign affair. He composed significant shifts, that
emphasized on strengthening cooperation among the developing countries or Third
44

World and the previous Prime Ministers concerned was more with the sovereignty
issues. The significance shifts of Malaysian foreign policy under Mahathir were the
priority of MFP that emphasized regionalism, Islamic solidarity and Third World affairs.
Subsequently, Ahmad Faiz argued that in his study on Mahathir between 1981-1996,
MFP centered on the issues of regionalism (through ASEAN and EAEC), Malaysias
connections with the Islamic world and the relationship between Malaysia and other
Third World countries especially within the NAM and the G-15 (Faiz, 2005). He
concluded that NAM and G-15 was the core of South-South cooperation. South-South
cooperation is defined as the strategy for the greater mutual use of developing countries
resources in order to promote economic independence, increased self-reliance and
improve bargaining power with the developed countries. The main purpose of
cooperation is to transform the unequal international economic relations and the gradual
elimination developing countries dependency on developed countries.
Unlike the argument that offered by Faiz (2005) about the significant shifts of
Malaysia foreign affair, Liow (2001) argued that until the mid-1980s Malaysian foreign
policy was still predominantly concerned with the protection of state sovereignty and
territorial integrity. In the same time, pushed by the protectionism of developed
countries, Mahathirs attention began shifting to the developing world. This was
reflected in Malaysias push to transform the terms of trade through organizations such
as Non-Alignment Movement, the G-15, which Malaysia helped institutionalized, and
the G-77.
There are several factors that influenced Malaysia to involve South-South cooperation.
First, after independence, MFP under the leadership of Tunku Abdul Rahman was still
45

heavily linked to Britain. This policy was then shifted under Tun Abdul Razak by
making radical change of focus to the priorities Malaysias relationship with the Third
World countries. Under the Tuns leadership, Malaysia became an active member of the
NAM and the G77. The second factor was the internal pressures from the United Malays
National Organization (UMNO) members and the backbenchers who requested the
Government to minimize relations with the British. The Malay nationalists in the
Parliament, led by Mahathir Mohamad, at that time a backbencher, were dissatisfied
with Tunkus foreign policy which was heavily dependent on the West. Finally, the
active involvement of Malaysia in South-South cooperation was endorsed by a strong
Mahathirs leadership. Mahathir had succeeded in bringing Malaysia to the fore,
especially among the Third World countries, by voicing forcefully the aspirations and
aims of the Third World nations. Mahathir has been involved in Third World affairs
since the 1960s. As a backbencher, Mahathir often voiced his displeasure about
Malaysia-Britain relations, especially on defence agreements. In the early 1970s, as the
Minister of Trade and Industry, Mahathir was very well informed on the global
economic structure and the failures of the North-South dialogue. Because of his
commitment to the welfare of developing countries, as soon as he became the Prime
Minister in 1981, Mahathir introduced several new policies which focused more on the
cooperation among developing countries (Faiz, 2005).
1.8.3. West in Mahathirs View
Unlike the issues of North-South, the other aspect that took Mahathirs attention is the
Western domination. Term of West can be conceived as norms, value, behavior, world
view of Western countries. According to Saravanamuttu (2004), the strong identification
46

of Mahathir with the East, means that Mahathir has enhanced MFP direction from
relying on the Western model (exercised by the former Prime Ministers) to stress on the
East. The policy was iconoclastic in two ways; first, the Malay worldview was never
resonated with Eastern work ethics or its aggressive economics. Behind the Look East
Policy was the clear message that these late and newly industrializing success stories of
the east were the ones that Malaysia should emulate. Secondly, Western economic
success was to be debunked as implicitly non adaptive to new times and more harshly as
exploitative (even worse still, imperialistic) and therefore not worth following. The
strong identification to the East can be seeing in the Mahathir initiatives to promote
some economic cooperation schemes such as the EAEG and the EAEC. These
cooperation schemes aimed to develop a common stand for a common problem caused
by the restricted trade practices of the rich.
Furthermore, Jeshurun (2007) argued that one of Wisma Putras (Malaysian
Foreign Affairs Office) first major operations was to campaign for the sensational
proposal that Mahathir had devised at the end of 1990 for an EAEG, against the
background of the lack of progress on the Uruguay Round of GATT negotiations in
Brussels. This was supposed to be a collaborative group comprising the countries of
Southeast Asia, China, Japan and Korea for the purpose of exchanging views and
examining ways of countering the negative aspects of economic controls being planned
in the West.
The embryo of the resistance of Mahathir toward Western domination departed
from the bitter experience of Malaysia and others developing countries that were
exploited by the West since colonial ages. In his study, Liow (2001) scrutinized the
47

Malaysian foreign policy which is divided into three sections. In 1981-1984 periods,
Mahathir launched the Buy British Last policy which was constructed as a response to
what Mahathir perceived as exploitation by Malaysias erstwhile colonial masters. After
the policy of Buy British Last, Mahathir launched the Look East policy. Look East
policy was meant as a conceptual blueprint for the industrialization of Malaysia,
whereby Malaysia could adopt and apply methods and approaches that Japan and South
Korea have used so successfully in their economic and industrial development
(Saravanamuttu, 2004).
During the international forum, he played significant role to promote the East. He
symbolized and promoted the interest and the positive character of the East Asians. He
never hesitates, to argue and criticize the different concept of democracy, human rights
and freedom in the West and in the East. Based on his conviction that East Asia would
emerge as the new economic and progressive society in the future, Mahathir offered the
concept of Asian Value. Mahathir categorically explained how the domination of
Western value had universalized to whole the world. He wrote that:
Many Westerners seem to believe that their values and ethics are-should
be-universally accepted by all civilized men and women everywhere. A
corrally belief found in the West is that the advocates and champions of
Asian values are merely seeking to justify oppression, dictatorship and
other undemocratic behaviour. Even though, the Asia consists of various
cultures, norms, and values. Mahathir believe there is a stratum of common
values and beliefs that most Asians follow as a guide through the world
(Mahathir, 1999).

In the global economy facet, Mahathir put himself as the opposition to increasing
Western pressure both in the form of economic policies articulated through the IMF and
48

US unilateralism. Savanamutu highlighted Mahathirs iconoclasm most evident in his

economic policies vis--vis international financial institutions, such as the IMF, seen as
closely linked to the US. With the onset of the Asian financial crisis, Mahathir went
head-to-head in criticizing neo-liberal policies in an anti-globalization drive
(Saravanamuttu, 2004). Mahathir argued that the financial crisis was caused by the
rogue speculators and blaming George Soros. In order to solve that problem, IMF
launched rescue package with its conditionality. Mahathir with his own style refused the
program offered by IMF. Soros and Mahathir had a war of words in Hong Kong during
the IMF World Bank meetings in September 1997 in which the former said the Prime
Minister was a menace to his own country. Mahathir created his own policy to solve
the effect of financial crisis as opposite to what IMF has offered. Malaysia took the high
economic road and introduced capital controls for the country and announced the nontradability (or convertibility) of the ringgit.
The evolution of the Look East policy can be view in the period between 1990-1999,
Mahathir Mohamad had firmly established himself as a charismatic leader with
reputation for outspokenness and daring to challenge prevailing norms in international
relations. The international political situation in this period had changed by monumental
events such as the fall of Berlin Wall and the collapse of Soviet Union which sign of the
end Cold War. During this period, Mahathir launched EAEC; viewed as a
metamorphosis of Mahathirs earlier Look East policy. Certainly, it was a manifestation
of the same spirit- that Asian could and should challenge Western dominance. The
EAEC was a product of Mahathirs dissatisfaction with the Uruguay Round of
multilateral trade negotiations. It also reflected his perception of the need for a genuinely
49

Asian response to challenges posed by the formation of the European Community and
NAFTA (Liow, 2001).
1.9. Research Method
This study employs the qualitative method which the analysis and interpretation
essentially are underpinned to Gramscian epistemological framework which derived
from the philosophy praxis method in situating, contextualizing and understanding the
research problems of this study.
Gramscis discussion on epistemology was both as the response to the intellectual
movement turning to a reductionist the historical materialism interpretation and to purify
the philosophy of praxis (the unity of theory and action; spirit and material; structure and
superstructure) which had developed by its founders particularly Frederick W. Hegel,
Karl Marx and Friedrich Engels. In his note on Problems of Marxism, Gramsci
provided a critique on the interpretation of classic doctrine of materialism positing the
material forces as the core of historical trajectories. It could be seen in the analysis of the
political institution (structure) as the product of the economic sphere (base) within a
given society in the interpretation of Lenin and Bukharin. The emphasizing of economic
sphere to the materialism has obscured the totality of historical materialism and Gramsci
called it as historical economism or economic interpretation of history. According to
Gramsci, there are two epistemological consequences of economism. On the other hand,
analysis of history and politics are just concentrated to the economics as in pure
Marxism argued that men taken as a mass obey economic necessity and not their own
emotions. Besides that, it intends to establish the separation between the political and
50

civil society which attempt to posit the economic locus as the autonomy sphere. The
materialism could be indentified through a set of principles that:
1. Materialism acknowledges the existence of an object of knowledge, independent
of a knowing subject, the process of knowledge production and the system of
knowledge itself;
2. The adequacy of the object of knowledge provides the ultimate standard by
which the cognitive status of thought is to be assessed;
3. Thought and ideas are recognized as realities in their own right and thus an
object of knowledge;
4. Those realities are theorized as not sui generis but as the result of causal
mechanisms. (Morera, 1990. p.122)
Due to this reciprocal relationships of political, ethical and ideological within a given
historical bloc or the unity of structure and superstructure, the historical economism
construct thus becoming a scientific superstition, as he said that:
In its most widespread form as economistic superstition, the philosophy of
praxis loses a great part of its capacity for cultural expansion among the top
layer of intellectuals, however much it may gain among the popular masses
and the second-rate intellectuals, who do not intend to overtax their brains
but still wish to appear to know everything, etc. As Engels wrote, many
people find it very convenient to think that they can have the whole of
history and all political and philosophical wisdom in their pockets at little
cost and no trouble, concentrated into a few short formulae (Gramsci, 1971,
p.164)

The ideas of economism could also be

seen in the form of the intellectual

movement of Free Trade/Laissez-Faire. Methodologically, it was argued that state

51

should not intervene and regulate the market since the economic activities belong to civil
society. Instead, the state (political society) and market (civil society) are the same and
similar in the actual reality. Epistemologically, the economism is based on a distinction
between political society and civil society. It was also presumed to be an objectivescientific principle of interpretation or positivism. Subsequently, Gramsci argued that
there is a fundamental problem of positivism in defining of objectivity of knowledge.
Indeed, knowledge historically is shaped by the social relations as he asserted that:
Objective always means humanly objective which can be held to
correspond exactly to historically subjective: in other words, objective
would mean universal subjective. Man knows objectivity insofar as
knowledge is real for the whole human race historically unified in a
single unitary cultural system. But this process of historical unification
takes place through the disappearance of the internal contradictions which
tear apart human society, while these contradictions themselves are the
condition for the formation of groups and for the birth of ideologies
which are not concretely universal but are immediately rendered transient
by the practical origin of their substance (Gramsci, 1971, p. 445).

The scientific superstition is one of the instruments to maintain the supremacy of

ruling class through the civil society institutions, university and school as the
manufacture of common sense. It could be seen with the theory of laissez-faire, whereby
the ruling class could modify the states policy by modifying the laws controlling
commerce securing its privilege. Gramsci outlined the characteristic of historical
economism below:
1. In the search for historical connections it makes no distinction between
what is "relatively permanent" and what is a passing fluctuation, and by an
economic fact it means the self-interest of an individual or small group. In
52

other words, it does not take economic class formations into account, with
all their inherent relations, but is content to assume motives of mean and
usurious self-interest, especially when it takes forms which the law defines
as criminal.
2. The doctrine according to which economic development is reduced to the
course of technical change in the instruments of work.
3. The doctrine according to which economic and historical development are
made to depend directly on the changes in some important element of
production-the discovery of a new raw material or fuel, etc.-which
necessitate the application of new methods in the construction and design
of machines (Gramsci, 1971. p. 163)
The objection of Gramsci against the positivism was addressed also apparent his
questions to work of Nikolai Bukharin (1921), Theory of Historical Materialism: A
Popular Manual of Marxist Sociology. In his argument, there was no consistency
between its titles and the content. The content of Popular Manual is merely developed
from the adoption of natural science or what he called as the evolutionist positivist. It
has obscured the meaning of philosophy or the philosophy of non-philosopher.
Methodologically, it just provided a schematic description and classification of historical
and political facts to build up on the model of natural science.
Positivism developed upon the philosophical foundation of the positivistic
Aristotelianism through the adaptation of formal logic to the methods of physical and
natural science. It has shifted the historical dialectic into the form of law of causality and
the search of regularity, normality and uniformity or in other words, Gramsci called it as
53

the flat vulgar development of evolutionism. Thus, the purpose of science in this sense
is merely for predicting and separating from the practical; and science is restricted to the
experiment, speculation and prediction. As Gramsci contended that prediction is
therefore only a practical act which cannot, at the risk of being an utterly futile waste of
time, have any other explanation than that given above (Gramsci, 1971. p.438).
In fact, there is an extreme difference between the social and natural sciences in
regard to their logic of inquiry and explanation. Since, the social world is merely
attained with limited generalizations. In fact, the social world is continuously changing.
The theoretical and practical activities cannot be separated from each other. If we
defined the science as the discovery of formerly unknown reality, it means that science
is the creation of the idea in the practical sense. If science is defined just as the
theoretical activities through the scientific experiment, it would then be just a
philosophical speculation.
As with the epistemological weakness of historical economism or the vulgar
materialism, Gramsci suggested that ideas relating to economism dialectically both at
the theoretical and practical level. At the theoretical level, in every study, it should be
representing the thesis and also the anti-thesis; the dialectics of structure and
superstructure as with the concept of historical bloc. It supposed to present the popular
belief or the similar ideas as the material forces. Concretely, the theoretical struggle
could be conducted by developing the concept of hegemony as well as the actual the
development of hegemony itself. At practical level, the reality is defined as the
unification of thought and action. Knowledge is the relations of the social and natural
order through the work of mans theoretical and practical activity. Thus, it is the basis to
54

develop the historical (dialectical) conception of world, the understanding to movement

and change, to conceive that the contemporary world as a synthesis of the past and the
project as the alternative of the future.
Generally, Gramscis discussions on the epistemology and ontology are rooted in
the philosophy of historical materialism under the theme of philosophy of praxis. The
philosophy of praxis is associated with the philosophy of Marxism and of need for a
reform and the development of Hegelianism. On another term, it is also called as the
science of dialectics or the theory of knowledge with the concepts of history, politics and
economics as intertwined in an organic unity. As Hegel has formulated the dialectical
form of the two moments of life of thought which are materialism and spiritualism
through the synthesis of a man walking on his head. Instead, Gramsci attempted to
expand its synthesis of dialectical unity in form the man walking on his feet.
The fundamental principle of philosophy praxis is the inseparable link between
theory and practice, thought and action. There is no abstract human nature, fixed and
immutable within the science. Human nature is the totality of historically determined by
social relations need to be rejected. Thus, science both as its concrete content and as its
logical formulation should be seen as a developing organism.
Knowledge is derived from the combination of intellectual efforts, emotion and
engagement with the mass of people. Knowledge is not merely as abstract but it should
be concrete within a particular social context. The connection of theory with practice is
constituted on the explanation that the practice is demonstrated rational, and theory
should be rational and realistic. The unity of theory and practice is not just a matter of
55

mechanical part, but it is a part of the historical process. For instance, the development
of the concept of hegemony represents in two levels as a great philosophical advance
and as a politico-practical. In the simple words, philosophy praxis is defined as a sociopractical activity that thought and actions which are reciprocally determined. It is
presumed to be dialectical and is regarded as an integral and original philosophy opening
up a new phase of history and a new phase in the development of world thought. In other
words, it is beyond the traditional idealism and traditional materialism (Gramsci, 1971,
pp. 333- 435).
The epistemological departure of philosophy praxis is the question of the existing
mode of thinking. The first task is to establish criticism of common sense in order to
present that everyone is a philosopher. The main purpose of critique is to renovate the
existing social order and to reveal the interests and meaning behind the modern
ideologies in their most advanced form, with the purpose to establish a group of
intellectuals. Secondly, it should educate the popular masses particularly the subaltern to
construct their consciousness (Gramsci, 1971, p. 392)
Based on the foundation of the epistemology above, the neo-Gramscians have
applied Gramscis epistemology to International Relations in regard to the predominance
of positivism reflecting on the epistemological debate of positivism and post-positivism.
Positivism is established by the four main assumptions; first is a believe in the unity of
science (including the social science); second is the view that there is a distinction
between facts and values that facts are theory neutral; third is the belief in the existence
of regularities in the social as well as the natural world and; finally is the belief that it is
empirical validation or falsification as the hallmark of real enquiry (Smith, 1996).
56

Contrast to the positivism, Gill (1993b) criticized the epistemological of positivism in

light of Gramscis epistemology (Italian school) on three arguments. First, it is an
epistemological and ontological critique of the empiricism and positivism. Second, it
presents a general critique of methodological and individualism and methodological
reductionism which the philosophy of praxis unify the economic sphere (the question of
exploitations, inequalities and class based analysis) with the political sphere (the
questions of legitimacy, ideologies and political movements) as an integral element.
Third, it also poses the question of ethical dimension of analysis within the key concept.
Therefore, the Gramscian epistemological should be contextualized within a framework
of analysis as well as the framework of action to open up the possibilities of historical
transformation of world order. Thereby, theory is not only recognized as the analytical
tool but also as the political forces; as what Cox (1996a) asserted on his phenomenal
phrase:
Theory is always for someone and for some purpose. All theories have a
perspective. Perspectives derive from a position in time and space
specifically social and political space. The world is seen from a standpoint
definable in terms of nations or social class, of dominance or subordination,
of rising or declining power, of a sense of immobility or of present crisis, of
past experience, and of hopes and expectations for the future. When
any theory so represents itself, it is the more important to examine it as
ideology and to lay bare its concealed perspective (Cox, 1996a. p.87).

According to Cox (1993), there are two forms of theory based on its purpose. First
it is problem solving which takes the world as it finds it, with the prevailing social and
power relationship and the institutions into which they are organized, as the given frame
work for action. The strength of the problem solving approach lies in its ability to fix
limits or parameters to a problem area and to reduce the statement of a particular
57

problem to limited number of variables which are amenable to relatively close and
precise examination. The second indicates as a critical theory. It is critical in the sense
that it stands apart from the prevailing order of the world and asks how that order came
about. Critical theory, unlike problem-solving theory, does not take institutions and
social power relations as they stand but calls them into question by concerning itself
with their origins and how and whether they might be in the process of changing. It is
directed toward an appraisal of the very framework for action, or problematic, which
problem solving theory accepts as its parameters. Critical theory is directed to the social
and political complex as a whole process rather than separate parts.
Departing from the conception of theory above, the neo-Gramscian scholars
attempt to formulate the research method in examining International Relations and
International Political Economy. Germain and Kenny (2006) in Engaging Gramsci:
International Relations Theory and the New Gramscian, suggested that the
methodology of new Gramscian in International Relations have to turn upon the
proposition that these concepts can be internationalized or globalized. Firstly, we
have to explore the concept of global civil society. Subsequently we have to describe
and explain how the hegemony emerges and how to search the possibilities and
alternatives in order to change the world order through the counter-hegemony programs.
Specifically, Gill (1993a) provides the framework of research agenda for study of
global politics involving at least the following theoretical and practical dimensions:
1. Ongoing attempts to reconsider epistemological and ontological aspects
of world order, in the context of past, present and future;
58

2. A continuous effort to promote methodological, theoretical and conceptual

innovation, so as, for example, to bridge the divide between subjective and
objective aspects of analysis (and agent-structure dichotomies)
3. The concrete historical study of the emerging world order, in terms of its
economics, political, and socio-cultural dimensions, with a view to its emerging
contradictions, and the limits and possibilities which imply for different
collectivities. This would involve work along the following dimensions;
a) Analysis of the structures/agents of globalization (for example in
production and finance, migration, communications and culture, ecology,
security), and their relations with more territorially bounded social
structures and forces.
b) This would be linked to the analysis, in various social formations, of the
role of and changes in social institutions such as state and civil society,
the market and family. For example, the hypotheses concerning postWestphalian forms of state and the internationalization of authority, and
work on the prospects for a global society need further analysis and more
research. Some of this work would concentrate on the public/private
forums concerned with management of the global economy, such as the
G7, World Economy Forum and the Trilateral Commission, and those
which might countervail them;
c) In turn (a) and (b) would be connected to analysis of (the persistence of,
and change in) pattern of interest and identity, for example with regard to
59

religion, nationality, ethnicity and gender. In this regard, studies of the

political uses history and the construction of social myth (e.g. of human
possibility, economic development and the possibility, economic
development and the possibilities for international co-operation) are of
substantial importance.
4. Finally, it is important to directly address and develop those related ethical and
practical approaches to global problems. This venture would need to be linked to
careful analysis of existing and potential forms of political organization and
action, including parties, social movements and informal links at a variety of
levels from local to global. These framework of analysis is employed to
investigate the potential Mahathir force in conducting the counter-hegemony
movement against the neo-liberal hegemonic bloc (Gill, 1993a, p.16-17)
In summary, Gramscian methodology framework departs from the deep
understanding on how the word order emerges, how it operates and what is the dominant
ideology underlying the global structure, what are impact and how are the available
strategies of movement to transform the world to be more equal and humanist. The
framework above will be employed and operated in this thesis implicitly or explicitly.
In term of data assemblage, analysis will be based on secondary sources of collected
documents, speech, books on and of Mahathir Mohammad and Malaysian government
publications. Secondary data are derived from books, journals, articles and websites.
Secondary data are useful for a full background study of the phenomenon.

60

Secondary sources will be collected in Malaysia. The sources will be investigated

mainly at the UUMs Library of Sultanah Bahiyah and Perdana Leadership Foundations
Library in Putera Jaya. Beside these sources will also be collected and derived from
Malaysian government and non government institutions.
For specific Gramscis sources, special efforts will be made in referring to his pre-Prison
Notebooks writings, touching on the impending Second World War and his critical view
on the expanding Anglo-Saxon financial institution to Europe.

61

CHAPTER TWO
THE CONSTRUCTION OF FINANCE AND WAR HEGEMONY
AT GRAMSCIS TIME
In the imperialist phase of the historical process of the bourgeois class,
industrial power is divorced from the factory and concentrated in a trust, a
monopoly, a bank, the bureaucracy of the State.
Antonio Gramsci, The Factory Council, LOrdine Nuovo
(5 June 1920)

2.1. Introduction
The aim of this chapter is to scrutinize the Gramscis thinking on the initial
predominance of finance capital, the American type of passive revolution, and its
connections with war or imperialism as the advanced historical phase of capitalism. In
understanding these issues, the analysis came up from the deep interpretation and
investigation of Gramscis writings both on his pre-prison and prison periods. The
interpretations focus on the inter-connection of the external and internal conditions of
Italy, particularly, corresponding to the world of finance and war capitalism. Therefore,
a deep interpretation and investigation to Gramscis writings became a departure toward
the understanding the development of finance-war hegemony practically and
theoretically. This study places Italys condition of Gramscis time, as peripheral of the
capitalist world within the initial stage of the development of world finance-war
hegemony. This included appreciating the relations among the capitalist states, seen as
the cornerstone of the bourgeois system (Gramsci 1978).The current condition of the
development of finance-war has evolved into an advance model than that at Gramscis

62

time and this chapter will attempt to reveal the origin of development of finance-war
hegemony as the theoretical ground of this study. Gramscis analysis which explicitly
combine national and international dimensions and stresses the dialectic between
progressive and reactionary forces; explaining the possibilities of progressive struggle or
counter-hegemony movement of the present. In line with Bellamy (1990), this chapter
argues that the Gramscis ideas cannot be meaningfully applied outside of the specific
historical context in which they were developed.
Many of Gramsci readers asserted Gramscis observation mainly on the national
level and put little attention to the international relations aspects. This chapter argues
that there were inter-connections in the application of the Gramscis notion on
hegemony, civil society, passive revolution and counter-hegemony between the national
and international level. According to Simon (1991), the Gramscis observation on the
relationship of social forces was equally interpreted at two moments which are the
relations of forces within any country and at the international relations, Gramsci insisted,
the point of departure though must be national as he asserted that:

In reality, the internal relations of any nation are the result of a

combination which is original and (in a certain sense) unique: these
relations must be understood and conceived in their originality and
uniqueness if one wishes to dominate them and direct them. To be sure,
the line of development is towards internationalism, but the point of
departure is nationaland it is from this point of departure that one
must begin (Gramsci, 1971, 240)
Morton (2007) elaborated at least, three contexts of Gramscis explanation at
international level in his own life time. Firstly, through his critical observation, Gramsci
was concern with the asymmetric relation among classes engaging in the class struggle
63

either at the national level or the international level. The uneven development and
matured development of capitalism model, as well as in his Southern Question, was not
only exist within Italy but also came up at the International level which there were two
groups of states; (1) the group of capitalist states which formed the keystone of the
international states-system (Britain, France, Germany, the United States); and (2) those
states which represented, at the time, the immediate periphery of the capitalist world
(Italy, Poland, Russia, Spain, Portugal) (Gramsci, 1978, pp.40810). Therefore, the
global politico-economic model was marked by the Anglo-Saxon hegemony which
incorporated the colonial subjection of the whole world to Anglo- Saxon capitalism
(Gramsci, 1977, pp. 81-9). In sum of Gramscis view, the peripheral countries or the
uneven development of capitalism is a world historical phenomenon which the
colonial populations become the foundation on which the whole edifice of capitalist
exploitation is erected (Gramsci 1977). Subsequently, the historical movement of
passive revolution on international sphere at his time, departing from the class struggle
of the coloured people against the white exploiters and murderers of the European
capitalist class, as Gramsci stated that:
But today flames of revolt are being fanned throughout the colonial
world. This is the class struggle of the coloured peoples against their
white exploiters and murderers. It is the vast irresistible drive towards
autonomy and independence of a whole world, with all its spiritual riches.
Connective tissues are being recreated to weld together once again
peoples whom European domination seemed to have sundered once and
for all (Gramsci, 2000, 113)
Secondly, the growing of fascist party within the Italy history viewed as the
further attempt of expansion of capital. He argued that is not fascism precisely a new
liberalism? Is not fascism precisely the form of passive revolution proper to the
64

twentieth century as liberalism was to the nineteenth? (Gramsci, 2000, pp.2645).

Furthermore, Fascism was regarded as the efforts of the Italys ruling class the alliance
of capitalist class at the urban/Northern and the rural petty bourgeoisie- in order to
engineer the productive forces in competition with the more advanced industrial
formations (Gramsci 1971: 120). Consequently, the political economy of Fascism was
formed in response to the thrust of Anglo-American capital in Italy which indicated by
the growing predominance of financial capital over the State, as Gramsci stated on The
Italian Situation and the Tasks of the PCdI (Lyons Theses):
The economic policy of Fascism is completed by the measures aimed at
raising the value of the lira, stabilizing the trade balance, paying war
debts and encouraging the intervention of Anglo-American capital in
Italy. In all these fields, Fascism is carrying out the
program of the
plutocracy [ ... ] and of an industrial landowning minority, at the expense
of the great majority of the population, whose conditions of life are being
made progressively worse.
All the ideological propaganda and the political and economic activity of
Fascism is crowned by its tendency to 'imperialism'. This tendency
expresses the need felt by the industrial and landowning ruling classes of
Italy to find outside the national domain the elements to resolve the crisis
of Italian society. It contains the germs of a war which in appearance will
be fought for Italian expansion, but in which Fascist Italy will in reality
be an instrument in the hands of one of the imperialist groups which are
striving for world domination (Gramsci, 2000, p. 149)
Based on Gramscis writing stated above, it be sum up that the international
hegemony started from the ambitions of national capitalist class to accumulate capitals
which infiltrate to the national ideologies of the peripheral states in particularly is Italy.
Then, State or government is merely the administrative and the executive committee of
the capitalist bourgeoisie as Gramsci stated on LAlleanza Cooperativa, 30 October
1916. Colonialism is one exploitative face of capitalism and certain ideology is molded

65

to justify the domination of the ultimate position of capitalist class either as nationally or
internationally as Gramsci argued that:
All the ideological propaganda and the political and economic activity of
fascism is crowned by its tendency to imperialism . . . It contains the
germs of a war, but in which fascist Italy will in reality be an instrument
in the hands of one of the imperialist groups which are striving for world
domination. (Gramsci, 1978, p. 352)
Thirdly, in order to illustrate the asymmetric distribution of the uneven development and
the mature development in international state-system, Gramscis comparison of
condition of Russian revolution and the emergence of liberal internationalism of
Woodrow Wilson will be referred to. He noted that on the economic level, the
bourgeois class is international: it must necessarily wield influence across national
differences. Liberalism is a class doctrine liberalism in politics and free trade
economics. Explicitly, the attempt in spreading Wilsonian cosmopolitanism and the
League of Nations are considered as the proper ideology of modern capitalism.
Furthermore, he noted that:
It seeks to liberate the individual from all collective authoritarian
shackles dependent on pre-capitalist economic structures, in order to
establish the bourgeois cosmopolis and allow a more unrestrained race
for individual enrichment, possible only with the fall of national
monopolies in the worlds markets. The Wilsonian ideology is antiCatholic, anti-hierarchical: it is the demonic capitalist revolution that the
Pope has always exorcised without being able to defend the traditional
economic and political patrimony of feudal Catholicism against it.
(Gramsci, 1975, p. 114).

66

2.2. The Historical Development of Finance Capitalism

In the light of Gramscis observation, the conception of finance capital was derived from
the historical trajectories of the capitalist society of Italy. His observation departs from
the Italian situation and the complexities of the international capitalism; particularly the
introduction, of a new mode of production; of Fordism and the postwar worldwide crisis
of 1920s and the Great Depression of 1930s.
Historically, the embryo of finance capital in Italy could be understood within the
political-economy structure of Italy. As the examination of Gramsci on the history of
Naples, there were the same patterns of the relations of social forces at Naples with the
other area in Italy. Gramsci illustrated that the relation of forces between the peasant and
the landowners in term of capital accumulation was the primordial of rentier capitalist
system. The ownerships of land in the countryside did not belong to the peasant
cultivators. But it was in the hand of a small-town bourgeoisie. The land was leased or
rented to the peasant through the sharecropping exchanged for natural good and services.
In other words, it was the work rentier capitalism. According to Gramsci, these practices
generated the economic parasites making them economically unproductive; a stratum in
the society appropriating surplus value of the peasant cultivators. It is the primitive
usurious exploitation, as Gramsci said that:
This is the most hideous and unhealthy means of capital accumulation,
because it is founded on the iniquitous usurial exploitation of a peasantry
kept on the verge of malnutrition, and because it is inordinately
expensive, since the small saving of capital is offset by the incredible
expenditure which is often necessary to maintain a high standard of living
for such a great mass of absolute parasites (Gramsci, 1971, p.283).

