Woo, WT. 2004. Some Fundamental Inadequacies of the Washington Consensus: Misunderstanding the Poor by the Brightest.
"The Washington Consensus suffers from fundamental inadequacies, and that a more comprehensive framework of the economic process is needed to guide the formulation of country-specific development strategies. The following five propositions summaries the set of interrelated arguments made in this paper" (1).
1. it shows a poor understanding of patterns of Asian growth.
2. the current goal of The Consensus is to get "institutions" right. However, this is not concrete.
3. it has the potential to overly stifle the state
4. there is a lack of understanding regarding the centrality of the state in the development of new technologies.
5. it assumes that all countries are under similar structural constraints, which is empirically problematic.
There is a list of 10 policies that the Washington Consensus favors on page 3.
The history of the Washington Consensus is explored, and the reliance on proper institutions in its later iteration is criticized.
The remainder of the article represents an excellent critique of the Washington Consensus.
Sunday, December 21, 2008
Summers: International Financial Crises: Causes, Prevention, and Cures
Summers, LH. 2005. International Financial Crises: Causes, Prevention, and Cures. Economic Globalization In Asia.
This is a lecture.
Summers begins by noting how important applied economic research is to policy decisions, and how frequently it is used to make decisions that affect the lives of millions. Today he is talking about crises. There are four points that he outlines that he will address: 1.) what is the relationship between efficiency in financial architecture and system performance? 2.) what are the sources of crises? 3.) how best should the financial architecture be structured either internationally or nationally? 4.) what should nations do when a crisis occurs? (2).
Summers analogizes the advent of jet-engine technology to that of financial capital flows: the jet improved international travel immensely, even though there were spectacular crashes that occurred, especially earlier in the adoption of the technology. In this same way, finance capital can also stream-line international capitalism, though it may also be prone to spectacular crashes.
"International financial crises can be defined in many ways and can take many forms. What I mean by an international financial crisis is a situation where the international dimension substantially worsens a crisis in ways that would not occur in a closed economy" (5).
"There have been six major international financial crises during the 1000's: Mexico in 1995; Thailand, Indonesia, and South Korea in 1997-1998; Russia in 1998; and Brazil in 1998-1999" (6).
There are three general trends that can be inferred from these crises: "First, after a period of substantial capital inflows, investors...decide to reduce the stock of their assets in the affected country in response to a change in its fundamentals...Second, after this process went on for some time in these emerging-market countries, investors shifted their focus from evaluating the situation in the country to evaluating the behavior of other investors...Third, the withdrawal of capital and the associated sharp swing in the exchange rate and reduced access to capital exacerbated fundamental weakness, in turn exacerbating the financial-market response" (6).
Contagion is also another crucial factor in determining the severity and breadth. The author lists seven different ways that contagion can take effect.
"Just as better airplanes and airports are good in ways that go beyond accident-prevention, all of these steps are valuable not simply as crisis prevention measures, but in their own right, as proven strategies for promoting economic efficiency and growth" (9).
"Crisis response, like crisis prevention, has two dimensions: national policies that can restore confidence and international efforts to finance a credible path out of crises. Of these, by the far the [sic] most important is the response of national authorities in the countries concerned" (10).
Summers outlines potentially helpful national and international responses to financial crises.
This is a lecture.
Summers begins by noting how important applied economic research is to policy decisions, and how frequently it is used to make decisions that affect the lives of millions. Today he is talking about crises. There are four points that he outlines that he will address: 1.) what is the relationship between efficiency in financial architecture and system performance? 2.) what are the sources of crises? 3.) how best should the financial architecture be structured either internationally or nationally? 4.) what should nations do when a crisis occurs? (2).
Summers analogizes the advent of jet-engine technology to that of financial capital flows: the jet improved international travel immensely, even though there were spectacular crashes that occurred, especially earlier in the adoption of the technology. In this same way, finance capital can also stream-line international capitalism, though it may also be prone to spectacular crashes.
"International financial crises can be defined in many ways and can take many forms. What I mean by an international financial crisis is a situation where the international dimension substantially worsens a crisis in ways that would not occur in a closed economy" (5).
"There have been six major international financial crises during the 1000's: Mexico in 1995; Thailand, Indonesia, and South Korea in 1997-1998; Russia in 1998; and Brazil in 1998-1999" (6).
There are three general trends that can be inferred from these crises: "First, after a period of substantial capital inflows, investors...decide to reduce the stock of their assets in the affected country in response to a change in its fundamentals...Second, after this process went on for some time in these emerging-market countries, investors shifted their focus from evaluating the situation in the country to evaluating the behavior of other investors...Third, the withdrawal of capital and the associated sharp swing in the exchange rate and reduced access to capital exacerbated fundamental weakness, in turn exacerbating the financial-market response" (6).
Contagion is also another crucial factor in determining the severity and breadth. The author lists seven different ways that contagion can take effect.
"Just as better airplanes and airports are good in ways that go beyond accident-prevention, all of these steps are valuable not simply as crisis prevention measures, but in their own right, as proven strategies for promoting economic efficiency and growth" (9).
"Crisis response, like crisis prevention, has two dimensions: national policies that can restore confidence and international efforts to finance a credible path out of crises. Of these, by the far the [sic] most important is the response of national authorities in the countries concerned" (10).
Summers outlines potentially helpful national and international responses to financial crises.
Saturday, December 20, 2008
Armijo: Political Geography of World Financial Reform
Armijo, LE. 2001. Political Geography of World Financial Reform: Who Wants What and Why, The. Global Governance 7: 379.
Ever since the latter third of the 1990s and the collapse of many economies in South East Asia, there have been many calls for finance reforms. "The purpose of this essay is to demystify some of the major reform proposals, and to understand which countries and interests back them. I suggest that the reforms proposed by a loose coalition of 'financial stabilizers' make the most sense on economy efficiency grounds, but that the bargaining structure of the issue area is such that the reforms most likely to be implemented are those of the 'transparency advocates'" (1).
How does one define "Financial Architecture"? "Not unexpectedly, the definition of the beast is elastic. To multinational bankers and institutional. investors, reforms of the financial architecture means consensual global implementation of best practice standards of accounting and reporting of national and corporate financial information in developing countries. To many members of the U.S. Congress, it means that the [IMF]... and World Bank should slim down and stop wasting taxpayers' money. To Japan and many Western European governments it means that the U.S. government should cease acting like a one-man band in responding to global financial crises. To finance ministers in very poor countries, as well as to many middle class activists in the advanced industrial democracies, global financial reform means debt forgiveness...And to incumbent policy makers in the so-called emerging market countries...reform of the world's financial architecture usually implies creation of a global lender of last resort with deeper pockets than the present IMF" (2).
"For purposes of this essay, the global financial architecture is an 'international regime,' designating a set of 'principles, norms, rules and procedures' in an international issue area...The international financial regime includes but is not limited to norms and institutions governing exchange rate practices, regulation of all private cross-border financial flows, and management of the 'international financial institutions'..." (2).
Four groups are identified that are interested in financial reform, but that are motivated by different drivers. These are the following: laissez faire liberalizer, transparency advocates, financial stabilizers and anti-globalizers (3). Detailed overviews of each of these groups is presented. The author argues, as noted earlier, that the financial stabilizers are those that should be listened to, but that this is unlikely to actually happen.
Ever since the latter third of the 1990s and the collapse of many economies in South East Asia, there have been many calls for finance reforms. "The purpose of this essay is to demystify some of the major reform proposals, and to understand which countries and interests back them. I suggest that the reforms proposed by a loose coalition of 'financial stabilizers' make the most sense on economy efficiency grounds, but that the bargaining structure of the issue area is such that the reforms most likely to be implemented are those of the 'transparency advocates'" (1).
How does one define "Financial Architecture"? "Not unexpectedly, the definition of the beast is elastic. To multinational bankers and institutional. investors, reforms of the financial architecture means consensual global implementation of best practice standards of accounting and reporting of national and corporate financial information in developing countries. To many members of the U.S. Congress, it means that the [IMF]... and World Bank should slim down and stop wasting taxpayers' money. To Japan and many Western European governments it means that the U.S. government should cease acting like a one-man band in responding to global financial crises. To finance ministers in very poor countries, as well as to many middle class activists in the advanced industrial democracies, global financial reform means debt forgiveness...And to incumbent policy makers in the so-called emerging market countries...reform of the world's financial architecture usually implies creation of a global lender of last resort with deeper pockets than the present IMF" (2).
"For purposes of this essay, the global financial architecture is an 'international regime,' designating a set of 'principles, norms, rules and procedures' in an international issue area...The international financial regime includes but is not limited to norms and institutions governing exchange rate practices, regulation of all private cross-border financial flows, and management of the 'international financial institutions'..." (2).
Four groups are identified that are interested in financial reform, but that are motivated by different drivers. These are the following: laissez faire liberalizer, transparency advocates, financial stabilizers and anti-globalizers (3). Detailed overviews of each of these groups is presented. The author argues, as noted earlier, that the financial stabilizers are those that should be listened to, but that this is unlikely to actually happen.
Hirst and Thompson: Globalization in Question
Hirst, PQ, and G Thompson. Globalization in question. Polity Press.
Ch. 5: The Developing Economies and Globalization:
In the early to mid 90s, around the first edition of this book, the authors claim that there was much hype surrounding the idea that developing countries would continue to grow rapidly, and that they would soon reach parity with more developed countries. It was argued that China would represent the world's largest economy by 2020. These proponents believed that this represented a wonderful trend that would also benefit rich countries, as previously poor countries would now have a demand for the more complicated service items that the developed world has specialized in for some time. However, others argued that this would mark a race to the bottom, where capital, being unrestricted in its movement, would search out the lowest cost for production. This would cause poor countries to have to fight to lower their wages to attract capital. This would also destroy low-skilled employment opportunities in developed countries.
Financial crises in Korea, Latin America and Thailand are explored. Each of these was caused by a different complex mixture of events and factors.
"It should now be obvious that the combination of thoroughgoing internal and external financial liberalization combined with a rigidly pegged exchange rate is a disaster for developing countries. Given the relative shallowness of their financial markets and the difficulty of constructing appropriate regimes of supervision by domestic authorities and practices of transparency by local firms, the tendencies toward exuberant over borrowing and the excessive growth of credit are difficult to prevent. When capital flight begins, attempts to contain it by defending the exchange rate by the use of foreign currency reserves are generally futile" (151).
"The excessive optimism of the early 1990s about the prospects for economic growth in the developing world has rapidly turned sour. It is quite clear that the economic liberal vision of a world transformed by the power of free markets has failed" (160).
Ch. 5: The Developing Economies and Globalization:
In the early to mid 90s, around the first edition of this book, the authors claim that there was much hype surrounding the idea that developing countries would continue to grow rapidly, and that they would soon reach parity with more developed countries. It was argued that China would represent the world's largest economy by 2020. These proponents believed that this represented a wonderful trend that would also benefit rich countries, as previously poor countries would now have a demand for the more complicated service items that the developed world has specialized in for some time. However, others argued that this would mark a race to the bottom, where capital, being unrestricted in its movement, would search out the lowest cost for production. This would cause poor countries to have to fight to lower their wages to attract capital. This would also destroy low-skilled employment opportunities in developed countries.
Financial crises in Korea, Latin America and Thailand are explored. Each of these was caused by a different complex mixture of events and factors.
"It should now be obvious that the combination of thoroughgoing internal and external financial liberalization combined with a rigidly pegged exchange rate is a disaster for developing countries. Given the relative shallowness of their financial markets and the difficulty of constructing appropriate regimes of supervision by domestic authorities and practices of transparency by local firms, the tendencies toward exuberant over borrowing and the excessive growth of credit are difficult to prevent. When capital flight begins, attempts to contain it by defending the exchange rate by the use of foreign currency reserves are generally futile" (151).
"The excessive optimism of the early 1990s about the prospects for economic growth in the developing world has rapidly turned sour. It is quite clear that the economic liberal vision of a world transformed by the power of free markets has failed" (160).
Friday, December 19, 2008
Wibbels: Dependency Revisited: International Markets, Business Cycles, and Social Spending in the Developing World
Wibbels, E. 2006. Dependency Revisited: International Markets, Business Cycles, and Social Spending in the Developing World. International Organization 60, no. 02: 433-468.
"While increased exposure to the global economy is associated with increased welfare effort in the OECD, the opposite holds in the developing world" (1). The author presents a case that this can be partially explained by the different patterns of engagement with the global economy that are taken by either developed or less developed countries. "Thus, while internationally-inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption...across the business cycle" (1).
"In this paper, I complement the emphasis on domestic factors by placing them in international context. In discussing the incentives of governments and actors in tradable sectors, I emphasize the importance of fiscal constraints rooted in distinctly patterns of integration into global markets. While national income shocks associated with international markets are quite modest in the global north, they are profound in developing nations. In the global north, governments can respond to those shocks by borrowing on capital markets and spending counter-cyclically on social programs. No such opportunity exists for most governments in the developing world that have limited access to capital markets in tough times, more significant incentives to balance budgets, tradable sectors that are sensitive to currency fluctuations, and as a result cut social spending at exactly the times it is most needed. Thus, while internationally-inspired income shocks in no way threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption...across the business cycle" (3).
LDCs are in a tight bind because they are encouraged to cut spending when external financial shocks enter their borders. Also, these shocks are more pronounced as they have made themselves more vulnerable to business cycles and market dynamics through a deregulated capital market.
"I argue that he findings on the relationship between trade dependence and welfare effort result, in part, from a dependent position in the global economy and the ways in which that position shapes the interests of key domestic actors. More specifically, exposure to volatile international markets inspires sever internationally-inspired business cycles prevents governments from engaging in counter-cyclical spending to smooth consumption during recessions" (7).
"While increased exposure to the global economy is associated with increased welfare effort in the OECD, the opposite holds in the developing world" (1). The author presents a case that this can be partially explained by the different patterns of engagement with the global economy that are taken by either developed or less developed countries. "Thus, while internationally-inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption...across the business cycle" (1).
"In this paper, I complement the emphasis on domestic factors by placing them in international context. In discussing the incentives of governments and actors in tradable sectors, I emphasize the importance of fiscal constraints rooted in distinctly patterns of integration into global markets. While national income shocks associated with international markets are quite modest in the global north, they are profound in developing nations. In the global north, governments can respond to those shocks by borrowing on capital markets and spending counter-cyclically on social programs. No such opportunity exists for most governments in the developing world that have limited access to capital markets in tough times, more significant incentives to balance budgets, tradable sectors that are sensitive to currency fluctuations, and as a result cut social spending at exactly the times it is most needed. Thus, while internationally-inspired income shocks in no way threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption...across the business cycle" (3).
LDCs are in a tight bind because they are encouraged to cut spending when external financial shocks enter their borders. Also, these shocks are more pronounced as they have made themselves more vulnerable to business cycles and market dynamics through a deregulated capital market.
"I argue that he findings on the relationship between trade dependence and welfare effort result, in part, from a dependent position in the global economy and the ways in which that position shapes the interests of key domestic actors. More specifically, exposure to volatile international markets inspires sever internationally-inspired business cycles prevents governments from engaging in counter-cyclical spending to smooth consumption during recessions" (7).
Rudra: Globalization and the Decline of the Welfare State in Less-Developed Countries
Rudra, N. 2003. Globalization and the Decline of the Welfare State in Less-Developed Countries. International Organization 56, no. 02: 411-445.
This article begins by noting that there is quite a lot of literature that deals with the question of how the welfare state is being affected by increased global capital. Much of this literature focuses on more developed countries and concludes that there is not, in fact a problem. This article paints a different picture, and focuses more heavily on developing countries. Rudra attempts to show that developing and developed countries react to capital mobility differently, and that welfare states in developing countries may not be robust enough to fight off the pressures of international capital. "I show that in the face of globalization labor in LDCs has been unable to prevent the dismantling of the welfare state, quite unlike labor in the more developed countries" (411-2).
"In LDCs, low-skilled labor is highly abundant, yet persistent collective-action problems accompanying globalization undermine labor's political clout in LDCs. I assess these two opposing effects by introducing a new indicator of labor power (potential labor power, PLP). My results clearly indicate that the collective-action problems of labor in countries with large pools of low-skilled and surplus workers tend to offset labor's potential political gains from globalization" (413).
The current literature is explored.
The globalization experiences of developed and less developed countries are compared.
The theory is presented.
The data are analyzed. It is a large-n study.
"Does the conventional wisdom that globalization adversely affects welfare spending hold true in LDCs? This investigation of fifty-three LDCs from 1972 to 1995 shows that welfare spending in these countries does indeed respond to greater trade flows and capital mobility. These findings challenge others who do not show that globalization affects welfare spending in developed and developing nations differently. Growing numbers of low-skilled workers relative to skilled workers, coupled with large surplus-labor populations, exacerbate the collective-action problems of labor in LDCs and make it increasingly difficult for them to organize" (435).
UPDATE:
"...the demise of the welfare state is expected for two reasons. First, generous welfare benefits are not regarded as good market-disciplining devices on labor. Both the resulting upward pressures on labor costs and the dampening effects on work incentives are claimed to adversely affect export competitiveness. Second, globalization discourages governments from raising revenue. 'Footloose capital,' or the capacity to withdraw and shift both productive and financial capital with greater ease, has made it increasingly difficult for governments to generate revenues through taxation. This 'race to the neoliberal bottom' in tax rates is compounded by governments' lowering taxes to compete with other states for international investors and to prevent capital flight. By the same token, state borrowing, which leads to higher debt and interest rates, also deters investment...With increasing global competition, governments supposedly find it more difficult to protect citizens from market-generated risks and inequalities" (414).
UPDATE: This work is broadly supported by the following study:
Kaufman, RR, and A Segura-Ubiergo. 2001. Globalization, domestic politics, and social spending in Latin America. World Politics 53, no. 4: 553-588.
This article begins by noting that there is quite a lot of literature that deals with the question of how the welfare state is being affected by increased global capital. Much of this literature focuses on more developed countries and concludes that there is not, in fact a problem. This article paints a different picture, and focuses more heavily on developing countries. Rudra attempts to show that developing and developed countries react to capital mobility differently, and that welfare states in developing countries may not be robust enough to fight off the pressures of international capital. "I show that in the face of globalization labor in LDCs has been unable to prevent the dismantling of the welfare state, quite unlike labor in the more developed countries" (411-2).
"In LDCs, low-skilled labor is highly abundant, yet persistent collective-action problems accompanying globalization undermine labor's political clout in LDCs. I assess these two opposing effects by introducing a new indicator of labor power (potential labor power, PLP). My results clearly indicate that the collective-action problems of labor in countries with large pools of low-skilled and surplus workers tend to offset labor's potential political gains from globalization" (413).
The current literature is explored.
The globalization experiences of developed and less developed countries are compared.
The theory is presented.
The data are analyzed. It is a large-n study.
"Does the conventional wisdom that globalization adversely affects welfare spending hold true in LDCs? This investigation of fifty-three LDCs from 1972 to 1995 shows that welfare spending in these countries does indeed respond to greater trade flows and capital mobility. These findings challenge others who do not show that globalization affects welfare spending in developed and developing nations differently. Growing numbers of low-skilled workers relative to skilled workers, coupled with large surplus-labor populations, exacerbate the collective-action problems of labor in LDCs and make it increasingly difficult for them to organize" (435).
UPDATE:
"...the demise of the welfare state is expected for two reasons. First, generous welfare benefits are not regarded as good market-disciplining devices on labor. Both the resulting upward pressures on labor costs and the dampening effects on work incentives are claimed to adversely affect export competitiveness. Second, globalization discourages governments from raising revenue. 'Footloose capital,' or the capacity to withdraw and shift both productive and financial capital with greater ease, has made it increasingly difficult for governments to generate revenues through taxation. This 'race to the neoliberal bottom' in tax rates is compounded by governments' lowering taxes to compete with other states for international investors and to prevent capital flight. By the same token, state borrowing, which leads to higher debt and interest rates, also deters investment...With increasing global competition, governments supposedly find it more difficult to protect citizens from market-generated risks and inequalities" (414).
UPDATE: This work is broadly supported by the following study:
Kaufman, RR, and A Segura-Ubiergo. 2001. Globalization, domestic politics, and social spending in Latin America. World Politics 53, no. 4: 553-588.
Navarro, Schmitt and Astudillo: Is Globalization Undermining the Welfare State?
Navarro, V, J Schmitt, and J Astudillo. 2004. Is globalisation undermining the welfare state? CPES.
"This paper analyses the evolution of the welfare states in the majority of OECD countries during the pre-globalization (1946-80) and globalization (1980-2000) periods. Our purpose is to find out whether globalization has produced a convergence towards a smaller welfare state, funded increasingly by non-mobile factors such as labor, property and consumption rather than by mobile factors such as capital. The data presented here challenge the claims about such a convergence, showing that social public expenditures and public employment have continued to expand during the globalization period in most OECD countries. We also show that the welfare states remain rooted in the political traditions that have governed them" (133).
There has been much debate as to whether or not increased capital mobility would lead to a decreased ability of wealthy countries to provide welfare for their citizens. As the argument goes, when capital mobility is increased, this will cause states to have to adopt policies that are geared towards doing more to attract capital. This means reducing constraints on capital investment and taxation and increasing taxation, etc., on less mobile factors, such as labor. This article examines these claims which it refers to as either the "convergence" claim or the "politics still matter" claim using the most recent data.