67

In the Italian historical trajectory, the Naples society model was the prototype of
the Italian structure that constructs the imbalance relation between the capital owner or
capitalist class and the working class. As with the rapid development of industrial
capitalism, the advanced capitalism was centered on the Northern of Italy, particularly at
the industrial city such as Turin. And the big landowners established more critical
asymmetric relations in the South. The asymmetric relation of forces between the
developed North and the uneven of South is devoted in his note the Some Aspect of
Southern Questions.
Subsequently, throughout his writing entitled the Lyon Theses, Gramsci
illuminated the imbalance of social forces of post-war Italy. The Italian social forces
comprised of the industrial capitalists, the landowners, working class, peasantry class
and the urban petty bourgeoisie. The later has great significance and consisted mainly by
artisans, professionals and state employees. There were two fundamental class forces;
the industrialists and the landowners. He pointed out that the agricultural mode of
production was still the leading economic sector. He argued that industrialism, which is
the essential part of capitalism, is very weak in Italy. It was caused by two main factors;
the majority of population concentrated as agricultural workers and the industrialist
cannot absorb labour as much than agricultural sector. He compared that 4 million
1

industrial workers exist side by side with 3 /2 million agricultural workers and 4 million
peasants. Base on the geographical condition, there were the scarcity of raw materials in
Italy. Therefore, it could be said that the economic basis of Italy at that time lied on the
agricultural sector. In fact, the industrialist not needed to compete with the landowners
in order to attain the workers. The accessibility of workers has guaranteed by the
68

abundant poor rural population which at the time was the characteristic of Italy. The
prevailed Italy condition was generated by an industrial-agrarian alliance as agreement
is based on solidarity of interests between certain privileged groups, at the expense of
the general interests of production and of the majority of those who work. It produces an
accumulation of wealth in the hands of the big industrialists, which is the result of a
systematic plundering of whole categories of the population and whole regions of the
country. Territorially, the Italy economy was composed of two poles; the industrial of
North and the agricultural South, and Gramsci argued that:
In Italy the relations between industry and agriculture, which are essential
for the economic life of a country and for the determination of its political
superstructures, have a territorial basis. In the North, agricultural
production and the rural population are concentrated in a few big centres.
The big industry of the North fulfils towards them the function of the
capitalist metropolis. The big landowners and even the middle bourgeoisie
of the South, for their part, take on the role of those categories in the
colonies which ally themselves to the metropolis in order to keep the mass
of working people subjugated. (Gramsci, 2000: 144)

The existence of industrial-agrarian oligarchy, furthermore, was sustained by the

Italian fascist regime through finance. In this term, Fascism was defined as the
instrument of industrialists and landowners to control over all the wealth of country and
in the hand capitalism. Fascism was composed by two contradictions, in one hand, the
contradiction between landowners and capitalists, whose interests clash, in particular,
over tariffs. Furthermore, the rise of predominance capitalist class created a ruling class
which relatively unified in political sphere under the leadership of finance hegemony. It
changed the structure of the ruling class which naturally was much more close and direct
to the State, as Gramsci stated that
69

it is certain that todays Fascism typically represents the clear

predominance of finance capital within State: capital which seeks to
subjugate all the productive forces of the country and in another hand, the
contradiction between petite bourgeoisie and capitalism. The Fascist
petite bourgeoisie sees the Party as its instrument of defence, so were its
Parliament and its democracy. It seeks to put pressure on the government
through the Party, to prevent itself from being crushed by capitalism
(Gramsci, 1971, p. 292).
This condition was described by Gramsci of what he called as the plutocracy,
indicating the emergence of the new model of capital accumulation through financial
capital. The power of capital concentrated with a few bourgeois financiers and the form
of capital shifted from the land, labour, industries machines and raw materials to the
single power of finance. It could be seen on his argument that
The intention of favoring the plutocracy is shamelessly revealed in the
plan to legalize the preference share system in the new commercial code;
a little handful of financiers will in this way be enabled, without
restriction, to dispose of vast masses of savings originating from the
middle and petty bourgeoisie, and these categories will be stripped of the
right to dispose of their wealth. (Gramsci, 2000, p. 148-9)
The predominance of finance in Italy was the historical product of the
development of capitalism at national level. Indeed, the arrival and thrust of AngloAmerican finance capital also took a role in constructing the predominance capital in
Italy. Then, the acceptance of the Anglo-American finance capital by Fascist through its
policies which one of the political-economy agenda making fascist Italy as one of
capitalistic societies within Europe. In illustrating the acceptance of Fascist toward the
new of mode of production of America, Gramsci described that
In Italy there have been the beginnings of a Fordist fanfare: exaltation of
big cities, overall planning for the Milan conurbation, etc.; the affirmation
70

that capitalism is only at its beginnings and that it is necessary to prepare

for it grandiose patterns of development (Gramsci, 1971, p. 287)
In order to develop the ascendancy of finance capital, Fascist implemented the
finance oriented policy which was the reorganization of the finance instrument
particularly the banking sector in as much as banks being the heart of finance capital.
The main function of banks is to centralize money capital gathering together with
unemployed capital (capitalists reserves, depreciation funds, and the like, as well as the
savings of other social strata). As the principle of pooled reserves most of the money
could then be relent to the profitable use, even as a relatively small portion held in cash
as reserves (Hilferding, 1910) The Fascists policy on finance could be seen on the
merger of issuing banks of the two big Southern banks. It means that the elimination of
Southern banks would facilitate the Northern capitalist to exploit the wealthy of the
Southers as Gramsci argued that:
The elimination of the Southern banks as issuing banks will transfer this
function to Northern big industry which controls, via the Banca
Commerciale, the Bank of Italy. We shall thus see the 'colonial' economic
exploitation and impoverishment of the South increased, and the slow
process of detachment of the Southern petty bourgeoisie from the state
accelerated (Gramsci, 2000, p.149)
Subsequently, the predominance of finance capitals have the tendency to
manipulate and destruct real material wealth. The real economic activities being
marginalized and it destroy of the foundation of society. It developed the new relations
of distribution of wealth with the production capacity of society was decreasing and in
the same time the bourgeois accumulation capital of massively increased through

71

finance. Indeed, this new relation of distribution subjugated and exploited working class
in differ form. It is the crisis of capitalist society as Gramsci stated that:
Bourgeois society is dying because it is not producing, because, what
with the new relations of distribution created by the war and the resulting
plutocratic phase of capitalism, the labour of the produces is not enough
to keep up with consumer demand, far from allowing any accumulation.
Material wealth is being gradually annihilated, while, at the same time,
the accumulation of share certificates for the appropriation of material
wealth paper money is increasing. The capitalist system of
distribution has become a kind of armed looting, which is being carried
out by those in government. (Gramsci, 1994, p.153)
Finance has successfully isolated the industrial power from the factory and the
subsequent phase followed by the increasing disequilibrium between the unproductive
and the productive forces within the society which capital concentrated in a trust, a
monopoly, a bank and the bureaucracy of State (Gramsci, 1994). Hence society needs
the real production to live and to develop, as the main premise of Gramsci, that a
society must adhere to some historically determined form of production which the
historical life of mode of production will deliver a society to a certain model. Therefore,
the predominance of finance would lead the crisis as the effect of disequilibrium within
society. In the same line with Marx (1976), the crisis within capitalist society is derived
from the unproductive capital which channeled in the form of finance or credit. The
capitalist seeking of profitable returns of its interests and in the same time, the
unemployed capital have become separated from the productive sphere. As he stated:
The so-called plethora of capital always applies essentially to a plethora
of the capital for which the fall in the rate of profit is not compensated
through the mass of profit this is always true of newly developing fresh
offshoots of capital or to a plethora which places capitals incapable of
action on their own at the disposal of the managers of large enterprises in
the form of credit (Marx, 1976, p. 251).
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These processes constructing two site of the capitalist mode of production which
in one hand, capital invests to the productive activities and on the other hand, capital is
recapitalized through the finance activities, and as Marx himself concluded that
unemployed capital at one pole and unemployed workers at the other (Marx, 1976, p.
251). Thus, the pre-dominance of finance capital produce the over-accumulation of
capital and the over unemployment of labour that places the economic structure of crisisridden capitalism. Therefore, the money as capital is being meaningless which it is a
progressive deterioration of the relation between credit and exploitation; rendering
capital, in its elementary form of money, potentially meaningless. Marx (1976) pointed
out that this condition as the abolition of the capitalist mode of production within the
capitalist mode of production itself. The over-accumulation of finance capital
devastated the productive capacities, increasing the level of poverty which caused by
high unemployment. It also has led to the destruction of human life through war and
starvation. The question is on how bourgeois society gets over these crises? On the other
hand by enforced destruction of a mass of productive forces; and the other, by the
conquest of new markets, and by the more thorough exploitation of the old ones (Marx
and Engels, 1977, pp.189). In the light of Marxist thinking, Gramsci argued that crisis
was caused more by the accentuation of the return of finance capital than by the surplus
value of production activities. Consequently, the surplus value of productive economy
was pulled out to the finance sphere. Therefore, Gramsci recognized it as the parasite of
capitalism; that the increase of the unproductive income of the unproductive economy,
as he asserted that:

73

The increase in unproductive masses and the shift of equilibrium in the

relation between income and productive work meanwhile specified the
important changes in the social stratifications. Along with the increase in
unproductive income, entire social groups become dislocated which have
no direct contact with production. The fact is: given the general
conditions, huge profit created by the technical progress of work creates
new parasites, that is people who consume without producing, who do not
exchange work for work, but other peoples work for personal aim
(Gramsci, 1975, p. 273)
The predominance of finance also locked Italy within the international circuit of finance.
It put Italy as the peripheral thrust of the hegemony of finance capital. The circuit of
global finance in Italy constituted as the close relation of Fascist with the global
capitalist financier of America, JP Morgan. In fact, JP Morgan lent huge money to the
Fascist in order to finance the fascist agenda. Obviously, the fascist State was indebted
to JP Morgan and this was one form of expansion of capitalist class of developed
capitalist state in to the peripheral such as Italy. It was further achieved by extending the
domination at international level. Throughout the finance power, a capitalist could
control the economy of its peripheral. At that time, Morgan lent over 100 million dollars
to Italy in early 1926. Consequently, Morgan persuaded the fascist State to retain the
existence of the domination of a few bourgeois and furthermore, to subjugate the
working class and at same time, indicating Morgan strong influence in the Italian
economic structure. It is worth to quote the passage below:
The Morgan debt, moreover, was incurred under even worse conditions.
Of the hundred million dollars of this loan, the government has only
thirty-three million at its disposal. The other sixty-seven million the
Italian government can only make use of with the generous personal
consent of Morgan which means that Morgan is the real head of the
Italian government (Gramsci, 2000, p. 293).

74

2.3. The Capitalist Crisis and America Passive Revolution

In order to achieve this hegemonic position, the dominant class employed the strategy of
what Gramsci called passive revolution. Gramsci suggested that a strategy of passive
revolution is the characteristic response of the bourgeoisie whenever its hegemony is
seriously threatened and a process of extensive reorganization is needed in order to reestablish its hegemony. The notion of passive revolution departs from Gramscis
observation on two historical processes, both of them corresponding to a stage in the
development of the capitalist mode of production, they were the Risorgimento (the
unification of Italy on 1871) and the Fascism-Americanism where it was the revolution
on the organizational plane as the result of new relations between politics and
economies.
In their introduction on Americanism and Fordism of Selection from the Prison
Notebooks, Hoare and Smith (1971) argued that Americanism and Fordism are unique
among Gramsci's prison writings which departed from the contemporary events of the
development of the corporate (fascist), the Great Depression of 1920s worldwide crisis
and the First Soviet Five Year Plan. This study focuses on the passive revolution of
Fordism as the initial stage of the development of transnational capitalist class. In his
notes of Americanism and Fordism, he perceived that Americanism and Fordism were
an essential change on the world of production and the beginning of a new historical
epoch. The rise of America as the alliance of the development of capitalism and
democracy, has affected the Europe in general and also Italy in particular. Specifically,
he perceived the element of passive revolution constituting Roosevelts New Deal,
consisting of the great expansion in state intervention to help overcome the profound
75

economic crisis of the 1930s. The passive revolution also translated as the furtherance of
state power and the re-organization of state and subaltern producer class identities which
shaped within the intertwine of the international realm, the emerging dominance of
Anglo-Saxon capitalism and colonial exploitation and the latest development of the form
state of Italy at that time. In order to put in a concise manner, the concept of passive
revolution could be described as revolution from above (Davidson, 2005).
The originality of Gramscis analysis of Fordism lie in the discovery of
countertendencies of capitalism in the form of the organization of labour; the reexploration of the political dimension that is a central feature of the Factory Council
strategy in the light of new developments in capitalism. In short, his study enlightens us
over the relations between productive forces and political forms. Indeed, the instruments
of American type of passive revolution relied on the reorganization of the wage-earner,
the development of differential practices within working class, and the creation a new
fragmented proletariat. The development of the productive forces took place under the
leadership of the dominant class with a monopoly over initiative and over the working
class to the extent that latter lacked any autonomous and conscious leadership (BuciGluckmann, 1979). Furthermore, the invention of Ford not merely affected the mode of
production within the entire capitalist world but also universalized throughout
ideological intermediaries, as the passage below:
Recall here the experiments conducted by Ford and to the economies
made by his firm through direct management of transport and distribution
of the product. These economies affected production costs and permitted
higher wages and lower selling prices. Since these preliminary conditions
existed, already rendered rational by historical evolution, it was relatively
easy to rationalise production and labour by a skilful combination of
force (destruction of working class trade unionism on a territorial basis)
76

and persuasion (high wages, various social benefits, extremely subtle

ideological and political propaganda) and thus succeed in making the
whole life of the nation revolve around production. Hegemony here is
born in the factory and requires for its exercise only a minute quantity of
professional political and ideological intermediaries (Gramsci, 1971,
p.285)
The another factor why Fordism was considered as a variation of passive
revolution appeared from the response of America capitalists to the worldwide crisis
triggered by the Wall Street Crash of 1929 and the subsequent Great Depression.
According to Buci-Glucksmann (1979), there was an explicit attempt by Gramsci to
discover in Americanism a specific model of development of capitalism, which has
passed from the crisis of 1929 into passive revolution: the question of whether
Americanism can constitute. a gradual evolution of the same type as the passive
revolution examined elsewhere (Gramsci, 1971, p. 279-80). It was clear that the
moment of Americas passive revolution was started from the world crisis of 1920s.
Despite that there were tremendous impacts of the crisis, particularly on the working
class. Instead, Gramsci conceived the crisis as the result of the predominance of finance
capital which produced by the unproductive masses and the parasites within the society.
It was not merely an economic crisis but it was socio-economic crisis. It could be seen in
his questions on the problem of crisis at the passage below. Yet, the passage is not short,
but it is certainly important to notice on below statement:
What is the excess of consumption to be attributed to? Can one prove that
the working masses have raised their living standards to such an extent
that it can be seen as an excess of consumption? Thus, that the
relationship between salaries and profits has become catastrophic for
profits? Statistics could not even show this for America has it not
happened that within the distribution of national income especially
through commerce and the stock exchange category of withdrawers has
introduced itself after the Warwhich fulfils no necessary and
77

indispensable productive function, while it absorbs an impressing part of

the income?...After the war, the category of the unproductive parasites
has in absolute and relative terms grown enormously, and it is them who
devour all savings The causes for the crisis are thus not moral
(enjoyment, etc) nor political ones, but socio-economic, thus of the same
nature as the crisis itself: society creates its own poisons, it must let the
masses (not only unemployed wage-earner) of the population live that
hinder saving and thus break the dynamic equilibrium (Gramsci, 1975,
p.793).
The Great Depression not only attacked the economy of America per se, but it also
contributed to the crisis of capitalism of a whole world. In particular, great depression
influenced the economic formation of Italy as the peripheral of world capitalism. As its
impacts, Gramsci observed that there were massive shift of wealth and a phenomenon
of "simultaneous" expropriation of the savings of vast masses of the population almost
everywhere, but in America most of all (Gramsci, 1971: 313). This condition affected
the behavior of finance capitalists particularly of Italy or in Gramscis word as
producers of savings" who are really nothing other than predators of surplus value
which they attempted to use State as their protector as with the public investment such as
government bonds in order to maintain high return on investment and low tariff
protection. Therefore, State was not simply conceived as an institutions limited to the
government functionaries, instead, state is the entire complex of practical and theoretical
activities with which the ruling class not only justifies and maintains its dominance, but
manages to win the active consent of those over whom it rules (Gramsci, 1971, p.178).
In other words, according to Bieler & Morton (2006a), state is understood as a social
relation. Thus, the power of State was needed by the finance capital as such as by the
tariff protection and State functioned as the capital accumulation machine of capitalist
class which reflected by its economic policies, as Gramsci pointed out that:
78

The State thus finds itself invested with a primordial function in the
capitalist system, both as a company (state holdings) which concentrates
the savings to be put at the disposal of private industry and activity, and
as a medium and long-term investor (creation in Italy of various mortgage
houses, industrial reconstruction, etc., transformation of the Banca
Commerciale, consolidation of the savings banks, creation of new forms
of Post-Office savings, etc (Gramsci, 1971, p.314).
The investments on the State were understood as the efforts to strengthen the
supremacy of state under the control of finance capitalist class. It was the struggle to
place State in the plutocracy which there was a tightly tied between big finance capital
and the ruling class. Besides that, it also justified State as the biggest plutocratic
organism holding the masses of savings of the society (Gramsci, 1971). The
centralization of savings around the state organization within the framework of a
functional dislocation of income is also parasitic vis--vis the reproductive organism.
As the consequences, the mass of savers were isolated from the world of production and
work. It means that finance capital has too high a social cost which annihilated the
existence of productive economy. Surely it subjugated the working class as Gramsci
contented at the passage below:
If the new structure of credit were to consolidate this situation, in reality
it would be a turn for the worse. If parasitic savings, thanks to State
guarantees, were to be rendered exempt even from the general hazards of
the normal market, then on the one hand parasitic landed property would
be strengthened and on the other hand industrial debentures, with legally
determined dividends, would undoubtedly impose an even more crushing
burden on labour (Gramsci, 1971, p.316).
The intersection of the predominant bourgeoisie control in the industrialagricultural oligarchy of finance which mediated through the State and the raising of
world capitalism through the spread of Fordism, pushed Gramsci to postulate
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extensively a theoretical and practical sense of hegemony. At the national level, the
predominant finance caused by the pattern of social forces relations derived from the
imbalance relations of economic sphere or in his language in the structure. The
hegemony of fundamental class arised when in which one becomes aware that ones
own corporate interests, in their present and future development, transcends the
corporate limits of the purely economic class, and can and must become the interests of
other subordinate groups too (Gramsci, 1971).

For Gramsci this is where the

specifically political moment is situated, and it is characterized by ideological struggle

which attempts to forge unity between economic, political and intellectual objectives,
placing all the questions around which the struggle rages on a universal, not at a
corporate level. Therefore, one effective way is by creating the hegemony of a
fundamental social group over a series of subordinate ones (Gramsci, 1971, pp.180-3).
Therefore, the functions of government are in hands of the capitalists or the highranking social class which is linked to the proprietors through financial interests. The
subordinate posts the posts as national deputies are in the hands of the petitite
bourgeoisie, which allows itself to be dominated economically and morally by the
capitalists. The mass of working people is manipulated politically to satisfy the material
interests of the proprietors and the ideological ambitions of the petite bourgeoisie. In
order to keep this class of hierarchy intact, the Constitution maintains that it is illegal for
deputies to be bound by imperative mandates (Gramsci, 1994). It means that hegemony
exercised its leadership both at the economic and politics sphere.
Hegemony is the combination of domination through coerce and consent way. To
give consent is to accept voluntarily by the civil society through its application in the
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institutions. The institutions are not as State apparatuses per se, but as constituting in the
private institutions such as university, school, church and trade union. These institutions
were supported by the ruling class as long it support and maintain the domination of
ruling class. In the other hand, coercion is exercised by the state apparatuses. It can be
conceived, when State has privilege to conduct punishment and penal code to the certain
social group. It will be conducted, when considered is the reformist sense, that it will
replace the ruling class. Thus, hegemony is to maintain its domination upon developing
organ of State which is Executive, Legislative and Judiciary. Those organs of provide
ruling class will create laws and regulations within society subjugating to the
hegemonys interests. Conceptually, hegemony could be understood through the passage
below:
The supremacy of a social group manifest itself in two ways, as
domination and as intellectual and moral leadership. A social group
dominates antagonistic groups, which it tends to liquidate or to
subjugate perhaps even by armed force; it leads kindred or allied groups.
A social group can, an indeed must, already exercise leadership before
winning governmental power (this indeed is one of the principal
conditions for winning such power); it subsequently becomes dominant
when it exercises power, but even if it holds it firmly in its grasp, it must
continue to lead as well. (Gramsci, 1971, pp.57-8)
Besides that, beyond the national level, the rise of Fordism, and the predominant
world finance of the Morgan and the financial form debt a vantage point, all were
involve in construct the concept of hegemony at the international level. The relations of
forces within a state also of engendered a dominant or hegemonic group. This group will
expand its influence to the other States by co-operating or collaborating with the general
interest of subordinate state. The development and expansion of particular group can be
conceived as a universal expansion. The well developed dominant group within a state
81

will spread its own particular mode of production, ideology, norm, value to the less
developed countries (subordinate states). These interaction followed by constructing a
new pattern of the interaction that corresponded by its own organized economic and
political expression in international relations. Therefore, Gramsci defined international
relations as the intertwine of the internal relations of nation-states, creating new, unique
and historically concrete combinations. A particular ideology, for instance, born in a
highly developed country, is disseminated to less developed countries and impinging on
the local interplay of combinations. This relation between international forces and
national forces is further complicated by the existence within every State of several
structurally diverse territorial sectors, with diverse relations of forces at all levels
(Gramsci, 1971).
The success of American capitalist leadership was not fully borne on its own
capitalist class forces, but also by the raising of Americanism and Fordism in
disseminating the particular mode of production to worldwide also supported by
mechanism of international organizations. In a general term, we could have said that
Gramsci consistently focus on the relations of advanced capitalist world during and
developing countries which emphasize on the forms of American global hegemony
during his time (Gramsci, 1971). In other words, the spreading of American hegemony
was not only through the expansion of its capital in term of economic structure but also
through the various international civil institutions or international voluntary associations
promoting American liberalism and supporting the universal projection of mass
production in term of ideological superstructure. These associations comprised the
Young Mens Christian Association (YMCA), international groups like the Rotary Club,
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or Pan-Christian movements (Gramsci, 1971, p.318-20). Forms of regional and

international economic integration, within which hegemonic states might organize
national and international (interstate) markets, were also discussed. As, indeed, was the
role of the Catholic Church, which was described as a worldwide hegemonic
institution that promoted an imperialistic (religious) spirit of international hegemony
(Gramsci, 1985).
According to Morton, (2007), Gramsci engaged with the relations within society and
hegemonic systems within state equally with as he stated, the relations between
international forces which compose on the combinations of states in a hegemonic
system. In sum, the particular social force may raise as the hegemony within a national
social order as well as through the world order. Hegemony operates at two levels which
by establishing a historical bloc and constructing social cohesion within a form of state
and developing hegemony through the level of world order. For instance, at Gramscis
time, this was borne by the expansion of Fordist assembly plant production beyond the
United States which would lead it to be a world hegemony and power of Americanism
and Fordism from the 1920s and 1930s (Gramsci, 1971, pp.277318).
2.4. The Imperialism of Finance Capital
Finance capitalism was the departure point of imperialism in term of the foundation of
the capitalist movement to expand their domination outside the national territory. Within
Italy at that time, the tendency of imperialism could be seen in the political economy of
Fascism as Gramsci stated that It is the attempt to resolve the problems of production
and exchange with machine-guns and pistol shots (Gramsci, 1978, p.23). Hence,
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imperialism defined as the instrument of the capitalist groups to extent their domination
outside national territory as the passage below:
All the ideological propaganda and the political and economic activity of
Fascism is crowned by its tendency to 'imperialism'. This tendency
expresses the need felt by the industrial/landowning ruling classes of Italy
to find outside the national domain the elements to resolve the crisis of
Italian society. It contains the germs of a war which in appearance will be
fought for Italian expansion, but in which Fascist Italy will in reality be
an instrument in the hands of one of the imperialist groups which are
striving for world domination (Gramsci, 2000, p.149).
The colonialism character of Fascist was nothing than the continuation of the
former colonialism as such as Francesco Crispi (18181901), Italian prime minister on
various occasions between 1876 and 1896. Besides that, this is can be seen in relation to
the response in the tendency of colonialism in capitalist Europe which was rich in
resources. It arrived at the point that the rate of profit was tend to fall. They needed to
enlarge and expand its income-bearing investment and thus after 1890; the great colonial
empires were created (Gramsci, 1971, p. 68). War of colonialism was nothing more than
the bourgeois class project, hidden behind the myth of ruling class. Thus, the
justification of war was found in the consciousness of mass society being manipulated
by ruling class. This was indicated through the passage below:
When Mussolini says to the Italian bourgeoisie: Go where your destiny
leads you in other words, If you believe that it is your duty to make
war with Austria, the ploletariat will not sabotage your actions he is
not by any means backtracking on his pas attitude to the Libyan War,
which led to what a.t. calls the negative myth of war. When he says
your destiny, speaking to the bourgeoisie, he is talking about that
destiny which, given the historical function of the class, must inevitably
lead it to war. War thus retains its character as the irreducible antithesis
of the destiny of the proletariat: a character ever more apparent as the
ploretariat acquires consciousness of this fact (Gramsci, 1994, p.6).
84

Colonialism for Gramsci was defined as the form of economic exploitation and
political oppression of certain fundamental class. Besides that, from his point of view,
colonialism was not only exercised outside the national territory of Italy, but in the same
time colonialism also exercised at home. As here, colonialism could be seen in the form
of the exploitation of the southern masses of the Mezzogiorno with the support of
Catholic Action and the monarchy as the state form of the Fascist regime. On the other
hand, the colonial exploitation abroad could be seen in the form of expansion in Ethiopia
(Gramsci 1978). The colonialism at home was derived from the economic structure of
Italy sustained by the relations of industry and agriculture sector and the political
infrastructure which emerged from it. At the territorial level, north was the concentration
of factory production as the center of industrial capitalism. Otherwise, the peasantry
concentrated in the South and the landowners within industrial zone seen as their ally.
In the North, an industrial and rural proletariat emerged, while in the South the rural
population, subjected to a 'colonial' system of exploitation, had to be held down with a
stronger and stronger political repression (Gramsci, 2000, p.146). Thus, the North
functioned as the metropolis or centers which absorb the surplus value of the peripheral
of South. It was in the form of colonial exploitation at home as Gramsci argued at this
passage:
The establishment of the industrial-agrarian dictatorship posed the
problem of revolution in its real terms, determining its historical
conditions. In the North, an industrial and rural proletariat emerged, while
in the South the rural population, subjected to a 'colonial' system of
exploitation, had to be held down with a stronger and stronger political
repression. The terms of the 'Southern question' were laid down clearly in
this period (Gramsci, 2000, pp.145-6).

85

This was a critical stage in the political condition of Italy which induced the
imperialist character of capitalism. As the rising of the resistance of peasant and the
working class toward in their subjugation and exploitation by the capitalists, thus
capitalist class lost its allies. As the result, capitalist class prefers to establish the close
relation with the military group in order to extent its domination to the all classes. The
alliance of capitalist class and the military groups was the main source of the brutish and
protagonist character of capitalist State. It accelerated war of imperialism in order to
gain territorial annexation. To sum up, war led by the interest of hegemony with the
purpose to retain its domination, domestically and internationally.
Capitalism, as a political force, is being reduced to corporate associations
of factory owners. It no longer possesses a political party whose ideology
also extends to the petit bourgeois strata in the cities and the countryside
and so ensures the survival of a broadly based legal state. In fact,
capitalism has been reduced to relying for its political representation on
the major newspaper (a print-run of 400,000, a thousand electors) and the
Senate, which is immune as an institution, from the actions and reactions
of the great popular masses, but which also lack authority and prestige in
the country. Because of this, the political power of capitalism is tending
to become even more closely allied with the upper ranks of the military
with the Royal Guard and the swarm of adventures who have emerged
since the Armistice, aspiring, every one of them, to become the Kornilov
or the Bonaparte of Italy. The political power of capitalism today only
find expression in a military coup dtat and an attempt to impose a rigid
national dictatorship to drive the brutalized Italian masses into reviving
the economy by sacking neighboring countries sword in hand (Gramsci,
1994, pp.193-4).
Broadly, the explanation of Gramsci of the alliance of bourgeoisie with the State
could be understood as the general condition of European capitalist state at the early of
twentieth century. This close relation between finance capitalist with the State was also
found on the study by Hilferding (1910) the rise of finance capital of Germany in his
seminal writing of Finance Capital: a Study of the Latest Phase in Capitalist
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Development. Hilferding emphasized that finance capital needed the power of the state
to gain the benefits of monopoly. Throughout the States protection, and subsequently,
finance capital could conduct the territorial expansion by exporting capital to its colonies
instituting a powerful state in the process; as indicated through this passage.
The demand for an expansionist policy revolutionizes the whole world
view of the bourgeoisie, which ceases to be peace-loving and
humanitarian. The old free traders believed in free trade not only as the
best economic policy but also as the beginning of an era of peace.
Finance capital abandoned this belief long ago. It has no faith in the
harmony of capitalist interests, and knows well that competition is
becoming increasingly a political power struggle. The ideal of peace has
lost its lustre, and in place of the idea of humanity there emerges a
glorification of the greatness and power of the state. . . . The ideal now is
to secure for ones own nation the domination of the world. (Hilferding,
1910, p.335)
According to Gramsci, the capitalist state also exercised the coercive instrument to
expand their domination to outside the national boundaries. The treatments of colonialist
to the population of colonies were outside the border of humanity. The indigenous
people of colonies lived under poor standard and physically, they were exploited in the
harvest of the raw materials in order to fulfill the demands of competitive European
capitalists. Otherwise, the European capitalists lived upon the indigenous people of
colonies; as in Gramscis words that the Europeans were unconscious vampire.
Therefore, capitalism was a deadly killer and worse than modern weapons. They killed
the women, children and men through starvation and relentless despair. In simply words,
the colonial populations become the foundation on which the whole edifice of capitalist
exploitation is erected (Gramsci 1977, p.6972). Base on this dialectical thinking,
Gramsci argued that in dismantling colonialism it needs class struggle of coloured
people against the white murderers toward to achieving their independence (Gramsci,
87

2000).

Thus, millions people of the colonies is the worth of the commodities of

capitalism. In illustrating the life of colonies, it is worth to quote the passage below:
The indigenous peoples of the colonies were not even left their eyes for
weeping; a foodstuff, raw materials, everything possible was combed
from the colonies to sustain the resistance of the warring metropolitan
peoples. This capitalist vice gripping the colonies worked wonderfully:
millions and millions of Indians, Egyptians, Algerians, Tunisians and
Tonkinese [Vietnamese] died from hunger or disease as a result of the
devastation wrought on the wretched colonial economies by European
capitalist competition. How could an Egyptian or Indian peasant make his
prices competitive with the English or French or Italian state? Rice,
wheat, cotton, wool -all this was secured for us Europeans, while the
colonial peasant had to live on herbs and roots, had to subject himself to
the harshest corvee labour in order to scrape a bare subsistence minimum,
and had to suffer the raging of impetuous and untamable famines that
rage in India like natural storms (Gramsci, 2000, p.113-4).
To recap, Gramscis notion on imperialism or colonialism both at national and
international level is nothing than the form of expansion of particular fundamental class
to maintain their hegemonic position. Imperialism was borne from the laissez-faire law
of capitalism, of the free competition pursued by capitalism. At the national level, there
was a contradiction or competitions among the capitalists to win the hegemonic position
and at international level, there was competition among the European capitalist states to
achieve the status of world hegemony. The imbalance relations between the Northern
and Southern Italy provide the vivid pictures of the mode of economic colonialism
organized within the national territory basis. The growth of European expansion was
also a vantage point in explaining the tendencies of imperialism as inherently
expansionist, as in Gramscis observation. This study concludes that the core motives of
imperialism was derived from the historical trajectory of parasites of capitalism, the
unproductive capitalist class that live without producing and live from the high return of
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finance capital resulting with the under consumption at home and expanding its
supremacy to outside of national territory in extracting the surplus value from colonies.
In the light of Marxs thinking of at his era, Gramscis imperialism has the same nuance
with most Marxists in defining imperialism, as Lenin for example argued through the
passage below:
Further, imperialism is an immense accumulation of money capital in a
few countries. . . . Hence the extraordinary growth of a class, or rather of
a social stratum of rentiers, i.e. people who live by clipping coupons, who
take no part in any enterprise whatever, whose profession is idleness. The
export of capital, one of the most essential economic bases of
imperialism, still more completely isolates the rentiers from production
and sets the seal of parasitism on the whole country that lives by
exploiting the labour of several overseas countries and colonies (Lenin,
1950, p.537).

2.5. Conclusion
During his time Gramscis noted that, the construction of finance capital at the initial
phase of its development in the capitalist world. It has transformed the primordial
capitalist mode of production to a new type of the accumulation of capital. Capitalists
can control the heart of economic activity through seizure of the banking system in order
to command the industry-agriculture economic sector. This model of accumulation will
not increase national wealth. In reverse, it is the new form of exploitation of capitalism
either as directly or indirectly, of the impoverished proletarian and peasantry. During
Gramscis time, the rising of the predominant finance capitalist was the meeting point of
the internal and external forces.

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Internally, the predominance of finance is a new phase of capitalism developed by

the close relation of the bourgeoisie and the Fascist State. The Finance capital was
merely the instrument of the persistence of the hegemony of ruling class in exploiting
the working class and peasantry. The finance capital has successfully unified the
economic and political objectives of the ruling class. As an economic structure, the
contradictions among the bourgeoisie were solved through the finance intermediaries in
sustaining the industrial-agrarian oligarchy. As on the spatial level, the surplus value of
the entire Italy; either the industrial North or agricultural South could be absorbed easily
by finance and the reorganization of finance through the banking system of, shares,
credit, and joint stock of exchange. Thus finance capital established a new mode of
production dislocating the factory from agriculture. It promised of high returns without
engaging in productive activities. The rapid development of finance capital in Italy was
the product of historical trajectory of the culture of rentier capitalism. As the result, the
predominant capital in Italy established the imbalanced relations between the North and
South which Gramsci argued as the model of colonial exploitation of capitalism at
domestic level.
At the political level, the predominance of capital was also supported by the
government or fascist State through its political-economy policies. These were mutual
relations between the capitalists and the State. As the objective of fascism, the
predominance of capital was the main gate to bring Italian powerful capitalist state into
Europe and expand its domination to the entire world. It could be seen at the expansion
of Fascism to Africa in response to competition among capitalist States within Europe.
As the objective of capitalists, the power of State was needed to protect their interests in
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producing profits from financial investment. In response to the American crisis,

capitalists investments concentrated in the state hand, rather than in private capitalist
hands. The State will protect their return in a economic policy; such as monetary, tariff
and protectionist policies.
Externally, in the eve of the rising America capitalist in Europe and being a new
world hegemony, American financier played a huge role to penetrate its capital to the
periphery. Clearly, it was the type of passive revolution capitalism and of capitalist class
struggle to preserve its dominant status.

At the same time, American capitalism

emerged as the new force of world hegemony. It begins to replace former British
hegemony. The international voluntary associations also played a huge role in
disseminating of the ideology of American liberalism. Therefore, it was real
phenomenon that Gramsci vividly explained as the function of civil institutions in
constructing of hegemony by the consent.
To conclude this chapter, there is a direct link between finance and war of capitalism.
Beyond the economic-political motives of capitalism, the universal law of laizze-faire
laid the main factor of capitalism to expand its domination. At domestic level, there was
competition among the capitalist classes in order to accumulate capital. The invention of
finance capital produced a new sphere of capitalist accumulation. It could be said as the
intermediary of the productive economic sphere. As such industrial-agricultural forces in
form of shares, joint stock of exchange, credit, debentures and also money played then
roles. Increasingly the return of finance capital, the productive forces became
marginalized As a consequence, the predominance of finance has the tendency to
increase the disequilibrium between the productive capital and non-productive capital
91

indicating by the fall of profit, under-consumption and over-production. At the domestic

level, the capitalists need the state to protect their interest at home.

However, at

overseas, the capitalists need the state to expand its domination in providing assistance
to export its capital as the solution of disequilibrium at home. The war is inevitable in
order to occupy a territory amidst the competition among capitalist states and finding its
external colonies. It was the tendency of capitalism to indulge in imperialism. Yet, in
order to achieve a world hegemony status it had not only to rely on colonial exploitation
as in the Italian capitalism, but it also must be able to construct a world historical bloc
through the universal expansion of its own particular mode of production, ideology,
norm, value and carry them to the less developed countries (subordinate states) as what
Gramsci clearly observed in the success of the American passive revolution.

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CHAPTER THREE
THE NEOLIBERAL HISTORICAL BLOC
Structures and superstructures form an "historical bloc". That is to say the
complex, contradictory and discordant ensemble of the superstructures.is the
refection of the ensemble of the social relations of production.
Antonio Gramsci, Structure and Superstructure
(Selections from Prison Notebooks, 1971)

3.1. Introduction
In order to gain the understanding on how the current world order emerged, this chapter
will devote on the application and expanding concept of the historical bloc. As
referring to the purpose of this study, we need to conceive on how the prevailing world
order emerged, who benefited from the structure, prevailing the ideology which is the
underpinning a world order, and furthermore, determining the point of departure in
questioning hegemonic domination and search for the alternatives. This chapter focuses
on the historical assessment of the raising of finance hegemony as the domination mode
of production, the dominant common sense which preserves the hegemonic system and
the institutionalization of hegemony as a global order
The purpose of this study is to elaborate the notion of hegemony which firmly
rooted in Gramsci thought and to search for the alternatives to change the hegemonic
world order. Hegemony in Gramscis sense is complex which includes the mode of
production, ideology and leading institutions within the society. This argument derived
from the translation of the writing of Gramsci on historical bloc (blocco storico) in the
Italian context during his time and much of Gramscians sees the same strategy as valid
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in a global context (Cox, 1996; Gill, 1993; Langley, 2002; Bieler & Morton, 2006).
Historical bloc refers to a set of relations of the ideas, institutions and social production
within society under the leadership of the hegemonic class.
It is the unity of the contradiction between spirit and nature (structure and
superstructure), unity of opposites and of distinct and unity of domination
and subordination Historic bloc required the leading and dominant class
that maintains cohesion and identity within the propagation of a common
culture (Gramsci, 2001, p. 337).
The purpose behind this meant to show us the complexity of world order and this
should include the ideology, institutions and economic reproduction which have
reciprocal relations with each other. Thus, base on his reading of the historical bloc at
his time, Gramsci established the concept of hegemony which the leadership of
hegemonic class exerts both coercive and consent through the social institutions within
the civil society. At the global level, world order is the result of a hegemon and the
formation of a historic bloc which organized around a set of hegemonic ideas-a
dominant ideology-that forms the basis for an alliance between social classes. Therefore,
a successful historic bloc is organized through the exercise of intellectual and moral
leadership and forms the organic link between political and civil society (the extended
or integral state) (Cox & Sinclair, 1996). Furthermore, world hegemony is expressed in
universal norms, institutions, and mechanisms which lay down general behaviour for
states and for those forces of civil society that act across national boundaries, rules
which support the dominant mode of production (Cox, 1996, p. 137).

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3.2. The Evolving Predominance of Finance Capitalism

Since, the birth of the capitalist system at its homeland, Europe, capitalism has been
transformed and metamorphosed into an advanced model. Although, there are broad
range of the elements concerning capitalist system, this study focuses on the role of
finance as the glue to bind the entire world under the capitalist system. Accumulation of
capital is the main objective within capitalist system. As the earlier class analysis
perspective, the asymmetric relations between capitalist (bourgeoisie) class and workers
(proletariat) class produced by the ownership of capital. The bourgeoisie seized the
power to run industry through its capital (machines, money, and land), meanwhile, the
workers class relies on their human power to sustain their life. The earlier mode of
production of capitalist society was the production of commodities. Furthermore, the
profit comes after the commodities are sold in the market which Marx considered that
profit as the surplus value. In the surplus value contain the labour power and labor time.
The circulation and exchange of the commodities in the society, moreover, Hilferding
(1910) called as the exchange of value. He argued that the bond which ties a commodity,
as a use value, to some particular individual need is severed while it is in circulation,
where it counts only as an exchange value. It resumes its role as a use value and reestablishes its relevance to another individual need only after the process of exchange
has been completed.
Money has significant role within the capitalist system functioning as the
intermediary of the exchange value. The value of labour time and production process are
converting to money. From this perspective, money derived from the exchange value.
The conversion of value to money, posit money as a capital in the capitalist society.
95

Hence money could transfer to the commodities. Furthermore, this process that results in
the alienation to the worker class as argued by Hilferdings states that:
Since all commodities transform themselves into money by divesting
themselves of their use values, money becomes the transformed existence
of all other commodities. Only as a result of this transformation of all other
commodities into money does money become the objectification of general
labour time, that is, the product of the universal alienation and suppression
of individual labours (Hilferding, 1910. p. 35).