"According to the first, 'convergence' hypothesis, we should see during the period of globalization...a convergence of all welfare states towards a reduced level of welfare, funded increasingly by taxes on fixed factors such as labour rather than on mobile factors such as capital. According to the second hypothesis, that 'politics still matter', we should see no such convergence during this period, but rather a continuing divergence of welfare states, each keeping the characteristics of the pre-globalization era...rooted in the distinct political traditions governing those countries for most years in this period" (134).
The vast majority of the article analyses and presents data supporting the case being made. I skimmed this and do not wish to document it.
"The data presented in this paper show that, for the most part, the welfare states of most developed capitalist countries have not converged during the globalization period towards a reduced welfare state. On the contrary, over the globalization period, whether measured as a share of GDP or by public employment, welfare states have grown across the large majority of the worlds' richest economies...The data presented here also challenge another assumption of the 'convergence' theory, which assumes that the globalization process has forced a shift of welfare state funding towards a greater reliance on taxes on fixed factors of production such as labour or consumption and lesser reliance on taxes on mobile factors such as capital. In fact, taxes on capital have increased an taxes on labour, property and consumption have declined in the majority of OECD countries" (151).
"This paper analyses the evolution of the welfare states in the majority of OECD countries during the pre-globalization (1946-80) and globalization (1980-2000) periods. Our purpose is to find out whether globalization has produced a convergence towards a smaller welfare state, funded increasingly by non-mobile factors such as labor, property and consumption rather than by mobile factors such as capital. The data presented here challenge the claims about such a convergence, showing that social public expenditures and public employment have continued to expand during the globalization period in most OECD countries. We also show that the welfare states remain rooted in the political traditions that have governed them" (133).
There has been much debate as to whether or not increased capital mobility would lead to a decreased ability of wealthy countries to provide welfare for their citizens. As the argument goes, when capital mobility is increased, this will cause states to have to adopt policies that are geared towards doing more to attract capital. This means reducing constraints on capital investment and taxation and increasing taxation, etc., on less mobile factors, such as labor. This article examines these claims which it refers to as either the "convergence" claim or the "politics still matter" claim using the most recent data.
"According to the first, 'convergence' hypothesis, we should see during the period of globalization...a convergence of all welfare states towards a reduced level of welfare, funded increasingly by taxes on fixed factors such as labour rather than on mobile factors such as capital. According to the second hypothesis, that 'politics still matter', we should see no such convergence during this period, but rather a continuing divergence of welfare states, each keeping the characteristics of the pre-globalization era...rooted in the distinct political traditions governing those countries for most years in this period" (134).
The vast majority of the article analyses and presents data supporting the case being made. I skimmed this and do not wish to document it.
"The data presented in this paper show that, for the most part, the welfare states of most developed capitalist countries have not converged during the globalization period towards a reduced welfare state. On the contrary, over the globalization period, whether measured as a share of GDP or by public employment, welfare states have grown across the large majority of the worlds' richest economies...The data presented here also challenge another assumption of the 'convergence' theory, which assumes that the globalization process has forced a shift of welfare state funding towards a greater reliance on taxes on fixed factors of production such as labour or consumption and lesser reliance on taxes on mobile factors such as capital. In fact, taxes on capital have increased an taxes on labour, property and consumption have declined in the majority of OECD countries" (151).
Hirst and Thompson: Globalization in Question
Hirst, PQ, and G Thompson. Globalization in question. Polity Press.
Ch. 6: Can the Welfare State Survive Globalization?
"In no area is increased openness to international capital movements and trade seen in more apocalyptic terms than in the case of social welfare" (161).
Many talked about the race to the bottom as being the defining feature of an era of increased capital mobility, with welfare states stripping away rights and privileges that were previously afforded to the downtrodden in their own societies in order to reduce tax burdens and attract capital from foreign investors. This story is too blunt and misses much nuance. The welfare state has not gone asunder, and has arguably been strengthened in many parts of the world by the boon of income provided by increased international trade. The welfare state can act as a mitigating force against the booms and busts of a liberalized global economy. It can also act as a tool for macroeconomic stimulus when needed.
However, while globalization has not marked the end of the welfare state, it has changed the way that it works, and this has happened differently in distinct countries.
Sweden and Denmark are compared in the early 1990s. Sweden has been used as a case for the demise of the welfare state: Swedish welfarism was seen as being a driving force in the country's stagnation throughout the early 90s. However, Denmark represents an opposite case: its country has grown while government expenditures have remained monstrous.
The Netherlands are explored. It is argued that welfare states, once institutionalized, become very difficult to change and become an embedded feature of society.
Italy is explored.
The European Monetary Union is also explored as being a potential damper on the standard European welfare state structure.
Ch. 6: Can the Welfare State Survive Globalization?
"In no area is increased openness to international capital movements and trade seen in more apocalyptic terms than in the case of social welfare" (161).
Many talked about the race to the bottom as being the defining feature of an era of increased capital mobility, with welfare states stripping away rights and privileges that were previously afforded to the downtrodden in their own societies in order to reduce tax burdens and attract capital from foreign investors. This story is too blunt and misses much nuance. The welfare state has not gone asunder, and has arguably been strengthened in many parts of the world by the boon of income provided by increased international trade. The welfare state can act as a mitigating force against the booms and busts of a liberalized global economy. It can also act as a tool for macroeconomic stimulus when needed.
However, while globalization has not marked the end of the welfare state, it has changed the way that it works, and this has happened differently in distinct countries.
Sweden and Denmark are compared in the early 1990s. Sweden has been used as a case for the demise of the welfare state: Swedish welfarism was seen as being a driving force in the country's stagnation throughout the early 90s. However, Denmark represents an opposite case: its country has grown while government expenditures have remained monstrous.
The Netherlands are explored. It is argued that welfare states, once institutionalized, become very difficult to change and become an embedded feature of society.
Italy is explored.
The European Monetary Union is also explored as being a potential damper on the standard European welfare state structure.
Kapstein: Winners and Losers in the Global Economy
Kapstein, EB. 2003. Winners and Losers in the Global Economy. International Organization 54, no. 02: 359-384.
"Is globalization responsible for the growing polarity in wages now being observed in many countries around the world, creating a sharp divide between society's 'winners' and 'losers'? If so, what are the political and economic consequences of that fissure? If not globalization, what is responsible for that trend, and what, if anything, should policy makers do in response?" (359).
This article is a literature review of four texts: Cline (1997); Collins (1998); Rodrik (1997); and Wood (1994).
"The works discussed here represent the most significant recent efforts by economists to explore one aspect of the distributive problem: the effects of deepening international integration on domestic wages in the industrial countries, especially the United States" (360).
This article touches on a very wide range of topics, from the normative foundations of trade policy theory to debates between efficiency and distribution.
"The latest economic research on the relationship between trade and labor demonstrates that the great American high tide of the 1990s has failed to 'lift all boats.' Unskilled workers are struggling in the face of unemployment, job insecurity, and rising income inequality. Of all these developments, rising income inequality is of special concern to many scholars not only because of its political implications for the free trade agenda but also because of its possible economic consequences in terms of lower growth rates in the future. Does the research show, however, that free trade is a cause of labor market problems? It appears that a consensus on that question has finally emerged. Although the early literature by such scholars as Revenga suggested that increasing openness was a significant cause of job displacement and/or falling wages in import-penetrated industries, a second wave of work, led by the Lawrence-Slaughter study, cast doubt on how widespread the economic effects really were. Today, the findings of such scholars as Cline bring us to a middle ground or 'Goldilocks' view: that trade and immigration have had some effect on labor markets in the industrial countries, but they are not solely responsible for the current problems we observe" (380-1).
"Is globalization responsible for the growing polarity in wages now being observed in many countries around the world, creating a sharp divide between society's 'winners' and 'losers'? If so, what are the political and economic consequences of that fissure? If not globalization, what is responsible for that trend, and what, if anything, should policy makers do in response?" (359).
This article is a literature review of four texts: Cline (1997); Collins (1998); Rodrik (1997); and Wood (1994).
"The works discussed here represent the most significant recent efforts by economists to explore one aspect of the distributive problem: the effects of deepening international integration on domestic wages in the industrial countries, especially the United States" (360).
This article touches on a very wide range of topics, from the normative foundations of trade policy theory to debates between efficiency and distribution.
"The latest economic research on the relationship between trade and labor demonstrates that the great American high tide of the 1990s has failed to 'lift all boats.' Unskilled workers are struggling in the face of unemployment, job insecurity, and rising income inequality. Of all these developments, rising income inequality is of special concern to many scholars not only because of its political implications for the free trade agenda but also because of its possible economic consequences in terms of lower growth rates in the future. Does the research show, however, that free trade is a cause of labor market problems? It appears that a consensus on that question has finally emerged. Although the early literature by such scholars as Revenga suggested that increasing openness was a significant cause of job displacement and/or falling wages in import-penetrated industries, a second wave of work, led by the Lawrence-Slaughter study, cast doubt on how widespread the economic effects really were. Today, the findings of such scholars as Cline bring us to a middle ground or 'Goldilocks' view: that trade and immigration have had some effect on labor markets in the industrial countries, but they are not solely responsible for the current problems we observe" (380-1).
Freeman: Are your wages set in Beijing?
Freeman, RB. 2000. 'Are your wages set in Beijing?'. International Political Economy: Perspectives on Global Power and Wealth.
In the last fifth of the 20th century, there was a decreased demand for low skilled labor in developed countries and an increase in this demand in certain developing countries. This sparked a new debate about the effects of developed countries trading with less developed countries. "The new debate focused on one issue: whether in a global economy the wages or employment of low-skilled workers in advanced countries have been A(or will be) determined by the global supply of less-skilled labor, rather than by domestic labor market conditions. Put crudely, to what extent has, or will, the pay of low-skilled Americans or French or Germans be set in Beijing, Delhi and Djakarta rather than in New York, Paris or Frankfurt?" (16).
"One one side of the new debate are those who believe in factor price equalization--that in a global economy the wages of workers in advanced countries cannot remain above those of comparable workers in less-developed countries. They fear that the wages or employment of the less skilled in advanced countries will be driven down due to competition from low-wage workers overseas. On the other side of the debate are those who reject the notion that the traded goods sector can determine labor outcomes in an entire economy or who stress that the deleterious effects of trade on demand for the less skilled are sufficiently modest to be offset readily through redistributive social policies funded by the gains from trade. They fear that the neoprotectionists will use arguments about the effect of trade on labor demand to raise trade barriers and reduce global productivity" (16).
The rest of the article expands upon the above summary.
In the last fifth of the 20th century, there was a decreased demand for low skilled labor in developed countries and an increase in this demand in certain developing countries. This sparked a new debate about the effects of developed countries trading with less developed countries. "The new debate focused on one issue: whether in a global economy the wages or employment of low-skilled workers in advanced countries have been A(or will be) determined by the global supply of less-skilled labor, rather than by domestic labor market conditions. Put crudely, to what extent has, or will, the pay of low-skilled Americans or French or Germans be set in Beijing, Delhi and Djakarta rather than in New York, Paris or Frankfurt?" (16).
"One one side of the new debate are those who believe in factor price equalization--that in a global economy the wages of workers in advanced countries cannot remain above those of comparable workers in less-developed countries. They fear that the wages or employment of the less skilled in advanced countries will be driven down due to competition from low-wage workers overseas. On the other side of the debate are those who reject the notion that the traded goods sector can determine labor outcomes in an entire economy or who stress that the deleterious effects of trade on demand for the less skilled are sufficiently modest to be offset readily through redistributive social policies funded by the gains from trade. They fear that the neoprotectionists will use arguments about the effect of trade on labor demand to raise trade barriers and reduce global productivity" (16).
The rest of the article expands upon the above summary.
Karl: The Perils of the Petro-State
Karl, Terry Lynn. 1999. The Perils of the Petro-State: Reflections on the Paradox of Plenty. Journal of International Affairs 53, no. 1.
During the oil crisis of 73-4, many predicted that OPEC would become the most powerful bank in the world. Additionally, oil exporting nations were confident that their soaring revenues would provide for a type of developmental utopia, where all national needs were met and where investment in domestic production produced great wealth. The author of this article, however, wonders why oil reserves can be such a curse, and likens them to the touch of Midas. Though oil producing states are substantively diverse in terms of geography and demographics, they remain linked by their common reliance on energy exports, which creates its own unique set of problems.
These problems are quite similar, and all stem from an overreliance on one commodity for income. This produces a set of circumstances that change the incentives for quality behavior on the part of the leader. This also makes the country susceptible to shocks and gluts in the system. "In effect, rulers of oil exporters have no immediate incentives to be frugal, efficient and cautious in their policymaking, and they have no reason to decentralize power to other stakeholders" (37).
There is then a discussion of oil exporting countries' problems within the context of the Dutch Disease.
The author ends with a series of prescriptions as to what should be done to mitigate the above-stated problems.
During the oil crisis of 73-4, many predicted that OPEC would become the most powerful bank in the world. Additionally, oil exporting nations were confident that their soaring revenues would provide for a type of developmental utopia, where all national needs were met and where investment in domestic production produced great wealth. The author of this article, however, wonders why oil reserves can be such a curse, and likens them to the touch of Midas. Though oil producing states are substantively diverse in terms of geography and demographics, they remain linked by their common reliance on energy exports, which creates its own unique set of problems.
These problems are quite similar, and all stem from an overreliance on one commodity for income. This produces a set of circumstances that change the incentives for quality behavior on the part of the leader. This also makes the country susceptible to shocks and gluts in the system. "In effect, rulers of oil exporters have no immediate incentives to be frugal, efficient and cautious in their policymaking, and they have no reason to decentralize power to other stakeholders" (37).
There is then a discussion of oil exporting countries' problems within the context of the Dutch Disease.
The author ends with a series of prescriptions as to what should be done to mitigate the above-stated problems.
Thursday, December 18, 2008
Collier and Gunning: Explaining African Economic Performance
Collier, P, and JW Gunning. 1999. Explaining African Economic Performance. JOURNAL OF ECONOMIC LITERATURE 37: 64-111.
Why has Africa experienced such a slow rate of economic growth? This is explored through a literature review of growth studies, specifically those that focus on endogenous growth. These models are grouped into six categories, but the results are still problematic: Africa is growing even slower than it would be expected to. The later focus of the article is on different national agents: farming households and manufacturing firms. "Drawing on the new literature on 'social capital,' we argue that neither households or firms have as yet sufficiently created the social institutions that promote growth" (64). Section four explores the impact of regulation. "In Section 5 we bring together the argument. Both a hostile environment, particularly high risks, and inadequate social capital, particularly dysfunctional government, have lowered the returns on investment. The low returns on investment have caused capital flight on a massive scale" (65).
That is a summary of the introduction.
"Above, we have made two distinctions in the causes of slow growth. The first was between those that are intrinsic, notably geography, and those that are policy-dependent. The second was between those causes well-proxied in the regression analysis, which are predominantly macro, and those identified at the levels of agents and markets, which are microeconomic. There are thus three conceptually distinct causes of slow growth: geography, macroeconomic policies, and microeconomic policies" (100).
Why has Africa experienced such a slow rate of economic growth? This is explored through a literature review of growth studies, specifically those that focus on endogenous growth. These models are grouped into six categories, but the results are still problematic: Africa is growing even slower than it would be expected to. The later focus of the article is on different national agents: farming households and manufacturing firms. "Drawing on the new literature on 'social capital,' we argue that neither households or firms have as yet sufficiently created the social institutions that promote growth" (64). Section four explores the impact of regulation. "In Section 5 we bring together the argument. Both a hostile environment, particularly high risks, and inadequate social capital, particularly dysfunctional government, have lowered the returns on investment. The low returns on investment have caused capital flight on a massive scale" (65).
That is a summary of the introduction.
"Above, we have made two distinctions in the causes of slow growth. The first was between those that are intrinsic, notably geography, and those that are policy-dependent. The second was between those causes well-proxied in the regression analysis, which are predominantly macro, and those identified at the levels of agents and markets, which are microeconomic. There are thus three conceptually distinct causes of slow growth: geography, macroeconomic policies, and microeconomic policies" (100).
Haggard: The Newly Industrializing Countries in the International System
Haggard, S. 1986. The Newly Industrializing Countries in the International System. World Politics 38, no. 2: 343-70.
"...what domestic political factors account for the different development trajectories of the East Asian and Latin American NICs?" (344).
"States respond differently to the constraints associated with economic interdependence. Dependency is too frequently portrayed as a determinant international structure rather than as a set of shifting constraints within which states seek to maneuver" (346).
"Variation in the social organization of agriculture, the timing of labor mobilization, and the interests and strength of domestic entrepreneurs provide the permissive social conditions underlying the divergent development trajectories of Brazil, Mexico, Korea and Taiwan" (346).
This story is then told in great detail.
"As the foregoing analysis suggests, different national strategies result in different forms of 'dependence' on the world economy. Economic changes in the international system...have facilitated the growth of NICs, but created new bargaining and adjustment problems. The ability to manage these is a function of domestic structures and capacities, as is evidenced by the problems of managing expanded trade and foreign direct investment in manufacturing" (360).
There is much in this piece that I skimmed because there is much in this piece that focuses on comparative politics.
"...what domestic political factors account for the different development trajectories of the East Asian and Latin American NICs?" (344).
"States respond differently to the constraints associated with economic interdependence. Dependency is too frequently portrayed as a determinant international structure rather than as a set of shifting constraints within which states seek to maneuver" (346).
"Variation in the social organization of agriculture, the timing of labor mobilization, and the interests and strength of domestic entrepreneurs provide the permissive social conditions underlying the divergent development trajectories of Brazil, Mexico, Korea and Taiwan" (346).
This story is then told in great detail.
"As the foregoing analysis suggests, different national strategies result in different forms of 'dependence' on the world economy. Economic changes in the international system...have facilitated the growth of NICs, but created new bargaining and adjustment problems. The ability to manage these is a function of domestic structures and capacities, as is evidenced by the problems of managing expanded trade and foreign direct investment in manufacturing" (360).
There is much in this piece that I skimmed because there is much in this piece that focuses on comparative politics.
Walter: Understanding Financial Globalization
Walter, A. 2002. Understanding Financial Globalization. Institute of Defense & Strategic Studies.
"This paper makes three main arguments. First, it is implausible to claim that contemporary levels of financial integration remain low by historical standards...Second, I argue that it is now reasonably well-established that financial globalization is not (or at least not yet) the great 'leveling force' implied in some of the earlier literature, where it was seen as an increasingly powerful structural constraint upon national policy autonomy in all countries...Third, I argue that it would be wrong to conclude from this somewhat Euro-centric literature that financial globalization has had little effects at all. The emergent international financial structure constrains governments, but very unequally: most of the costs and risks it entails falls largely upon developing countries" (1).
The author argues that global financial flows have grown considerably since the 70s, and that this represents a unique global phenomena. However, measures of these global transfers are not perfect, and Walter goes about exploring a few different metrics for thinking about changes in and different types of international financial tools. The author argues that financial global integration has not been benign, or simply beneficial for less developed countries: "...the costs of financial integration have been substantial" (5).
While these costs have been high, and the author argues that they are higher than anticipated, it is a wonder that countries who have suffered through the ill effects of increased financial costs (ie., the SE Asian financial crisis) have not imposed capital controls (with the notable exception of Malaysia). "Three main approaches in the existing political economy literature to explain financial globalization may be identified: technological determinism...hegemonic power approaches...and rational interest group approaches" (5).
The author then goes on to provide literature reviews of each of these three explanations for the increase in financial interdependence.
"I have argued that structural theories, including technological determinism and hegemonic power theories, are better at explaining the broad trend towards financial opening since the 1970s. However, they largely fail to explain the large differences in patterns across countries. Rationalist interest group approaches, supplemented by institutional analysis, provides considerably greater insight into the cross-country pattern of financial liberalization, but perhaps inevitably does so at the cost of much greater analytical complexity" (14).
"This paper makes three main arguments. First, it is implausible to claim that contemporary levels of financial integration remain low by historical standards...Second, I argue that it is now reasonably well-established that financial globalization is not (or at least not yet) the great 'leveling force' implied in some of the earlier literature, where it was seen as an increasingly powerful structural constraint upon national policy autonomy in all countries...Third, I argue that it would be wrong to conclude from this somewhat Euro-centric literature that financial globalization has had little effects at all. The emergent international financial structure constrains governments, but very unequally: most of the costs and risks it entails falls largely upon developing countries" (1).
The author argues that global financial flows have grown considerably since the 70s, and that this represents a unique global phenomena. However, measures of these global transfers are not perfect, and Walter goes about exploring a few different metrics for thinking about changes in and different types of international financial tools. The author argues that financial global integration has not been benign, or simply beneficial for less developed countries: "...the costs of financial integration have been substantial" (5).
While these costs have been high, and the author argues that they are higher than anticipated, it is a wonder that countries who have suffered through the ill effects of increased financial costs (ie., the SE Asian financial crisis) have not imposed capital controls (with the notable exception of Malaysia). "Three main approaches in the existing political economy literature to explain financial globalization may be identified: technological determinism...hegemonic power approaches...and rational interest group approaches" (5).
The author then goes on to provide literature reviews of each of these three explanations for the increase in financial interdependence.