We could conclude that capital can be understood in two ways. In real term, it is
defined as aggregated value of fixed capital and stock of raw materials, semi-finished
goods and finished goods that do not enter into final consumption. In financial term, it is
defined as aggregate value of securities held by property-owners (shares, private bonds);
public bond gives rise to another dimension of property, an entitlement to income from
future production (Amin, 2003). And at the next stage, money not only recognized as the
medium of exchange, but also funding the development of capitalism. At the early stage
of development, money accepted as the precarious metal (gold and silver), hence the
demand of money increased to fuel the capitalist engine in order to fulfill the endless
capital accumulation. Thus the form of money evolves to other forms known as paper
money, credit, shares etc. Since, the accumulation of capital can only be obtained, as
and mediated by money. Furthermore, the value of money is manipulated and
reproduced currencies, trading, joint stock of exchange, future trading, markets
speculation as capital as well called as fictitious capital (Hilferding, 1910). According
to Amin (2005), the capitalist system has always been financialized: capitalist
accumulation cannot be conceived without money and credit. Credit provides capital in

96

the production, speculation, to increase profit and even funding war that lead
imperialism (see Lenin 1917; Hilferding 1910; Amin, 2003 & Nobudere 1977).
The rise of industrial capitalist countries in Europe led them finding cheap raw
materials and international market and at the same time protect their domestic industries
from its competitor or known as the protectionist policy. As a leader of industrial
capitalist countries, British emerged as the economic powerhouse since its industrial
revolution and the discoveries of new technology. These objectives motivate the
industrial countries in Europe to found colonies to build its empire. With the rise of
economic nationalism and beggar-thy-neighbor trade and cartel policies, it is probably to
coincide that the years from 1884 to 1900 also saw an expansion of empires worldwide,
as governments struggled to obtain sources of labor and raw materials within their
empires free-trade zone- or simply squabbled over then useless land, which might
become useful in coming decades and centuries. As the consequence, at the time,
Governments hoped colonies would provide a market for finished goods and sources of
raw materials. In other words, everything they had lost as free trade was abandoned. In
those 16 years, the British Empire expanded by 3.7 million square miles and 57 million
people; France annexed 3.5 million square miles and 36 million people; Germany built
an empire of a million square miles and 17 million people, Belgium began developing
the Congo, Italy went into North Africa. Russia and Britain dueled in central Asia. Japan
took Korea, Taiwan, and a chunk of Mongolia. By 1914, the world had been completely
divided up, and the empires went toe to toe over already-accounted-for areas such as the
Balkan remainders of the decaying Ottoman Empires (Lewis, 2007, pp. 36-37)

97

As the largest colony, British rose as the superpower at the time. According to
Magdoff (1969) the headquarters of the capitalist system is the money market. The
financial power exercised through the banks and other institutions of the money market
enables the industrialized nations to fend off or alleviate balance-of-payments
difficulties. It is also the power which, directly or indirectly, keeps the underdeveloped
countries in line as the raw materials suppliers. Consequently, London emerged as the
world financial center under the gold standard regime and pound sterling being the
world currency of what western known as Pax Britanica.
The operation of the international monetary system of the period 1880-1914 was
due to the hegemonic role that Britain is often held to have played. This period is well
known as the Pax Britanica, Andrew Walter (1993) in quoting Gilpin argued that:
a primary objective of British foreign policy became the creation of a
world market economy based on free trade, freedom of capital movements,
and an unified international monetary system. The achievement of this
objective required primarily the creation and enforcement of a set of
international rules it promoted free trade, provided investment capital,
and supplied the international currency (Gilpin in Walter, 1993, p. 85)

Following the expansion of the empire, British arose as the great empire at that
time, internationalized her currency to its colonies. The international exchange mediated
by the pound sterling. Bank of England established in 1694, was the world central Bank
which provided international currency of the international economy. At that time, British
recognized as the world hegemony and many scholars call the period between 18801914 as the Pax Britanica of a stable regime under the leadership of the British (Walter,
1993; Keohane & Nye, 1977, 1987; Kindleberger, 1996; Cox, 1996; Gill, 1993;
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Germain, 1997 & Langley, 2002). The hegemonic stability theories (Walter, 1993;
Keohane & Nye, 1977, 1987; Kindleberger, 1996 & Gilpin, 1987) argued that British act
as the stabilizer of international monetary order with pound sterling and emerged as the
public goods. Pound sterling was fixed and pegged to gold and known as the
international gold standard system (Walter, 1993). In 1717, the pounds value was
translated into gold at 3 pounds, 17 shillings, 10.5 pence per ounce of gold, putting
England on a bimetallic standard with gold on top instead of silver. The Locke definition
of the British pound persisted (with lapses) until 1931, a 233-year stretch of currency
stability (Lewis, 2007, p. 30). London dominated the British national political economy
and, supported by imperialism and commercial success, industrialized Britain dominated
the world economy for much of the nineteenth century (Hobsbawn, 1968 & Kynaston
1994). The networks of the century and joint-stock banks at home and the foreign and
colonial joint-stock banks abroad channeled a vast mass of accumulated capital into
London that was far in excess of that the disposal of Amsterdams financiers a century
earlier (Kindleberger, 1996, pp. 79-81).
Bank creates money when it gives loans against future revenues and profits.
Credit-money and money-creation generates resources for various colonial, military,
technological and industrial ventures and furthermore, discovering of new territories,
supply demand of cheap raw materials and expand its market to fill the endless
accumulation of capitalism. London emerged as the world financial center which
supplied credit to merchants, corporations and financing the discovery of new colony.
Bank invested in colonialism that is why colonialism is considered as the best
investment at the time. The pre-1914 gold standard is more accurately understood as a
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London-centered global credit system (Germain, 1997). Londons position as the single
world financial center after 1815 is revealed by its dominance of world credit practices.
In contrast to the largely European reach of Amsterdam-centered credit practices during
the previous centuries, London-centered credit practices were undertaken at a worldscale that to some extent embraced Africa, Asia, Oceania, Latin and North America
(Held et al., 1999). Commercial credit practices in support of British and later, world
trade took the form of issuing and trading billings of exchange and commodity future
contracts, institutionalized within specialized merchant banks called acceptance houses
Barings, Brown Shipley and Co., and Wiggin Wilson and Wilders (Langley, 2002. p.50).
As the consequences of the expansion of capitalism from its homeland through
imperialism, and at the same time, British internationalized her currency on entire world
through, what Strange (1971) called the master currency of an empire and become an
international monetary system for its colonies. The Master Currency is the political
domination of the state issuing the currency over other areas, which may also include,
direct and acknowledged dependencies, besides areas that operate as (and for other
purposes are treated as) sovereign an independent political units but that either have
been or perhaps still are subordinate to it and subsequently, when the colonies raised its
independences, the Master Currency directly negotiated with the sovereign states. It
called as Political or Negotiated Currency which holders had to bribe with a variety of
inducements ranging from the financial ones already mentioned through the promise of
military protection and support.
The raising of international monetary order under the leadership of Britain,
predated by the emergence of London as the center of credit and the rapid development
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of finance, thus transforming the new capitalist mode of production. Finance defined as
the new capital which translated to credit and represents a social invention in which
fungible assets are exchanged for future promises to pay. Credit here is a resource which
people, governments and firms have access to at discretion of others, and at a cost
established by others: it is both a material resources (credit can exist in several forms: as
cash, bank balances, lines of credit, or as enforced right) and a set of social practices
associated with realizing it- the social and political implications of credit. It concerns
also with who controls the access of others to credit, who is privileged by access to
credit, and who reaps the competitive advantage which access to adequate credit imparts
(Germain, 1997). The development of finance at the period of Pax Britanica was
nurtured by the transnational classes which collaborated in the bank networking across
British, French and others which binding them into a set of international norms and
practices underpinned by the gold standard. The economic historian, Karl Polanyi called
this network as haute finance (Polanyi, 1944). Furthermore, he argued that the Gold
Standard, and the transnationally-operating European financial system, maintained the
nineteenth-century conservative order notwithstanding the Crimean War of 1854-56,
the Franco-German War of 1870-71 and other lesser wars between European powers. It
was the transnational financial system of Rothschild and other main banks that sustained
a system power-balancing in Europe.
What find capital expands it transcends the early stage of production of, advancing
further finance capital itself. Moreover, the capitalist system is controlled by the finance
supplier of an oligarchical banking fraternity and its network. They could acquisitive
others capital within a state and outside State by establishing of an international banking
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network and stock of exchange as the sources of finance capital. The significant
transformation of finance capital is the shift from export of goods to export of capital
(Hilferding, 1910 & Lenin, 1917). Export of capital means the export of value which is
intended to breed surplus value abroad. There are two forms of the export of capital;
first, it can migrate abroad either as interest-bearing or as profit-yielding capital and
second, it may function as industrial, commercial, or banking capital. Therefore, the
joint-stock company and a highly developed credit system endorse the export of capital.
Export of capital understood as the rapid expansion of capitalism that integrates the
entire world economy under a single capitalist system.
Finance capital leads to monopoly capital at all of the branches of production. The
monopoly of finance capital is of a high finance (haute finance) era where capital
became concentrated as an oligarchy of banks and nurtured by this transnational
capitalist class (Pijl, 1998; Polanyi, 1944 & Hilferding, 1910). As Hilferding argued,
Finance capital puts control over social production increasingly into the
hands of a small numbers of large capitalist associations, separates the
management of production from ownership. Once finance capital has
brought the most importance branches of production under its control, it is
enough for society, through its conscious executive organ the state
conquered by the working class to seize finance capital in order to gain
immediate control of these branches of production (Hilferding, 1910, p.
367).

Furthermore, Polanyi (1944) argues that the expansions of colonialism were

fuelled by finance capital which mediated through the banking network and capitalist
classes within Europe. Finance capital was responsible for imperialism, notably for the
struggle of the spheres of influence, concessions, extraterritorial rights, and the
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innumerable forms in which the Western Powers got a stranglehold on backward

regions. Finance capital will be invested in railways, public utilities, ports, and other
permanent establishments on which their heavy industries made profits. In actual fact,
business and finance were responsible for many colonial wars, but also for the fact that a
general conflagration. Finance capital as the root organization of heavy industry
affiliated with the various branches of industry in too many ways to allow one group to
determine its policy. The development of finance capital considered as the latest
development of capitalism. Its an instrument to expand the capitalism to the entire
world by imperialism or in the Lenins statement as the highest stage of capitalism.
Lenin contended that:
It is characteristic of capitalism in general that the ownership of capital is
separated from the application of capital to production, that money capital
is separated from industrial or productive capital, and the rentier, who lives
entirely on income obtained from money capital, is separated from the
entrepreneur and from all who are directly concerned in the management of
capital. Imperialism, or the domination of finance capital, is the highest
stage of capitalism in which this separation reaches vast proportions. The
supremacy of finance capital over all other forms of capital means the
predominance of the rentier and of the financial oligarchy; it means that a
small number of financially powerful states stand out among all the rest.
(Lenin, 1917, p. 58).
Imperialism, colonialism and concentration of capital by the transnational capitalist
class were the embryo of the emergence of the circuit of Trans-Atlantic capitalist
classes. It has its root in the transnational capitalism since the expanding capitalist class
in the Europe, and to its colonies. This was especially can be seen in the expansion of
British capitalism to finance technological inventions of the New World. It is further
enhanced by the role of Bank of England in this circuit capital since 1860. Finance

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capital has developed into a world finance bloc or a circuit capital making Great
Britain as a world hegemon.
The decline of British hegemony was with form of the two world wars in Europe.
During this period, there were disorders in the international economy which caused by
the World War I and World War II. US immediately rose as the new world hegemony
with the primary function of a post war US to establishing and maintaining the rules and
institutions of a liberal world economy. The commonly expressed view is that US
dominance was crucial for the establishment and maintenance of the Bretton Woods
regime (Walter, 1993).
At the time, it was clear that the US would emerge from the war as the dominant
economic power and US policy makers were determined to play a leadership role in
building and sustaining a more liberal and multilateral international economic order.
This objective was to create what Ruggie (1982) has called an embedded liberal
international economics order was shared by Keynes who had emerged as policy maker
in charge of UK planning for the post-war world economy during the early 1940s. He
worked together with his American counterpart, Harry Dexter White, to produce the
blueprint for the post-war international monetary and financial order that was soon
endorsed by forty-four countries at the 1944 Bretton Woods conference. Signatories of
the Bretton Woods agreements agreed to put the US dollar as convertible into gold with
a rate of $35 per ounce. By pegging their currencies in this way, countries appeared to
be establishing an international gold standard-or to be more precise, a gold exchange
standard or gold dollar standard (Ravenhill, 2005).

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With the establishment of the IMF and World Bank, they subsequently acted as the
world central bank. By the establishment of Bretton Woods system, it was reflected that
as a phase of the internationalization of capitalist through consensus formation in the
international system and transnational society. The three decades of relative stability of
international monetary order under the leadership of US through the Bretton Woods
regime stretched from 1944-1970 and was described as the new phase of hegemony of
the world order and known as the Pax Americana. The Bretton Woods system
understood as the institutionalization of the hegemony of US dollar as world currency
beneath the multilateral agreement. According to Langley (2002), the Bretton Woods
agreements of 1944 were central to the creation of a multilateral consensus of western
states and societal forces around the liberalization of world trade and the establishment
of a system of fixed exchange rates pegged to the US dollar. No such consensus marked
world finance before. Subsequently, it provides a pivotal position of the US political
economy in world trade and the correlated institutionalization of the US dollar as world
money. From 1944 onwards this power explicitly mediated by the two Bretton Woods
institutions, namely, the IMF and the World Bank, and implicitly undergirded by US
hegemony (Soederberg, 2007).
The US had appeared from the Second World War as the dominant creditor
economy to such an extent that the majority of capital goods necessary for western
European reconstruction could only be imported from the US. After the war the western
European political economies were in no position to generate large amounts of foreign
exchange and, consequently, there was a massive demand for dollar-denominated credit
to pay for imports from the USA (Langley, 2002). Consequently, US Dollar gains a
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seiniorage position as the world currency. And seiniorage is defined as privilege right of
a state to create money and impose its money or currency over the other countries
(Strange, 1996 & Lewis, 2007). US dollar replaced the status quo of British pound
sterling, the international trade, finance and foreign exchange denominated and mediated
by the US dollar. Thus, the Bretton Woods fixed-exchange rate standard can be more
accurately understood as a New York-centered global credit system (Germain, 1997). It
acted as the center of credit provider in financing the restoration of post-war Europe
through the Marshall Plan, development aid, financing the US TNCs, military aids, and
etc.
At the early of decade of Pax Americana, credits were used to finance the
restoration of Europe through the public (sovereign) credit to the governments. With the
US state-directed flows of sovereign credit, whether in the form of aid or military
expenditure, and this inclined to have much condition attached that sought to reinforce
the multilateral framework for trade and payments and the Pax Americana more broadly.
For instance, Marshall Plan aid to Western Europe was at the conditional membership of
the OEEC which worked towards the liberalization of intra-European trade (Cox, 1987
& Rupert 1995). At the next stage, the predominant of private credit has a significant
position which replaced the public credit. The transnational corporations took the pivotal
role in replacing the public credit in the form of FDI. The long-term capital movements
out of the United States from about 1956 onward thus came to be dominated by FDI,
which rose from a net outflow of $1,111 million in 1947 to a net outflow of $7,717
million in 1971. Equity and security issues combined to form the vast majority of the
rest of private long-term capital flows, followed by bank lending, but they are
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overshadowed by the magnitude of FDI. The emergence of FDI as the major form of
international long-term capital movement marks a major change in the way in which the
world-economy was provided with credit (Germain, 1997, pp.79-80). The distribution of
long-term US corporate capital outflows took place beneath the umbrella of US Cold
War interests. Outflows of US TNC FDI into Latin America, Africa and the former
colonial areas of Asia were backed by informal guarantees of US military might and
direct interventionism (Augelli and Murphy 1993; Gill, 1994 & Langley, 2002).
The demise of Pax Americana is marked by economic stagflation in US, the over
printed of US dollar which circulating the entire of world and the US budget deficit to
pay the cost of Vietnam War. These drove America to unilaterally abandoned the gold
standard regime. The US dollar is no more redeemable to the gold at fix standard
according to the Bretton Wood agreement. By the late 1960, US experienced substantial
inflation and balance-of-payments problem, causing in large part by the Vietnam War
expenses. US unilaterally disposed of the multilateral agreement of the Bretton Woods
regime; in August 1971 President Nixon suspended the convertibility of the dollar into
gold, the relationship that lay at the heart of the Bretton Woods arrangements. While the
dollar had been subjected to speculative attacks in the Euromarkets, this so-called
Nixon shock was underpinned by the assumption that a relatively over-valued dollar
was contributing towards weakening US industrial competitiveness, increasing
unemployment and balance of payments problem (Langley, 2002)
The newly haute finance has emerged from the crisis of the 1970s stronger and
more privileged than ever. Susan Strange (1986) sees 1971 as an important date because
it marks the extraordinary power of the United States unilaterally both to change the
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rules of the game and to reduce systematically the scale of public control of the activities
of private financial firms. Kindleberger (1981), on the other hand, argue that 1971 is an
important date, points out that the perceived root cause of monetary instability- the
American balance of payments deficit- was in actuality nothing more than the efficient
performance by New York of international financial mediation, borrowing short to lend
long. And finally, Walter (1993) argues that the image of the breakdown of Bretton
Wood is most misleading because it underestimates the continuity in the evolution of the
international monetary system since the late 1950s. From the arguments stated above
by the scholars, the removing gold-US dollar standard was a cornerstone for the
establishment with a full grant to the US in printing world currency. Thereby, with the
power of financial controlled by the US Federal Reserve, they could decide the value of
money and how much it would be allowed to circulate the entire world. Directly, under
the hegemony of US dollar, the world financial system is fully backed by paper currency
and the deadly banking interest imposed turned finance capital into the supremacy of
usury capitalism.
The source of financial power is laid on the ability to create money as a means of
exchange and as a means of payment. The creation of money used to pay for
investments and to make loans arises in two banking activities: (a) the conversion of
inactive fund into active fund, and (b) the creation of credit. The creation of money
through the extension of credit (or the printing money) is at the heart of modern banking
(Magdoff, 1969). Since the 1970s, world economy was rapidly moved under the
domination of finance capital, and money was mostly translated to the power, in order to
buy finance capital (shares, offshore trading, derivatives capital, currency trading) than
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real capital (land, labour power, raw materials and so on). Thus finance hegemony is
associated with the globalization of capitalism, that the finance capital has erased the
border of states. Strange (1996) argues that the emergence of global finance capital has
been eroded the position of state in the market and states lost control over some of the
functions of authority and are either sharing them with other states or with other nonstate authorities and the non-state actors (banking network, insurances company, TNCs).
The later took away some of the functions of the states in the management of the
markets. Furthermore she argued that:
one of the major shifts resulting from structural change has been the
increased power and influence of the multinationals more properly called
transnational corporations and the networks they set up and operate
(Strange, 1996. p. 43).
The raising of the power of finance led to the current world economic order
monopolized by the transnational capitalist classes channeling finance capital and
printing money, credit creation of banking system. In her seminal work, Transnational
Capitalist Classes, Sklair (2001) asserts that the prime candidates for this role as we
enter the twenty-first century are the transnational corporations. Transnational refers to
forces, processes, and institutions that cross border but do not derive their power and
authority from the state. Specifically, Pijl (1998) concluded that the recent global
hegemon derived it power from the trans-Atlantic class: economic, military (NATO),
global governance (Bretton Woods conference).
The heart of current financial architecture is concentrated to the world capitalist
cities rather than states New York, Tokyo, London, Paris, and Frankfurt and extends
by computer terminal to the rest of the world. The development of technology
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contributes to create digital money which can be saved on the computer memory and
available anywhere. The advanced of technology facilitated the finance market and it
unregulated and destructed the state sovereignty. The transnational capitalist classes are
the major players holding the power of finance and mostly they are of North-Atlantic
base. The money creation of banking system through credit dominated the global
economic edifice which the rise and domination of private credit over the public
(sovereign) credit. As a comparison, during the period 1972-6 the ratio of public credit
to private is 2:1, and by 1992-3 stood at 83 percent private and 17 per cent public
(Germain 1997, p.119). Most of credits are used in the financial activities as speculation
such as joint stock of exchange and currency trading. Henderson (2001) illustrates this
as the global financial casino. It means global financial market driven by the loosening
regulation policies, electronic trading and commerce eroding the powers of all nation
states. Even the most democratically elected politicians policies are disciplined by
computerized currency bond traders in todays $1.5 trillion daily global casino, 90 per
cent of these flows are unrelated to trade or the real economy, i.e., they are speculative
(Henderson, 2001, pp.116-117 & Scholte, 2002, p. 15). 30 years ago, the majority of
currency transactions (80-90 per cent) reflected the passage of goods and services
between nations. Today, only 2 per cent of a much greater volume of trading can be
linked directly to the real world of trade. In other words, almost 98 per cent of all foreign
exchange is estimated to be entirely speculative in nature basically, people and
institutions betting on the relative strength of one currency versus another (Wright 2000,
pp. 6-7, Soederberg, 2004, p. 11). Following Amin (2003), that departing from the

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superiority of finances it drives for which he called as financial hypertrophy involving a

set of phenomena that can be easily recognized and measured:
a) The volume of capital markets (stocks and shares, government securities and
private-sector loans) expanding at a rate far above that of economic growth, to
reach 189 per cent of Triad (Europe, US and Japan) in 1995.
b) An extraordinary diservication of the arrangements and instruments available on
these markets (through the invention of multiple derivatives), together with an
explosion of what can only be called speculative financial operations.
c) The growing weight of finance in corporate affairs, as financial investment
outside the company takes an increasing shares of resources in comparison with
investment in physical assets.
d) Progressive globalization of the financial hypertrophy, expressed in stock-market
capitalization in so-called emerging economies, which soared from less than 70
per cent of GDP in 1983 to more than 250 per cent in 1993 (Amin, 2003, p. 43).
The financial hegemony has subjugated major of world population with increasing
inequality of wealth and power in finance. That is caused by the over-accumulated of
capital in the few transnational capitalist classes. The productivity of most peripheral
countries is absorbed by the core through finance arbitrated through the operation of
capitalist banking over the world. Surplus value of the peripheral can be easily absorbed
by the banking oligarchy that converted it to money saved in banks. Money is then
treated as finance capital entering into the global financial markets. Therefore, the rise of
finance hegemony under the supremacy of US dollar is the moment of a larger crisis
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within global capitalism system reducing the periphery as their victim. Under the
hegemony of dollar, the peripheries are insisted to hold US dollar as their national
reserves in financing its international economic activities. If they manage the US dollar
poorly, they will face two scenarios; more borrowing of US dollar with IMF and World
Bank under stringent conditionality or devaluating their currency with potential to
trigger financial crisis.
Prior to the Asian crisis, a study by IMF economist found that of the Funds 181
member states, 133 had experienced disruptions of banking practices between 1980 and
early 1996. Overall the findings classified 108 instances of disruption as significant,
and 41 instances in 36 states a crises. In many instances of crisis, disruptions
generated a sizeable reduction in GDP. Both the high frequency of crises and the extent
of their detrimental consequences for economic growth were found to be worse than any
similar period since the Great Depressions of the 1930s. More significant in our terms, is
that the contemporary financial order itself has lurched from one major crisis to another
(Langley 2002, p.132). Of course, the periphery become subordinated through the debt
bondage and lost some sovereignty to determine economic policies and messed up by
hegemony. In other words, the capitalist state of the core have been restructured to better
serve the interests of the transnational capitalist classes with privileged position to
control finance capital and manipulate finance hegemony of a new form of colonialism
in this current world order. Globalization, therefore, understood as the representation of
the new stage in the history of world capitalism involving integration of national
economies to a new global financial system through the raising of finance hegemony.

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3.3. Manufacturing the Common Sense of Neoliberalism

This section devotes to the underpinning ideas of the formation of current hegemonic
order emphasizing the historical development of certain hegemonic ideas. It reflects the
root of development of a neoliberal as an intellectual leadership and accepted as the
common sense. Secondly, this section examines how the neoliberalism spreads to the
entire world through western universities, international public institutions (particularly
in the Bretton Woods institutions) and international private institutions (such as the
global transnational networks) that recognized as agents in the internationalization of
finance capitalism as the dominant mode of knowledge implicitly legitimizing the
domination of western core capitalist state.
Each of the historic bloc developed by a certain ideology of the dominant
classes. According to Gramsci, the ideology is translated to the way of life and world
view of dominant classes and socialized mostly through the structure of civil society;
such as schools, churches, universities and state structures. The leadership of this
ideology accepted as the common sense and attempted to recognize it as a natural way.
In this term, the domination of one social class over the entire capitalist societies may be
termed capitalist hegemony. This notion embodies not merely political and economic
control of the ruling classes, but also the ability of the dominant class to project its own
way of viewing the world, so that subordinated classes accepts it as common sense and
natural (Gramsci, 1971). Common sense is not something permanent and static, but
gradually transforming itself as ideology and actual social experience which enters
into a contradiction within a society. The Gramscian notion of ideology is defined as
shared ideas or beliefs (common sense) which serve to preserve the interests of dominant
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classes by legitimating the latters power in society, and thus distorting the real
condition in which people find themselves (Soederberg, 2006; Rupert, 2000). According
to Rupert (2000), common sense could become a ground of struggle because it is not
univocal and coherent, but an amalgam of historically effective ideologies, scientific
doctrines, and social mythologies. This historical sedimentation of popular common
sense is not something rigid and immobile, but is continually transforming itself,
enriching itself with scientific ideas and with philosophical opinions which have entered
ordinary life. According to Peet (2003), in this formulation, hegemony is a conception of
reality, spread by civic institutions, that informs value, customs and spiritual ideals,
inducing, in all strata of society, spontaneous consent to the status quo.
It is undisputable that the prevailing world order underpinning neoliberalism as a
single ideology since the collapse of state central planning of communism in USSR.
Most of the supporters of liberalism argue as the victory of liberalism over the other
ideology and propagated it as the end of history (Fukuyama, 1992). It locates the
superiority of market over the state sovereignty. Since, the Great Depression of 1930s,
neoliberal intellectuals pushed for free market as a superior mechanism in exchange
and production, and promoted the extension of market mechanisms through the
liberalization and commercialization of many aspects of public and even private life. It
departs from the skepticism of the states ability in distribute the wealth among the
citizens. There are two main arguments of neoliberal theorists, to maintain market in
determining economic sphere. First, they contend that a freer market guarantees greater
economic efficiency and faster growth as private firms wrest control of the economy
away from governments. Besides, governments are inherently incapable of matching the
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efficacy of multitude of individual economic actors (Friedman 1962; Fukuyama 1992).

Second, they insist that formal western-style democracy is the only political system that
ensures what they consider the fundamental goal of the state guaranteeing individual
economic freedom. This objective that they maintain is best achieved by limiting the
areas of government action (Kohl, 2006).
Neoliberalism is also defined as an ideology of market underpinning the
neoclassical economics, with its idea that most efficient allocation of resources is
achieved by a natural and self-regulating market driven by its natural law. This idea
translated to the policy of privatization, outsourcing, fiscal austerity and retreat of the
state (Robison, 2006). Strange (1996) contend that the focus of neoliberals mask a
neoliberalisms principal goal of privatizing the economy, and to shrink the state
(Strange, 1996). The ultimate aim of neoliberalism is to dismantle state intervention in
the market putting privilege of markets over state authority and simultaneously
concentrate the wealth within the minority party who channel and control the financial
power.
Moreover, global neoliberalism, a system that privileges the market, reduces the
ability of the state to provide social services, and simultaneously concentrates wealth
among an elite minority while it reinforces poverty among the majority (Kohl, 2006). At
the global level, the ownership of finance capital concentrates on the hand of
transnational capitalist classes (Robinson, 2006; Sklair, 2001), which the conception
finance and money in neoliberal term, it defines the object of international capital flows,
functioning as to transfer accumulated capital to where the marginal rate of return is
highest (Gilpin, 1987). Referring to Gill (2003), to shift toward greater private control,
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current international development agencies seek to establish new constitutionalist

limits that mandate the insulation of key aspects of the economy from the influence of
politicians or mass citizens by imposing, internally and externally, binding constraints
on the conduct of fiscal, monetary and trade and investment policies.
Neoliberalism is derived from the classical liberal political economy of Adam
Smith. It lied on a set of ideological assumption about the relationship between
individual and the state. From the perspective of classical liberal theory, state is
considered as the coercive power which is translated as the primary threat to individual
freedom. The principal economic beliefs of Western liberalism and in support to
capitalism were first set down systematically by philosophers and political economist
such as Thomas Hobbes, John Locke, David Hume and Adam Smith, writing mainly in
seventeenth and eighteenth century Britain. These founding philosophers thought hard
on behalf of a new class of manufacturing entrepreneurs then coming to the fore.
Essentially their philosophies rephrased more exactly modern beliefs emerging from
new kinds of economic and social practice. Adam Smiths The Wealth of Nations,
published in 1776, laid out a liberal theory of individual economic efforts in a society
characterized by competition, specialization and trade (Peet, 2003).
The root of liberal philosophy, furthermore, is evolving in different form of
ideology at the different stage of history with it ultimate purpose is to preserve the
capitalist class. The emergence of Adam Smith writing is to resist and question the
authority of the landowning nobility, the grant merchants and the monarchical state of
their conservative ideas of divine rights, family values, feudal loyalties and patriotic
duties. In other words, the conservative ideas were restraining the development of
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capitalist class with attempt to preserve the position of the landowner and the superiority
of earlier monarchical state. This economic system was called as the mercantilism. The
early of liberal doctrine progressively resisted the involvement of government directly in
intervening market to the accumulation monarchical state power. Otherwise, liberalism
puts the main assumptions as that of the rationality of markets actor and self-regulating
of market. Furthermore, the early Smiths economic principles were drawn into a
political-economic theory which developed by a group free market activist in London in
the 1820s and 1830s. Then, in the second half of the nineteenth century, this economic
theory was further developed through usage of mathematic and scientific laws of market
economies articulated by neoclassical economists. Simply put, neoclassical economic
theory argues that, under conditions of perfect competition, markets yields in a long-run
a set of prices that balance, or equilibrate, the supply and demands of each commodity
(Peet, 2003).
The practice of western capitalist system met with a crisis of capital in 1930s
originating in the speculation of stock market in US. This crisis drove the liberal
scholars to introduce a new kind of economic principle. John Maynard Keynes recalled
the role of government to regulate market in order to maintain the market confidence.
This principle further is called as Keynesianism. This principle used state intervention,
exercised through various levels of planning and public ownership, in its social
democratic versions, and fiscal and monetary policy in its liberal democratic versions to
stabilize their economies. He argued that the level of employment was determined by
demand for goods and services and the real investment by business was the crucial
component of this demand. In turn, business investment resulted from decisions made by
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entrepreneurs under conditions of risk, with the key variable being expectation, or the
degree of investors confidence. The government could influence this confidence
through interest rates (manipulation of interest rates) and other monetary policies.
Broadly, Keynesian economic theory builds the legitimacy of state to intervene the
market with the purpose to assume growth and high employment levels which decided
on the basis of social policy (Peet, 2003).
During three decade of the golden age of Keynesianism, there was opposition on its
common sense in managing the global economy. The main opposition was not derived
from the external threat of capitalism i.e communism, but from the new neo-classical
groups within capitalism known as neoliberals.

Neoliberal thinking has strongly

influenced the mainstream, and thus by and large replaced preceding social-liberal
orientations characteristic of the Fordist Era. Sklair (2001), argues that the role of
intellectuals like Friedrich Hayek (1944) and Mont Pelerin Society (MPS) in organizing
the neoliberal as significant role in rejecting Keynesianism. They recall the position of
market that free itself from state intervention. Frederick Hayek (1944), Milton Friedman
(1962) and, more recently, Francis Fukuyama (1992) are considered as articulating the
theoretical base of neoliberalism. Their main theses are:
1. The ideal society is composed of utility-maximizing individuals with perfect
information to engage in free exchanges in free market democracies.
2. Free markets, which they also call competitive or capitalist markets, need
democratic governments to operate it most efficiently.

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3. that the combination of a free market economy and a democratic government is

not only more economically efficient but also socially desirable (Kohl, 2006. p.
16)
Peet (2003) asserts that the controlling faction of this economic belief changed to
the right under the combine movement of two growing tendencies. The first was a
change in the discipline of economics away from Keynesianism and towards a
neoclassicism influenced by the Austrian Schools trust in markets, as opposed to state
regulation, and by the monetarist theories of Milton Friedman, which likewise
minimized state intervention in the economy. The second was a rightward shift in
political opinion at the end of the long decade of the sixties (that is, stretching well into
the 1970s) marked by the elections of Margaret Thatcher, for example, who read von
Hayek as an Oxford undergraduate, and proclaimed that Hayekian ideas were what a
right-wing Conservative Party should believe in and by the appointment to high posts
in the US Treasury Department of dedicated right-wing ideologues who forced Hayekian
principles upon the IMF and the World Bank authorities on threat of withdrawal of US
funding (Peet, 2003, p. 13).
Subsequently, ideas of neoliberalism were adopted by British Prime Minister, Margaret
Thatcher and US President, Ronald Reagan. The famous slogan of Thatcher was there
is no alternative (TINA) that free markets, free trade, and capitalist globalization is the
only way to solve the capitalist problems. Thatcher privatized gas, power, public
housing, railroads, telecommunications and water services from 1984 to 1991 and this
represented a major realignment of the boundaries between the state and private sectors
of the UK (Young, 2001). Shortly after Reagan took office, through the new
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administrations principal policy document, Americas New Beginning: A Program for

Economic Recovery. Known as the Reagan Revolution, it called for cuts in federal
spending, massive tax cuts for corporations and wealthy individuals, deregulation to
promote investment, and tighter monetary control to predictably increase money
supply (Blyth, 2002; Kohl, 2006).
3.4. The Organic Intellectual of Neoliberalism
The success of this hegemonic common sense depends on the emergence of intellectuals
which fittingly organized a set of world view over the society. According to Gramsci
(1971), the common sense is mostly developed in the civil institutions such as school
and universities rather on within the state apparatuses. It is important to note most of
development of the intellectuals of neoliberal is centered in the western prestigious
universities. They are extracting the mode of knowledge of neoliberal as a rigid
discipline in economic realm. Following to Cox (1996), theory is always for someone
and for some purpose, theory in this sense refers to a standpoint or a world view in
understanding, explaining, predicting and expectation of the man producing the ideas.
Furthermore, he asserts that it is the more important to examine it as ideology, and lay
bare its concealed perspective (Cox, 1996).
Specifically, Peet (2003) described the center of development of the intellectuals of
neoliberals as being centered in the Austrian School of Economics in Vienna in the early
twentieth century, the London School of Economics in the 1930s, the Institute of
Economic Affairs, Centre for Policy Studies and Adam Smith Institute, all in London.
This covers also, the ordo-economics school of Walter Euchan and Franz Bohm at
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Freigburg and the Hoover Institution at Stanford University in California. Furthermore,

he emphasized that the intellectual capital of neoliberalism is undoubtedly the Chicago
School of Political Economy. This influential school of thought was started by Frank H.
Knight, a liberal in the nineteenth century sense, a critic of New Deal liberalism and a
believer in the ideal of the creative, active, free individual. Knight was followed by a
second generation of liberal revivalists, including Milton Friedman, George Stigler,
James Buchanon, Gary Becker and Robert Lucas. The rightist politics of the Chicago
School were translated by Friedman into the apparently scientific, neutral mathematical
codes of monetarist economics (that is, the idea that macro-economic problems such as
inflation and indebtness derive from excessive government spending driving up the
quantity of money circulating in a society). These ideas were spread in popular versions
carried by sympathetic mass media, an industry that also abhors state regulation (Peet,
2003).
Subsequently, Elite universities in both the United States and Britain, where future
leaders from low- and middle-income countries are permeated with the latest western
economic and political orthodoxy, played a key role in the dissemination of neoliberal
ideology (Kohl, 2006). This strategy called by Gramsci as the trasformismo that the
strategy to co-opt the subaltern groups to prevent the opposition movement toward their
supremacy as the leading class.
3.5. Institutionalizing of Neoliberalism
The common sense of neoliberal, furthermore, universalized through the financial
institution which accommodate them into its policy. Gill (2003) argues that Reagan
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administration has a significant role in encouraging neoliberal idea at IMF and World
Bank, Reagan administrative appointees who forced Hayekian principles on the Fund
(IMF) and the World Bank on threat of withdrawal of US funding (Gill, 2003, p. 13).
This lead a transformation in international development policy, from state guided
principle to the market guided principles. It was noted earlier that IMF and the World
Bank already applied neoclassical economics as the theoretical basis for policy
formation for three decades, but in the mid-1970s for the IMF and the late 1970s for the
World Bank.
It is undeniable that the Bretton Woods invented by US and the British was
intended to establish a hegemonic monetary order centered on the dollar. The agreement
intended to create a post-war monetary order based on the discussion between US
represented by Harry D White and UK which represented by John Maynard Keynes. The
institutionalization of Breeton Woods agreement merely viewed as the process of
formalization of the discussion between both of US and UK, and in its process inclined
to manipulate and insist both delegations to sign the agreement without learn it before.
Peet (2003) mentions that informal discussion between American and British officials
had begun in 1942. The Americans continued bilateral discussions with the British and
representatives of other countries during the summer of 1943. At the meeting on 22-23
June 1943 between the British and American representatives, plans were made for
negotiating a Joint Statement on an International Monetary Fund to be presented at an
international conference. Representatives from the US and the UK met nine times in
Washington between 15 September and 9 October 1943. Complete agreement on a Joint

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Statement of Experts on the Establishment of an International Monetary Fund was

reached in April 1944 (Peet, 2003, pp. 41-42).
At the day of the conference at Bretton Woods, the preceding informal agreement
of US and UK formalized by the signatories of 44 states. Most learned of the document
only during the conference and consequently, they not have time or opportunity to
evaluate the document. Moreover, many delegates did not speak English, the official
language of the conference, and the sophisticated issues discussed remained
unintelligible to many, and it is ridiculous to notice as, most of the delegations have few
of qualifications requirement for the conference. For instance, Guatemala delegated a
post-graduate student in economics Manuel Noriega Morales, from at nearby Harvard
University (Eckes, 1975, p.138). Keynes described the conference in the following
arrogant terms:
twenty-one countries have been invited [to Bretton Woods] which clearly
have nothing to contribute and will merely encumber the ground the
most monstrous monkey-house assembled for years (Peet, 2003, p. 40).