"I have argued that structural theories, including technological determinism and hegemonic power theories, are better at explaining the broad trend towards financial opening since the 1970s. However, they largely fail to explain the large differences in patterns across countries. Rationalist interest group approaches, supplemented by institutional analysis, provides considerably greater insight into the cross-country pattern of financial liberalization, but perhaps inevitably does so at the cost of much greater analytical complexity" (14).
Knight: Developing Countries and the Globalization of Financial Markets
M Knight, “Developing countries and the globalization of financial markets,” World Development 26, no. 7 (1998): 1185-1200.
The author notes that, throughout the beginning of the 90s, there was a substantive move towards the globalization of financial markets. "These developments create the prospect of a more efficient worldwide allocation of savings and investment than was possible in the past4, when domestic investment in most countries was constrained by domestic caving" (1185). While there are upsides, the financial crisis of the late 90s demonstrated the risks.
"This paper analyzes the recent globalization of financial markets, considers some features that may raise concerns about financial stability in DTEs [developing and transition economies] and outlines recent initiatives to enhance the safety and stability of financial systems. In particular, it focuses on imperfect competition and gaps in the structure of financial markets as elements of financial instability in DTEs, and discusses the complementary roles of market discipline and official oversight as essential elements of a robust financial system" (1185).
"We consider an economy where domestic bank credit is the only source of financing for capital investment by productive enterprises, and examine the consequences of the structure of competition in the banking sector for the overall stability of the financial system. The key element of the analysis is that, in evaluating credit risks, banks assess the underlying profitability of the project they are considering financing using a different information set from that available to the prospective borrower. They therefore provide a valuable service to the productive firms: that of giving a 'second opinion' on the expected profitability of the project. The efficiency with which banks provide this financial service depends on a number of factors, including the structure of competition in the banking sector and the state of the macro economy" (1189).
"This analysis suggests that an imperfectly competitive banking system responds to bad loan problems by reducing lending and raising intermediation spreads" (1191).
"The discussion in the preceding sections shows that a number of factors--both microeconomic and macroeconomic--can cause financial problems in DTEs, and that regulatory oversight and market discipline are, in principle, complementary means for achieving a stable and robust financial system...The basic elements of a sound financial system are a supportive legal and regulatory environment, strong internal governance, external discipline provided by market forces, and external governance provided by regulation and supervision at both the domestic and international level" (1197).
The author notes that, throughout the beginning of the 90s, there was a substantive move towards the globalization of financial markets. "These developments create the prospect of a more efficient worldwide allocation of savings and investment than was possible in the past4, when domestic investment in most countries was constrained by domestic caving" (1185). While there are upsides, the financial crisis of the late 90s demonstrated the risks.
"This paper analyzes the recent globalization of financial markets, considers some features that may raise concerns about financial stability in DTEs [developing and transition economies] and outlines recent initiatives to enhance the safety and stability of financial systems. In particular, it focuses on imperfect competition and gaps in the structure of financial markets as elements of financial instability in DTEs, and discusses the complementary roles of market discipline and official oversight as essential elements of a robust financial system" (1185).
"We consider an economy where domestic bank credit is the only source of financing for capital investment by productive enterprises, and examine the consequences of the structure of competition in the banking sector for the overall stability of the financial system. The key element of the analysis is that, in evaluating credit risks, banks assess the underlying profitability of the project they are considering financing using a different information set from that available to the prospective borrower. They therefore provide a valuable service to the productive firms: that of giving a 'second opinion' on the expected profitability of the project. The efficiency with which banks provide this financial service depends on a number of factors, including the structure of competition in the banking sector and the state of the macro economy" (1189).
"This analysis suggests that an imperfectly competitive banking system responds to bad loan problems by reducing lending and raising intermediation spreads" (1191).
"The discussion in the preceding sections shows that a number of factors--both microeconomic and macroeconomic--can cause financial problems in DTEs, and that regulatory oversight and market discipline are, in principle, complementary means for achieving a stable and robust financial system...The basic elements of a sound financial system are a supportive legal and regulatory environment, strong internal governance, external discipline provided by market forces, and external governance provided by regulation and supervision at both the domestic and international level" (1197).
Wednesday, December 17, 2008
Feenstra: Integration of Trade and Disintegration of Production in the Global Economy
RC Feenstra, Program on Pacific Rim Business and Development, and Davis University of California, “Integration of trade and disintegration of production in the global economy” (1998).
The author does a comparative analysis of different methods for measuring the amount of outsourcing to foreign destinations. Fennstra also argues that this outsourcing has increased steadily since the 1970s.
The author also explores globalization, with an eye towards the impact on wages of those who are arguably most vulnerable in an economy: those with low levels of skill. "In fact, I will argue that by allowing for trade in intermediate inputs, globalization has an impact on employment an wages that are observationally equivalent to the changes induced by technological innovation. The idea that globalization has a minor impact on wages relies on a conceptual model that allows only for trade in final goods, thereby downplaying or ignoring the outsourcing of production activities. The empirical evidence supports a much more prominent role for the optimal decisions of firms to allocate production worldwide, that in turn needs to be incorporated into our theoretical framework" (32).
"...outsourcing has a qualitatively similar effect on reducing the demand for unskilled relative to skilled labor within an industry as does skill-biased technological change" (41).
The author then explores some of the policy implications for the decreased demand of unskilled workers that arises out of an increased drive to outsource production.
"The world has become increasingly integrated through trade in the last several decades, and the structure of trade has shifted towards more outsourcing...I have suggested that to understand the implications of this change, we need to use a conceptual framework where firms allocate their production activities worldwide. While many details of this framework remain to be worked out...I would like to speculate on the type of results that it might yield...First, the globalization of production should bring with it gains from trade that are likely to be substantial...However, we must ask whether these efficiency gains bring costs in terms of the distribution of income" (47).
"If we want to move beyond the possibility of Pareto gains to making actual compensation, it appears that we should give serious consideration to wage subsidies for low-skilled workers" (48).
The author does a comparative analysis of different methods for measuring the amount of outsourcing to foreign destinations. Fennstra also argues that this outsourcing has increased steadily since the 1970s.
The author also explores globalization, with an eye towards the impact on wages of those who are arguably most vulnerable in an economy: those with low levels of skill. "In fact, I will argue that by allowing for trade in intermediate inputs, globalization has an impact on employment an wages that are observationally equivalent to the changes induced by technological innovation. The idea that globalization has a minor impact on wages relies on a conceptual model that allows only for trade in final goods, thereby downplaying or ignoring the outsourcing of production activities. The empirical evidence supports a much more prominent role for the optimal decisions of firms to allocate production worldwide, that in turn needs to be incorporated into our theoretical framework" (32).
"...outsourcing has a qualitatively similar effect on reducing the demand for unskilled relative to skilled labor within an industry as does skill-biased technological change" (41).
The author then explores some of the policy implications for the decreased demand of unskilled workers that arises out of an increased drive to outsource production.
"The world has become increasingly integrated through trade in the last several decades, and the structure of trade has shifted towards more outsourcing...I have suggested that to understand the implications of this change, we need to use a conceptual framework where firms allocate their production activities worldwide. While many details of this framework remain to be worked out...I would like to speculate on the type of results that it might yield...First, the globalization of production should bring with it gains from trade that are likely to be substantial...However, we must ask whether these efficiency gains bring costs in terms of the distribution of income" (47).
"If we want to move beyond the possibility of Pareto gains to making actual compensation, it appears that we should give serious consideration to wage subsidies for low-skilled workers" (48).
Pauly and Reich: National Structures and Multinational Corporate Behavior
LW Pauly and S Reich, “National structures and multinational corporate behavior: enduring differences in the age of globalization,” International Organization 51, no. 01 (2003): 1-30.
Many make the case that globalization is changing the world's political economy. If this is truly the case, one would expect to see a set of converging practices among leading multinational firms. However, this is not necessarily played out by prevailing evidence. "...this article shows that MNCs continue to diverge fairly systematically in their internal governance and long-term financing structures, in their approaches to research and development...as well as in the location of core R&D facilities, and in their overseas investment and intrafirm trading strategies" (1).
Standard arguments about firm convergence are explored.
"But we argue that the underlying nationality of the firm remains the vitally important determinant of the nature of its adaption...there remain systematic and important national differences in the operations of MNCs--in their internal governance and long-term financing, in their R&D activities, and in their intertwined investment and trading strategies" (4).
There is then much evidence provided to support this thesis.
Many make the case that globalization is changing the world's political economy. If this is truly the case, one would expect to see a set of converging practices among leading multinational firms. However, this is not necessarily played out by prevailing evidence. "...this article shows that MNCs continue to diverge fairly systematically in their internal governance and long-term financing structures, in their approaches to research and development...as well as in the location of core R&D facilities, and in their overseas investment and intrafirm trading strategies" (1).
Standard arguments about firm convergence are explored.
"But we argue that the underlying nationality of the firm remains the vitally important determinant of the nature of its adaption...there remain systematic and important national differences in the operations of MNCs--in their internal governance and long-term financing, in their R&D activities, and in their intertwined investment and trading strategies" (4).
There is then much evidence provided to support this thesis.
Ito: Convergence or Divergence? The Political Functions of the International Trading Regime on the Democratizing and Liberalizing Reforms
K Ito, “Convergence or Divergence?: The Political Functions of the International Trading Regime on the Democratizing and Liberalizing Reforms.”
Reliance on state-based economic decision making was in vogue as the Soviet and Chinese governments consolidated power and developed after WWII. However, this preeminence of bureaucratic decision making began to wane throughout the 1980s. This paper explores to what degree the GATT or WTO affected this transition. "I argue that the international trading regime, especially GATT, didn't lead these socialist and developing states to the liberalizing reforms directly by means of obliging them to abstain from intervening the international trade...At the same time, however, we can identify the indirect functions of the international trading regime which significantly contributed to the democratization and trade liberalization in those states. First, the beneficiaries of state-intervening economic policies in those states, such as the authoritarian political elites and import-competing business sectors, were all the more encouraged for the very permission of protectionist measures by the international trading regime...Second, the international trading regime has facilitated the commerce on goods and services among advanced industrial states, and has contributed to the dramatic increase in the amount and value of international trade" (1-2).
"This paper examines how the international trading regime has legally and politically affected the processes of democratization and liberalization in the developing and (former-)socialist states, with the emphasis placed on the effects of convergence and divergence of policies across those states, to which, I argue, the international trading regime has significantly contributed" (4).
Two different schools of thought are explored vis-a-vis the development and promotion of international trade regimes and their potential effects on units with the system. The first is hegemonic stability theory promoted by Kindleberger (though he didn't use the term). The second is neo-liberal institutionalism, promoted notably by Keohane.
GATT, for example, helped to spread the westerns sphere of influence throughout the Cold War. Specifically, it provided developing countries with large amounts of contingency plans if they were to join the trade regime. GATT restrictions applied most truly to only a handful of industrialized countries.