In other words, the IMF and World Bank were not formed as democratic
institutions but they are institutionalized to serve the interest of its inventor, particularly
the proxy of US interest. It is reflected in unfair of distribution of quota. The quota
determine the power of vote each member in deciding of policy within Fund and World
Bank. This arises in respect of decisions requiring a special majority of 70 or 85 percent
of votes. Holding 17 percent of votes, the United States alone can block any board
decision requiring 85 percent. It is the only member with an individual capacity to do
this (Woods, 2006, p. 27). Therefore, the international institutions are the site where the
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hegemonic ideology developed and impose upon entire world through its rule and
mechanism. Cox (1996) depicts the features of hegemonic role within international
organizations as:
1. The institutions embody the rules which facilitate the expansion of hegemonic
world orders.
2. They are themselves the product of the hegemonic world order.
3. They ideologically legitimate the norms of the world order.
4. They co-opt the elites from peripheral countries.
5. They absorb counter hegemonic ideas. (Cox, 1996. p. 138)
The common sense of these neoliberals in the international institutions is accepted
as the cooperation framework that promise the equal position for all members and each
party will gain benefit from those framework. Thus, the norms of international
institutions recognized as the universal principle which the members countries should
adhere its norms in term of national policies. But, in fact, the benefit mostly obtained by
the party who has power to finance capital beneath of the neoliberal common sense. The
policies of international financial institutions such as IMF and World Bank impose to
entire world which justified by the experts behind its bureaucracies. The root of its
knowledge which applied within the international financial institutions could be traced
back through the discourse in formulating its policies. Peet (2003) suggest by applying
Michel Foucaults notion of discourse linked to a Marxian-Gramscian analytical
framework to analyze efforts to create a neoliberal hegemonic discourse, concluded:
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economic policy does not come from sciences ability to mirror the exact
structures of social reality in a structure of truthful statements called exact
theories. Instead, policy is socially produced by a community of experts
who agree, more by convention of political persuasion than factual
backing, to call a certain type of thinking and speaking rational (Peet,
2003, p. 16-17).

In other words, the core idea of each policy within global institutions constructed
by a particular of mode of knowledge and the epistemic community which produce the
knowledge, principally, is the policy maker which implement that set of policy
framework. Thereby, the implication of the two decades of neoliberal globalization
subjugates the broader public interest by privileging the private sector while minimizing
the role of the government in production in over 100 of the worlds low- and middleincome countries (World Bank 1990, 1996, 1997; Gill 2003; Peet 2003).
The international institutions also emerge as the new global constitution and
disciplinary neoliberal in order to sustain the finance hegemony in the long term. The
new global constitution can be conceived as the imposition of new constitutional and
quasi-constitutional political and legal frameworks - with respect to the state and the
operation of strategic, macroeconomic, microeconomic and social policy. This concept
is well known as the disciplinary of neo-liberal which could be seen as the efforts to the
extension of the processes of commodification and alienation based on the
intensification of the discipline of capital in social relations (Gill, 2000a). The practice
of the new global constitution and disciplinary neo-liberalism is aimed to ensure the
adherence of all nations to the neo-liberalism ways. The intensification of capital
mobility or finance hegemony put the center of the policy guidance at the international
institutions level. More detail, Gill (2000a) define the disciplinary of neoliberalism to
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the three of C of the power of capital which are the ways that public policy has been
redefined so that governments seek to prove their credibility, and the consistency of their
policies according to the criterion of the confidence of investors. These policy rules are
the reference of the market forces and the power of capital as well of the IMFs 1997
World Economic Outlook linking discipline directly to economic globalization:
The discipline of global product and financial markets applies not only to
policy-makers, via financial market pressures, but also to the private
sector, making it more difficult to sustain unwarranted wage increases
and mark ups. If markets adopt too sanguine a view of a countrys
economic policies and prospects, however, this could relax policy
disciplines for a time and result in a high adjustment cost when market
perceptions change ... [and then] markets will eventually exert their own
discipline, in such a way that the time period for adjustment may be
brutally shortened (IMF, 1997: 70-71).
Based on the definition of the discipline of market above, the foundation of the
current dominant system of political economy correlated with the disciplinary of neoliberalism which underpin upon the market, especially the capital market, to discipline
economic agents. The main obligation of the government is to create conducive business
climate to the investors. Subsequently, this condition defined as what Gill & Law called
as a form of the structural power of capital (Gill and Law 1989a).
Despite of the public financial institutions, the transnational private network also
have major contribution in organizing and spreading the common sense of neoliberals.
They include the academia, business association, finance managers, media and
journalist. The most progressive organized group is known as Mont Pelerin Society. It
was established in 1947, the main of initiators was the Swiss Businessman Albert
Hunold and Friedrich von Hayek. They united the trans-Atlantic neoliberal intellectuals
from Europe to the United States in the meeting at Mot Pelerin, a small village close to
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Lake Geneva. Plehwe and Walpen (2006) depict that the guiding principle of the
neoliberal organizing, networking and institutionalization effort extracted from the main
ideas of Hayek which are the right lacks capable scientists and experts able to match
the rising stars of social liberal and socialist orientation (such as Lord Keynes and
Harold Laski in England). This problem can only be overcome if a strong effort is made
to rebuild anti-socialist science and expertise in order to develop anti-socialist
intellectuals. Second, the socialist filter in the knowledge-disseminating institutions of
society, universities, institutes, foundations, journals, and the media has to be attacked
by the establishment of anti-socialist knowledge centers capable of effectively filtering,
processing, and disseminating neoliberal knowledge.
Following the study of Caroll and Carson (2006), there are five major
transnational networks which functions as the global policy groups that considered as
agencies of transnational capitalist class formation. They grant intellectual leadership
which is the essential of the process in transforming transnational capital from
economically dominant class to a class whose interests take on a sense of universalism
and financially back up by the capitalists associations. Two of them are the longhistorical development and the others emerged after the collapse of Bretton Woods
system. First, is the Paris-based International Chamber of Commerce (ICC), founded in
1919, is the oldest of the business policy groups and the only one to maintain a primarily
free-market conservative strategic vision. It is also the largest, grouping of some 7,000
member companies and associations over 130 countries. Its primary function is to
institutionalize an international business perspective by providing a forum where
capitalists and related professionals (e.g., law firms and consultancies, national
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professional and sectoral associations) can assemble to forge a common international

policy framework in areas ranging from investment to specific technical and sectoral
subjects. Since the mid-1990s its efforts to institutionalize an agenda of corporate selfregulation have fostered close working relationship with international institutions such
as the WTO, UNCTAD and the UN General Secretariat (Balanya et al. 2000: 166-74).
The secondary function is to integrate national chambers throughout the world into a
single global network through its World Chamber Federation (WCF) (Caroll & Carson,
2006).
The Bilderberg Conferences have provided a context for more comprehensive
international capitalist coordination and planning. Founded in 1952, the Bilderberg,
named for the Hotel de Bilderberg of Oosterbeek, Holland, assembled, in the spirit of
corporate liberalism, representatives of Right and Left, capital and organized labor (Pijl
1998). Third, emerging at the break point of recent economic globalization in 1973, the
Trilateral Commission (TC) was launched from within the Bilderberg meetings by
David Rockefeller as a forum

to foster effective collaborative leadership in the

international system and closer cooperation among the core capitalist regions of northern
Europe, North America and Japan the triad. It maintains a consultative ruling class
tradition, bringing together transnationalized factions of the business, political, and
intellectual elite during several yearly meetings, which it convenes at the national,
regional, and plenary levels. The primary purpose of the TC is to institutionalize elite
economic, political, and intellectual/cultural bonds between the North-Atlantic heartland
and the Asia-pacific and to expand the regulatory sphere of capitalist discipline to

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incorporate metropolitan labor and (more recently) peripheral states (Caroll & Carson,
2006).
Founded two years earlier, the World Economic Forum (WEF) convened Europes
CEOs to an informal gathering in Davos, Switzerland to discuss European strategy in an
international marketplace. Organized by renowned business policy expert, Klaus
Schwab, the meetings were aimed to secure the patronage of the Commission of the
European Communities, as well as the encouragement of Europes industry association.
By 1982 the first informal gathering of World Economic Leaders took place on the
occasion of the Annual Meeting in Davos, bringing cabinet members of major countries
and heads of international organizations (including The World Bank, IMF, GATT)
together with burgeoining core membership of top international capitalists.
The WEF is organized around a highly elite core of transnational capitalists
which it currently limits to 1,000 of the foremost global enterprises. Invited
constituents, however, are represent a variegated range of globalist elites, including
members of the scientific community, academics, media leaders, public figures, and
various NGOs. Constituents populate a hodgepodge of policy work groups and forums,
including the InterAcademy Council, the Business Consultative Group and the Global
Leaders of Tomorrow. And the last group is the World Business Council for Sustainable
Development (WBCSD), founded in 1995. By 1997, WBCSD membership comprised
123 top-TNC chief executives (Caroll & Carson, 2006, p. 58-59).
The establishments of the transnational capitalist networks above were mostly intended
to develop the consciousness of capitalist classes against the threat of economic control
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by state which can restrain their activities to achieve highest profit and endless
accumulation of capital. They operate autonomously and transnationally and have close
relations with the public international financial institutions. Furthermore, they were
supported by abundant financial resources and mostly from the big transnational
capitalist classes. The conferences appealed to the journalist and media with the purpose
of disseminating and universalizing the output of forum. The success of this
transnational networks leads to integration of trans-Atlantic capitalist classes under the
spirit of market freedom or neoliberalism. In these ways, neoliberal policy groups can be
said to function as
collective intellectuals deputies or agents of the capitalist class
entrusted with the activity of organizing the general system of
relationships external to.. business itself,(Gramsci, 1971, p. 6).

3.6. Conclusion
The historical assessment on the prevailing historical bloc treated as the point of
departure to conceive the asymmetric relation, concentration of power in controlling
capital, and the raising of finance hegemony. The scrutiny of this study provides vivid
illustration that current historical bloc put finance capitalism as the dominant mode of
production, the broadening of the meaning of money as capital, the monopoly of money
creation in the hands of banking networks and the seigniorage of dollar as the world
currency.
The current financial order is not merely seen as a natural process. But it is the
historical development of capitalist formation to preserve it privileged position in
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manipulating and its endlessly accumulating of capital. Historically, capital has been
internationalized through the coercive way; of war, colonialism, imperialism and the
consent way by establishing the universal norms; value, and mechanism within global
order through the public and private institutions. The power of finance lied on the hand
of trans-Atlantic capitalist classes such as the banking network, financier, and
speculators. They create abundant money within the financial market and banking
operations such as the currency trading, joint stock of exchange, derivative trading,
credit, and speculation. The surplus value of major world population absorbed to
financial market, states insisted to collect US dollar to maintain its economic stability.
Eventually, the world economy is fully transformed to the single usury capitalism under
the supremacy of paper money.
Money is the main form of capital, hence, the surplus value saved into money
form, and money converted to other capital such as land, raw materials and human labor.
Therefore, in the capitalist system, the main objective is the accumulation of profit
mediated by money. The raising of finance hegemony provides privileges to US in
creating world money and subjugates the periphery. On other hand, the periphery is
trapped to the debt bondage, its currency gradually devaluating against the dollar,
inflation increasing over-shadowed by endless financial crises. On the other hand, the
Core can pay its deficit through printing of more paper money and export it to entire
world. Furthermore, the value of money is monopolized and manipulated by the
capitalist classes. Money does not portray its intrinsic value anymore; and the value of
money is artificial.

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The raising of finance hegemony is inseparable from the ideology of capitalist

neoliberal. It justifies the current global financial system as the common sense. The
common sense of neoliberal developed within the institution of western capitalist
society including universities, media and transnational network. These common
senses, further reinforce hegemonic domination of the hegemon. The ideas of
neoliberal are massively organized by the organic intellectual who support and
preserve the domination of capitalist class. The ultimate aim of the neoliberal ideas is to
maintain and serve the interest of western capitalist classes to accumulate capital of the
entire world. They produce knowledge that legitimize the liberalization, deregulation
and freeing of capital flow from one the state border to another.
The current capitalist historical bloc constructed through the historical development of
triad - finance hegemony, neoliberal common sense and the neoliberal institution. The
trans-Atlantic capitalist classes obtained privilege position in controlling the global
finance. Departing from the understanding of the exploitation and subordination of
hegemony within the prevailing order; it requires a counter-hegemony movement in
order to disengage the process of subordination beneath this finance hegemony. It is
undisputable that the current historical bloc is the historical formation of capitalism.
Therefore the counter-hegemony objectives should be conducted in three dimension;
which are the resistance to remove the finance hegemony, build a counter mass
consciousness questioning the domination and developing of alternative civil institutions
by constructing alternatives common sense.

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CHAPTER FOUR
HISTORICAL TRAJECTORY OF MAHATHIRISM

"The Malays are spiritually inclined, tolerant and easy-going. The nonMalays, and especially the Chinese, are materialistic, aggressive and
have an appetite for work. For equality to come about, it is necessary
that these strikingly contrasting races adjust to each other."
Mahathir Mohammad, "The Malay Dilemma. ,1970

4.1. Introduction
State and civil society are the main locus of the project of hegemony in associating to
the construction of the dynamic of world order. Hence, the state and civil society is the
place where interplay of dominant class with subaltern class, hegemony and counterhegemony, the coercive and consent, the trasformismo and passive revolution are
developed. This chapter purposes to offer a historical background of Malaysias social
forces and to investigate the historical trajectory of Mahathirs leadership or
Mahathirism within the national context as it is assuming as the basis of Mahathirs
movement at the international level. Thus, this chapter primarily highlights three critical
moments considered as the main point of the evolution of Mahathirism. First is the
intellectual ascendance of Malay Dilemma as Mahathirs ideological platform. Second
is the emergence of May 1969 Riot precipitated by the socio-economic inequalities
between Malay and Chinese followed by the introduction of New Economic Policy
(NEP). Finally is the actualization of Mahathirism during his premiership from 1981 to
2003.

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4.2. The BumiputeraPassive Revolution

Mahathirism is a term attached to Mahathirs leadership character originating from his
critical intellectuality and the actualization of thought in the pragmatic sense.
Frequently, Mahathirism is associated to the personal ideas and distinctive character of
Mahathirs leadership.Khoo (1995) defined Mahathirism as the coherent of Mahathirs
political ideology that distinguished by the five core components. They are nationalism,
capitalism, Islam, populism and authoritarianism. Instead, there are contradictions
among these components or what Khoo called them as the Paradoxes of Mahathirism.
Thus, Mahathirism is not only implying ideas, but also to reflect his personality and the
imprint of his style. In the similar sense, Milne and Mauzy (1999) stated that
Mahathirism is not a guide to Mahathirs thoughts or actions. Rather, Mahathirs
thoughts and actions are a guide to constructing Mahathirism. Mahathirism is an
exercise in allocating thoughts into logical categories with the aim of achieving
intellectual satisfaction and understanding. Thereafter, John Hilley (2001) contended
that Mahathirism was legitimized through the cultural production, the delineation of
social values and the filtering of the consensual ideas. It was the outcome of a complex
set of class-based, political and intellectual dynamics within Malaysia historical
trajectories. In addition, Munro-Kua (1996) asserted that Mahathirism is a form of state
authority emerges from the construction circumstances of class and communalism in the
colonial period. Furthermore, Munro-Kua argued that Mahathirism as an ongoing Malay
nationalist strategy:
(mahathirs) rule has seen an extensive expansion of executive power and
consequent blocking of various mediations while strengthening his own
direct link to the populist base. While nationalism has been an important
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strand of populism, this is essentially a Malay nationalism, which seeks

to mobilize support for the Malay bourgeois class project through
communal appeal (Munro-Kua, 1996. p.8)

Since its independence, Malaysia essentially engages the ethnic-class relations

problem in the form of racial tensions, of balancing of communal rewards and ethnic
loyalties. Phenomenally, the latent tension among the ethnic-class (mainly between
Malay and Chinese in Kuala Lumpur) culminated in the social upheaval known as the
Race Riot of May 1969.The riot was triggered by the laissez-faire capitalism and the
ethnic division of labor that could not match with the social expectation of Malay (Khoo,
2004). During the post-independence period, the majority of Malay economically was
the lower class as statistical evidence did show Malay incomes, relative to Chinese,
falling from a ratio of 1:2 to 1:2.5 between 1958 and 1967 (Hilley, 2001, p. 33). Political
sphere, there was premature political system with political arrangements mainly based
on the compromises between the United Malays National Organization (UMNO), whose
main concern is on the political authority and the control of government ; and the
Malaysian Chinese Association (MCA) whose focus is to secure Chinese economic
interests. These compromises paved the way for political alliance. The Malaysian Indian
Congress (MIC) jointed the Alliance. At the cultural aspect, there was the conflict of
identity between the Malay and the non-Malay particularly in the areas of language,
culture and citizenship. However, it should be noticed that the establishment of the
Alliance was also opposed by a substantial fraction of Chinese and Malays communities.
Their opposition emphasized the miss-match between economic democracy and high
citizen expectation since independence. The Malays rural peasantries tend to tie their
interest to the social ideas of the Pan-Islamic Party of Malaysia (PAS) and the fraction of
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Chinese business community prefers to support the alternative Chinese party such as the
Democratic Action Party (DAP), the Gerakan and the Peoples Progressive Party (PPP).
Thus, these parties are identified as the opposition (Hilley, 2001& Weiss, 2006).
The May incidence has significantly contributed to the popularity of Mahathirs
masterpiece book Malay Dilemma. It was considered as the most comprehensive
observation in answering why the riot occurred. Nevertheless, it was banned in Malaysia
but published in Singapore in 1970. Khoo (1995) argued that the Malay Dilemma
explained Malaysia socio-political setting at the post-Merdeka, early period as and preNEP period Malay nationalism. The Malay Dilemma discussed the unbalanced political,
economical and cultural dimensions within the ethnic-relations of Malaysia before
1970.For Malays, it represented the Malays feelings and further it was as Mahathirs
agitation to design a transformation plan of Malay class. The Malay backwardness was
offered on the crux of the Malay Dilemma. According to Malay Dilemma, backwardness
was caused by the passivity of customs, social values and the culture of the Malay
against competition with the others ethnic groups particularly the Chinese and
subsequently resulting in the increasingly of economic gaps between Malays and
Chinese; as Mahathir asserted that:
For most Malays property and land are synonymous (and)... attachments
to the land are deeply ingrained, (while) money is a convenience to the
Malays. (It is this) inability to understand the potential capacity of money
(which) makes the Malays poor businessmen (Mahathir, 1970, p. 166).

Thus, the economic backwardness of Malay worsened and the state assumed this
due to the specialization of economic activity based on ethnicityand mainly between the
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Malays and Chinese. Consequently, government policies were contrasted to the social
expectation of subaltern class, particularly the majority of Malay. This situation widened
the economic gap and thus culminated as the riot of May 1969. In the critical sense,
Mahathir forcefully illustrated the mainstream of governments policy at the initial phase
of Malaysias post-independence through the paragraph below:
It believed that the Chinese were only interested in business and
acquisition of wealth, and that the Malays wished only to become
Government servants. These ridiculous assumptions led to policies that
undermined whatever superficial understanding there was between
Malays and non-Malays. On top of this the Government, glorifying in its
massive strength, became contemptuous of criticisms directed at it either
by the opposition or its own supporters. The gulf between the Government
and the people widened so that the Government was no longer able to feel
the pulse of the people or interpret it correctly (Mahathir, 1970, p. 15).

Fundamentally, the riot of 1969 was the cornerstone of the initial phase of passive
revolution in the nurturing of the supremacy of Bumiputera class (Malay and the
indigenous people). It began with the introduction of New Economic Policy (NEP)
under the leadership of Tun Abdul Razak who headed the National Operations Council
(NOC) then. The NEP was established to achieve two major goals. Initially, it was the
elimination of poverty irrespective of race and the second goal was to restructure
society; by four objectives which are restructuring employment patterns, restructuring
ownership in the corporate sector, creating a Bumiputera commercial and industrial
community, and creating a new growth centers in rural areas (Torii, 1997).Jomo
(2004)argued that the NEP was a manifestation of the First Outline Perspective Plan
(OPP) for 1971-1990. The OPP was to reduce the poverty level from 49 per cent in 1970
to 16 per cent in 1990. It aimed to achieve the target of corporate ownership of Malay at
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30 per cent Bumiputera share of corporate stock ownership then, just at 1.5 per cent in
1969. In sum, the NEP could be understood as the positive discrimination policy within
ethnicity-oriented policy (Torii, 1997) in order to reduce the economic disparities
between Bumiputera and Chinese.
The implementation of the NEP was also an adjustment in inter-ethnic political
configuration and in political agenda of Barisan Nasional (BN) as the ruling party.
Historically, the BN was derived from the negotiation of Malay landowning aristocracy
(who seized political authority through UMNO and managed the civil service) and
Chinese commercial bourgeoisie (who were allowed to protect their economic interest
through the MCA). On the post-riot of 1969, there was a change in the distribution of
political posts. Before 1969, the Ministry of Finance and Trade was headed by the
MCAs leaders. As the introduction of NEP, the ministry was now headed by an UMNO
leader. In other words, the economic policy making was monopolized now by UMNO
(Khoo, 2004).The States policies were implemented to emphasize in promoting the
Bumiputera class to be the leading class in economic, political, education and cultural
spheres. Consequently, State is to function as the manufactory of the supremacy of
Bumiputera. The orientation in policies was to construct a new capitalist and middle
class of Bumiputera in providing opportunities in the form of the financial assistance to
the Malays entrepreneurs, enlarging the existing corps of Malay entrepreneurs, with
credit facilities, and preferential share allocations. Thousands of Malays student were
sent overseas, under special subsidies and training. Therefore, by this period, State is
nothing more than the domain in breeding of Bumiputera capitalist and middle class
through the aegis of NEP.
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As Mahathir assumed to office at 1981, the first decade of his premiership was
signaled by the massive selective privatization policy extending NEP goal. The
privatization gave emphasis to an alliance of state and the domestic capital under the
slogan of Malaysia Incorporated. It posited the Bumiputera as the core component of
the policy. The economic development model followed the East Asian model associating
with the economic success of Japan and East Asia Tigers. In this context, Khoo (1995)
argued that:
the state is now promoted a goal of Malaysian economic nationalism within
which a leading role was reserved for the Bumiputera Commercial and Industrial
Community (Khoo, 1995, p.333338).

In fact, there is no fundamental difference between the NEP and the Malaysia Inc
projects. The Malaysia Inc generated the close relations between the market and the
political agency of Bumiputera class particularly the emergence of UMNO as one of the
key players in the market through the ownership and holding companies, Hatibudi
Group and Fleet Holding and the like. Privatization was employedin a sense to distribute
the wealth and resources to selective political-corporate elites (Hilley, 2001). In sum, the
first decade of Mahathirs premiership characterized the evolution of the NEP in the
form of privatization policy in order to create a strong leadership of Bumiputera class
both at the political aspect (through the UMNO and Barisan Nasional) and economic
level (selective privatization). Hence, this study argues that the first decade of
Mahathirs leadership was the crucial period of the passive revolution of Bumiputera.
The states policies obviously expressed the manifestation of the Malay Dilemma in the
praxis sense. The privatization and the consolidation of UMNOs networks were
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conceived as the concrete movements to construct the supremacy of Bumiputera. Thus,

the Malaysia Inc was the manufacture of the new Malay bourgeois class.
In the evaluation of the NEP in 1990, it was announced that the NEPs targets
were achieved as the statistic showed that between 1970 and 1990, the incidence of
poverty had declined from 49 per cent (of all households) to 17 per cent; the Bumiputera
share of corporate equity had risen from 2.5 per cent in 1970 to at least (and probably
considerably more than) 20 per cent. Bumiputera professionals, who formed less than 5
per cent of major professional categories in 1970, constituted over 29 per cent in 1990
(Khoo, 2004). Following the achievement of the NEP; Mahathir introduced the
Malaysian transformation agenda of his Vision 2020 (Wawasan2020) beginning early
1991. The main objective of the Vision is Malaysia will be a fully developed country by
the year 2020. Specifically, he argued that Malaysia should be developed not only in the
sense of economic aspects but also the others aspects as he asserted that:
It must be a nation that is fully developed along all the dimensions:
economically, politically, socially, spiritually, psychologically and
culturally. We must be fully developed in terms of national unity and
social cohesion, in terms of our economy, interms of social justice,
political stability, system of government, quality of life, social and
spiritual values, national pride and confidence. (Mahathir, 1991)

Further, Mahathir also attached the Nine Challenges Facing All Malaysians, a
charter for economic development, national integration and social community within the
roadmap of Vision 2020.The Vision is not merely as the policy agenda but it is also
aimed to construct a new national identity. The ideological propaganda of Bangsa
Malaysia aimed to construct a new symbol of unity in regards to reduce the latent
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tension among the ethnic-based identities. The popular acceptance of the Vision has
established a new post-ethnic nationalism (Hilley, 2001).According to Khoo (1995),
the Vision 2020 principally originated from the core components of Mahathirist
ideology as an evolving nationalism, a freer capitalism, a universalizing Islam, and a
scripted populism. In addition, the acceptance of Vision was also fostered by the
publication of World Bank study titled The East Asian Miracles on 1993. It posited
Malaysia as one of the eight High-Performing Asian Economies (HPAEs), together with
Japan, South Korea, Taiwan, Hong Kong, Singapore, Malaysia, Thailand and Indonesia.
All had achieved sustained and equitable export-led high growth and rapid
industrialization. In this sense, Mahathir attempted to establish a new popular image of a
national unity in facing the global competition in order to consolidate the whole of class
support (Case, 2004). The concerns of ethnic-relations were replaced to the national
challenge discourses in order to achieve a fully developed country status (Gomez, 2004).
Culturally, the Vision has transformed the contradiction of cultural identity to the one
identity of Malaysia. It promises more inclusive citizenship than the previous decade, as
Heng (1998) concluded in his study of Chinese Response to Malay Hegemony (19571996) that
Chinese political observers were particularly struck by the unprecedented
usage of the term Bangsa Malaysia. Malay leaders previously had employed
the word bangsa within a chauvinistic Malay nationalist context By
widening the words connotation to embrace non-Malay membership,
Mahathir appeared to be breaking from the convention of Malay nationalist
exclusivity (Heng, 1998, p. 73).

Thus, the passive revolution of the Bumiputera is to be completely of a ruling class

and with the employment of State interventions and common sense of Vision during
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the second decade of Mahathir premiership. The Vision 2020 is not only a rhetoric but it
has reincarnating effect as the ideology of masses. This strategy is precisely with what
Gramsci referred to as the Trasformismo. Trasformismo refers to the ability of leader
of the given system to absorb any potential opposition movement, remove substantive
differences and establish a convergence between contending social-class forces. It
functioned to co-opt potential leaders of subaltern social groups and assimilating and
domesticating potentially dangerous ideas by adjusting them to the policies of the
dominant coalition and can thereby obstruct the formation of class-based organized
opposition to established social and political power (Cox, 1996; Morton,
2007&Schwarzmantel, 2009). Broadly, it could be said that the Mahathirist hegemonic
project mainly is composed by the fostering of Vision 2020, the strengthening of social
harmony through the representation of all ethnics within BN, and also with the
persistence of Internal Security Act (ISA). These situations could be described as the
normal exercise of hegemony with a force as not being predominating excessive over
consent, as Gramsci argued that:
not only a unison of economic and political aims, but also intellectual and
moral unity, posing all the questions around which the struggle rages not
on a corporate but on a universal plane, and thus creating a hegemony of
a fundamental social group over subordinate groups. (Gramsci, 1971,
pp.1812)

Following the successful of NEP and the launching of Vision 2020, Mahathir
confidently expanded his political movement beyond the national context. He appeared
as an international figured with his notions of Asian Values. Initially, he advocated the
Asian Value concept as the alternative values to the predominant western-liberal values.
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The Asian value is a set of concept to response to western type of societal values such as
individualism and western democracy concept. Actually, the Asian values were also
introduced by the others Asian leaders particularly, Lee Kuan Yew (Singapore), and
Shintaro Ishihara (Japan). Distinctively, the Mahathirs Asian values are strong
authority, prioritizing the community over the individual, and a strong family based
society. According to Sani (2008), the Mahathirs Asian Values or the Mahathir model
draws upon the experience of the Western world in order to evaluate state and society in
the light of modernity. As Mahathir said that:
For Asians, the community, the majority comes first. The individual and
minority must have their rights but not at the unreasonable expense of the
majority. The individuals and the majority must conform to the mores of
society. A little deviation may be allowed but unrestrained exhibition of
personal freedom which disturbs the peace or threatens to undermine
society is not what Asians expect from democracy. (Mahathir, 1999,
p.105)

Departing from the notion of Asian Values, and on several international occasions
Mahathir also confidently proclaimed that the 21st century should belong to the Asian
countries with Asia emerging as the world economic powerhouse; such as Japan, South
Korea, China and also the Asian Tigers. Thus, Asian, according him, ought to play
significant role as the leader of world-defined century. The World Century means the
mankind century which is the end of the dominance of Anglo-Saxon over the world and
would then lead in an age of equality (Schottmann, 2008), as he said in front of the
audiences of ASLI World Leadership Conference in Kuala Lumpur:
We know that the 21st century will indeed be the Asian century. We are
moving into an age of Asian leadership as Asia emerges to become one of
the primary drivers of global economic growth. The rise of East Asia is
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only natural and inevitable given the dynamism of countries in this region
(Mahathir, 1994).

4.3. Crisis of hegemony and Caesarism

Amidst the praise of the economic success of Malaysia, the financial turbulent suddenly
struck the economic growth and its optimism in South East Asia in the mid of 1997. The
crisis began when currency exchange regimes came under speculative attack, beginning
with the Thai baht in June 1997. It did not take very long for contagion effect from the
Asian Financial crisis usually dated from the floating of the Thai Baht on 2 July 1997
to spread to Malaysia. With the baht down, currency speculators turned their sights on
other economies in the region that had similarly vulnerable quasi-pegs to the US dollar.
The Ringgit fell beginning in mid-July 1997, eventually reaching RM4.88 to the US
dollar in early January 1998- losing by almost half in six month from a high of RM2.47
in July 1997. The stock market dropped more severely, with the KLCI dropping to 262
on 1 September 1998 from almost 1,300 in the first quarter of 1997 (Chin & Jomo 2003,
p.125). Consequently, the financial turbulent has challenged the supremacy of
Mahathirs bloc. This period was considered as the moment of the crisis of the
supremacy of Mahathirs bloc. The threats come from the internal as well as external
forces.
4.3.1. The Counter-Hegemony of Reformasi
Internally, Bumiputera capitalist class perceived that the crises will wipe out the wealth
of their corporations. These giant corporations have close connection with the ruling
class of UMNO. Thus, there was a sharp contradiction of the expectation of the crisis
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management between the Malaysias capitalist blocs that favor to protect their
corporations by bail-out and Anwars initiatives preferences of liberalization and
transparency project. This contradiction further precipitated the rise of Reformasi
movement in order to remove the Mahathir hegemonic bloc. Externally, the IMF blocs
induced Mahathir to follow the Washington Consensus arrangement and the demand of
democratization in Malaysia. The riot in Indonesia also contributed to the increase in the
tension with a fear that the crisis will assume the joint political and social crisis in
Malaysia. Broadly, the crisis has challenged the supremacy of Mahathirism both at
national and international level. It was the moment of the crisis of hegemony as Gramsci
argued that:
In every country the process is different, although the contentis the same.
And the content is the crisis of the ruling classshegemony. . . . [Hence] a
crisis of authority is spoken of: thisis precisely the crisis of hegemony,
or general crisis of the state.(Gramsci,1971, p. 210)

As the crisis worsened, the attention of the Malaysian capitalist class (substantially
the Bumiputera capitalist bloc) looked to the role of Anwar Ibrahim as the minister of
finance in formulating a set of comprehensive counter-measures. Initially, Anwars
initiatives were mostly emphasized upon restoring the investors confidence and the
stability of the market. He also paid attention to the small-medium industries (SMIs) in
form of allocating RM1 billion of the special budget as the stabilizer of the domestic
capital. The elements of the Anwars measures included:

Measures to curb imports through increased duties on a range of capital and

consumer goods, most notably luxury cars;
145

A 10-15% range of tax incentives for high-performing exporters;

The removal of levels and raising of quotas on foreigners property purchases;

A 2% reduction in corporate tax to 28%; and

The deferment of more mega-projects (Hilley, 2001. p. 70)

As the market continuously worsened, Mahathir announced the establishment of

New Economic Action Council (NEAC) in 7 January 1998, an independent body that
served as a consultative body in dealing with the economic problems and bring about
economic recovery. Consequently, the crisis management was centeredwith the NEAC
with Daim Zainuddin, the architect of the Malaysia Inc and privatization, was appointed
as the executive director and Anwar Ibrahim as responsible to supervise the NEAC.
Politically, there was conflict of interest with Anwars initiatives that preferred market
liberalization and the efforts to capitalize the domestic capital through SMIs. In fact, the
SMIs represented the main economic domain of Chinese where 84% of SMIs were
owned by the Chinese. Contrast to Anwars initiatives, the NEAC (dominated by the
UMNOs network) attempted to secure the corporations tied to UMNO. It could be seen
with the selective bail-out of the giant Renong conglomerate, controlled by UMNO
through Halim Saad. In addition, Renong had been of the forefront of Mahathirs
Cyberjaya and Putrajaya projects and also the special assistance of RM2 billion to the
Tenaga Nasional, the second biggest company, in late 1997 (Hilley, 2001).This
contradiction worsened with the political sensitivities of Anwars relation with the other
Mahathir loyalists such as Sanusi Junid, Foreign Minister Abdullah Badawi and
DaimZainuddin himself. These sensitivities could be seen in the context of privatization
and the strategic placement of business elites by leading political figures (Hilley, 2001).
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Gradually, the tension between Anwar and UMNO cliques appeared in public
domain. Firstly, it was signaled by the circulation of a surat layang, or poison pen letter,
in August 1997 claiming that Anwar had engaged in homosexual and adulterous
liaisons, subsequently though it was dismissed by Mahathir. Secondly, in many forums,
Anwar loudly campaigned for a democratic reform which seemed to be supported by
the western bloc. He argued strongly for government transparency, such as in situations
when interviewed by Greg Sheridan of Australia, saying that the great lesson we have
learned, which is actually a major transformation and a revolution by itself, is that it has
called for greater transparency, greater accountability and for greater democracy.
During the 1998 UMNO gathering, he also forcefully argued that the crisis had
unleashed a gale of creativity destruction that would cleanse society of collusion,
cronyism and nepotism (Hilley, 2001). Thus, most of Mahathirs loyalists perceived
Anwars reform propaganda representing the interest of the West. The negative
sentiment of Anwar was also precipitated by the Anwar perceived close relation with the
Western bloc as Hilley explained:
If Anwars case was somewhat more respectable, it is, nevertheless, safe
to say that he was being sponsored by the IMF-Washington network as
the man to do business with; someone who, in the name of new civil
reform, would, it was hoped, lift restrictive barriers to capital and move
business dealings beyond the caustic relationship with Mahathir. Of
course, Anwar had other roles here, for example as spokesman for the
Southeast Asia Group of developing countries at IMF summits. However,
he had also developed close associations with figures such as James
Wolfensohn at the World Bank, US Defence Secretary Madeline Albright
and Michel Camdessus at the IMF, with whom he planned to co-author a
book on Asian civil reform (Hilley, 2001, p.75)
Gradually, the Reformasi movement spread within the civil society as reflected by
a good support of a wide array of protesters composing by a diversity of interests and
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objectives. It could be seen in Anwars Pematang Pauh Declaration that established two
new coalition forums; of the Malaysian Peoples Movement for Justice (GERAK) headed
by Fadzil Noor of PAS and the Coalition for Peoples Democracy (GAGASAN), headed
by Tian Chua of Suaram. These were composed of DAP, PAS, PRM (Malaysia Peoples
Party) and most reformist NGOs. In meantime, Dr Wan Azizah Wan Ismail had formed
the Pergerakan Keadilan Sosial (movement for Social Justice), known as ADIL on
December 1998. Subsequently, these bodies were working together to build a broad
political alignment. Further, Reformasi has been transformed to be a popular movement
for political, economic and social change. It could be seen in the mid-1999 survey that
85 per cent of respondents concurred with the statement Malaysia needs a political,
economic and social re-assessment (Weiss, 2000).
By the April 1999, the Reformasi movement was transformed into an electoral pact. It
started from the NGO of ADIL superseded by the political party of Keadilan led by Dr
Wan Azizah Wan Ismail. A few months later, Keadilan, PAS, DAP and PRM announced
their coalition as of Barisan Alternatif (BA) on June 1999. Then, the BA listed ten
common issues: constitutional monarchy; parliamentary democracy; human rights; rule
of law; independence of the judiciary; the rights and responsibilities of citizens; Islam as
the official religion, and freedom of religion; Malay as the national language, and the
right to use other languages; the special position of Bumiputera, and rights of other
groups; and federalism (Hari, 2000). Consequently, the emergence of Reformasi and BA
has conveyed the Gramscian counter-hegemony forces to question and replace the ruling
class of BN.

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4.3.2. The Caesarism of Mahathir in reaction to the Reformasi

The financial crisis has affected the relations of social forces of Malaysia. This period
can be precisely described as the crisis of hegemony period which signed by the rise of
counter-hegemony movement of reformasi in order to remove the prevailing ruling class
of UMNO. According to Gramsci, the crisis hegemony is:
a situation when the ruling class has lost its consensus, i.e. is no longer
leading but only dominant, exercising coercive force alone; it meant
precisely that the great masses ha[d] become detached from their traditional
ideologies, and no longer believe[d] what they used to believe previously
(Gramsci, 1971, pp. 2756).

As Gramsci (1971) argued, when the crisis of hegemony occurred, it needs the
intervention of Caesarism or the men of destiny to resolve the crisis. Caesarism is a
strong man intervening to resolve the stalemate between equal and opposed social
forces. There are two types of caesarism; the progressive who has strong leadership in
constructing development of a new state; and the reactionary who attempted to stabilizes
the existing power (Cox, 1996).
In order to resolve the crisis, Mahathir performed the reactionary caesarism
character to maintain the supremacy of Bumiputera class and his political bloc. It
reflected on the employment of coercive policy as instrument to force a breakthrough in
crisis, particularly the oppressive ISA against the opposition and the imposition of
capital control, which reflected the strong idiosyncratic of Mahathir.
Amidst of the debate of the crisis management of the IMF scenario vis--vis the
bail out of the Bumiputera capital and the Anwars maneuvers by the reform agenda,
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Mahathir performed his strong personal character by announcing the unorthodox capital
control policy on 1 September 1998 and discharged Anwar as Deputy Prime Minister,
and Finance Minister. Anwar was also formally removed from the party on 4 September
1998.Mahathir also employed the sodomy allegations and corruptions charges as part of
strategy in curbing Anwars maneuvers. The decision taken has not only removed
Anwars control of the economic direction, but cut his close relationship with the IMF
nexus with free-market reformer within governments and representing mostly Western
interest.
Post-dismissal, Anwar conducted a series of public speaking around the country
and presented public lectures. The prevalence of cronyism and corruption, the urgency
of reform, the need for social need and also justice were main topics of his public
advocacy. Rapidly, Anwars views attracted the support of Islamic NGOs and the
opposition such as DAP and PAS. The support for Anwar has spilled over in the form of
the Reformasi (reform movement). It was attested by an enormous rally in Kuala
Lumpur on September 20, 1998 led by Anwar. The following day, Anwar and a number
of his followers were arrested under the ISA. Nevertheless, the ISA became the central
issue when Anwar appeared with serious head and neck injuries. It broadened the
Reformasi movement. Previously, the Reformasi gained currency by the other incidence,
such as the imprisonment of Lim Guan Eng on August 1998. He was Deputy SecretaryGeneral of DAP and an opposition parliamentarian, and was charged with sedition and
publishing false news under ISA. Lims case also attracted large sympathy among
Chinese and Malay (Weiss, 2006). Apart from the issue of ISA, Anwar also attracted
public attention by his letter from prison, titled from the halls of power to the labyrinth
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of incarceration and described with details how the corruption, nepotism and abuse of
power within the UMNO system becoming prevalent. It also revealed political scandals
of the UMNOs elites (Hilley, 2001). With Anwar in prison, the Reformasi was
continued by his wife Dr.Wan Azizah Ismail.
Although the growing Reformasi movement politically was represented by the BA, the
tenth general elections of Malaysia on November 29, 1999 nonetheless was won by the
BN. The BN went into the polls with166 of 193 seats, 162 of which had been won in
1995, with a net gain of 4more in the interim period. With over 71 percent turnout, the
BN garnered56.5 percent of the popular vote, substantially less than the 65 percent it had
won in 1995, but comparable to its level of support in prior elections. In fact BA,
particularly PAS made significant progress at Kedah, Perlis, Pahang and Selangor. It
also almost swept completely all federal and state seats in Kelantan and Terengganu
(Weis, 2006). The victory of BN cannot be separated from the personal role of Mahathir
in convincing the voters that BN under his leadership has been able to manage the
economic crisis and consequently maintained the national development momentum since
independence.
4.3.3. The Thrust of Neoliberalism
Based on the neo-liberal perspective, the crisis was the outcome of the internal financial
sector weakness (Goldstein 1998), and in particular with the so-called crony
capitalism patterns of lending capital that promoted irrational and poorly regulated
credit creation and poor investment portfolios based more on social and political
relationships rather than rational risk analysis (Langley 2002). The market consensus,
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largely voiced by mainstream western media, illustrated the crisis as the result of an
economic mismanagement and thus provoked a loss of investor confidence in the East
Asian miracle. The leading practitioners of what might crudely be labeled Asia
Incorporated were accused of protecting favored coalitions of commercial and political
interests in ways that reeked of inefficiency, cronyism and corruption (Khoo, 2000).
Thus, the crisis is the states burden and the result of the mismanagement of state
policies. Based on that diagnosis, the global capitalist bloc launched the remedies or
prescriptions called as Washington Consensus which was dominated by the capitalist
countries and the powerful International Financial Institutions such as IMF and World
Bank. They insisted that the developing countries and their governments to deliberate,
decrease public expenditures, privatize the national company and reform the tax policies
in order to facilitate a free market interest.
At that time, it was a phenomenal, that all emerging markets accepted the neoliberals prescription. Mahathir announced its stance to resist and reject all these
explanations and prescriptions as ideologically and praxiologically propagated by global
capitalist agents. Furthermore, he blamed the currency speculators as causing the
financial crisis in East Asian. On July 24 Mahathir charged bitterly,
Anyone with a few billion dollars can destroy all the progress we have
made. The problem was an undue attachment to globalization, which
allowed currency markets to drive down the value of the Malaysian ringgit.
We are told, we must open up, that trade and commerce must be totally free.
Free for whom? For rogue speculators. For anarchists wanting to destroy
weak countries in their crusade for open societies, to force us to submit to
the dictatorship of international manipulators (Foreign Policy 1997, p.100).

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He asserted his position at the world forum; particularly in September 1997, when
the World Bank and IMF held their annual meeting in Hong Kong. He told the delegates
and financiers. I am saying that currency trading is unnecessary, unproductive, and
immoral. It should be stopped. It should be made illegal.Beyond rhetoric, Mahathir
launched the extraordinary policies with the purpose to resolve the currency turbulent.
He opposed the neo-liberal prescription closed its capital accounts, lowered rather than
increased interest rates, using exchange controls to fend off attacks on its currency. Most
commentators argued that his rhetoric and policies will exacerbate the situation and
making market uncomfortable and deepen the crisis. These policies were perceived by
many western observers to be economically irrational. Mahathir was characterized as
defiant, polemical, and even desperate. Furthermore, Mahathir casted the country as the
victim of financial culprits, which includes the financier George Soros, which represents
the International Monetary Fund, of hedge managers, and Jews. His allegations were
often delivered perceived by Western observers as displays of irrationality and
desperation (Toyoda 2001, p.92).
Intellectually, liberal economists as such as Barry Eichengreen (1999) argued that
the capital controls were ineffective in regard to it doing the of preventing speculative
attacks and exchange-rate adjustment. In addition, Stanley Fischer (1998) also argued in
similar vein; that contrasts to the capital control, the open capital accounts promised to
be an effective allocation of resources and promote financial flexibility. IMF remained
opposed to Malaysia capital control imposition. IMF considered the capital controls as
unworkable during the crisis as Fischer argued:

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Malaysias decision to impose controls on capital outflows and support

for the idea among some academics raises the question of whether such
controls will once again become widespread. The IMFs position has long
been that capital account liberalization should proceed in an orderly way:
countries should lift controls on outflows only gradually as the balance of
payments strengthens; liberalization of inflows should start at the long
end and move to the short end only as banking and financial systems are
strengthened (Fischer, 1998, p.iii-iv)

Regardless to the liberal economists prediction, the Malaysia gradually showed its
recovery in an unprecedented level of easing the crisis. Stocks value grew by 5.4 per
cent and the Kuala Lumpur Stock Exchanges (KLSE) rebound from the lowest of 267.7
point in September 2008 to exceed 1,000 points by February 2000. Despite that fact,
there were also many indicators of recovery published by international rating agencies
such as stockbroking house of SocGen-Crosby and the Salomon Smith Barney (Sharma,
2003).
There was also empirical evidence of the success of the imposition of capital controls.
According to the study by Kaplan and Rodrik (2001) titled Did the Malaysian Capital
Controls Work? They concluded that the performance of Malaysian recovery under
capital control produced faster economic recovery, lower inflation, smaller declines in
employment and inflation-adjusted wages and a more rapid turnaround in the stock
market than the recovery performance proposed by IMF for Thailand, Indonesia and
Korea. Subsequently, the successful capital controls was also praised by the World
Banks Senior Vice-President, Joseph E.Stiglitz. He argued that the capital controls had
shown to be successful in stabilizing speculative capital flow. This is in contrast to the
IMF prescriptions. The Mahathirs crisis management was described as the Malaysias
Sinatra Principle: doing it our way (Reyes, 1999).
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4.4. Conclusion
It was undoubtedly that the Malay Dilemma approach has successfully delivered
Mahathir to be a popular intellectual of what Gramsci termed as the philosopher of
philosophy of praxis. Mahathir has able to contextualize the sensitive issues of interethnic relation within the class-analysis framework, identified the subordination of the
Malay class and also the polemic of cultural identity among the ethnic in strong
language and with strong views. Thus, Malay Dilemma was considered as Mahathirs
ideological platform in guiding his political movement, both at national level and
international level. The explosion of 13 May incidence has attested that Mahathirs
intellect is alive within the society. Therefore, this study argues that Mahathir has the
organic intellectual character as the critical element of Gramscian thinking, in
questioning the pattern of domination and subordination in society. He also attempted to
mobilize and organize the passive revolution of Bumiputera both in the political and
civil society sphere. As the initial phase, the circulation of Malay Dilemma particularly
to the Bumiputera class has established a Bumiputera ideology in the post-Merdeka
period.
The strategy of the passive revolution of Bumiputera was mainly centered on the
discourses of Malay privileges and rights; as the son of soil. Historically, the passive
revolution could be observed since the formulation of NEP in 1970. As Mahathir
assumed to office, his policies were mainly conceived as the extension of NEP with his
selective privatization and his Vision 2020. The advancing of Mahathirist hegemonic
order was culminated on the manufacturing of the common sense in his Vision 2020. It
tends to merge the whole interests of the class within a universal interest. It has unified
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the ethnic-identity contradictions in the form of a popular ideology of Satu Bangsa.

Moreover, the Vision could be conceived as what Gramsci called the Trasformismo.
Trasformismo aims to absorb the idea of resistance of subaltern class by creating a
widest possible coalition of interest (Gramsci, 1971). Politically, trasformismo also
reflects the political coalition of UMNO, MCA and MIC of the BN platform implying
effort to constrain political tendencies that might generate a broad-base political
backlash against the supremacy of Bumiputera. It functions to establish a wider social
basis in legitimating the state. Broadly, the ethnic-base Malaysias social forces under
the Mahathirs premiership period could be described as the normal period of
hegemony.
It was crucial period when financial crisis struck the Southeast Asia amidst the
heyday of Malaysia achievement of 1997. It generated a significant impact upon
political and economic structures of Malaysia. The major impact of crisis could be seen
at the internal fractions of the UMNO on the policy choice of crisis management, on the
dismissal of Anwar Ibrahim from the office and on political repositioning, on the
imprisonment of Anwar, on the emergence of the Reformasi movement and on the
spillover Reformasi, leading to the establishment of the opposition coalition of BA
which aimed to shift the prevailing political and social order. The threat to Mahathirs
leadership also appeared from the Western interventions, such as the policy advice of
Washington Consensus. Further, they also forcefully supported the Reformasi movement
in regard to democratization and liberalization propaganda. Mahathir administration was
labeled by some as the authoritarian regime, crony capitalism, highly corrupted and of
lacking of transparency. Amidst the economic and political turbulence, Mahathir overtly
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demonstrated the caesarism character in securing his hegemonic bloc. This could be
seen in his imposition of capital control to manage the economic crisis and in engaging
the frontal assault against the Anglo-Saxon financial capitalist bloc. Domestically, he
employed coercive means in order to sustained the supremacy of the UMNO political
economy bloc such as the using of ISA to imprison Anwar and also upon others
opposing movements.
To summarize, the Mahathirism was born and operated within the historical trajectories
of Malaysia. Intellectually, Gramsci has provided a comprehensive framework in
explaining and understanding the historical trajectories of a given society, referring to
the case study on Malaysia. Thus, the Mahathirs movements at the international level
should be contextualized within the domestic relations of social forces and the external
social forces, within a comprehensive and holistic analysis. Gramsci also argued that the
State and Civil Society are the main locus of the project of hegemony and further they
are the point departure of the construction of world hegemony.

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CHAPTER FIVE
MAHATHIR MOHAMAD: THE ANTI-THESIS OF NEOLIBERAL
INTELLECTUAL

One of the most important characteristics of any group that is developing

towards dominance is its struggle to assimilate and to conquer
'ideologically' the traditional intellectuals. conquest is made quicker
and more efficacious the more the group in question succeeds in
simultaneously elaborating its own organic intellectuals.
Antonio Gramsci, Intellectuals
(Selections from Prison Notebooks, 1971)
5.1. Introduction
This chapter aims to examine Mahathirs world view in defining and interpreting the
finance hegemony in the current world order particularly since the demise of Bretton
Woods. The analysis of this chapter underpinned by the concept of intellectual bloc
proposed by Gramsci to explain the function of intellectual in defining the hegemony;
and also to distinguish the role of intellectual blocs, either as the affirmation of
hegemony or as the resistance to domination. In ideological term, the form of
intellectuals plays a significant role as the main gate in questioning or accepting the
hegemony. In a praxiological term, intellectual defines the basic ground in the formation
of movement to accept or go against a particular hegemon. Intellectual further provides
alternatives in search of justice and equality among societies.
According to Gramsci (1971), there are two forms of intellectual, that is traditional
intellectual and that is organic intellectual. Traditional intellectual refers to those who
operates or in charge of the economic system and political systems (hegemony system)
without questioning it. Their interest is affiliated with the dominant class or their
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consciousness has been hegemonized by the dominant class. In Gramscis life, these
people are tradesman, technicians, industrialists, and bureaucrats, or what Gramsci
called as the capitalist class. Organic intellectual element is of thinking and organizing
certain fundamental class. This group has a broader perspective in order to question the
pattern of domination in society. The organic intellectual attempts to mobilize mass to
build up consciousness; of mass in questioning the pattern of domination nationally or
within global order.
In the context of this study, the world recognizes Mahathir Mohammad as a spokesman
in championing the interest of the developing countries making him as an organic
intellectual. This chapter examines Mahathirs world view on the rise of finance
hegemony at the three elements of neo-liberal hegemony. These are the predominance of
finance in the world economic order, the domination of transnational capitalist class and
the bias function of international institutions particularly the twin edifice of neo-liberal
institution of IMF and World Bank. Main source of references will be Mahathirs
writings and speech on the international affairs. These sources will be in examined,
interpreted and understood his World View and his stance amidst of finance hegemony,
as both the national leader and also an international figure during his premiership and his
post premiership.
5.2. The Pillars of Finance Hegemony: Fictitious Capital and Petrodollar
From the critical point of Mahathir on the finance hegemony, this section focuses on
Mahathirs world view and his view on the US dollar hegemony through the financial
market and the petrodollar recycle as the two sole of finance hegemony. It considers that
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the finance capital and the petrodollar recycling have an intimate relation in buttressing
the finance hegemony. The market transactions in both the financial market and the
petrodollar market are pumping up the unrestricting massive flow of dollar to the entire
world. It justifies the seniorage of dollar and legitimizes US in making of dollar as the
world currency. This section pays attention to its impact on the world economic order
and to the developing countries according to the Mahathirs world view.
There is a growing consensus that the current world economy structure is
dominated by three inter-related characteristics; neo-liberalism, globalization and the
financialization. Neoliberalism historical bloc is sustained by triad of idea, structure of
mode of production and the institutionalization these upon the international institutions.
The idea of neoliberalism is the extension of the classical liberalism supporting the free
market and freeing market from the intervention of the state. It argues that the economic
activities both domestically and internationally are self-regulated. Consequently the
capitalist classes obtain an upper status in making money within the market.
It was a critical date when the Bretton Woods system collapsed in the wake of
1970s global contradictions. These were moments when the base idea linking
intergovernmental organization, universities and the transnational capitalist networks
articulated by their organic intellectual was challenged. The maturing role of the
neoliberal intellectual also catches attention of Mahathir. For him, neoliberalism is
beyond ideology; it is the religion of globalization (Mahathir, 2001d). Historically, he
noted that there was an intellectual movement to posit the sacred of market freed from
the intervention of government. This intellectual movement, he said, comes from the
western universities and he explained:
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How did the "lunatic fringe" move to centre stage? How did "neoliberalism" make the transition from the intellectual ghetto to become the
dominant doctrine of our time? The process by which the old economic
religion has so completely given way to the new economic religion is,
like the theology, the stuff of fairy tales.
The economic historians trace it to the tiny religious cell around Friedrich
von Hayek and his student disciples at the University of Chicago, student
disciples like Milton Friedman. From this small nucleus has sprung a
huge global network of foundations, institutes, research centers, scholars,
writers and public relations hacks (Mahathir, 2001d).

It is not exaggerating to say that Mahathirs statement above rhythmed well with
a Gramscis organic intellectual. Like Gramsci, Mahathir linked idea of neoliberalism to
key social institutions (e.g. state, market, schools, universities, international
organization), and to idea opposing the state regulation or to minimize state intervention
in the market.Furthermore, Mahathir described the relation of economic religion of neoliberalism with the international institutions as the temple of the neo-liberal missionaries
and he explained:
As you all know, the neo-liberal religion has many prominent temples.
The IMF, the World Bank, the WTO, the most powerful among them,
work closely with those who walk the corridors of power in the great
capitals, and who have such spectacular views from the skyscrapers of
money on Wall Street. This once lunatic fringe who now inhabit the
citadels of wealth, power and orthodoxy has huge sums of money and
vast reservoirs of intellectual resources (Mahathir, 2001d).

Prestigious western universities also play important role in producing the

neoliberal intellectual or what Mahathir called as the missionaries of
neoliberal. These missionaries representing the intellectual excellence around
the world which are taught by some of the best ranking of the priest of neoliberal
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religion. He considered these neoliberal intellectual in those universities as

paramount of in the reproduction of intellectual hegemony of neoliberalism and
Mahathir said:
And each year, tens of thousands more from around the world - the best
and the brightest from the developing as well as the developed world - graduate from the groves of academe where the sacred truths are
meticulously and lovingly taught, to swell the ranks of the priesthood.
As you know, this new economic religion has an impressive list of
cardinals, the custodians of the holy writ, who develop, preserve, refine
and interpret the theology. And it has developed a vast army of
missionaries (Mahathir, 2001d).

Furthermore, he firmly concluded that intellectual of hegemony as an immense

threat for independent thinking of developing countries. In front of the World Economic
Development Congress forum, he proclaimed to the developing countries leadership that
the greatest of threat in this globalization era is of hegemony in thought; as he stated:
Having, hopefully, apologized enough, let me state my belief that for the
developing world, with regard to "globalization", there are at least five
central challenges. The first is the most basic. It is the simple challenge of
independent thought, of thinking for ourselves. This is not very easy,
especially since there are so many kind people who are very happy to do
the thinking for us, and who get so upset when lesser beings like us try to
do our own thinking (Mahathir, 2001d).

In the realm of practical economics, Mahathir noted that finance market appeared
as the major form of the world mode, and for more critical than manufacturing
capitalism, marking by the emergence the era of post-Fordism regime. He lamented
against traded derivatives - that is, contracts specifying rights and obligations which are
based upon, and thus derived their value from, the performance of some underlying
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instruments, investment, currency, commodity or service index, rights or rate developed from the 1970s and grew exponentially from the mid-1980s. By the turn of
the century, they amounted to an estimated USD 70 trillion or eight times of the annual
GDP of the United States. Hedge-funds he noted also increased significantly over the
first years of the new century, growing annually at approximately 15-20 per cent to an
estimated USD 1 trillion. The hedge-funds effectively gamble on (or protect themselves
from) the future, by trading in options on the future trade. They traded with fine
calculation about what might happen and the risks either way (James & Patomaki,
2007).
Thus, money attaches social and economic power which could be move and
translate into value across time and space. Those who possess money, they are able to
buy assets, goods and human labour time. Consequently, the power of capitals constitute
in money form. Precisely, through the internationalization of neoliberalism, finance
reigns supreme and globalization and neoliberalism are themselves expressions of
finance (Cerny, 1993; B. Cohen, 2000; Epstein, 2005; James & Patomaki, 2007;
Langley, 2002; Pauly, 2006; Rupert, 2005; Scholte & Schnabel, 2002) which Mahathir
concurred and elaborated in his definition of finance hegemony as the new name of
Capitalism, with a capital C as he asserted that:
However the free market is no more than a new name for Capitalism,
unbridled Capitalism with a capital C. The size of the capital involved
today is unbelievable. It is said that the trade in currency, which is what
capital is about is twenty times bigger than world trade. Such a huge
sum of money cannot but disrupt businesses wherever it goes. When
used to buy and sell currencies economies can be totally disrupted,
enriching the money movers and impoverishing whole nations,
exploding into riots, violence and wars, overthrowing Governments and
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spreading anarchy where law and order had prevailed. Still the free
market or unbridled capitalism is defended (Mahathir, 2000b).

There is a consensus among International Political Economy (IPE) scholars that

for more than three decades, finance is the epicenter of capitalism. There were rapid
developments of finance, either by the inter-states agreement or by the private operations
at global level. There were two critical dates marking finance as the one of the fuel of
global capitalist system and the raising US dollar as the world currency. We can trace
back to the history of the systematic efforts of the great powers to build the world
economic architecture at the Bretton Woods conference in 1940s. The Bretton Woods
agreement imposed the US dollar as the medium of international trade precipitating the
growth of international economy after the 1930s economic downturn and the effect of
the two world wars to the capitalist world. At the early stage, the international financial
architecture constructed beyond the ashes of World War II explicitly condoned capital
controls. Once considered a heresy during the era of the classical gold standard.
However, the capital controls were by 1944 both normal and legitimate (Helleiner, 1994;
Eichengreen, 1996). Multilaterally, the signatures of Bretton Woods seem to concur that
US dollar is universally accepted as the world currency backed by the value of gold.
The supremacy of the US dollar the value of which is backed by gold of one dollar
equal to 35 ounce of gold just survived until the unilateral decision of US under Nixon
administration in 1970s to do away with it. As the budget deficit of US caused by
Vietnam War, worsened the dollar fully backed by gold value deepened US deficit, time
bomb and passed this burden to rest the world citizen. Thus, the floating exchange rate
was launched with the value of any currency was now determined by the laws of market.
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In addition, Mahathir argued that, it was importing too much and the dollar was flooding
Europe. It could no longer guarantee redeeming the dollar with 1/35 oz of gold.
Furthermore, it precipitated speculation financial markets and speculators moved in and
sold U.S. Dollar at below the guaranteed value. A market in Eurodollar was created
(Mahathir, 2000j). Moreover, underlying the free market regime, finance rose to the
center-stage of global capitalism development. Mahathir observed this situation and
concluded that the floating exchange rate was not come as ordinary phenomena, but it
was created by the powerful countries to maintain its currency domination abolishing the
international agreement of Bretton Woods. US unilaterally deceived the Bretton Woods
agreement in order to protect its economy collapsing under Nixon Administration.US
exported the misery US dollar to the entire world flooding the fast eroding US dollar in
the international transaction. Subsequently, he asserted that the floating exchange rate
regime was not an academic considerations or even coming out of multilateral
discussion. The main purpose was to preserve the domination of US. He argued:
The floating exchange rate is not a creature of Bretton Woods. It certainly
was not the result of serious study, debate and international agreement as
was the fixed rate of Bretton Woods. The floating rate is the result of
countries, powerful countries, reneging on their undertakings in the
Bretton Woods agreement (Mahathir, 2000j).

The world has been witnessing massive increase of financial transaction such as
shares markets, currency trading, speculations, derivatives trading, and are beyond the
real economy trading in goods and services. These false economies are pillars in,
sustaining, the circulation and the printing of US dollar in global market. In fact, this
fictitious capital market is based mainly on the manipulation of value or price such as
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the shares, currencies and other financial products. Moreover, an abundant financial
transaction has marginalized real economy transactions. The daily market index
considered as the main figures and numbers indicating of economic growth, the capacity
production of the real economies have been comprised. He argued:
I need not go into how the funds pushed up share prices or depressed
them, or how CEOs with share options helped them. I am not a
businessman. I dont play the market. But the fact is that the market Index
has become more important than the Company Annual Report including
the accounts. The Stock Market Index determines whether the people in
the world feel good or not, whether they buy things or the dont, they take
holiday or not. The production and sale of goods and services had
become irrelevant. The main business of the world is the selling and
buying the shares (Mahathir, 2002c).

Furthermore, he argued that finance hegemony has been serving the interest of
finance capitalists with speculations on/in developing economics. Consequently, the
financial markets could be now considered as the threat for the developing countries
leading to the suffering of people and disrupting the existence of nations as he stated:
What the world is interested in today is quick money, money that comes
from the speculation and manipulation; overnight money. The greedy
have taken over the economy of the world. They can only see quick
profits for themselves regardless of what happens to national and
international economies, regardless of the pain and suffering of people,
regardless of the turmoil and collapse of nations (Mahathir, 2002c).

Although, the typical financial crises are different for each region such as of
Latin America, but in each case it resulted in a neoliberal shift in governmental
economic policy and the increasing prominence of financial capital (Murphy, 1998).
The East Asian financial crisis was the true fact of how the financial markets destructed
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the economy of the developing countries (Mahathir, 2000d).The financial markets are
notoriously vulnerable to self-fulfilling speculative bubbles and attacks. The resulting
flows of funds, which may be massive, can be highly disruptive to national economies
owing to their amplified impact on real economic variables (Cohen, 2000a). It could be
summarized that the financial market now assuming as the source of threat to the
economic stability and sovereignty of nations, particularly of the developing countries.
The massive increase of financial flows rooted within the financial liberalization policy
universalized as the mainstream of economic policy for the entire world. Mahathir
illustrates the financial transaction as being dominated by the currency traders and most
of the transaction was based on speculation. Mahathir firmly stated:
If the amount of money circulating around the globe is anything to go by,
we are trading more now than at any other moment in human history.
Financial liberalization has certainly extensive, and the world has borne
witness to massive financial flows and market penetrations. The volume
traded in the world foreign exchange market has grown from a daily
average of 15 billion US dollars in 1973, to over 900 billion USD in
1992, and the number today far exceeds 1000 billion US Dollars a day
(Mahathir, 2000d).

The hard reality is that a mere two percent of foreign exchange traded is used for
trade payments and it produces excessive US dollar in the markets. Financial
transactions everywhere ultimately making US dollar as the single dominant currency;
of approximately around $1.5 trillion in a daily transactions. To summarize, Cohen
(2000b) used the metaphor of phoenix to illustrate the raising finance hegemony and like
a phoenix it rose from the ashes, and global financial (has taken) flight and soared to
new heights of power and influence in the affair of nations. Thus, the financial market is
truly unregulated; devoid of any form of intervention by governments. The IFIs such as
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IMF and World Bank merely provides a global standard of financial transaction on paper
leaning more on the neo-liberalism principle. Most of global free market commentators
persisted to argue that the free flow of finance will drive the economic growth as well as
the free flow of goods and services. The mobility of capital assumed to lead to more
productive employment of investment resources remained a false assumption. Such
argument was of the Federal Reserve chairman Alan Greenspan, that:
The accelerating expansion of global financeenhances cross-border
trade in goods and services, facilitates cross-border portfolio investment
strategies, enhances the lower-cost financing of real capital formation on
a worldwide basis, and hence, leads to an expansion of international trade
and rising standards of living (Greenspan 1997).

In contrast to the free market supporters, Mahathir critically views the nature
cross-border free flow of finance as being anarchic and chaotic. The anarchy of finance
is benefiting the few rich and exploiting the majority of poor. Mahathir contended that
the powerful countries intended to maintain the anarchy of market in order to preserve
its position as a hegemon. As Mahathir pointed out that:
Clearly this situation in terms of international finance is chaotic and
anarchic. But since the system benefits the powerful countries they are
unwilling to correct it. This anarchy in the international financial regime
will remain because it benefits the rich and the powerful. If we want to
protect ourselves we must evolve our own payment system, our own
trading currency (Mahathir, 2002d).

In this sense, the anarchy of market is sustaining the employment of US dollar as

the world currency. The supremacy of US dollar facilitates the capitalists to exploit the
surplus value of entire world and store world surplus in the form of US dollar deepening
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to dollar hegemony. The main capitalist principle is that, capital will flow to the area
which promises the high return in order to make huge profit. Nevertheless, the
marvelous profits are monopolized by the rich and there is no share for the poor. There
is no contribution of finance capital to the poor people, and their surplus value absorb to
the Core capitalist nation-states resulting in the rich being richer and poor being poorer;
as Mahathir noted as well:
After all, global capital, which is answerable to no one, can jump in and
pull out of any country without concern for the dislocation the host
countries face. Taxes can spread some of the wealth. In their own
countries they pay taxes on the wealth they make so the poor can have a
share of it. They now make profit by exploiting the whole world. But
they pay no taxes to the world to be expended on the poor in the poor
countries. Today more than two billion of the six billion inhabitants of
the world live in abject poverty suffering all kinds of diseases and dying
like flies. They no longer give out aid, the 0.7% of GDP that they
promised. As to being taxed so as to use some of their wealth to feed the
poor, they would not hear of it. Their media won't even publish the idea,
much less support it (Mahathir, 2003h).

The acceptance of the US Dollar as the world currency confers on it tremendous

political economy power. The demand for US currency becomes very high and this
demand strengthening the dollar which otherwise it would not happen. Its very status
and use as an international currency creates certain opportunities for profitable
manipulation by the unscrupulous (Mahathir, 2001c). This means the US dollar has
taken over some authority of the State. The emergence of this finance hegemony is
strengthened by establishing this global dollar monetary regime of a world currency that
affecting the other countries to surrender its sovereignty to the primacy of dollar finance.
This is what Cohen (2000a) called as the new geography of money the new
configuration of currency space. The fundamental domain of the money concerned is no
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longer corresponding with the formal jurisdiction of its issuing authority. Currencies
became increasingly deterritorialized, their circulation determined not by law or politics
but by the dynamics of supply and demand of paper dollars.
The supremacy of US dollar has taken over large part of sovereignty of nations in
determining its monetary independence and its various instrument of a global financial
regime. Mahathir asserted that the finance hegemony is the resurgences of old European
Imperialism. He defined European to mean people of European extraction whether they
now call themselves Americans, Canadians, Australians or New Zealanders. They may
live outside of Europe but culturally they are Europeans and they tend to close ranks
when faced with challenges by non-Europeans (Mahathir, 2003e). The new form of
colonization is manifested by the debt bondage of developing countries, who have to
follow the advice of this agent of global capitalists their management economic, politics
and society as advocated by the Washington Consensus Principles. He asserted that:
Today we are seeing the resurgence of European Imperialism. At first
we thought the colonization would be virtual. Merely by economic
strangulation and financial emasculation, the newly independent
countries could be brought to their knees, begging to be recolonised in
other forms. But today we are actually faced by the old physical
occupation by foreign forces. Puppet regimes are installed dancing as
puppets do (Mahathir, 2003i).
The former colonies of the Europeans may have gained independence in
the legal sense. But many are not truly independent. Politically and
economically they remain no better than colonies. For a time their
borders are respected. But then came new ideas about a globalized
world, a world without borders. How can a country be independent if its
borders are not free and they cannot do anything they like (Mahathir,
2003a).