There were even more indirect effects that the author attributes to GATT. They helped promote policies that exacerbated the need for international institutions in the wake of the global recession threatening in the early 1980s. They also promoted policies that helped to spurn effects of globalization. Finally, they were stanch opponents of authoritarianism and protectionism.
However, after organizations like GATT did provide certain incentives to shy away from state-centered economic planning, there were additional effects that brought about an increased intensity of international trade that then went on to slightly constrain early adopters of the original organization.
While there was convergence around trade policy, this was not entirely uniform. The final section of the paper addresses issues of divergence.
Reliance on state-based economic decision making was in vogue as the Soviet and Chinese governments consolidated power and developed after WWII. However, this preeminence of bureaucratic decision making began to wane throughout the 1980s. This paper explores to what degree the GATT or WTO affected this transition. "I argue that the international trading regime, especially GATT, didn't lead these socialist and developing states to the liberalizing reforms directly by means of obliging them to abstain from intervening the international trade...At the same time, however, we can identify the indirect functions of the international trading regime which significantly contributed to the democratization and trade liberalization in those states. First, the beneficiaries of state-intervening economic policies in those states, such as the authoritarian political elites and import-competing business sectors, were all the more encouraged for the very permission of protectionist measures by the international trading regime...Second, the international trading regime has facilitated the commerce on goods and services among advanced industrial states, and has contributed to the dramatic increase in the amount and value of international trade" (1-2).
"This paper examines how the international trading regime has legally and politically affected the processes of democratization and liberalization in the developing and (former-)socialist states, with the emphasis placed on the effects of convergence and divergence of policies across those states, to which, I argue, the international trading regime has significantly contributed" (4).
Two different schools of thought are explored vis-a-vis the development and promotion of international trade regimes and their potential effects on units with the system. The first is hegemonic stability theory promoted by Kindleberger (though he didn't use the term). The second is neo-liberal institutionalism, promoted notably by Keohane.
GATT, for example, helped to spread the westerns sphere of influence throughout the Cold War. Specifically, it provided developing countries with large amounts of contingency plans if they were to join the trade regime. GATT restrictions applied most truly to only a handful of industrialized countries.
There were even more indirect effects that the author attributes to GATT. They helped promote policies that exacerbated the need for international institutions in the wake of the global recession threatening in the early 1980s. They also promoted policies that helped to spurn effects of globalization. Finally, they were stanch opponents of authoritarianism and protectionism.
However, after organizations like GATT did provide certain incentives to shy away from state-centered economic planning, there were additional effects that brought about an increased intensity of international trade that then went on to slightly constrain early adopters of the original organization.
While there was convergence around trade policy, this was not entirely uniform. The final section of the paper addresses issues of divergence.
Tuesday, December 16, 2008
Hirst and Thompson: Globalization in Question: North-South Trade and International Competitiveness
PQ Hirst and G Thompson, Globalization in question (Polity Press).
Ch. 4: North-South Trade and International Competitiveness:
Two trends in the globalization literature are highlighted the our authors in this chapter. The first is the relationship between development in both the North and the South, a phenomena that has received a good deal of attention. The other is the idea of being internationally competitive. This competition stretches from country to individual, and threatens to pervade all aspects of life.
"The chapter is organized as follows. The first part sets out the issues involved and looks at the historical antecedents to the present North-South debate...The second part of the chapter examines the associated trends in international competitiveness. First we assess the reason for the growth of interest in the concept. Second we consider the conceptual frameworks that can be brought to bear in assessing it. Third the geo-0economic relationship between the major Triad blocs and the secondary players in the international competitiveness game is examined. Fourth we focus on economic competitiveness in particular, and the differences between the competitiveness of firms and nations in terms of the implications of trade theory. The concluding section sums up the implications for the globalization thesis and the lessons to be learned from it" (98).
There is, once again, a boon of evidence and data, first in relation to north-south economic interaction. This is seen to be developing rapidly from the 1970s onward.
"At the root of a concern about the effects of the growth of North-South trade is the question of the continued 'international competitiveness' of the Northern economies" (114).
There is an extended and apparently thorough account of the potential causes of competitiveness, etc.
"First, the extent of 'globalization' is once again exaggerated...Secondly, there are other explanations for the undermining of the living conditions of the unskilled workers in the advanced countries than just the economists' emphasis on trade and/or technical change...Thirdly, 'domestic' explanations remain more important to the outcomes in these matters than 'international' ones...Fourth, there is a need to disaggregate: Europe is not like the US and there are lots of differences within Europe...Finally, just as in the case of the discussion of 'globalization', the discussion of 'international competitiveness' must be treated with great caution" (133).
Ch. 4: North-South Trade and International Competitiveness:
Two trends in the globalization literature are highlighted the our authors in this chapter. The first is the relationship between development in both the North and the South, a phenomena that has received a good deal of attention. The other is the idea of being internationally competitive. This competition stretches from country to individual, and threatens to pervade all aspects of life.
"The chapter is organized as follows. The first part sets out the issues involved and looks at the historical antecedents to the present North-South debate...The second part of the chapter examines the associated trends in international competitiveness. First we assess the reason for the growth of interest in the concept. Second we consider the conceptual frameworks that can be brought to bear in assessing it. Third the geo-0economic relationship between the major Triad blocs and the secondary players in the international competitiveness game is examined. Fourth we focus on economic competitiveness in particular, and the differences between the competitiveness of firms and nations in terms of the implications of trade theory. The concluding section sums up the implications for the globalization thesis and the lessons to be learned from it" (98).
There is, once again, a boon of evidence and data, first in relation to north-south economic interaction. This is seen to be developing rapidly from the 1970s onward.
"At the root of a concern about the effects of the growth of North-South trade is the question of the continued 'international competitiveness' of the Northern economies" (114).
There is an extended and apparently thorough account of the potential causes of competitiveness, etc.
"First, the extent of 'globalization' is once again exaggerated...Secondly, there are other explanations for the undermining of the living conditions of the unskilled workers in the advanced countries than just the economists' emphasis on trade and/or technical change...Thirdly, 'domestic' explanations remain more important to the outcomes in these matters than 'international' ones...Fourth, there is a need to disaggregate: Europe is not like the US and there are lots of differences within Europe...Finally, just as in the case of the discussion of 'globalization', the discussion of 'international competitiveness' must be treated with great caution" (133).
Hirst and Thompson: Globalization in Question: Multinational Companies and the Internationalization of Business Activity
PQ Hirst and G Thompson, Globalization in question (Polity Press).
Ch. 3: Multinational Companies and the Internationalization of Business Activity:
"[This chapter] concentrates on the major changes in the structure of the international economy since the early 1980s, particularly in terms of the internationalization of production. One of the key changes identified and explored here is the increased salience of, and rapid growth in, foreign direct investment..." (66).
"This chapter is concerned to do a number of things. The first is to explore the overall significance of MNC activity and the geographically concentration of traditional measures such as FDI and trade. We also supplement this with the analysis of other measures of international inequality. Secondly, in this context, we analyze whether the advance of MNC activity has been quite so rapid and widespread as is often assumed by the strong globalization thesis, and particularly so fast as to seriously undermine the continuation of a national or local business system" (67-8).
This chapter has a wide variety of good data on MNCs and sectoral investment and advance. The dispersal of FDI has not at all been universal, and most has gone to industrialized countries.
"The argument of this chapter has involved a number of points. The first is that the internationalization of production and trading activity remains extremely unequally distributed, with a domination of the Triad countries and a few favored rapidly expanding less developed economies...Secondly, the extend of the internationalization of business activity is often exaggerated in both popular and academic accounts; and it is not increasingly at a particularly dramatic rate. From the quantitative analysis reported in the first part of the chapter it is reasonable to suggest that between 65 and 70 per cent of MNC value-added continues to be produced on the home territory...But there ahs obviously been some internatio0nalization of business activity. Thus a second issue was to assess the strategies of companies originating from different business systems. Despite the home-centeredness of the main findings, the remaining activity of the country groupings is quite diverse. That is, the different country MNCs operate in different areas to different extents...Connected to this is the question of what effects the limited internationalization of business activity is having on national systems of business, production and innovation...Finally, it is worth raising the issue of the 'governance' consequences of this analysis. These are twofold. In the first place, if national systems of production, business and technology still remain relatively firmly embedded, then there is still scope for the management of these in the interests of the stability and productivity of the national economy. Secondly, given that MNCs remain tethered to their home economies, whether these are specified either nationally or regionally, the opportunity arises for national or sub national regional bodies to more effectively monitor, regulate and govern them than if they were genuinely 'footloose capital'. Thus the overall conclusion of the chapter is that the extent of internationalization and its potential detrimental consequences for the regulation of MNC activity and for national economies is severely exaggerated. International businesses are still largely confined to their home territory in terms of their overall activity: they remain heavily 'nationally embedded'" (94-6).
Ch. 3: Multinational Companies and the Internationalization of Business Activity:
"[This chapter] concentrates on the major changes in the structure of the international economy since the early 1980s, particularly in terms of the internationalization of production. One of the key changes identified and explored here is the increased salience of, and rapid growth in, foreign direct investment..." (66).
"This chapter is concerned to do a number of things. The first is to explore the overall significance of MNC activity and the geographically concentration of traditional measures such as FDI and trade. We also supplement this with the analysis of other measures of international inequality. Secondly, in this context, we analyze whether the advance of MNC activity has been quite so rapid and widespread as is often assumed by the strong globalization thesis, and particularly so fast as to seriously undermine the continuation of a national or local business system" (67-8).
This chapter has a wide variety of good data on MNCs and sectoral investment and advance. The dispersal of FDI has not at all been universal, and most has gone to industrialized countries.
"The argument of this chapter has involved a number of points. The first is that the internationalization of production and trading activity remains extremely unequally distributed, with a domination of the Triad countries and a few favored rapidly expanding less developed economies...Secondly, the extend of the internationalization of business activity is often exaggerated in both popular and academic accounts; and it is not increasingly at a particularly dramatic rate. From the quantitative analysis reported in the first part of the chapter it is reasonable to suggest that between 65 and 70 per cent of MNC value-added continues to be produced on the home territory...But there ahs obviously been some internatio0nalization of business activity. Thus a second issue was to assess the strategies of companies originating from different business systems. Despite the home-centeredness of the main findings, the remaining activity of the country groupings is quite diverse. That is, the different country MNCs operate in different areas to different extents...Connected to this is the question of what effects the limited internationalization of business activity is having on national systems of business, production and innovation...Finally, it is worth raising the issue of the 'governance' consequences of this analysis. These are twofold. In the first place, if national systems of production, business and technology still remain relatively firmly embedded, then there is still scope for the management of these in the interests of the stability and productivity of the national economy. Secondly, given that MNCs remain tethered to their home economies, whether these are specified either nationally or regionally, the opportunity arises for national or sub national regional bodies to more effectively monitor, regulate and govern them than if they were genuinely 'footloose capital'. Thus the overall conclusion of the chapter is that the extent of internationalization and its potential detrimental consequences for the regulation of MNC activity and for national economies is severely exaggerated. International businesses are still largely confined to their home territory in terms of their overall activity: they remain heavily 'nationally embedded'" (94-6).