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Despite the supremacy of US dollar within the financial market, the petroleum
trade has a significant contribution to the existence of finance hegemony. Indeed, the
price of petroleum, politically and economically, is measured by the US dollar. It is
undisputed that the petroleum is the most important commodity for all the countries to
run their economy. According to the data which provided by Clark (2005), for a century
the industrialized world has become dependent upon the very cheap and abundant
energy provided by hydrocarbons. At the nation-state level, economic development
requires sources of energy, and currently, hydrocarbons comprise 90 percent of the
worlds transportation fuel and 40 percent of the worlds primary energy. The United
States remains the worlds largest energy consumer; it represents 5 percent of the
worlds population, but consumes more than 25 percent of the worlds oil production.
US were estimated to consume 7.5 billion barrels of oil in 2004, despite the fact that its
oil production was then at its lowest level since the early 1950s and was declining by
more than 2 percent per year. It is projected that by 2010 the United States will have less
than 15 billion barrels of domestic oil reserves and will have to import 65 percent of its
projected oil demand by 2020 (estimated at 26 mb/d).
The dollar pricing of petroleum insists that every country has to hold a certain
amount US dollar for buying oil. They have to purchase the US dollar in the global
market or convert their currency voluntarily into dollar in order to obtain petroleum. In
contrary, the US buys petroleum for free from the world petroleum producers by
printing dollar as much as they need. Subsequently, the dollar pricing of petroleum
becomes known as petrodollar. The emergence of US dollar as the sole oil currency
undisputedly put US hegemony into a high level: petrodollar hegemony. The demise of
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Bretton Wood system initiated to secure the position dollar as World Reserve Currency
and now replaced by this new hegemonic position. Following the collapse of Bretton
Woods system, under the Nixon administration, US unilaterally able to establish the
dollar as the single currency in petroleum trade. Discussions among the developed
countries and with the biggest petroleum producer, Saudi Arabia, took place to establish
a currency basket of oil pricing. And this clashed with US attempt to preserve its dollar
position. Referring to research by Spiro (1999) on the Hidden Hand of American
Hegemony: Petrodollar Recycling and International Markets, that undermined OPECs
intension to bring about a viability of pricing oil trades in several currencies. This
unpublished OPEC proposal involved a basket of currencies from the Group of Ten
Nations, or G-10. Members included the Bank of International Settlements (BIS),
Austria and Switzerland, major European countries and their currencies, such as
Germany (mark), France (franc), and the UK (pound sterling), as well other
industrialized nations, such as Japan (yen), Canada (Canadian dollar), and of course the
US (US dollar). It should be noted the powerful G 10/BIS also has one unofficial
member, the governor of the Saudi Arabian Monetary Authority (SAMA).
As the effort to maintain US dollar as the single price of petroleum and to prevent
the currency basket system, Nixon administration conducted high talk discussions with
the Saudi Arabia in order to impose the oil sales and only in dollars. In 1974 an
agreement was reached with New York and London banking interests that established
what became known as petrodollar recycling. That year the Saudi government secretly
purchased $2.5 billion in US Treasury bills with their oil surplus funds, and a few years

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later Treasury Secretary Blumenthal cut a secret deal with the Saudis to ensure that
OPEC would continue to price oil in dollars only (Spiro, 1999).
It is interesting to examine the position of Saudi Arabia not only as the world
biggest petroleum producer, but also, financially, under the petrodollar regime, Saudi
Arabia is now the world petrodollar hub. According to Mahathir, the existence of Saudi
Arabia as the center of petrodollar hegemony, play major role in flooding the world with
an abundant of US dollar. Unfortunately, the wealth of Arab world is not real when the
flow petro-dollar to the Arab world is pulled back to the developed countries as
investments at the western financial centers, as he stated that:
The huge funds of the Arabs countries are largely deposited in the banks
of the very rich Western countries earning very small returns. According
to conservative estimates, there is at least One trillion US dollars of Arabs
funds sitting in Western financial centres (New York, London and
Switzerland). Some of these funds have now been frozen (Mahathir,
2006a, p.275).

The petro-dollar is also inseparable from the interest of transnational capitalist

class such as the multinational petroleum companies and global banking capitalist
network. At the dawn of a post-Bretton Wood system, a group of 84 of the worlds top
financial and political insiders met at Saltsjobaden, Sweden, at the secluded island resort
of the Swedish Wallenberg banking family. This gathering of Bilderberg group heard an
American participant, Walter Levy, outlining a scenario for an imminent 400 percent
increase in OPEC petroleum revenues. The purpose of the secret Saltsjobaden meeting
was not to prevent the expected oil price shock, but rather to plan how to manage the

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about-to-be-created flood of oil dollars, a process US Secretary of State Kissinger later

called recycling the petrodollar flows(Engdahl, 2004).
Besides that, under the leadership of Secretary of State Kissinger, an agreement
was concluded between the US and Saudi Arabia known as the US-Saudi Arabian Joint
Commission on Economic Cooperation in June 1974. Based on the respective
agreement, The US Treasury and the New York Federal Reserve would allow the
Saudi Central Bank to buy US Treasury bonds with Saudi petrodollars. Similar to that,
the London banks also handle Eurozone-based international oil transaction, loaning
these revenues via Eurobonds to oil-importing countries. The debt and interest from
these loans would then flow to the dollar-denominated payments to the IMF, thereby
completing the recycling of surplus petrodollars to the Federal Reserve (Clark, 2005).
Thus, what is the impact of petro-dollar recycling to the finance hegemony?
Logically, when the price of petroleum is pushed up, the petroleum producers will be
flooded by the US dollar. The US Federal Reserve will print more US dollar and export
in huge amount to the entire nations for them to purchase petroleum. The abundance of
US dollar in the petroleum market affected the value of other currencies, particularly
devaluing the value of developing nations currencies. It is burdening the developing
countries with their reserves been absorbed by the purchase of petroleum and reducing
further their saving, if any at all. Subsequently, it is devaluing the currency of
developing nations and pushing up the massive flow of petro-dollar recycling to the
global financial market, to centers of financial market such as banking system in
London, New York etc. Mahathir claimed that there is a close connection between the

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petro-dollar recycling with the speculation of financial market and here dollar lost its
value gradually. He asserted that:
But today we use money. Since we don't have a currency which is strong
enough and stable enough in exchange rate terms, we have to use the
American dollar. But the dollar is also not stable. Today the dollar has
depreciated against many other currencies. This means that despite the
increase in the price of oil for example, we are actually earning less due
to the devaluation of the dollar. It is the same with the other currencies.
It is the same with our own currencies. They all fluctuate in value. And
they are all subject to speculation and manipulation as happened in
Malaysia and other East Asian countries, in Russia and in Latin America
(Mahathir, 2006a, p.276).

On the other hand, Mahathir commented that the petrodollar did not generate the
positive impact or real profit to the oil exporting countries. This is because when the
world is flooded by abundant of dollar, the dollar lost its value dramatically. He
calculated that oil exporting may earn more of theUS dollar because of the increase in
the prices of the oil, but that increase is not high as the figures indicated. This is due to
the depreciation in the value of the US dollar itself(Mahathir, 2006). In fact, Saudi
Arabia and the other OPEC producers deposited their surplus dollars in US and UK
banks, which then took these OPEC petrodollars and re-lent them as Eurodollar bonds or
loans, to governments of developing countries desperate for dollar to finance their oil
imports. While benefiting US and UK-based financial centers, it leads to the buildup of
these petrodollar debts by the late 1970s. This in fact facilitated the basis for the
developing worlds debt crisis of the early 1980s. Hundreds of billions of dollars were
recycled between OPEC, London and New York banks, and then recycled back to
developing countries (Clark, 2005).

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These recycling of dollar, Mahathir argued, created be an acute disease in the

world financial system. It is also a paradox which the economy of the US has significant
structural imbalances, with huge deficits in government budget and in trade, yet it
continues to be considered as a strong economy. The answer to this paradox lies in the
role of the US dollar as a reserve currency, and it as a trading currency, particularly for
trade in petroleum. Loans are also designated in US dollar (Mahathir, 2006). The petrodollar recycling is benefiting the US as the biggest petroleum consumer in the world,
with a huge deficit country. Furthermore, he contends that although US dollar gains
benefit through deposit of US dollar to all countries, but there is no guarantee that US
will pay its deficit from petrodollar recycle. He argues:
Oil is traded in US dollar. As huge funds in US dollar accumulate for the
producer countries, the need to recycle these huge US dollar reserves
becomes acute. Many take the easy way out investing in US- dollar
bonds at low interest rates. Effectively this amounts to lending money to
the US. Confident that the inflow of dollars would continue, the US
especially under Bush, spent beyond their means. Today US deficit is
estimated at more than US$10 trillion. With its need to import and
consume more petroleum and more of everything, there is no way for the
US to pay its debts, even though it may earn some money from lending
out the funds deposited with it by the countries of the world. There
simply is too much US dollars within the worlds financial system
(Mahathir, 2006a, p. 322).

In summary, the petrodollar recycling works is simply due to oil is a basic need for
every countries and the petrodollar system requires the buildup of huge trade surpluses
in order to accumulate dollar surplus. Indeed, all of countries have to purchase US dollar
to meet their need on the oil, and US controls the dollar and prints it at will as fiat. Every
country wants maximize dollar surpluses from their export because everyone needs the
dollar. The petrodollar recycling pushes the developing countries to borrow money from
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the international lenders and this deeper the debt bondage. Under the global financial
architecture, United States which represents as the core of global capitalist system which
enjoys the privileges and has rights to determine the procedure and agenda of IFIs as the
IMF and World Bank. For instance, the IMF Washington Consensus on record had
enforced draconian debt collection on developing countries, forcing them to repay dollar
debts despite the social upheavals and lack of funds for domestic growth (Engdahl,
2004). Moreover, this system prevented economic independence of developing nations
in but it kept the US banks and the dollar afloat. Therefore, all countries around the
world are forced to trade in deficits or face currency collapse. The rich interprets
globalization as the right of capital to cross and re-cross borders at will. Finance capital
is the new gunship of the rich and it is debt slavery of neo-colonialism, as Mahathir said:
But they were wrong. Their independence was not full. It was President
Soekarno of Indonesia who first realized it. He called it "neocolonialism", a form of colonial rule that required no physical occupation
of the land. The economic weaknesses of all the newly-independent
countries forced them to submit to the influence and even hegemony of
the economically powerful former colonial masters. The newlyindependent countries had to seek aid and to borrow from the rich
countries and these were not given without strings attached. Every day
the strings becomes more numerous and stronger. But still much lipservice was paid to non-interference in the affairs of independent
countries. For the rich ex-colonial masters even this need for lip- service
was frustrating. A way had to be found to dominate the former colonies
more directly once again (Mahathir, 2002a).

5.3. The Supremacy of Transnational Capitalist Class

This section examines Mahathirs point of view toward the prominent of transnational
capitalist class in construction and the persistence of finance hegemony. The class-based
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analysis of Gramsci employed to conceive the role of transnational capitalist classes in

the engineering of finance hegemony. Less than a century ago in Gramscis writing, his
main concern was the raising of capitalist formation in Italy which consolidated with
States institution and civil society. Class based analysis was the center of Gramscis
analysis to the nature of Italian national formation at his time. In sum, hegemony in
Gramscis language refers again to the domination of capitalist class who control the
state institution and civil society through the establishing of consent of civil society and
exercise of coercion through state institutions. The application of Gramscis class-based
analysis at the international level remain disputed among some social scientists, but
following arguments of Morton (2007) the analysis of Gramsci was vivid and tone. He
linked well the national formation of Italy, incorporating with the emergence of the
historical development of international capitalism and the development of capitalism
within Italy established by the capitalist class network among European capitalist
classes. There are three interrelated thematic linkages the Gramscis writing and all
devoted to the expansion of international capitalism. These are 1) his understanding of
the modern states-system and its relation to the emerging hegemony of Anglo-Saxon
capitalism; (2) the European response of fascism to the growing intervention and
predominance of foreign capital; and (3) the conditions of uneven development in terms
of the specific context i.e the Russian Revolution and the liberal internationalism of
Woodrow Wilson(Morton, 2007). These points were well-conceived by Gramscian note
well the early European capitalist strategies to consolidate and expand their influence to
entire world. Hence, the current neo-liberal bloc cannot be separated from the early
development of transnational capitalist classes of the Anglo-Saxon hemisphere.

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Although, there are many meanings of hegemony in the IR literature, however

generally, there are two axis in defining hegemony; which are the state-centric based
perspective and the class-based perspective. This study employs the class-based analysis
to take account of global capitalist hegemony or neo-liberal historical bloc making up of
world hegemony and underpinning by the progressive movement of the transnational
capitalist class and integrating the entire world under the banner of globalization (Pijl,
1998; Robinson, 2002, 2006&Sklair). Yet, the development of current capitalism is
more matured than in Gramscis time. It could be seen that successful leadership of neoliberal capitalist in constructing the global consent, institutions and finance hegemony of
the core hegemon is still centered on the transnational capitalist classes. Conceptually,
transnational capitalist classes are composed of the owners and managers of big
transnational corporations, private financial institutions and peripheral capitalists around
the world who need manage to their transnational capital. The bloc would also include
the cadre, bureaucratic managers and technicians who administer the agencies of the
transnational state, such as the IMF, the World Bank and the WTO and further other
transnational forums, and the states of the North and the South. Besides, also brought
into the bloc would be an array of politicians and charismatic public figures, along with
select organic intellectuals, who provide ideological legitimacy and technical solutions
(Robinson, 2006).
It is undisputed that most of transnational capitalist classes are come from the
Western countries which their operations take control of the world economy production.
According to Fortunes top 100 Transnational Corporations (TNCs), 80 per cent of
which are based in the United States or Western Europe and they have dramatically
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increased their control of the world economy (Petras & Veltmeyer, 1999). Accordingly,
Mahathir defines the transnational capitalist class as a group of the richest people who
come from the western countries and dominating the global finance capital. By quoting
the study of Merril Lynch and CAP Gemini Ernst & Young, Mahathir shows that global
capital is concentrated to the High Net Worth Individuals (HNWIs). The monopoly of
capital is the main reference of Mahathir in distinguishing transnational capitalist class.
Mostly, they make money within the global finance market.
The very rich today are called "HNWIs", high net worth individuals.
Merril Lynch and CAP Gemini Ernst & Young have issued, for several
years now, a study they call "The World Wealth Report". This year's
World Wealth Report 2001, released in June, states that there were 7.2
million high net worth individuals last year, high net worth individuals
being defined as people with investable assets of at least US$1 million,
not counting real estate. These are people who have US$1 million or
more that they can quickly put into stocks and shares, hedge funds,
currency speculation, bonds and other financial instruments. It does not
refer to the many more people who are less rich, who have incomes or
assets above US$1 million (Mahathir, 2001e).
Consequently, they point to a worsening the inequalities between the rich and poor
nation-states in world, where the wealth and capital are monopolized by a few.
According to Mahathir, it is ridiculous when the richest people own capital and stood
over millions of people of the world. For him, it is the greedy character of capitalists. He
argued:
In 1960, the total income of the wealthiest 20 percent of humanity was 30
times greater than the total income of the poorest 20 percent. Today, after
all the wonderful globalization, it is more than 85 times greater. This
figure in fact grossly understates the concentration of wealth amongst the
wealthiest. The UN estimates that "the assets of the 200 richest people are
more than the combined income of 41 percent of the world's people." Just
imagine, 200 people owning assets equal to the total wealth of 2.5 billion
of their fellow creatures. How many meals a day, how many wardrobes
of clothing, how many pairs of shoes, how many houses do these 200
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men need in order to survive. And yet they want more and the world must
accommodate them (Mahathir, 2001d).

It could be understood that the domination of transnational capitalist class is

acquired by the rationality of economic principle within finance hegemony. They could
maximize profit in the form of fictitious capital at the short time. Comparing with the
real economic transaction, the financial market promises huge profit than the real
economic transaction and in selling and buying currency, shares, derivatives and other
fictitious capital. The financial market is merely a global casino market which the most
of its activities in nature are speculation (Soederberg, 2004, 2007; Strange, 1986&
Underhill, 1997). As Saskia Sassen(2000) has documented, the foreign-currency
exchange market led the way with increasingly globalized transactions from the mid1970s with a daily turnover of USD 15 billion. The escalation in itself was
extraordinary: USD 60 billion in the early 1980s; USD 1.3 trillion in the late
1990s.However, the point is that these more abstract forms of exchange outpaced more
concrete exchange transactions such as commodity trading, which itself was greatly
increasing in volume: foreign currency exchange was ten times world trade in 1983,
sixty times in 1992 and seventy times in 1999. Thus, the domination of fictitious capital
market provides the high leverage of transnational capitalist class in the global order.
Mahathir describes the fictitious capital purposing:
For the greedy speculators what matters is immediate returns, huge
profits. Selling goods take too long. But selling shares and selling
currencies promise huge instant profits. Overnight a billion can be made
through the various forms of short selling. No real money is needed. No
real transactions need to made. The deals are made on the computer.
They involve mere figures of fictitious commodities i.e. shares and
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currency that they claim they have for sale. The buyers buy the figures on
the screen (Mahathir, 2002c).

Nowadays, the wealth of a nation is being irrelevant. The power of capital in the
hand of transnational capitalist class counts. Therefore, the finance hegemony is not
prospering the entire world. It is just enriching the few people who play the finance
capital. Moreover, the advantage of globalization is benefiting the capital owner and the
financial market rapidly grows in major markets of world economy. He depicts that:
The 7 million rich people in the world had in their hands capital to invest
amounting to 2.7 times the total goods and services produced by the
almost 280 milllion citizens of the United States. If The World Wealth
Report 2001 is correct in its predictions, by 2005 the amount that the
world's high net worth individuals have for quickly investing in stocks, in
the world's 6,000 hedge funds (which can in addition borrow massive
amounts), in currency speculation, in bonds and other financial activities
will be equivalent to 4 times the present GDP of the United States, 36
times the present GDP of China and 82 times the present GDP of India.
Imagine the enormous economic power of these high net worth
individuals on national governments and on the international financial
system. They are the biggest beneficiaries of globalisation, with the
biggest vested interests in the freest flow and the fullest free play of
global capital (Mahathir, 2001e).

Furthermore, Mahathir asserted that the finance hegemony has plagued the world
economy as whole. It is an unhealthy playing field for the poor countries. The current
international financial architectures are not providing good outcome to the developing
countries; instead it generates economic suffering to the developing countries.
Subsequently, the finance hegemony merely posits the speculators in a privileged

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position. Massive capital mobility bestowed upon currency traders huge profits from the
financial markets and this keep on impoverishing and he explained:
The world financial system and the unregulated and mysterious flow of
capital may benefit the speculators but they do the world no good at all.
They are destructive. They destroy more wealth than the profits that they
make for themselves. It is not even a zero sum game. It is a totally
negative game in which the winner destroys more than he gains. It is time
that this vicious system is outlawed and the worlds economy especially
the economy of the poorer nations be freed of this worst manifestation of
capitalist greed (Mahathir, 2000f).

Developing countries are being powerless in facing the rapid flow of private
capital. The states authority has been disrupted by the freecross-border flows of private
capital, particularly in the form of foreign portfolio investment and short-term capital
investments to the developing countries. From one perspective, it places the developing
countries in a vulnerable position with high economy risk, financial volatility and facing
crisis. From another perspective, crisis to it is the free-flow of private capital provides an
upper hand for transnational capitalist class to extract a huge sum of money in the short
time from developing countries (Soederberg, 2004). Mahathir proposal measures take
against the destructive form of transnational capitalist class. In his view, the existing
finance hegemony has unfairly strengthening position to the TCC and continues
marginalizing the developing countries, both economically and politically. Moreover, he
called the practice of currency traders as robbery; robbing of the wealth of developing
countries as he stated in his speech in front of United Nations General Assembly that:
The world has lost its way. The hopes of the post World War II period
and the United Nations were dashed by the Cold War. Now the Cold War
is over but the resultant unipolar world and the ascendancy of capitalism
have brought about new threats. No country is safe from marauding
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currency traders who in a few short days can demolish the patiently
nurtured economies of the developing world. Far from curbing these
highway brigands, they are lauded for their philanthropy (Mahathir,
2003i).

Without doubt Asian financial crisis was under finance hegemony has been
systematically devastating for the developing countries overnight. It depicted how the
currency traders made vast profit by manipulating the currency value through freemarket mechanism under their control. A year before the crisis strike the Southeast
Asia, Mahathir has warned about the threat of transnational capitalists force to the
independence of nation-state and spelt out the possible crisis scenario. Free cross-border
of transnational capitalists makes suzerainty and independence of a nation-state being
obscured and hollowed. Financial subjugation even put into question the validity of
international law and regulation. His warning has been attested one year later when the
crisis hit Southeast Asia. In front of the United Nations General Assembly forum, he
alerted the world on the predominance of transnational capitalists force, as he stated
As we approach the next millennium where the pre-eminence of
transnational forces has blurred the definition of national sovereignty, we
must seriously question why a powerful minority are still allowed to
bankrupt and coerce the majority to meet their narrow economic and
political ends. The poor are no longer independent. They have already
lost control over their own currency. And now they have lost their
borders too (Mahathir, 1996b).

Theoretically, there are two explanations of Asian financial crisis. The first
explanation argued that the occurrence of financial crisis is due to poor macroeconomic
management of the Asian countries (Jomo, 2000). This explanation strongly voiced by
Western observers associated with the neo-liberal intellectuals. Following their
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argument, the crisis occurred due to bad governments whose resisted the rationality of
markets and thus generates an inevitable functional breakdown of economies (Friedman
1997 & Camdessus 1997). Moreover they argued that, the close relation between
government and local businessmen has undermined transparency, efficiency and
competition that drive the market and government being corrupted in managing their
economic activities as this labeled as the crony capitalism (Khoo, 2000). Some
explained the crisis assume from the dissatisfaction of transnational capitalist class
seeing government not able to provide the confidence for foreign investors to run their
multinational business; particularly leading them to pull out their capital from the
emerging market.
The second argues that crisis is triggered by the rise of finance hegemony shifting
of the manufacture-based capitalism to the finance-based capitalism. The shift of the
sphere of world economic lead by US in the decline of its manufacture-based capitalism
or what known as Fordism (Rupert, 2000) to finance-based capitalism imposing a
shacking system of global financial markets. The systematic effort shift of
manufactured-base to finance-base capitalism could be seen with US promoting the
finance market by insisting the IFIs to impose the neo-liberal project to the entire world
(Soederberg, 2006). Thus, Southeast Asia is also included into the larger neoliberal
project whose purpose is to dismantle protected state-led capitalist systems by forcing
open market and deregulating financial regimes. This was a period in which neoliberal
ideas took a centre stage. The IMF, the World Bank as well as economic technocrats
within economic ministries across the region became key players as they attempted to
force market-oriented programmes of structural adjustment on interventionist states
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(Robinson, 2006). In sum, following Jomo (2000), it is obvious that the crisis have been
caused by the undermining of previous systems of international and national economic
governance through deregulation and other developments associated with financial
liberalization and globalization, i.e. the subversion of effective financial governance at
both international and national levels created conditions that led to the crises. Roughly,
the development and globalization can be viewed as means of advancing the
agendas of the transnational capitalist class.
Beyond the theoretical explanation stated above, Mahathir sharply accused the
speculators as being the root of the problem undermining international financial
architecture leading to the Southeast Financial Crisis. In his perspective, it was a
paradox observing the financial crisis which in one view, the West blamed the
government due to not adhering their ways in managing the economy. On the other
hand, they protected the speculators as the agent to discipline the government for not
allowing self-regulated market mechanism to function. The main object of the financial
is to let go of their currency stock devalue the price and take a huge sum of money from
the whole exercise. He asserted that:
The fact is that the economic disaster would not have happened if the
speculators had not attacked the currencies and the share markets. If it
could happen without their attacks, it would have happened long ago. The
same systems and practically the same governments ruled these countries
for 40 long years. But far from being economically recessive as they are
now, these countries grew by leaps and bounds. Surely these
governments were responsible for the so-called miracles. And surely
these governments alone cannot be the cause of their economic collapse.
Yet these governments are being blamed, while the currency traders,
foreign capitalists and hot-money stock-market raiders are being praised
for their efforts to discipline these governments and force them to change
their ways--i.e., adopt the ways of Western governments and business
(Mahthathir, 1998b).
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The neo-liberal propaganda was merely to justify the interest of a few of

transnational capitalist class over entire production within the developing countries. Far
beyond this, the West used as a major move to capture the economy of developing
countries and bought over companies that went bankrupt. They were in fact predators
who attempt to attack and take of things and maintain their global domination. They had
this hidden agenda and Mahathir described that:
The economic turmoil in East Asia has resulted in the rich taking what
belongs to the poor. As the banks and business of the former Asian tigers
collapse and as their share prices plunge, the rich have moved in to buy
the devalued shares and acquire the companies. They could have bought
at normal prices during normal times but they preferred to emasculate us
before they take over at a fraction of the cost. Backing this move are the
international institutions, which insists that we open up our countries so
that the predators can move in to take over everything. Governments may
not protect local businesses. Market-forces must prevail and since money
equals force in the market, those money will dominate (Mahathir, 2000i).

In summary, Mahathirs observation on the domination of transnational capitalist

class cannot be separated from his conviction against all form of colonialism. The old
colonialism and new colonialism are similar in the substance which aims to control the
economy of the periphery by the core. The transnational capitalists are the main agent of
this new colonialism in the current era. It is a strong argument of Mahathir that the
activities of transnational capitalist represented a systematic effort of the Western
capitalists and in coercive terms aiming to re-colonialize the developing countries,
imposing economic terrorism and of a new imperialism. In supporting the argument of
Mahathir, following the study of Sklair (2001), it has been attested that based on the
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Fortune list of Global 500, majority transnational capitalist class come from the Western
countries and they weld freedom cross border and does not derive their power and
authority from the state. There are domiciled but do not identified with any particular
country. Thus, we could conceive of a form of neo-colonialism in the Mahathirs version
when he explained:
When the mega corporations, already more wealthy and more influential
than the developing countries move in to take over the economy of these
countries, will they not control also the political Governance of these
countries? Can we consider these countries as being independent
anymore? What if the powerful countries where these corporations are
based make use of the power of these corporations to hegemonise, to
colonialise by another name. The people and the resources will then
belong to the foreigners. The last time the foreigners wield this kind of
power they exploited the people and the countries. Will they not do it
once again?(Mahathir, 2000j).

There is a set relation between imperialism and globalization; there is an

unfolding of trends leading towards increased integration into one world system. In one
side, of process, the nation-state is weakened, hollowed out, forced to retreat from the
process of national development and surrender its decision making power to a new set of
international institutions. In the other side, the Third World actively intervenes to
subsidize and attract capital, reduces the role of organized labour, etc. The imperial state
bailout banks, investors and speculators and provides political pressure to open markets
of others (Petras & Veltmeyer, 2004). Thus, the effect of economic globalization would
be the demise of the small companies based in the developing countries. Large
international corporations originating in the developed countries will take over
everything. Imperialism is repeated through the marvelous increase of the international
flow of capital, particularly the form of FDI. The new imperialism could be seen in the
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process of mergers, acquisitions and the restructuring of capital. This whole process
according to Mahathir to projected a new form of imperialism, as he argued:
Already we are seeing moves towards monopolies or at least oligopolies
in many businesses. Mergers and acquisitions are creating giants of the
corporations of the US and Europe, against whom few can compete. The
big banks of the rich countries are merging and acquiring each other so
rapidly that most of them now have more money than most national
governments or even countries. If they can operate in any country
unrestricted, the chances are the small national banks will be eliminated,
swallowed up. The international banks can afford to lose in any country
because they would be making a lot in the other countries. The national
banks cannot afford to lose because they operate only in their own
country. Two or three years of losses by a national bank, then it is ready
to beg for take-over by the international giants (Mahathir, 2006a, p.312).

Practically, Mahathirs observation on the predominance of transnational

capitalists provides an alternative view in defining the new form of colonialism over the
developing countries. He attempts to unmask the hidden agenda of transnational
capitalist behind the propaganda of free capital mobility of the blessing of globalization.
Foreign capital does not empower local development of developing countries. Instead, it
is merely an instrument to absorb and subjugate the wealth of developing countries in
the name of globalization. The ultimate objective of transnational capitalist is to break
up the barrier of capital flow and virtually, they destroy the sovereignty and
independence of developing countries as Mahathir stated:
For these capitalists the ideal world is one in which they were free to
exploit countries, peoples and resources to satisfy their insatiable greed.
And so they preached the freedom of capital to go anywhere ostensibly to
bring wealth to poor nations, but in reality to create such economic and
financial dependence that political independence became irrelevant.
Foreign capital became the opium of the poor countries. And so we see
the return of imperialism in a different form (Mahathir, 2000c).
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Historically, Mahathir argued that the neo-colonialism has similar modus operandi
with the old colonialism exercised by the trade, monopoly and economic occupation of a
nation. The liberalization of economy is the main instrument to insist that the developing
countries open up their economy and let the western companies come in and control the
national economy. Furthermore, their ascendancy within the national economy could
influence the governments policies. It means the developing countries have lost its
independence in determining their own policy without any intervention from the
outsider. As he asserted:
History has a way of repeating itself. The giant corporations and banks
which belong to the rich western countries can behave like the East India
Companies of the past. From merely demanding for unfettered trade, they
can go on to dominate and control the Governments of the countries
which had been opened to them. The end result will not be much different
from the colonialization which had followed trading by the European
Trading Companies of the past. Then the struggle for independence can
begin all over again and there could be violence and even a new series of
wars liberation (Mahathir, 2003a).

Therefore, the concept and practice of imperialism has evolved from what has been
defined by the Marxists at the dawn of global capitalism development such as Lenin
(1917), Hilferding (1910), Luxembourg (2003). Imperialism no more be defined as the
exploitation in order to gain cheap raw materials and labor power of periphery which
rooted from the rivalries among the capitalist states. World have entered a new
transnational stage of global financial capitalism marked by the rise of a truly
transnational capital and the integration of very countries into a new global production
and financial system (Robinson, 2006). Indeed, the current imperialism could be seen as

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how the transnational capitalist extract the surplus value of the periphery imposing
finance hegemony in the process.
5.4. The Apparatus of Hegemony
Institution is the site to construct, disseminate and implement the ideology of dominant
class. The agenda of dominant class has covertly and overtly constitute through the civil
society institutions. Following Gramsci, institution is the main instrument to preserve
the interest of dominant class. At his time, capitalist class raised as the dominant class
not only in Italy but also in majority of European countries. Throughout the state
institution and civil society institution, the leadership of capitalist class is imposed upon
the subordinate class. Religion, education and economics are critical elements to
establish a hegemonic ideology and be constructed and disseminated through the church,
school and universities. In summary, the dual role of institution in the Gramscis theses
helped to create in people consciousness certain modes of behavior and expectations in
consistent with the hegemonic social order.
The current model of international institutions with the underpinning the trinity of
IMF, World Bank and WTO is reiterated in the institutions of Gramscis time.
Gramscian scholars argue that the international financial institutions represent and serve
the interest of transnational capitalist class through these mechanisms in order to
preserve the domination of transnational capitalist class (Cox, 1996a, 1996b; Cox &
Schechter, 2002; Gill, 2000b, 2005; Pijl, 1998; Robinson, 2002, 2006; Scholte &
Schnabel, 2002; Sklair, 2001&Soederberg, 2006, 2007). The significant features of
international regime post-1970s, is the shift of world order to a more neoliberal which
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the dominance of power of capital world-wide. In this term, the raise of finance
hegemony is a central feature of current world order through again the
institutionalization of neoliberal order. Related to Gramscis theses on the role of
institution in preserving the interest of capitalist class, the ideology of neoliberal as
applied in practices are key social institutions such as state, market, school, universities
and international organization. It is closely related to the re-configuration of power
relations, a re-distribution of wealth and the intensification of new patterns of social and
economic inequality (Gill, 2000a). The international institutions establish the rules
facilitating the expansion of the dominant economic and social forces and in the same
time provide the minimum realization of the subordinated interests. The world monetary
and trade regimes have an important position representing the economic expansion and
preeminence of finance to the entire world. By joining the international institutions such
as IMF implied individual country surrendered their sovereign economic rights and they
had to adhere a set of monetary arrangement standard administered by the international
institutions bureaucrats, managers, cadre and technicians or what Robinson (2006)
termed as the transnational state structure. In sum, the role of international institutions
such as World Bank, IMF and WTO has shifted from the collaboration on the exchange
rates, payments, trade regulator and development agents to being a means of First World
in controlling over Third World (Peet, 2003). International institutions are used to
sustain the dominant position of world hegemony by implement, legitimize and
universalize their principles; particularly the free capital mobility with the purpose to
gain consent of key emerging markets and shackle social forces therein (Soederberg,
2004).

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Beyond the assessment of scholars above, as the one of the longest leaders of a
developing country and who has vast and intensive interaction with the international
institutions for more than two decades, Mahathir concluded that the role international
institutions is merely serving the interest and of US hegemony. The global scenario is of
an institutionalized core power at the expose of independence and true development of
others. Third World remains subjugated or impoverished, he argues:
Most decision making at the international level seemed to safeguard the
interests of the more matured economies without regard to national
sovereignty, economic freedom, economic empowerment, socioeconomic programmes, and technology development agenda being
undertaken by developing nations (Mahathir, 2000d).
Like the World Bank, the IMF and WTO is now being made into yet
another instrument to enrich the rich and impoverish the poor (Mahathir,
2003j).

In his last speech to the United Nations General Assembly (UNGA), Mahathir
described the position of international institutions, and ultimately the United Nations
itself as the instrument of the single power maintaining and achieving its position and
interest as well as perpetuating hegemony. In his term, the international institutions such
as the United Nations, International Monetary Fund, World Bank and World Trade
Organization work under the commands of the hegemon. In this context, Mahathir
referred to the United States. He said that:
And this august institution, the United Nations in which we had pinned so
much hope, despite the safeguards supposed to be provided by the
Permanent Five, this Organization is today collapsing on its clay feet,
helpless to protect the weak and the poor. This United Nations can just be
ignored, pushed aside, gesticulating feebly as it struggles to be relevant.

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Its organs have been cut out, dissected and reshaped so they may perform
the way the puppet masters want. The World Bank, the International
Monetary Fund, the World Trade Organization have now been turned into
instruments of hegemony, to impoverish the poor, to enrich the rich. It is
not surprising that today the disparities between rich and poor are far
greater (Mahathir, 2003i).

It is undisputed that the decision making process in the international institutions

are undemocratic and untransparent. For instance, the voting power of US is far greater
than the other members providing the privilege rights to the US. Whether US accepts or
abolishes the decision or agreement among UN members, depends on the interests of the
powerful State: United States of America. Furthermore, Mahathir contended that the
international institutions serve the national interest of the powerful, as he said that:
With an impotent United Nations and its agencies turned into national
organs of the powerful, the small nations are now naked and hapless.
Even if we are totally innocent, there is nothing to prevent trumped up
charges to be made against us (Mahathir, 2003i).

Obviously, with having a 17 per cent voting share, United States is not only the
largest shareholder in the IMF but also easily veto any changes to the Funds Charter
that it perceives as going against US national interests. Following Soederberg (2004),
the multilateral institutions are not neutral in it operations. The multilateral institution
such as IMF is the transmitter of the ruling class or dominant class within the powerful
states. The transnational capitalist class, in this sense, is the private financial actors and
plays a greater role in the development finance due to their role as the intermediaries
between debtor nations and international financial markets (Soederberg, 2004). In a
similar nuance, Mahathir contended that the privileged status of powerful countries, the
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function of international institutions are out of its mandate and objective and are now
mainly seem oppressing the developing countries as he stated:
Strengthening multilateralism requires a reform of Bretton Woods
institutions which dominate the development scene. These institutions are
operating against their overall mandate. Decision-making is undemocratic
and untransparent. Despite their specific mandates to facilitate
development and regulate the international monetary system, these
institutions are used to discipline third world countries, and to act as debt
collectors for the rich North. It is salutary to note that the World Bank
collected a net amount of $7.2 billion in 1995 in debt repayment over and
above what it disbursed in aid to poor indebted countries and raked in a
profit of almost $1.5 billion. The International Monetary Fund has now
become an enforcer of the dictates of market lenders and is now assuming
the role of a global rating agency (Mahathir, 1996b).

Since, absolute free market is to facilitate the interest of transnational capitalist

classes to maximize its profits and at the same time marginalizing the existence of
government. Consequently, following the notion of disciplinary of neoliberalism, the
orientations of any public policy, nationally or internationally, have to accommodate the
interest of transnational capitalist classes and government is subjected to the market. In
defending the independence of developing countries, particularly Malaysia, Mahathir
was against the concept disciplinary of neoliberalism which he recognized as extremely
of a neoliberalism hegemonic indicator to protect the interest of transnational capitalist
classes to discipline government to endorse the framework of pro-capital international
institutions. The emergence of disciplinary of neoliberalism is devised by the rich
countries, in this sense, the western capitalist countries monopolizing the process of
decision making within the international institutions to protect their capitalist interest.
Thus, the developing countries will lose its independence as dictated by the international
institutions in the pursuit of a fully free market. He said:
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We have done very well with our home-ground policies. We have no

doubt that our ways ensure growth and the betterment of our people and
our country. But now we are told that we must open up completely,
subject ourselves to rules which are formulated by rich people elsewhere,
and have our government abdicate its role as the formulator of policies
and their enforcement. Henceforth the market i.e. the big foreign
corporations backed by their governments would decide. The market
would discipline the government (Mahathir, 2003h).

In responding the notion of disciplinary of neo-liberalism, it is obviously that

Mahathir opposed all of the theses of disciplinary of neo-liberalism. He refused the
concept of the self-regulated of free market, otherwise he prefers to regulate market. He
stated:
The assumption that the free market will be self-disciplined is erroneous.
The market is managed by people whose primary aim is to make profits,
for the corporations and for the managers themselves. The welfare of
society is not concern of these people. The free market cannot therefore
be left absolutely free. Governments must oversee the market closely and
in many instances must provide necessary rules and regulations
(Mahathir, 2002e).

The implementation of discipline of neoliberalism could as a structural

adjustment programs (SAPs) launched by the IMF and World Bank in the early 1980s.
The main objective of SAPs policy was to reduce the economic role of national
governments and to open market for international capital. The policies suggestion was
constituted in the SAPs. Furthermore it was labeled as the Washington Consensus. A
World Bank economist John Williamson was the inventor of the term and Washington
Consensus which he defined as following:

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The Washington Consensus is the outcome of worldwide intellectual

trends to which Latin America contributed (principally through the work
of Hernando de Soto) and which have had their most dramatic
manifestation in eastern Europe. It got its name simply because I tried to
ask myself what was the conventional wisdom of the day among
economically influential bits of Washington, meaning the US government
and the international financial institutions (Williamson, 1993, p.1330).

Implicitly, the Washington Consensus could be understood as the effort to establish a

world consciousness considered as the direction for all developing countries to achieve
economic prosperity within a single economic system. Virtually, the consensus was an
important feature of the Dollar Wall Street Regime, not only because it expanded
markets but because it is the stabilizer and universalizing of the norms and value of
global financial capital. Beyond of a consensus, Washington Consensus also contains the
coercive character of the core upon the periphery (Soederberg, 2006). By making a
political decision to adopt policies such as financial liberalization (Washington
Consensus), the ruling classes within all the states actually permit transnational financial
actors to exercise coercive power over national social formations through, for example,
investment strikes and capital flight. In sum, there is a clear coordination between the
international institutions and the TCC in order to open up the national economy of all
nation-states to support the unrestricted flow of capital mobility. Overall, the activities
of international institutions are attempting to spread and consolidate market-based
economic system around the world (Williams, 1999). More detailed, the process of
establishing global consent based on the market-based economic arrangements translated
to the structural and sectoral adjustment programmes. The SAP unilaterally imposed to
the developing countries in order to coup the national economic territory to the single

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capitalist system. Following Williamson (1993), the SAP or Washington Consensus is

identified as having ten principles which are:
1. Fiscal discipline with deficits of less than two per cent
2. A change in public expenditure priorities that reduces subsidies for
special interests
3. Tax reform that includes cutting marginal tax rates, especially on
overseas investments
4. Financial liberalization, with market-determined interest rates, or
minimally, the abolition of subsidized interest rates for special interests
5. Unified exchange rates
6. Trade liberalization and the replacement of trade restrictions by tariffs, not to
exceed 10 per cent, or at worst 20 per cent
7. Increase of foreign direct investment through abolishing investment barriers in
order to level the playing field
8. Privatization of state enterprises
9. Deregulation and abolition of regulatory barriers to entry to all industries
10. Guarantees of secure property rights (Williamson, 1993, pp. 1332-3).

At the dawn of the Asian financial crisis, the IMF and World Bank proposed the
assistance fund and also insisted that South East Asia countries to implement the
conditionality of Washington Consensus with the purpose to save the developing
countries and based on the neoliberal principles. All of the South East Asian countries
accepted the Washington Consensus as the solution of financial crisis. Instead Malaysia
took the contra position to the Washington Consensus. Mahathirs stance was on the
front-line in opposing the Washington Consensus. His reasoning is that Washington
Consensus was merely the symbol of domination of Western over the developing
countries. The assistance of fund in resolving the crisis is merely an instrument of the

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rich to take over the developing countries, both as economically and politically, as he
argue:
The international institutions then moved in ostensibly to help with loans
but in reality to facilitate the takeover of the countries economy and even
politics. All these are made possible because the rich interprets
globalization as the right of capital to cross and re-cross borders at will.
Capital is the new gunship of the rich (Mahathir, 2000i).

In this sense, the consensus is understood as the effort to universalize the idea of
neoliberalism to the entire world. In the view of Mahathirs understanding, the world did
not need the Washington Consensus as just to serve the interest of western countries.
The world needed what he called as the World Consensus in serving the interest all
nations. In his interview with Executive Intelligence Review, he argued:
Washington itself implied that this is something out of the rich Western
countries, and if they agree on something that is to be imposed on the rest
of the world, it means that there is no consultation. It should be a world
consensus, not a Washington consensus. Every time we are up against
this understanding there, we find that they are all designed in order to be
in their favor, to enrich them, in fact, and it would be at our expense. That
is why we feel a need to resist the Washington consensus (Mahathir,
2001a).

The resistance of Mahathir Mohamad to the Washington Consensus was the

extension his principle of being against all forms of colonialism. He translated the
Washington Consensus as the new instrument to subjugate and exploit post-colonial
countries by the West. The intensification of capital, liberalization of national economic
based on the market-based system, the privilege of foreign capitalist classes in
engineering national economy were attempts to erode the sovereignty of developing
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countries and put them into the debt slavery bondage; Western countries persisted as the
master. This also meant that Malaysia virtually would lose its independence as he argued
borrowing from the IMF and placing our economy under its direction would mean a loss
of independence. Besides we have special problems which the IMF would not allow us
to resolve effectively. He detailed his reasoning:
The advice they give would only worsen the situation. And if their money
is borrowed then economic colonization by them would begin. They
would determine not just how the finances of the country should be
managed, but they would also insist on imposing their political creed. The
money borrowed is not disbursed unless certain reforms are carried out.
But even if the money given it is to be used to pay debts to foreign banks.
In effect the country is just changing the creditor, becoming borrowers of
the international institutions instead of the foreign banks. The burden of
debts remains, sometime permanently (Mahathir, 2002f).

In the sense of coercion, Mahathir understood Washington Consensus as the main gatekeeper of a new colonialism of both economic and politics of the debtors. The policies
of sovereign government have to abide to the command of international institutions.
Being under the direction international institutions, Malaysia would lose its
independence and sovereignty to determine its own policies. Thus the international
institutions are merely providers of new colonizing device and he stated:
In the meantime every aspect of the administration of the country is put
under control of the international institutions, which in effect means
being controlled by the rich countries which control the institutions. It
means colonization and nothing less. As before when gunships were used
to open up countries for trade, now the international institutions are used
to open up the countries for the so-called free trade (Mahathir, 2002f).

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5.5. Conclusion
Following Mahathirs stance, the objective of the international institutions is very clear,
it is not only to lock the developing countries to the debt bondage, covertly; the
economic liberalization package is to facilitate the expansion of transnational capital
freely across the borders of sovereign independence states. The rationalization of the
economic liberalization based on the assumption that financial flows generate a number
of important benefits to developing countries. Neoliberal strategist argued that
participation of foreign financial institutions in domestic markets promises to bring a
number of benefits, for instances, foreign financial institutions will drive the locals to
improve the efficiency of their management through greater competition and more
objective standards performance. Subsequently, the opening up the domestic financial
system may break up incestuous or cartelistic arrangements. When combined with fixed
exchange rates, capital openness effectively commits countries to controlling inflation;
they further argued (Noble & Ravenhill, 2000). Governments cannot pursue an
independent monetary policy with a fixed exchange rate. In sum, the program of
international institutions are affiliated to the interest of transnational capitalist classes to
sustain its domination at the global level through the process of commodification all
form of mode production under the finance hegemony.
According to Mahathir, the existence of finance hegemony which included a set
of mechanism of free market and justification of international institutions policies
facilitated the transnational capitalist classes to take over all branches of production
within the developing countries, as he stated:

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The IMFs principal objective was to praise open the beleaguered

countrys market so that foreign companies could move in to take over
local businesses. The raids by foreign predators are made less costly
because the pull-out of short term capital from the stock market lowered
share prices to rock-bottom level. Some countries resisted but others have
now lost all their good companies and banks, including the newly
privatized utility companies. Privatization was encouraged by the IMF
because locals were unable to participate and foreigners could pick the
choicest items (Mahathir, 2000b).

In summary, the existing of international institutions for Mahathir is merely as the form
of neo-colonialism. The function of the international institutions is simply to consolidate
the strategies handed down by their bosses what Amin (2003) called as the triads
collective imperialism who devising monetary, trade and idea colonialism. Thus, the
main objective of the international institutions is to construct, support and maintain the
hegemony of finance or what Mahathir called the power of capital as the new gunship of
the rich. International institutions are the safety belt of the transnational capitalists in
making of money under the aegis of finance hegemony.

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CHAPTER SIX
THE COUNTER-HEGEMONY: THE GOLD DINAR BLOC AND
CRIMINALIZE WAR MOVEMENT

Paper currency has no intrinsic value. You can print any figure you like on
currency notes, but in exchange rate term the figures mean nothing If we
want to being shortchanged, we must have a currency that has intrinsic
value Gold. The value of one Gold dinar is one Gold Dinar no matter what
the exchange rate of a currency is
Mahathir Mohammad, the 10th OIC Summit, 31 January 2002
History should remember Blair and Bush as the killers of children or as the
lying prime minister and president.
Mahathir Mohammad, Bush and Blair, children killers
Press TV, 09 October 2007
6.1. Introduction
This chapter examines a concrete counter-hegemony movement initiated by Mahathir
Mohammad. This chapter argues that Mahathir Mohammad plays a significant role as
the organic intellectual championing the developing countries and questioning the
domination of Anglo-Saxon capitalist class, as described in the previous chapter. Since
the domination of Anglo-Saxon capitalist classes is backed by the domination of finance
particularly of US dollar as the global currency ultimately linking it in controlling world
petroleum and using of coercive way in form of war to protect its global economic
interest against competitors or threats.
The main argument of this chapter is that Mahathir linked the finance-war
hegemony as manifested in the gold dinar bloc and criminalize war movement as the
war position kind of counter-hegemony. As the organic intellectual, Mahathir has a
significant role in building the counter-consciousness of the mass of world toward the
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flaws of US leadership particularly in the combined political economy and military

sphere. Thus, this chapter investigates and explains the concrete counter-hegemony
movements conducted by Mahathir through the gold dinar bloc and criminalize war
movement and designed within Gramscis framework of counter-hegemony.
6.2. Hegemony, Crisis and the Prospect of Counter-Hegemony
According to Gramsci, the concept of hegemony is not a static a dynamic concept. In the
development stage of certain hegemony, it will occur of what Gramsci called as the
hegemony crisis or the organic crisis. The organic crisis is a situation where the old
had exhausted its potential and where new forces struggle to emerge (Gill, 2008). It
means that the organic crisis involved a dialectical moment of forces, the decline of
hegemony capacity and the rise of its resistance in various forms. The crisis of
hegemony also can be defined as the situation when the hegemony modified its rule
through both the consent ways; and also using the coercive ways when the coercive
ways does not work properly in order to maintain its position (Gramsci, 1971).
According to Ismail (2009), a hegemony crisis may indeed come about when the ruling
class has failed in some major instances and losing the consent of the broad masses (war,
for example). The dominant class will no longer be leading but only dominant,
exercising coercive force alone. This means precisely that the great masses have become
removed from their traditional ideologies, and no longer believe what they used to
believe in previously (Gramsci, 1971).
The hegemony crisis is the point of departure to establish a counter-hegemony
movement. The rise of counter-hegemony movement could be understood that the
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process to establish a hegemonic project and this needs the participation of subordinate
groups. While hegemony is being implemented, maintained, and defended, it can be
challenged and resisted. Forms and dimension of resistance to hegemony are categorized
under the rubric of counter-hegemony (Mittleman & Christine, 2005). For a more
concrete conceptual understanding of counter-hegemony, we must turn to Mark Ruperts
(2003) interpretation of Gramsci:
At the core of Gramscis project was a critical pedagogy which took as its
starting point the tensions and possibilities latent within popular common
sense, and which sought to build out of the materials of popular common
sense an emancipatory political culture and a social movement to enact it
not
simply
another
hegemony
rearranging
occupants
of
superior/subordinate social positions, but a transformative counterhegemony (Rupert, 2003, p.186).

Gramsci proposed two strategies of counter hegemony; first, wars of movement as

frontal assaults against the state and second, wars of position can be conceived as
nonviolent resistance such as boycotts (Gramsci, 1971). Gramsci argues that the success
of counter-hegemony actions whether conducted by war of movement or war of position
depended on the social structure form from where they are established. Then, he
provides an example of the appropriateness of the counter-hegemony strategies, in the
East (Russia) which the social structure form was traditional; war of movement can be
conducted. But, in the West the social structure was complex. War of movement is
inappropriate, and counter-hegemony can be conducted by war of position. Thus,
counter-hegemony movement can be defined as the movements whether it is systematic
or unsystematic, short run or long run and local or global level. The purpose is to
criticize, transform and replace the domination and remove marginalization process in
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global order through developing consciousness and a new common sense in order to
build a new historic bloc. As Gramsci contended, the emergence of counter-hegemony
forces requires what he called the new intellectuals or organic intellectuals. These
intellectuals should play the equal or similar role as those hegemonic class intellectuals
in creating unique world views and developing new perceptions, organization networks
and various different techniques (Gramsci, 1971).
Indeed, the hegemony crisis of US started from the 1970s signalled by the
economic deficit of US, the rise of petroleum price and the abandoned of gold standard
monetary system (Cox, 1987). During post-cold war, the hegemony crisis could be seen
as the Asian crisis of 1997 (Gill, 2008 & Ismail, 2009). The other sign of the hegemonic
decline of US was the launching of several wars in order to protect their economic
interest particularly the access to the petroleum such as the Gulf War, Kosovo War,
invasion of Iraq and Afghanistan. These are imperialist wars and products of the neoliberal period of capital accumulation; beginning in the late 1970s combined with the
reordering state system which started with the end of the Cold War in 1989 (Rees,
2006). There is a dialectical interplay between the dominant forces connected to politics
of supremacy. For instance US through its Washington Consensus and the subordinate
forces struggled to create a new politics of resistance. We should take a note that the
resistance movement emerging within the Asian crisis produced an alternative project of
political economy or what Gill (2008) called as the transformative resistance. The
prospect of counter-hegemony might come with three forms which are the anti-globalist
Far Right which able to capitalize in numerous countries on the insecurities of working
and middle classes in the face of rapidly changing circumstances to mobilize a
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reactionary bloc; the progressive elites and nationalist groups in Third World countries
which consistently brought about awareness and criticized the US hegemonic project
such as Hugo Chavez in Venezuela and former Malaysian Prime Minister, Mahathir
Mohammad; the last is the worldwide popular sector, as performed by the rise of antineoliberal agenda for social justice such as the demonstrations during the Carnival
Against Capitalism (London, June 1999), mobilizations against World Trade
Organization (Seattle, November 1999), protests against the IMF and World Bank
(Washington, April 2000 and Prague, September 2000), and riots during the European
Union summit at Nice (December 2000), as well as the G-8 meeting at Genoa (July
2001) (Robinson, 2006) . In this sense, counter-hegemony in term of resistance to neoliberalism can be seen as attacks on capitalist relation of production itself.
6.3. Financial Crisis and Defending the Sovereignty
The severity of Asian Economic crisis occurred in 1997 was the milestone of the rise the
gold dinar movement as the anti-thesis of the finance hegemony. Referring to the
popular explanation, the Asian crisis emphasized on the corruption and cronyism, as
well as lack of transparency as the US Federal Reserve Board Chairman Alan
Greenspan, that focus on alleged cronyism and it supposed consequences as the new
explanation for the crises (Jomo, 1999).
On the opposite side, Mahathir Mohammad, as the Prime Minister of Malaysia at
that time, stood at the front line and he blame the financial speculators and the defect of
the international finance capitalist system through the free capital movement and
currency trading as the core of the crisis. He rejected the explanation of the IMF that this
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turmoil caused by corruption, crony capitalism, monopoly, inadequate human resources,

less than perfect banking systems and practices (Mahathir, 1999). According to
Mahathir, the root of the crisis is the currency trading as the subject of speculation for
the currency trader. In the various occasions, he reiterated to the world that the currency
trading is totally unnecessary. As he said:
money is not a commodity. This is where the currency traders are wrong. It is not
a commodity. You cannot trade money. You can trade coffee, tea, and sugar,
whatever (Mahathir, 2000e).
Therefore the currency trading is merely the political agenda of the big
transnational capitalist class to control the wealth of world through the international
financial system. Therefore, The currency crisis is an unnecessary crisis and need not
have happened if the objective of the international financial system is really to facilitate
trade and other economic interactions between nations, including foreign direct
investments (Mahathir, 2006c).
In answering the condemnation of cronyism as the primary cause of crisis,
Mahathir replied that the Malaysian government also imposed the privatization policies.
But it does not privatize the economies to the foreigners. Malaysia prefers, he said, to
privatize its economy sector to its citizens or Bumiputeraas stipulated in the New
Economic Policy (NEP). Therefore, the practices of NEP attracted critiques from the
western observers who argued that NEP is cronyism.
As can be expected, this was criticized by the West which saw the profits
from Malaysia's privatization slipping from their hands. They labeled the
NEP as cronyism. But we were successful in balancing the wealth of our
multi-ethnic population even at the highest level (Mahathir, 2000e).
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Therefore, it was a paradox of western analysts which before financial crisis attack
of East Asia, the analysts, economists and international organization praised the high of
economic growth in this region, a view shared by IMF and analysts before the financial
crisis attacked. To understand the causes of crisis, this study follows the study of Jomo
(2001) titled International Financial Liberalization and the Crisis of East Asian
Development envisaging the following factors:
a) The implications of the growth in currency trading and speculation in the postBretton Woods international monetary system;
b) The reasons for the Southeast Asian monetary authorities to defend their quasipegs against the strengthening US dollar despite its obvious adverse
consequences for export competitiveness and hence for growth;
c) The consequences of financial liberalization, including the creation of conditions
which have contributes to the magnitude of the crises;
d) The role of herd behaviour in exacerbating the crises;
e) Other factors accounting for the contagion effects (Jomo, 2001, p.203).
Suddenly, the turmoil changed the East Asian miracle to be a massive debacle.
The East Asian countries seem unprepared to confront and manage the financial disaster.
IMF as the crisis manager met the East Asian leaders to offer the prescription in order to
solve the financial crisis. The prescription is called as the Washington Consensus
discussed in previous chapter, as a strategy for development that proposed by IMF and
World Bank. These policies focused on minimizing the role of government, emphasizing
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privatization (selling off government enterprises to the private sector), trade and capital
market liberalization (eliminating trade barriers and impediments to the free flow of
capital), and deregulation (eliminating regulations on the conduct of business).
Mahathir perceived engineered by a new form of economic colonialism. Physical
occupation is no longer the only form of colonialism; control through currency trading
and coercive financial policies can have similar effects. Newly prosperous countries can
be colonized by weakening their economies and turning them into beggars. This form of
colonialism can be achieved without sacrificing the life of a single soldier. When a
country becomes poor, it will be politically unstable and a power struggle will ensue
(Mahathir, 1999).
Most of the East Asian countries (South Korea, Thailand, Indonesia and
Philippine) accepted the IMFs prescriptions. Contrarily, Mahathir used his own remedy
to recover Malaysian economic from the financial disaster. Mahathir loudly rejected the
prescriptions that offered by IMF. He said that:
If we still have to resort to the International Monetary funds (IMF)
assistance because our economy has suffered badly, the conditions imposed
by the IMF will require us to open up our economy 100 percent to
foreigners. With that, not only can foreigners own 100 percent equity in our
companies and banks, but they can also carry out their business in our
country without our participation (Mahathir, 1998c).

At the next stage, in order to control of its economy from the speculators and
manipulators, in September 1998, Mahathir launched the unorthodox policy of selective
exchange control or known as capital control. The capital control comprised three
measures which are:
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1. The offshore ringgit market was eliminated and currency speculators

no longer access to ringgit funds. This was done by freezing the
external ringgit accounts of the non-residents in Malaysia.
2. The Government fixed the exchange rate at RM 3,80 to the US dollar.
3. A twelve month rule was imposed prohibiting the repatriation of
portfolio funds for twelve months. This twelve month rule was
necessary given the prevailing instability of the financial market
(Mahathir, 2004).

6.4. The Revivalism of Gold Dinar Bloc

Learning from the crisis, Mahathir proposed a set of counter-system in order to
minimize the using of US dollar as the international currency to prevent the crisis
happening in the future. Firstly, Mahathir launched the monetary system that was called
as Bilateral Payments Arrangements (BPA). It is a system which derived from the barter
trade system that the total trade between two countries are computed over a fixed period
of time and only the balance between the total value of export and imports paid in an
agreed currency. Within the country a central agency would collect payments from an
importer in local currency and pay an exporter also in local currency. The balance
between total exports and imports can be paid in the currency of the exporting country or
in other acceptable currencies (Mahathir, 2001c). The main purpose of the Bilateral
Payment Arrangements is to reduce the employment of US dollar in the international
trading between two countries. The application of BPA system, gradually show its
progress which in a few years, the trade of Malaysia with other countries increased more
than 400 percent (Mahathir, 2001d).
As the success of BPA system, Mahathir called the Muslim countries to establish a
common currency as the alternative to the disposal the using of US dollar. Thus, he
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proposed the development of gold dinar as the common currency, trade currency and
national currency. It is an alternative to change the defect of current international
financial system and it needs the gradual movement in establishing a new financial
architecture. At the initial stage, Mahathir attempted to convince the Muslim countries
who were member the Organization of the Islamic Conference (OIC) composed of 57
member countries and with a population of more than 1.25 billion, larger than three
largest countries, US, European and Japan combined. He contended that
Effectively the use of the Islamic dinar will create an Islamic trading
bloc. Such a trading bloc will be a powerful voice in International trading
regimes and the shaping of the new financial architecture (Mahathir,
2001c).

The notion of gold dinar as the alternative international currency is understood as

Mahathirs anti-thesis toward the hegemony of finance; particularly the domination of
the US dollar as the global currency. Hosein (2007) has praised Mahathir as the single
Muslim leader who advocate to using gold dinar as the world currency. He not only
understood the exploitative nature of the monetary system created by modern western
civilization, but also, and quite correctly so, did what scarcely any of the Muftis of Islam
have so far done, or dare to do. He called for the return to the Gold Dinar as money, in
place of the money-system built around the utterly fraudulent US dollar, so that Muslims
could extricate themselves from financial and economic oppression and exploitation.
Despite the crisis, the notion to use gold dinar is also departing away from the
defect of US dollar itself as paper currency or fiat money. Since the US dollar is not
backed up by gold in 1970s, it is merely a fiat money: money created out of nothing.
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According to Mahathir (2006a), the hegemony of US dollar constituted of its role as the
reserve currency and world trading currency, particularly for trade in petroleum. In fact,
the huge funds of the Arab countries are largely deposited in the banks of Western
countries (New York, London and Switzerland) of proximately one trillion US dollar at
least. Thereby, even the economy of US has significant structural imbalances, with huge
deficits. But its economy is not adversely affected. These conditions in fact are
benefiting the developed countries. Thus, the anarchy and chaotic situation of this
international financial system was never corrected by the developed countries. Since, it
provided their global leadership position as Mahathir contended:
This anarchy in the international financial regime will remain because it
benefits the rich and the powerful. If we want to protect ourselves we
must evolve our own payment system, our own trading currency
(Mahathir, 2002d).

The characteristic of fiat money called seigniorage is at the root of financial crises,
monetary instability and unjustness. Thus, there is clearly a need to reduce dependence
on the US dollars and for better management of capital and reserves (Mahathir, 2006a).
It has depreciated against others currencies. It is subjected to speculation and
manipulation as happened in Malaysia and other regions such as in Russia and Latin
America. US dollar and currencies pegged to it is now merely a paper currency which
has already lost its intrinsic value. It could be printed as much as it could. The demise of
the US dollar is also reflected through the hiking of gold price. For instance, within the
Bretton Woods framework, the one dollar was worth at 1/35 ounce of gold and in
January 1980 it was recorded that an ounce of gold worth of US$850. Its price

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sustainability will increase and is expected to escalate up US$3,000 or more per ounce
(Hosein, 2007).
Again the seigniorage of dollar as the global currency, it manifested the new form
of colonialism. Under mechanism or framework of current monetary order, the
developed countries through an array of financial instruments (i.e. credit, default debt,
seigniorage of powerful central bank in the developed countries, hyperinflation), the
wealth of the developing states is in fact transferred to the developed countries through
the manipulation of this fiat money. As Meera (2004) argue that phenomena as the theft
of nations which could be understood by the explanation below:
Consume the savings of other nations. Importing more than
exporting, this would show up in the form of trade deficits. Some
countries produce more than they consume, like Japan for example.
Therefore, another nation could borrow from such surplus
countries and consume away their saved produced. The United
States have been doing this for the past few days.
Cheat by means of lending fiat money to other countries with
interest charges attached. We categorize lending money at interest
as cheating because the public and even leaders of nations are
generally gullible and are not aware that money lent to them is
simply created out of nothing. However, we argued earlier that the
fiat money interest-based systems gradually transfer wealth and
sovereignty to the lender.
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 Steal by means of seniorage for example. A country or a party

may attempt to make its fiat currency an international currency or
make it a legal tender in other countries, etc. another way is to
establish foreign banks in other countries and thereby create the
money of the nations where they operate (as allowed through
multiple deposit expansion).
Rob or extort from others forcefully by taking away the wealth,
resources and sovereignty of other nations, by means of war for
instance. (Meera, 2004, pp. 46-47).
Technically, Mahathir proposed the mechanism of using gold dinar as
international currency through what he termed as the Bilateral Payments Arrangements
(BPA) system. BPA system could be understood by the processes below:

Two countries, say Malaysia and Saudi Arabia, sign a bilateral payments
arrangement, under which trade balances will be settled every 3 months.

The trade will be denominated in Gold Dinar.

The value of one Gold Dinar is defined, say, as one ounce of gold.

The Malaysian exporters will be paid in Ringgit by Bank Negara Malaysia on

the due dates of exports, based at the Ringgit/Gold Dinar exchange rate
prevailing at the time of the export. Bank Negara will then debit the Saudi
Central Banks account. Similarly, the importers will pay Bank Negara the
Ringgit equivalent of their imports.

The Saudi Central Bank will do the same for its exports and imports.
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Say, at the end of the 3 months cycle i.e. on March 31, the total exports from
Malaysia to Saudi Arabia is 2 million Gold Dinar and the total exports of Saudi
Arabia to Malaysia is 1.8 million Gold Dinar.

Therefore, for that particular 3 months cycle ending on March 31, the Saudi
Central Bank will pay Bank Negara 0.2 million Gold Dinar. The actual payment
can be by way of the Saudi Central Bank transferring 0.2 million ounce of gold
in its custodians account, say, in the Bank of England in London, to Bank
Negaras account with the same custodian or can be in US dollar, Euro, Yen or
any other currency based on the exchange rate against Gold Dinar on March 31.
The important point to note here is that, under this mechanism, a relatively small
amount of 0.2 million Gold Dinar is able to support a total trade value of 3.8
million Gold Dinar. In other words, we optimise on the use of foreign exchange.
Even countries that do not have a large amount of foreign exchange reserves can
participate significantly in international trade under this mechanism (Mahathir,
2002d).
According to Mahathir, the BPA system could be raised to the level of a

Multilateral Payment Arrangement (MPA) which follows the principles as constituted in

the BPA system. The formulation of BPA and MPA are purposed to minimize the
transfer of gold dinar in the large amount. It could be settled by the guarantee of its
central bank. At domestic level, it is still needed paper currency withvalue pegged to
gold and its rate to be decided by the authorities; as Mahathir argued that:

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The proposed Gold Dinar will not replace the domestic currencies. The
domestic currencies (e.g. Ringgit) will continue to be used for domestic
transactions in the respective countries. The Gold Dinar will be used
only for external trade among the participating countries (Mahathir,
2002d).
6.4.1. Gold as the World Currency: Theoretical and Historical Backdrops
The notion to use gold as the world currency is supported by both the Islamic view and
Political Economy view, and backed by historical data. Indeed, gold was the universal
currency of world. It has been implemented for a long period of time with march of
human civilization. the word dinar was denar for the Roman. Dirham or silver is called
dercham in Greek. According to Ibnu Khaldun (1333-1406 AD) in his seminal work of
the Muqaddimah: an Introduction of History, gold and silver price did not fluctuate and
did not be speculated. They were not traded like other commodities. God created the two
mineral stones, gold and silver, as the measure of value for capital accumulations.
Gold and silver were world accepted and is considered as true treasure and property.
Other commodities were subject to market fluctuation; but gold and silver are exempted
and remained basis of profit, property and treasure. The last gold dinar was last minted
in Istanbul in 1824, with the rise of Atturk Turkey and the final demise of the Ottoman
Caliphate.
In his interview with one Germany-based magazine Globalia; Mahathir said that
the Islamic Dinar and Dirham were part of Islamic Law for more than 1,000 years.
According to the standard of the second Khalif,Umar ibn al-Khattab, one Dinar equals
4.24 g of gold, while one Dirham corresponds to 3g of silver. In a gold exchange
economy, other metals artifacts used as money were pegged to gold value. Furthermore,
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Mahathir argued the Dinar could be used as a Central Bank reserve. This would mean
that traders would not need to deal entirely in physical Dinars, and only the balancesheet difference between the imports and exports of two countries would have to be paid
in gold. This will reduce the necessity to move the Gold Dinar around. The surplus or
deficit can be credited or debited against future imports and exports (Breuer, 2008).
In line with Khaldun, Marx (1904) in his book titled A Contribution to the
Critique of Political Economy contended that as the mediums of circulation, gold and
silver have benefit over other commodities, that their specify gravity which condenses
much weight in little space, corresponds to their economic specific gravity which
condenses relatively much labour-time, i.e. a great quantity value in a small volume.
The superiority of precious metal constitute on its durability, comparative
indestructibility, insusceptibility of oxidation through the action of the air, in the case of
gold insolubility in acids except in aqua regia all these natural properties make the
precious metals the natural material for hoarding. Hence, Gold and silver are not money
by nature, but money is by nature gold and silver. In the first place, silver and gold
money crystals are not only the product of the process of circulation. In fact it is only a
final product. In the second place, gold and silver are ready as direct products of nature,
not distinguished by any difference in form.
Furthermore, there are three criteria of money in the Islamic perspective which are based
on the Quran and Sunnah:
Firstly, it established money in Islam to be either precious metals such
as gold and silver, or other commodities such as wheat, barley, dates and
salt which are commodities of regular consumption as food but which
have a shelf-life.
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Secondly, when gold, silver, wheat, barley, dates and salt (rice, sugar,
etc.) were used as money, the value of the money was inside the money
and not outside. Hence, the Hadth established money in Islam to
possess intrinsic value.
Thirdly, money was always located within Allahs creation in a
commodity that was created by Allah Most High, with value assigned to
it by Allah Most High Himself (Hosein, 2007).

It should be noted that gold is also more secure from speculative activities with
the increase of the amount of gold in the world is relatively stable. Since 1492, the world
supply of gold has not risen by more than 5 percent in any one year, and even that
modest figure was hit briefly only during the feverish gold rush of the 1850s. A gold
rush from the 1890s to 1910 brought production to 3 to 4 percent of supply. Since 1910,
it has averaged around 2 percent (Lewis, 2007).
Historically, the predominant of gold as the medium of exchange not only a
Muslim practice, but also been practiced by Europeans. It should be noted that Britain
adopted the gold standard since the 1717 and abandon the gold standard in only
1931.The United States America began the gold standard since 1800 and lasted till 1930.
As Lewis (2007) argued that in the longest term, golds record is flawless. Commodities
prices were roughly the same in 1717, when Britain began the gold standard, as they
were in 1931, when Britain left it. The same held true in the United States between 1800
and 1930.
As a historical record, in the Southeast Asia, gold was used as money since the
8th century. The two largest Kingdoms, Srivijaya in Sumatera and Sailendra in Java,
officially used gold and silver as the medium of exchange, as well as real currency
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coinages. Gold currency system consists of units called one mas (contains pure gold: 20
saga = 2.4 gram), and one kupang (contains pure gold: 5 saga = 0.60 gram). The wellestablished exchange was 1 mas = 4 kupang. The introduction of silver as the medium of
exchange coincided with the demise of the Srivijaya and Sailendra Kingdom and the rise
of new Kingdom such as Pasai, Melaka, Kedah, Johor, Aceh, and Makassar at 12th-14th
century. The introduction of silver was pioneered by the Portuguese which captured the
Malaka in 1511. The previous of gold standard was replaced by the silver of Rialle as
the medium of exchange in commodity transaction. When Europeans arrived into the
Malay world and started to get involved in spice trading, they managed to convince the
natives to accept their silver Dollars. The agreed rate of exchange was: One Spanish
Dollar (consists of 27.30 grams of silver) for two pieces of One Mas (consists of 2 x 2.4
grams gold). It means, 27.3 grams of silver could be used to buy 4.8 grams of pure gold
in the Malay Archipelago.
Obviously, there was a massive transferred of gold from the Southeast Asia to the
Europe and gold coinage returns to Southeast Asia. The disappear of gold currency was
not only replaced by the European silver currency but also followed by the introducing
of paper money at world level (Museum, 2009). The arrivals of the Europeans to the
Southeast Asia and to dominate trade of spice led to the introduction of European
currencies and removed the nature gold currency.