Horowitz: Restarting Globalization after World War II
S Horowitz, “Restarting Globalization after World War II: Structure, Coalitions, and the Cold War,” Comparative Political Studies 37, no. 2 (2004): 127.
"The present period of economic globalization originated following World War II. Given the strongly protectionist tendencies prevailing at the time, how did this happen?" (127).
Trade protectionism is examined in the five largest trading countries.
"'Economic globalization' can be defined as an increase in the values of international trade and investment as a share of the value of total output over a given time period. It can be measured for the world economy as well as for individual national economies" (127; from Footnote 1).
"There are two basic explanatory approaches in the international trade policy literature. One emphasizes endogenous tariff formation in response to the changing relative size and political power of protectionist and free-trading interest groups...Another emphasizes how military externalities of trade can lead countries to modify trade policies in an effort to strengthen allies or to strengthen themselves relative to their enemies" (128).
How does a world war affect international patterns of trade? Firstly, and obviously, there is a decrease in trade among countries who are in contention with one another. This will bring about competition among sectors who previously competed with these exports to grow and the total amount of exports to contract. This will bring about a tendency towards protectionist measures. Additionally, foreign finance patterns will change.
"In the period after World War II per se, one would expect the structural effects through production- and trade-diversion and changes in foreign investment stocks to be relatively limited. This is because similar shocks due to World War I and the Depression had already pushed a once extensive international division of labor and investment network a long way back toward national self-sufficiency and exclusive trading blocs. On the other hand, the same reasoning implies that initial conditions should strongly favor protectionist sectoral coalitions. Given the postwar strength and scope of exchange and trade controls, exchange rate overvaluation and undervaluation would also be expected to have more limited impacts on sectoral competitiveness" (132). The above two paragraphs are summarized in Hypothesis 1.
The second and third hypotheses involve the relationship between military explanations and trade patterns. The second suggests that, if there is a positive relationship between military expenditures and free trade, this will further buttress policies after the war for expanded trade. Hypothesis 3 states the opposite: that if there are negative relationships between the military and trade, this will stifle trade, at least in the affected sectors.
"Some related features of the political mechanism and process should also be kept in mind. One is that coalitions will not necessarily form in a way that pits all protectionist industries against all free-trading industries" (134). This leads to the fourth hypothesis: "Coalitional side payments, economic ideologies, fragmentation of institutional power, and international economic institutions may have additional effects on the relative size and effectiveness of protectionist and free trading political forces" (136).
"The most important factors influencing post-World War II trade policy changes in the five large trading states can now be summarized. Beginning with World War I and continui9ng through the Depression and World War II, structural economic changes played a central role in reversing the pre-World War I tide of globalization. But these protectionist structural economic tendencies were least advanced in the most capital intensive economies of the United States and FRG. During and after World War II, the most important changes in the balance of power between protectionist and free-trading coalitions were produced not by uneven structural economic changes but rather by side payments to agriculture in the United States and the FRG. However, strong military interests in free trade with allies best explain the unilateral form of US and FRG trade policy liberalization" (146).
"The present period of economic globalization originated following World War II. Given the strongly protectionist tendencies prevailing at the time, how did this happen?" (127).
Trade protectionism is examined in the five largest trading countries.
"'Economic globalization' can be defined as an increase in the values of international trade and investment as a share of the value of total output over a given time period. It can be measured for the world economy as well as for individual national economies" (127; from Footnote 1).
"There are two basic explanatory approaches in the international trade policy literature. One emphasizes endogenous tariff formation in response to the changing relative size and political power of protectionist and free-trading interest groups...Another emphasizes how military externalities of trade can lead countries to modify trade policies in an effort to strengthen allies or to strengthen themselves relative to their enemies" (128).
How does a world war affect international patterns of trade? Firstly, and obviously, there is a decrease in trade among countries who are in contention with one another. This will bring about competition among sectors who previously competed with these exports to grow and the total amount of exports to contract. This will bring about a tendency towards protectionist measures. Additionally, foreign finance patterns will change.
"In the period after World War II per se, one would expect the structural effects through production- and trade-diversion and changes in foreign investment stocks to be relatively limited. This is because similar shocks due to World War I and the Depression had already pushed a once extensive international division of labor and investment network a long way back toward national self-sufficiency and exclusive trading blocs. On the other hand, the same reasoning implies that initial conditions should strongly favor protectionist sectoral coalitions. Given the postwar strength and scope of exchange and trade controls, exchange rate overvaluation and undervaluation would also be expected to have more limited impacts on sectoral competitiveness" (132). The above two paragraphs are summarized in Hypothesis 1.
The second and third hypotheses involve the relationship between military explanations and trade patterns. The second suggests that, if there is a positive relationship between military expenditures and free trade, this will further buttress policies after the war for expanded trade. Hypothesis 3 states the opposite: that if there are negative relationships between the military and trade, this will stifle trade, at least in the affected sectors.
"Some related features of the political mechanism and process should also be kept in mind. One is that coalitions will not necessarily form in a way that pits all protectionist industries against all free-trading industries" (134). This leads to the fourth hypothesis: "Coalitional side payments, economic ideologies, fragmentation of institutional power, and international economic institutions may have additional effects on the relative size and effectiveness of protectionist and free trading political forces" (136).
"The most important factors influencing post-World War II trade policy changes in the five large trading states can now be summarized. Beginning with World War I and continui9ng through the Depression and World War II, structural economic changes played a central role in reversing the pre-World War I tide of globalization. But these protectionist structural economic tendencies were least advanced in the most capital intensive economies of the United States and FRG. During and after World War II, the most important changes in the balance of power between protectionist and free-trading coalitions were produced not by uneven structural economic changes but rather by side payments to agriculture in the United States and the FRG. However, strong military interests in free trade with allies best explain the unilateral form of US and FRG trade policy liberalization" (146).
Hirst and Thompson: Globalization in Question: Globalization and the History of the International Economy
PQ Hirst and G Thompson, Globalization in question (Polity Press).
Ch. 2: Globalization and the History of the International Economy:
Common assumptions about globalization are that it began gathering steam after WWII. The authors problematize this assumption. "The key issue at stake in our assessment is the changing autonomy of national economies in the conduct of their economic activity" (19).
The authors briefly explore the relationship between growth levels in output and trade, exploring the patterns of its development from the 19th century through to the late 20th century.
The movement of labor, or migration, is the next issue taken into consideration. Figure 2.3 on page 26 clearly demonstrates that, whether migration is measures as a percentage of the population or in absolute numbers, levels of immigrants coming to the US were highest in the mid 19th century and by the end of the first decade of the 20th.
Relative economic openness is the next measure of globalization that the authors explore from a historical perspective. This is accomplished, at least initially, with a GDP to trade ratio. The 1913 period is seen as representing a higher degree of the ratio of GDP to trade than the 70s. Other issues of comparative globalization are addressed such as remittances and regionalization.
The history of monetary and exchange rate regimes is then explored. A helpful chart (Table 2.5) is produced outlining the different regimes that existed from 1879 to the late 1990s (33).
"We have striven to argue a number of points in this chapter. First, that the level of integration, interdependence, openness...of national economies in the present era is not unprecedented...The second point has been to argue that governance mechanisms for the international economy have been in place over almost the entire twentieth century, in one form or another...Thirdly, we have argued that there are some new and different issues of economic interdependence in the present era which are particular to it...Finally, we have traced the trajectory of 'national economic autonomy' through the various regimes of governance operating over the twentieth century. This has shown that such autonomy ahs oscillated between periods of strong and then weak forces, and that it has operated with various degrees of effectiveness" (60-1).
Ch. 2: Globalization and the History of the International Economy:
Common assumptions about globalization are that it began gathering steam after WWII. The authors problematize this assumption. "The key issue at stake in our assessment is the changing autonomy of national economies in the conduct of their economic activity" (19).
The authors briefly explore the relationship between growth levels in output and trade, exploring the patterns of its development from the 19th century through to the late 20th century.
The movement of labor, or migration, is the next issue taken into consideration. Figure 2.3 on page 26 clearly demonstrates that, whether migration is measures as a percentage of the population or in absolute numbers, levels of immigrants coming to the US were highest in the mid 19th century and by the end of the first decade of the 20th.
Relative economic openness is the next measure of globalization that the authors explore from a historical perspective. This is accomplished, at least initially, with a GDP to trade ratio. The 1913 period is seen as representing a higher degree of the ratio of GDP to trade than the 70s. Other issues of comparative globalization are addressed such as remittances and regionalization.
The history of monetary and exchange rate regimes is then explored. A helpful chart (Table 2.5) is produced outlining the different regimes that existed from 1879 to the late 1990s (33).
"We have striven to argue a number of points in this chapter. First, that the level of integration, interdependence, openness...of national economies in the present era is not unprecedented...The second point has been to argue that governance mechanisms for the international economy have been in place over almost the entire twentieth century, in one form or another...Thirdly, we have argued that there are some new and different issues of economic interdependence in the present era which are particular to it...Finally, we have traced the trajectory of 'national economic autonomy' through the various regimes of governance operating over the twentieth century. This has shown that such autonomy ahs oscillated between periods of strong and then weak forces, and that it has operated with various degrees of effectiveness" (60-1).
Monday, December 15, 2008
Zysman: The Myth of a 'Global' Economy: Enduring National Foundations and Emerging Retional Realities
J Zysman, “The myth of a 'Global' economy: Enduring national foundations and emerging regional realities,” New Political Economy 1, no. 2 (1996): 157-184.
*Note: Pagination taken from Word document
Globalization is a label placed on a phenomena that no one understands. Those who say the nation-state will crumble have a very ahistorical view of the situation: governments' roles will change, governance will continue. However, while the state will not wither, this current trend is something that is relatively unique historically. Globalization is change; exactly what that means for who is not very well understood.
" Globalism is thus characterised by multiple government and industrial strategies to cope with the rapidly changing contours of competition" (3).
The world can be divided up into three economic geographies: North America, Asia and Europe. The nature of regional economic groups within these three geographies is explored. Development does not happen within these geographies, or from one region against another, uniformly but in stages.
The author argues that it seems likely that different regional dynamics will emerge from increased globalization.
The issue of convergence is examined: "... does the current period of adaptation and change produce national convergence or, alternatively, will-there be continued lines of parallel development in which particular national resolutions sustain enduring differences?" (8). Four factors are identified that could cause united policy outcomes that do not directly relate to more robust market connections: imitation, negotiations, political compulsion and market compulsion (8).