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6.4.2. The Manufacturing of Gold Dinar

The initial instigation of Mahathir in provoking the world to start using gold as world
currency gradually materialized. Some communities followed Mahathirs proposal.
There are some companies already started to mint the gold dinar for various purposes.
In Malaysia, the State of Kelantan has been distributing the gold dinar in the
national and international level since 2007. It has sold some 10,000 gold dinars to the
public denominated at , 1, 2, 4, 5, 8, and 10 dinar. A dinar is equal to 4.25 grams of 22
ct gold. Kelantan began for the purpose of using gold dinar to pay for zakat and as a
store value (Dahinden, 2010).
In Indonesia, there is Wakala Induk Nusantara which produces the gold dinar and
silver dirham since 2003. The Wakala Induk Nusantara, also known as the Master
Wakala, is responsible for minting the coins in accordance with the Royal Mint of
Indonesia (Logam Mulia), and the sells them through a network of wakalas (dinar
agencies). The wakala is a private institution that facilitates the exchange of paper
money into gold and silver coins. It is not a business enterprise and this important to be
stressed. . It is profit-free. Since its establishment, there are currently 75 wakalas which
sell the coins to the public for purposes to pay zakat, sadaqah, dowry and collectors
item. And again gold and silver serve as the best store of value as Marx himself
recognized. In Indonesia, the dinar is 22 carat gold (91.7 per cent purity), 23 mm in
diameter and is 4.25 grams in weight. The dirham is 99.99 per cent pure silver, 25 mm in
diameter and 2.975 grams in weight. The dinar has been minted in two other
denominations dinar and 2 dinars. The dirham is in three other denominations 2,
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and 1/6 9the last of which is called the daniq. The daniq has been minted very recently
and may be considered the most important coin for basic and daily market transactions.
The Wakala Induk Nusantara has been minting and distributing the coins over the last
eight years has within the circulation of approximately 50,000 coins throughout
Indonesia (Shafyi, 2010).
There is also the internet based gold dinar company of e-dinar FZ LLC headquartered in
Dubai. E-dinar is the name of an internet based electronic payment and exchange system
that facilitates online transactions. It is 100 percent backed by physical gold and silver.
The primary function of e-dinar system is to render payments, in gold (e-dinar) and
silver (e-dirham), from one customer to another. Through its official website stated that
each e-dinar electronic unit corresponds to an exact, fixed weight of 4.25 grams of pure
24k gold. Each e-dirham corresponds to an exact, fixed weight of 3 grams of .999 silver.
These units are infinitely divisible thus allowing large as well as very small transactions.
The account holders of e-dinar are now of approximately 9000 customer accounts. In
total, and there are 6000 active accounts with a gold or silver balance (Herpel, 2008).
6.5. The Criminalize War Movement: the Struggle to End War Hegemony
War is the other main concern of Mahathir in the international relations during his
premiership and post-premiership. He has this strong anti-colonialism character deriving
from his experience witnessing exploitation and colonialism in Malaysia. It drives him
to be a man of action to conduct struggle against colonialism; as he explained in his
interview with Bary Wain (2009) in Malaysian Maverick: Mahathir Mohamad in
Turbulent Times:
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My interest in politics was stirred up actually during the Japanese period.

You know, I read a lot of history, and I felt that the Malays seem fated to
live under the domination of other people they used to be under the
Thaisand they had to pay tribute to China. They had to submit to the
British, the Portuguese for 450 years.. I read about thirteen colonies
and how they struggled for independence and how the United States
emerged this influenced me a lot (Wain, 2009, pp.9-10).

Mahathir conducted various types of struggle against the colonialism; such as the
Buy British Last policy, his anti-war stance in the Bosnia-Herzegovina conflict and
supporting the Palestine independence. This chapter focuses to the criminalize war
movement initiated by Mahathir in the late December 2005. This movement is
acknowledged as the paramount of Mahathirs struggle against the persistence of war.
Here, he is seen not just a leader of Malaysia but as a Gramscian global organic
intellectual. Through the criminalize war movement, he attempts to establish a counterconsciousness of world level and construct the global civil society alliance as constituted
in the declaration of Kuala Lumpur Global Peace Forum that signed twelve global
prominent figures who represented the international non-governmental organization,
scholars, and also professionals. The main objective its movement is stated below
UNITED in the belief that peace is the essential condition for the
survival and well-being of the human race,
DETERMINED to promote peace and save succeeding generations
from the scourge of war,
OUTRAGED over the frequent resort to war in the settlement of
disputes between nations,
DISTURBED that militarists are preparing for more wars,
TROUBLED that use of armed force increases insecurity for all,
TERRIFIED that the possession of nuclear weapons and the imminent
risk of nuclear war will lead to the annihilation of life on earth
(The Kuala Lumpur Initiative to Criminalize War, 17th December
2005b).

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Mahathir leadership in establishing this criminalize war movement are based on

two main factors. The first factor which states there is a terrible danger of nuclear with
grave implication for the entire world. Secondly, the political economy aspect of war as
war is utilized in securing the interest of a hegemon, particularly the control of oil. War
is a big of business of selling weapons. These factors came up from his long experiences
and his interpretation on the cause of war and who benefits from it and disadvantage of
wars. He explicitly pointed out that war has marginalized the developing countries and
provide big profit for western capitalist class.
According to Mahathir, there is a contradiction in modern civilization and war
persists as the best option to solve the international disputes. He pointed out that a leader
espousing wars within any national domain must be recognized as a war criminal.
Massive killings through war must be recognized as super power countries propaganda
for democracy as with the war on terror doctrine.
The meaning of war is obscured by the West particularly the US and its allies who
view war is a legitimate way to promote democracy and human rights. Thus, the idea of
war was noble and those who fought wars and die or were wounded were heroes and the
icons of the people (Mahathir, 2005b). Indeed, war is regarded as mass killing of people
and it should be stopped. Departing from this rationalization, and as the initiator,
Mahathir named the anti war-movement move to the criminalize war movement as its
main objective. He initiated effective and sustained campaign against war, a campaign to
make the killing of people as a means of solving disputes between nations illegal. He
reiterated that global civil society to criminalize war and to see that war is a crime action

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and all civilized people should reject all kinds of war. He contended in his keynote
address at the first conference of criminalize war in 2005 that:
We would like this Conference to be the beginning of a world-wide
sustained effort to criminalize war and banish it as an option in the
settlement of disputes and conflicts between nations; to recognize and
define war as legitimized mass murder, as inhuman and uncivilized. We
would like this conference to reject war totally and to accept peace as
worthy of being the true expression of the humaneness and nobility of
humankind, that peace be the ultimate measure of the level of civilization
humanity should strive for, should attain (Mahathir, 2005b).

6.5.1. The Danger of Nuclear War

In his speech on the Public Lecture of the Middle East Agenda: Oil, Dollar Hegemony &
Islam, Mahathir warned the global society that war is remained ongoing even after the
cold war. The war in Iraq, Palestine and Afghanistan are clear evidence of the continuity
of wars. Thus, he defined the current war as the World War IV (Mahathir, 2006b). The
World War IV is shadowed by the danger of the employment of nuclear weapon by US
in reference to the US Joint Chiefs of Staffs published Doctrine for Joint Nuclear
Operations in March 2005 that the nuclear weapon will employ in the situations below:
i)

To counter potentially overwhelming adversary conventional forces;

ii)

For rapid and favorable war termination on US terms;

iii)

To ensure success of US multi-national operations

iv)

To demonstrate US intent and capability to use nuclear weapons to deter

adversary use of WMD (Mahathir, 2006b).

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The dangers point is breached when the development of nuclear weapon will
trigger the others countries to develop their own nuclear weapon; one country adopts it
to deter threats of another nuclear-possessing country. Therefore, the competition for
nuclear weapons among countries will pave the possibility of a nuclear world war.
Mahathir reiterated that we should learn from the effects of Nagasaki and Hiroshima
bombing. It has proven on how tremendous effects of nuclear weapons were and it
wiped out those cities; as he argued that:
They did not know of the dangers of radiation from their Fat Man and
Little Boy Hiroshima and Nagasaki bombs and the diseases that would
follow later. It was years after Hiroshima and Nagasaki that they learnt
what kind of a doomsday weapon they had used. They thought it was just
going to be the biggest and most spectacular explosion ever. But it was
more than that (Mahathir, 2005b).

In the worst scenario, Mahathir forcefully argued that when the nuclear wars
occurred, it not only threatens the countries involved, but it will wipe out the entire
human civilization making this earth being inhabitable. It is indeed a massive killing
machine ever produced by men. He pointed out that the monopoly of the threats of
nuclear weapon is in the hands of powerful countries, particularly the United States.
Although, the United Nations was established in order to solve the problem among
countries through peaceful way, in the reality it fails to stop war. The United Nations is
controlled by the powerful countries to retain their privileged rights in international
affairs. Furthermore, the powerful countries use the threat of nuclear weapon in order to
preserve and maintain its domination to the entire world as Mahathir contends that:
The powerful countries basically reject the idea of rule of international
law which they so vehemently insist that all countries must accept. The
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powerful and presumably civilized countries still want to kill people in

furtherance of their dominance (Mahathir, 2009a).

6.5.2. The Political Economy of War

War favors business; war pays well to both weapon producers and weapons buyers. War
is a big business and weapon producers spend trillions of dollars to invent superior
weaponry. Weapon trade has grown to be a big part of world trade. Mahathir provided
the example of the cost of war, During the World War II a fighter aircraft would cost
US$1 million or thereabouts. Today fighter cost US$ 100 million to procure and fly
(Mahathir, 2005b). Expanding on weapon trading generates a huge profit for the weapon
manufactures.
According to a report of Stockholm International Peace Research Institute
(SIPRI) Top 100, there is a significant increase of the total arms sales of the worlds 100
largest arms-producing companies which increased by $39 billion in 2008 to reach $385
billion. The top 100 is composed by 45 North American companies (all but one of them
US-headquartered), accounting for 60 per cent of the arms sales of; 34 West European
companies, accounting for 32 per cent of arms sales; 7 Russian companies, accounting
for 3 per cent of arms sales; and companies from Japan, Israel, India, South Korea and
Singapore(SIPRI Top 100 Arms-Producing Companies, 2008).
As a matter of fact, the top arms producers remain dominated by the American
arms producing companies or what Chossudovsky (2005) called as the Americas Big
Five: Lockheed Martin, Raytheon, Northrop Grumman, Boeing and General Dynamics.
Based on the facts above, it could be argued that the Anglo-Saxon war capitalism needs
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the continuation of war industry in order to maintain and accumulate capital. Departing
from these facts, Mahathir contended that the tendency and persistence of war is
maintained by the military industrialists and in peace situation. They created arm race
among the nations, making the poor countries be coming poorer, as he argued that:
Today trillions of dollars are being expended on the development and
production of ever more lethal weapons of mass destruction. Poor
countries are forced to buy these weapons by playing on their false sense
of pride. They buy these expensive weapons so as not to be less wellequipped than their neighbours. Yet these weapons are often not used at
all. Still they have to be upgraded or replaced with newer versions at
tremendous cost.
Malaysia has been drawn into this game. We have bought two
submarines costing over RM3 billion. When are we going to use them?
Are we contemplating going to war with our neighbours? I can think of
other ways of spending RM3 billion in Malaysia.
We need a defence force to preserve our independence. But do we have
to be involved in an arms race? Only the suppliers of arms would benefit
from an arms race (Mahathir, 2005a).

According to Mahathir (2009b), the weapon trade has impoverished the

developing countries and put them under the propaganda of the anarchic of international
system. For instance by pursuing the logic, a country has to protect its sovereignty
through increasing its defense capability, in order to deter threat from other countries.
The money that has been spending to buy, upgrade and maintain the military weapons is
too high for the developing countries. The weapon salesmen from the inventive rich
countries persuaded the poor countries with various pressures to buy their products.
Subsequently, they created the arm race between neighbors or rival countries to buy and
sell the weapons; as Mahathir observed as their modus operandi in the passage below:

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The weapons merchants would try to create an arms race between

neighboring countries or rival countries in order to be able to sell the
arms that they produce. The arms race would create fear and tension
between countries, yet fearing mutual destruction few of these countries
would go to war with each other. Not being used the expenditure on arms
would be wasted. The urge to try out these weapons in real life situation
would be irresistible. And so proxy wars and wars against weaker nations
would be started (Mahathir, 2009b).
Unscrupulously, they would hint that the neighbors or nearby unfriendly
nations are buying such weapons. Frightened or ashamed, these countries
are forced to buy. And a costly arms race would start (Mahathir, 2005b).

With a highly cost of the research, development and production of new weapons,
the advanced countries need to sell the newest weapon in order to pay for production
cost and seek high profit margin. Weapon industrialists promoted its weapon to all
countries as to upgrade the previous weapon. The continuous development of new
weapon will produce an endlessly arm race circuits that insisted any nation to upgrade
its military capability. These circuits make the poor countries becoming poorer as they
should spend huge money to buy new weapons although they are not engaged in the
war. According to Mahathir, weapon trade is one of the instruments of powerful
countries to subordinate the poor countries and he said:
The arms trade is destroying the economies of many poor countries.
They have to continue investing in research and development of newer
and efficient killing machines. The cost will mount and keep mounting as
the new technologies and innovative designs require even more
sophistication and expensive material. And if the powerful countries go to
war, as America has done in Iraq, the cost to the country is mindboggling. The cost of the war in Iraq for the U.S. is estimated by Joseph
Stiglitz the Nobel Laureate to be more than US$ 3 trillion dollars so far. It
is going to go on gulping more and more money (Mahathir, 2005b).

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Another intention of war was motivated by the economic interest to obtain and
control oil. For instance, in the Iraq war case, war against Saddam Hussein was not for
his weapon of mass destruction, nor from the threat of terrorism. The main reason of
Iraqis war is to control its oil. Iraq is the second world biggest oil producer. Without oil,
US and western industries will collapse (Engdahl, 2004; Clark, 2005& Chossudovsky,
2005).
Unfortunately, the conduct of war is not only controlled by sovereign governments
but also controlled by private economic interest. This can be seen on the direct access of
the US oil giant company in the planning of military and intelligence operations. For
instance, President George W. Bushs family has been running oil companies since
1950.Vice President Dick Cheney spent during the late 90s as CEO of Haliburton, the
worlds largest oil services company. National Security Advisor Condoleeza Rice sat on
the board of Chevron, which graced a tanker with her name. Commerce Secretary
Donald Evans was the CEO of Tom Brown Inc. - a natural gas company with fields in
Texas, Colorado and Wyoming - for more than a decade (Cave, 2001).
In fact, there are close link between wars and the interest of money-making
capitalist of wars. War is a business operation for military services companies; in the
areas of mercenaries services, defense procurement, intelligence, etc. According to
Chossudovsky (2005), the key individuals of the business operations of war under Bush
administration is its Vice President of Dick Cheney through his company of Halliburton.
In addition, beyond the reductive-explanation of relations between oil and war, Rupert
(2005b) argued that the US interest in the Middle East oil through its national security

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strategy should be conceived in sense of both global strategic dominance and the energyintensive capitalism where dominance is embedded.
Thus, in critical sense, Mahathir pointed out that Bush and Cheney are oil men
and war criminals who have profited tremendously from the war in Iraq. Cheney is a
major stockholder in Halliburton whose stocks have increased from USD 10 before the
war to around USD 46 today. The phenomenal increase in value of its stocks is due to
Halliburton continuously winning no-bid contracts in Iraq amounting to almost 20
billion dollars. Today, more than a million Iraqis have died in the war that has been
supported by firms such as Halliburton; which have benefited from the U.S being able to
control the flow of oil in West Asia (Mahathir, 2005c).
Therefore, war has a close link with the finance hegemony. War is associated as
the controlling of oil and it is related to the high finance profit through the petrodollar
recycling. It could be conceived that war is the coercive instrument to secure the interest
of Anglo-Saxon capitalist class in petroleum resources. It links to the military industry,
petroleum trade and the finance-banking networks where the petrodollar is invested in
the banking system of developed countries; and bank in return finances war. War causes
inflation in the developing countries and hit everybody. As Mahathir mentioned:
The rise in oil prices are connected with war. And oil prices affect the
process of all goods. In other words, the increase in oil prices brings
about inflation. The poor of this world will be the ones most affected.
The wars will be clearly bankrupt the world( Mahathir, 2005b).

Learning from the Iraq war, Mahathir summed up that war is used in the last
resort to control the oil. He pointed out that the invasion of Iraq came up as the result of
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the failure of previous US actions such as applying sanctions, subversion and

condemned Iraq on the weapon of mass destruction ploy. Indeed, the major motive of
war is to get the wealth of a country rich in oil as he argued that
For the Iraq War, the US Congress had in 1998 passed the Iraq Liberation
Act of 1998, five years before the actual invasion and certainly before
September 11, 2001 and the al-Qaeda phobia. Obviously the invasion was
pre-meditated and was neither about the weapons of mass destruction nor
about Saddams oppressive dictactorship. It was about getting the wealth
of a country rich in oil.
Under the Omnibus Consolidated Emergency Supplemental
Appropriation Act 1999, the US provided US$8 million to assist Iraqi
oppositions. This is nothing more than formalized subversion. If
subversion is frustrated then sanctions, invasion, war, may be used
(Mahathir, 2005b).
6.5.3. The Development of Second Superpower
There are two main strategies employed within this criminalize war movement; which
are building a mass consciousness on the truth about war and the efforts to set up the
Criminal War Tribunal to punish the war criminals. To build mass consciousness, it
needs to establish non-governmental organizations promoting and disseminating the
information about wars. In order to achieve these objectives, the criminalize-war
movement, under Mahathirs leadership, set up the non-governmental organizations of
Perdana Global Peace Organization in 2005 and the Kuala Lumpur Foundation to
Criminalize War (KLFCW) in March 2007. The main task of these organizations is to
disseminate the knowledge about the horrifying affect of wars and to build the
consciousness of mass world citizen against wars by various strategies. The process of
consciousness-building of world population, involved to annually organize an
international conference series and exhibitions on criminalize war. The conference and
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exhibition were attended by the NGOs activists, scholars, professionals, the victims of
war and also common people interested to stop war at global level. Therefore, Mahathir
contended that this strategy is to ensure people know the truth about war, about the
dangers which even the attackers and the victors would be exposed to (Mahathir, 2007).
Thus, Mahathir emphasized the role of NGOs activists to build a global alliance to
promote the idea of making war as a crime. It required a worldwide network of NGOs
for peace as first step to achieve the elimination of wars. It encouraged peace activists
everywhere using various strategies. Thus, the perpetual campaign in each country will
establish the consciousness of citizens to elect leaders who are pacifists and who refuse
wars as a mean of international dispute settlement. The success of peace movement does
not depend on the NGOs per se, but it should also involve the consciousness of
individuals. Therefore, the voice of the people of world is the main element in this
criminalizes war movement. According to Mahathir, their voice was recognized as the
second superpower being the agents to spread the ideas that war with any country is
illegal and a crime. Thus, the strength of this Second Superpower, it can be maintained
through solid networking (Bernama, 2007a). As Mahathir said that:
The women and children against war must be mobilized and empowered.
They should be among the most vocal, for they are the ones going to lose
their children, their brothers, husbands and their fathers who have to go to
strange lands to fight wars which will make the world no better, probably
worse. Their sacrifices and those of their loved ones come to nothing,
would be sheer waste (Mahathir, 2005b).

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6.5.4. The Kuala Lumpur War Crimes Commission and War Crimes Tribunal
Beyond the building up of consciousness, Mahathir also proposed the establishment of
War Crime Tribunal as the current international law to punish the war criminals is
inadequate. He is skeptical about the competence of international organizations
particularly the UN provide a truly just war tribunal. Because the UN is under control of
USA and allied super powers becoming their instrument to maintain their domination, as
he said:
The United Nations was set up by the victors of 60 years ago and they
still control and direct the Untied Nations today. Even the courts are
under the control of the victors, in particular the veto powers. For so long
as the United Nations and its agencies are under the direction of the
victors of 60 years ago, we cannot expect fairness and justice from them
for the crimes of killing people in wars (Mahathir, 2007).

Recognizing the inadequacy of international tribunal on arrangement war, and as

the founder, Mahathir established the Kuala Lumpur War Crimes Commission and War
Crimes Tribunal in 2007. Based on its charter, the primary aim of tribunal is to
adjudicate prosecutions brought by the Kuala Lumpur War Crime Commission
particularly those involved crimes against peace, humanity, genocide and war crimes.
And the general objectives of the Commission are:
(i)

To receive and investigate complaints from victims of wars and armed

conflicts in relation to crimes against peace, war crimes, crimes against
humanity and other like offences as recognized under international law.

(ii)

To put an end all war crimes and crimes against humanity currently
perpetrated by any government in any part of the globe;

(iii)

To bring war criminals of any nationality to justice;

234

(iv)

To prevent the recurrence of war crimes, crimes against humanity, in future.

(The Charter Kuala Lumpur War Crimes Commission, 2007).

In addition, according to article 2 of the charter, the specific objective of the

Commission is composed of investigation of the war crimes committed in Iraq,
Palestine, Afghanistan, and Lebanon. Currently, the tribunal is composed of nine former
judges and legal experts, the member of tribunal are largely Malaysian. The nonMalaysian is Francis A. Boyle, a professor of law at the University of Illinois in the
United States and a former legal adviser to the Palestinian Liberation Organization. He
is now engaged in the court martial of Lt. Ehren Watada, the first U.S. soldier who
refused deployment to Iraq. Despite the Kuala Lumpur War Crimes Tribunal which may
lack the legal authority of an international organization and could not impose penalties,
but the main aims is to raise Gramscian like counter-hegemony consciousness.
The commission is tasked to investigate, collect the facts, hearing the victims of
war and decide whether a war is crime or not. For instance, In February 2007, the Kuala
Lumpur War Crimes Tribunal charges against US President George W. Bush, British
Prime Minister Tony Blair and Australian Prime Minister John Howard for the
sufferings of the people in Iraq, Lebanon and Palestine. There were nine charges against
them which are first, deliberate plan of deception, falsehood, forgery and outright lies,
misled their respective Congress and Parliament to wage war against Iraq which was a
"crime against peace; second, a deliberate plan of deception, falsehood, forgery and
outright lies, misled their respective Congress and Parliament to wage war against Iraq
which was a "crime against peace; third, ordering the destruction of vital facilities

235

essential to civilian lives in Iraq, Lebanon and Palestine; fourth, for the bombing of
schools, hospitals, mosques, churches, residential areas and historical sites and
conveniently labelling the destruction as "collateral damage"; fifth, allowing the use of
weapons of mass destruction that inflicted indiscriminate death and suffering against
civilian targets such as the cluster bomb, napalm bomb, phosphorous bomb and depleted
uranium ammunition; sixth, they have fraudulently manipulated the United Nations and
the Security Council as well as corrupting its members to commit crimes against peace
and war times; seventh, destroyed the environment of Iraq, Lebanon and Palestine;
eighth, they ordered and condoned the violation of human rights, specifically the
civilians in the Abu Ghraib prison in Iraq, Guantanamo Bay in Cuba as well as other
prisons known and unknown in Iraq, Lebanon, Palestine and anywhere else in the world;
finally, they systematically controlled and manipulated, directed and misinformed the
mass media so as to incite war to achieve their military objectives in Iraq, Lebanon and
Palestine (Bernama, 2007b).
In summary, the role of the Kuala Lumpur War Crimes Commission and War Crimes
Tribunal mainly to condemn any national leaders who employ war to achieve its interest.
The punishment to the war crimes is merely in ethical sense by labelling and disseminate
to the world that they are war criminals.
6.6. Conclusion
The returning coinage and circulation of Gold dinar and the criminalize movement are
two fronts of the same counter-hegemony movement. It provides a distinct form of
Gramscian counter-hegemony in order to look for the alternative of a world order.
236

Obviously, Mahathir seeks connection between finance and war hegemony formation.
He links the finance-war hegemony not just at the theoretical or rhetoric level per se, but
he links it through a concrete movement in form of what Gramsci called war of
position. War of position means that counter-hegemony is not conducted through the
frontal attack against the hegemon, but through a gradual movement building up an
alternative world view, mass consciousness and establishing the alternative historic bloc.
The Gold dinar bloc and criminalize war movement must be conceived as the
endless process of subordinates to questioning the leadership of hegemon. It is not the
end but as the alternative views which gradually develop. Thus, the emergence of
struggle in form gold dinar bloc and criminalize war movement initiated by Mahathir is
very Gramscian. Mahathir is a living Gramscis thesis on the intellectual. Mahathir must
be recognized as the global organic intellectual who has the organic intellectual
character questioning the domination of a global hegemon. In a simple way Mahathir
described the two-fold of finance-war hegemony as:
Oil is traded in US dollar. As huge funds in US dollar accumulate for the
produce countries, the need to recycle these huge fund US dollar becomes
acuteThere simply is too much US dollars within the worlds financial
system In the meantime the US involved itself in expensive foreign
adventures in the hope of getting the oil it needs at cheap prices At the
same time the US needs more money for its army occupation (Mahathir,
2006a).

In summary, Mahathir has combined the finance-war hegemony as the consent-coercive

form of domination in the contemporary world order marginalizing the mass of world
population under the neo-liberal ideology, of the predominance of finance and of the
propaganda of wars. Implicitly, Mahathir defines the finance-war hegemony in term of
237

his praxis or concrete movements. Thus, he is not merely one among the Malaysian
leaders, but he has emerged to be a global leader championing the poor and oppressed
people of the entire world in a concrete international political economy of counterhegemony.

238

CHAPTER SEVEN
CONCLUSION

7.1. Introduction
This chapter is a conclusion of this overall study. First, it provides an overview of the
study and major discussions are summarized; second, the limitations of the study.
Finally, suggestions for further research and a final comment are made.
7.2. Overview of the Study
This study is connected to the fundamental thesis of Gramsci on hegemony and counterhegemony with the Mahathirs prime international agenda through the returning of gold
dinar economy which constitutes war as the international crime. This study framed and
applied Gramscis thesis at national and international level. According to Gramsci, the
national politico-economy formation is the main point departure in understanding the
emergence of dominant class, hegemonic structure and possibilities of counterhegemony movement. As the objective of study, the Gramscis thesis has provided the
theoretical ground to conceive the current global finance order and its connections with
wars. The study also reinterpreted the works of Neogramscian in order to expand or
internationalizing the Gramscis thesis to international relations as the theoreticalground
of this study. Thus, the level of analysis is covering both the politico-economy formation
of Malaysia at Mahathirs period and the formation of global historical bloc.

239

At Gramscis time, it was the initial phase of the development of finance capital. There
was a meeting point between finance capital and war. Referring to the Italy context,
finance capital has succeeded in controlling the industrial North and the agricultural
South through the coup of the Bank. The predominance of finance capital has generated
the disequilibrium with capital concentrated in form of trust, monopoly and bank. It
destructed the real material wealth and marginalized the mass of labor and the peasant
classes. Moreover, it precipitated the crisis within the society. Thus, the Italian fascist
State attempted to occupy the other peripheral countries in order to resolve the crisis of
Italian society such as the Fascist invasion of Ethiopia. Externally, this period coincided
also with the emergence of American passive revolution of internationalization of
Fordism and the internationalization of American finance capital such as JP Morgan. As
a peripheral of global capitalist network, Italy has been locked to the transnational
finance capital circuit. This was attested by the financial assistance of JP Morgan to the
fascist. In sum, it could be said, that the initial phase of the development of Anglo-Saxon
capitalist hegemony was based on the predominance of Finance and War in order to
expand their domination within and outside its national territory.
In parallel and undisputedly the feature of contemporary world order is
represented by the predominance of neo-liberalism historical bloc. It is derived from of
the historical trajectories of the passive revolution of the advanced capitalist state
particularly the US. Many of Neogramscians have attempted to observe the emergence
of neoliberal hegemony in various aspects such as the manifestation of neoliberalism as
market ideology (Gill, 1993, 1998, 2000, 2008;

Rupert, 2000, 2003, 2005), the

international institutions mechanism (Cox, 1996 ; Murphy, 2000, 2001,

240

2006;

Overbeek, 2004, Peet, 2003&Soederberg, 2004, 2006),

the consolidation of

transnational capitalist class (Pijl, 1998; 2002; Robinson, 1996, 2002, 2005, 2007;
Sklair, 2001, &Worth, 2009), the predominant of finance capital (Cerny, 1993; Germain,
1997, 2002, 2006; Langley, 2002; Scholt, 2000, 2002& Sinclair, 2007), the global labour
exploitation (Bieler,2006; , the emergences of counter-hegemony movement (Gill, 2005;
Birchfield, 2005; Deak 2005; Drainville, 2005; Morton, 2002, 2004, 2007& Worth
2004).
Based on the historical analysis of the development of capitalism of Gramscis
time, there is a coherent historical trajectory with the contemporary global hegemony, as
represented by the neo-liberalism hegemony. Historically, Gramscis time is considered
as the initial phase of the development of the supremacy of Anglo-Saxon capitalist class.
This is to overcome the long process of American Passive Revolution of Fordism. The
supremacy of neoliberal historical bloc is manifested in the form of the combination of
the structure and the power of capital, the globalized market ideology, and
institutionalization of market fundamentalism such as of the IMF, World Bank, WTO,
and the oligopoly and monopolies of transnational capital. Nonetheless, this studys
focused concern is on the understanding of the connections of both finance and war as
the joint pillars of contemporary global hegemony. It discusses the supremacy of
neoliberal is being bolstered by the predominance of financial transaction over the
commodity trading and the petro-dollar recycle. The predominant of finance is derived
from the common sense of the US dollar as the global currency since post-1970s. It
means that the US dollar was utilized to absorb the surplus of entire of world. Most
financial transactions, such as referring to the shares markets, currency trading,
241

derivatives trading, are in nature speculation. The centre of global financial architecture
is controlled by the transnational network of Anglo-Saxon capitalist class. The
unregulated financial market is protected by the global constitution of neoliberalism
architecture arranged via International Financial Institutions.
Thus, the persistence of war and the predominance of finance are intertwined by
the petro-dollar recycle called also as petrodollar hegemony. The petro-dollar connects
the global banking network with the abundant petro-dollar reflow to the global financial
centre in the form of the portfolio investment. War is employed as the coercive
instrument in securing the interest of Anglo-Saxon capitalist class to retain domination
over the petroleum resources. War is mounted when the peripherals attempt to threaten
the interest of Anglo-Saxon capitalist class. In addition, War itself is the making of
money, having close link with the military industrial complex, such as the weapon
industries and the private military contractors. Consequently, both the predominance of
finance and war legitimize the neo-liberal historical bloc again by both the consent and
coercive ways. It provides the privilege for the Anglo-Saxon capitalist class in absorbing
the surplus value of the peripherals. The peripherals are continuously being marginalized
by the predominance of finance increasing of debt bondage, the volatile of currency
devaluation, the unexpected financial crisis exploiting the peripherals.
The emergence of Mahathir as an international figure cannot separate from the
historical trajectories of the relations of social forces within Malaysia. There were three
crucial moments of the development of Mahathirs leadership; first is the riot of 1969;
second is his premiership period of 1981 to 1997 and; finally is the post Asian Financial
Crisis of 1997. This study argues that the intellectual genesis of Mahathirs political
242

movement is mainly centralized on the Malay Dilemma. The relations of social forces
are accentuated by the passive revolution of Bumiputera through the NEP, the selective
privatization, the trasformismo of Barisan Nasional and also the national discourse of
Vision 2020; the crisis in hegemony of Mahathirism during the crisis 1997 as reflected
by the emergence of counter-hegemony of Reformasi and also the external pressure of
neo-liberal forces in form of the thrust of Washington Consensus and the
democratization propaganda. However, Mahathir has a caesarism character to resolve
the crisis through the employment of ISA and the imposition of capital control. Thus, the
Asian Financial crisis of 1997 considered as the cornerstone of Mahathirs counterhegemony movement against the global neo-liberalism hegemony based on the
predominance of finance and the persistence of war. Subsequently, Mahathirs counterhegemony against neo-liberal hegemonic bloc could be divided to the two phases.
The first phase is the period of Mahathirs premiership, mainly the post-1997. His
concrete movement against the hegemony of neo-liberal is employ to the states policy
such as the rejection of the SAPs and also the controversial capital controls. Thus, the
main objective of his counter-hegemony is to protect the economic sovereignty of
Malaysia against the Anglo-Saxon capitalist class. Furthermore to be more specific, the
resistance aimed to defend the economy and political supremacy of Bumiputera class. At
the end of his premiership, Mahathir forcefully attempts to globalize his resistance on
the using of gold as the world currency in several international meetings. The notion of
gold dinar is understood as the agitation to the Muslim countries, particularly the
petroleum exporters, to connect themselves from finance, capital and the petrodollar
hegemony. Furthermore it can be the basis of passive revolution of Muslim countries.
243

The second phase is his pots-premiership period. At this period, Mahathir counterhegemony strategies are cantered upon the global civil society movements. His
international agenda has connected Gramscis thesis at the early period of international
capitalist development to the domination of transnational capitalist development in the
form of neoliberalism.
On the other hand, the development of international gold dinar bloc was emphasized
with the civil society rather than the inter-governmental arrangements. Initially, he
encourages the Muslim communities both, within Malaysia and the international
communities to begin minting, distributing and using the gold dinar as an international
exchange mechanism and as store of real value. Intellectually, Mahathir develops the
alliance of the Gold dinar intellectuals through sponsoring of various international
conferences highlighting the returning prospect of gold dinar.
On another hand, the anti-war movement is culminated with the establishment of the
International Criminalize War Movement, a coalition of International NonGovernmental Organization activists, world scholars and also world professionals. The
establishment of the coalition was signed by the declaration of Kuala Lumpur Global
Peace Forum on late 2005. These movement, consider war as the coercive instrument of
the Anglo-Saxon hegemony, in alliance with the gigantic business military industries.
They consider it as mass killing of people on a world and global scale. The co-optation
of the international institutions by the hegemonsuch as the United Nations and
International Court of Justice, the forum set up a Criminal War Tribunal in order to
punish world leaders as war criminals. They publicize the horrifying impacts of war,
constructing the consciousness of global citizens to oppose wars,propose various anti244

war strategies and also to investigatewar crimes by the Kuala Lumpur War Crimes
Commission and by War Crimes Tribunal. Thus, the results of investigation are
announced to the public and the imposition of punishment. These anti-hegemonic thrust
are able to disseminate to the world names of war criminals.
7.3. Limitations
With the objectives of this study on mind, there could be four limitations of this study:
1. Intellectually, Gramsci has comprehensively provided the theoretical framework
in observing the historical development of leading class within a given society;
particularly in Italian context. He has expanded the concept of state and civil
society by the notion of hegemony and passive revolution. Praxiologically, he
has also provided the framework of action of counter-hegemony in order to open
the possibilities of change within the society. Since he has provided a
comprehensive framework to analyze of the relations of social forces both at the
national and international level, many of IR and IPE scholars have attempted to
internationalize the Gramscis notions in the study of IR and IPE within the
hegemony and counter-hegemony discourses. In the similar vein, this study
attempts to establish a comprehensive understanding the connections of finance
and war as the pillars of the contemporary global hegemony. Thus these are two
different time and context that the author of this study may over-generalize.
2. Mahathirs counter hegemony is derived from his distinctive organic intellectual
character in questioning and proposing the alternatives of the prevailing world
order. Mahathirs intellectual is cantered on the persistence of anti-colonialism,
245

anti-western value, and promoting Islam values. The persistence of anticolonialism is rooted in his experience during the British colonial period and this
is attached to his personal character. In order to oppose the Western value, he
attempts to construct a new identity of the Asian Values composing ofstrong
authority, prioritizing the community over the individual, and a strong familybased society. Islam is also the main discourses of Mahathirs world view
reflecting his movement in empowering the passive revolution of Muslim
countries against the domination of West. Of course we are talking of two
different personalities and author may again underrate both similarities and
differences in the persona contradiction.
3. Mahathir defines the contemporary global hegemony of neoliberal mould is
being legitimized by the predominance of finance capital and the persistence of
war. The predominance of financial capital exploits the peripherals, in subtle
ways and by the manipulation of value; for instance the petro-dollar controlling
world financial markets. The colonial war persist and its never ended. War has
subjugated the mass of people and it is used to maintain the leadership of the
Anglo-Saxon bloc in coercive way. Thus, the predominance of finance and war
become the main instrument of hegemony of neoliberal in marginalizing the
people of Third World. The author may not capture enough of the dynamic
change in current world order.
4. The complexity of exploitation and marginalization of the mass people of Third
World countries has moved Mahathir to launch a concrete counter-hegemony
movement of the Gold Dinar bloc and linking it to criminalize-war movement in
246

order to construct alternatives of a new world order. This counter-hegemony is

considered as Gramscian war of position in its attempt to build a new historic
bloc. Although the Gold Dinar bloc and criminalize movement remain at an early
stage, it has offered the possibility of change in the prevailing world order.
In conclusion, this study attempted to provide a distinctive counter-hegemony feature
initiated by the progressive national leader who struggles against the global exploitation
of neo-liberal hegemony based on the predominance finance and war. It has certainly
opened up may be in a small way new alternative of world order for the future. The
constructing of any historic bloc is not the end of counter-hegemony. It is a long-term
project. Since the world order is constructed by the struggle between the dominant
forces and the subordinated forces, this study suggests that the counter-hegemony
movements will persists may be launched by social forces from other areas or regions.
Thus, it needs to further study in order to investigate other potential forces particularly
the progressive national leaders in propagating the counter-hegemony in their
prospective areas. Intellectual movements against domination of neo-liberal hegemonic
bloc will persist.

247

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