"In sum, distinct national technological communities do appear to continue in the face of the `globalisation' of markets. And, as important, there is a theoretical basis to belief that they will continue to endure. But the relationship between these technological communities is changing; the significant question simply has to be reposed" (13).
The article continues to asks whether globalization has caused financial systems to converge on a set of normative operating procedures. The conclusion is, in my estimation, a call for nuance.
Institutional Foundations and the Persistence of National Forms:
"Underpinning the analysis and interpretation here is a notion of how a political economy functions. It is worthwhile to make the notion explicit. I sketch here a four-step approach to link institutional and social contexts to the dynamics of national market systems" (19).
Step 1: Institutions that are created by the state define the boundaries in that markets can operate
Step 2: This institutional structure interacts with industrial organization to provide markets with choices.
Step 3: The "major players" are able to dictate the correct logic based on their interactions.
Step 4: Competition from trade is an example of the explication of these factors globally, thus highlighting different market structures in different regions.
And the last paragraph: "In the final analysis, it is the consequence of the endurance of national systems that must concern us. The debates will be about finding mechanisms of accommodating, as much as compressing, that national diversity. As always, marketplaces will rest on institutional foundations that politics create, and this time the politics will be driven by the interplay of national governments and national markets" (23).
*Note: Pagination taken from Word document
Globalization is a label placed on a phenomena that no one understands. Those who say the nation-state will crumble have a very ahistorical view of the situation: governments' roles will change, governance will continue. However, while the state will not wither, this current trend is something that is relatively unique historically. Globalization is change; exactly what that means for who is not very well understood.
" Globalism is thus characterised by multiple government and industrial strategies to cope with the rapidly changing contours of competition" (3).
The world can be divided up into three economic geographies: North America, Asia and Europe. The nature of regional economic groups within these three geographies is explored. Development does not happen within these geographies, or from one region against another, uniformly but in stages.
The author argues that it seems likely that different regional dynamics will emerge from increased globalization.
The issue of convergence is examined: "... does the current period of adaptation and change produce national convergence or, alternatively, will-there be continued lines of parallel development in which particular national resolutions sustain enduring differences?" (8). Four factors are identified that could cause united policy outcomes that do not directly relate to more robust market connections: imitation, negotiations, political compulsion and market compulsion (8).
"In sum, distinct national technological communities do appear to continue in the face of the `globalisation' of markets. And, as important, there is a theoretical basis to belief that they will continue to endure. But the relationship between these technological communities is changing; the significant question simply has to be reposed" (13).
The article continues to asks whether globalization has caused financial systems to converge on a set of normative operating procedures. The conclusion is, in my estimation, a call for nuance.
Institutional Foundations and the Persistence of National Forms:
"Underpinning the analysis and interpretation here is a notion of how a political economy functions. It is worthwhile to make the notion explicit. I sketch here a four-step approach to link institutional and social contexts to the dynamics of national market systems" (19).
Step 1: Institutions that are created by the state define the boundaries in that markets can operate
Step 2: This institutional structure interacts with industrial organization to provide markets with choices.
Step 3: The "major players" are able to dictate the correct logic based on their interactions.
Step 4: Competition from trade is an example of the explication of these factors globally, thus highlighting different market structures in different regions.
And the last paragraph: "In the final analysis, it is the consequence of the endurance of national systems that must concern us. The debates will be about finding mechanisms of accommodating, as much as compressing, that national diversity. As always, marketplaces will rest on institutional foundations that politics create, and this time the politics will be driven by the interplay of national governments and national markets" (23).
Hirst and Thompson: Globalization in Question: Globalization, Governance and the Nation-State
PQ Hirst and G Thompson, Globalization in question (Polity Press).
Ch. 9: Globalization, Governance and the Nation-State:
"So far we have been mainly concerned with the economic aspects of globalization, and have considered governance primarily in terms of its economic necessities and possibilities. In this chapter we consider the wider political issues raised by globalization theorists, and consider in particular whether the nation-state has a future as a major locus of governance" (256).
This chapter provides a general overview of the genealogy of the concept of sovereignty, focusing on the fact that its current nature is a relatively recent phenomena. This is obviously quite important to discuss in any analysis of the relationship between the power of the state versus the power of international capital.
The following three points are made:
1. Assuming that earlier arguments about the nature of the international economy are sound, ie., that globalization has not created a golem that cannot be controlled, than the state has a decisive role to play in coordinating global economic activity
2. However, this does not mean that the state will remain similarly sovereign as it was post WWII. The state will now work through international mechanisms to reign in the potentially corrosive influence of global corporations, etc.
3. While the state may not be similarly sovereign as it was in the years after WWII, it still will retain a certain kind of control over its territory, and that will involve the control of populations "(256-7).
An overview of the concept of sovereignty takes up a sizable chunk of this chapter. It focuses on territorial sovereignty, as stemming from Weber's classical definition. The story culminates with the state's supreme control of domestic territory and population in the 1960s. I would argue that their exploration of sovereignty misses out on much literature that understands sovereignty to be an ever-changing bundle of rights, etc.
Globalization has problematized sovereignty, it is argued, and this has been to the advantage of a wide variety of political groups. Politics on the left and right now have scapegoats. There is a discussion of a decline of conflict, either inter-state or class based, between advanced countries.
Globalization has reduced the amount of control that states have over ideas, but it has done nothing to reduce the way that it controls populations.
"There can be no doubt that the era when politics could be conceived almost exclusively in terms of processes within nation-states and their external billiard-ball interactions is passing" (268).
"We are not returning to a world like the Middle Ages and before the development of national 'sovereignty'. This is not just because national states and the 'sovereign' control the peoples persists. The scope and role of forms of governance is radically different today, and this has distinct implications for the architecture of government" (269).
"States remain 'sovereign', not in the sense that they are all-powerful or omnicompetent within their territories, but because they police the borders of a territory and, to the degree that they are credibly democratic, they are representative of the citizens within those borders" (275).
"...nation-states as sources of the rule of law are essential prerequisites for regulation through international law, and as overarching public powers they are essential to the survival of pluralistic 'national' societies with diversified forms of administration and community standards" (277).
Ch. 9: Globalization, Governance and the Nation-State:
"So far we have been mainly concerned with the economic aspects of globalization, and have considered governance primarily in terms of its economic necessities and possibilities. In this chapter we consider the wider political issues raised by globalization theorists, and consider in particular whether the nation-state has a future as a major locus of governance" (256).
This chapter provides a general overview of the genealogy of the concept of sovereignty, focusing on the fact that its current nature is a relatively recent phenomena. This is obviously quite important to discuss in any analysis of the relationship between the power of the state versus the power of international capital.
The following three points are made:
1. Assuming that earlier arguments about the nature of the international economy are sound, ie., that globalization has not created a golem that cannot be controlled, than the state has a decisive role to play in coordinating global economic activity
2. However, this does not mean that the state will remain similarly sovereign as it was post WWII. The state will now work through international mechanisms to reign in the potentially corrosive influence of global corporations, etc.
3. While the state may not be similarly sovereign as it was in the years after WWII, it still will retain a certain kind of control over its territory, and that will involve the control of populations "(256-7).
An overview of the concept of sovereignty takes up a sizable chunk of this chapter. It focuses on territorial sovereignty, as stemming from Weber's classical definition. The story culminates with the state's supreme control of domestic territory and population in the 1960s. I would argue that their exploration of sovereignty misses out on much literature that understands sovereignty to be an ever-changing bundle of rights, etc.
Globalization has problematized sovereignty, it is argued, and this has been to the advantage of a wide variety of political groups. Politics on the left and right now have scapegoats. There is a discussion of a decline of conflict, either inter-state or class based, between advanced countries.
Globalization has reduced the amount of control that states have over ideas, but it has done nothing to reduce the way that it controls populations.
"There can be no doubt that the era when politics could be conceived almost exclusively in terms of processes within nation-states and their external billiard-ball interactions is passing" (268).
"We are not returning to a world like the Middle Ages and before the development of national 'sovereignty'. This is not just because national states and the 'sovereign' control the peoples persists. The scope and role of forms of governance is radically different today, and this has distinct implications for the architecture of government" (269).
"States remain 'sovereign', not in the sense that they are all-powerful or omnicompetent within their territories, but because they police the borders of a territory and, to the degree that they are credibly democratic, they are representative of the citizens within those borders" (275).
"...nation-states as sources of the rule of law are essential prerequisites for regulation through international law, and as overarching public powers they are essential to the survival of pluralistic 'national' societies with diversified forms of administration and community standards" (277).
Hirst and Thompson: Globalization in Question: Introduction: Globalization - a Necessary Myth?
PQ Hirst and G Thompson, Globalization in question (Polity Press).
Ch. 1: Introduction: Globalization - a Necessary Myth?
It has become commonly held that we live in an age of radical change, where global interdependence directly affects social life in ways that are unprecedented. This understanding stems from, at least in large part, the forces of economic liberalization and interconnection.
This book approaches this issue with caution. Is it truly the case that national choice has become constrained by international capital? While it is clear that things have changed, this book attempts to put those changes within a perspective that is freed from the commonly held assumptions about global interdependence.
The following five points are argued:
1. the currently intensely interconnected economy is not unprecedented
2. companies that are able to truly span nations, ie., transnational corporations, are not as common as would be commonly assumed
3. there are not massive amounts of capital concentrations pouring into less developed countries. In fact, developed countries continue to be the bedrock of capital investment.
4. globalization is not world-wide: trade, for example, is concentrated among the largest players: the US, EU and Japan.
5. the three countries mentioned in the previous point do have the capacity to overwhelm the logic of capital (2).
The authors outline some potential origins of the myth of globalization. They then paint pictures of two types of economic organization with different degrees of internationalization: the inter-national economy and the globalized economy.
"An inter-national economy is one in which the principal entities are national economies" (8). This economic organization does not entail a radical systemic shift from the period of the Pax Britannia of the gold standard before WWI. Countries are still able to dictate economic policy that may not be to the benefit of global capital.
"A globalized economy is a distinct ideal type from that of the inter-national economy and can be developed by contrast with it. In such a global system distinct national economies are subsumed and rearticulated into the system by international processes and transactions. The inter-national economy, on the contrary, is one in which processes that are determined at the level of national economies still dominate and international phenomena are outcomes that emerge from the distinct and differential performance of the national economies"(10). In such a globalized economy, national governance is difficult to enact and enforce. Additionally, MNCs would necessarily have to be TNCs. Also, labor's ability to unionize and act as a balance against the power of capital would also be eroded. Finally: "A final and inevitable consequence of globalization is the growth in fundamental multipolarity in the international political system In the end, the hitherto hegemonic national power would no longer be able to impose its own distance regulatory objectives in either its own territories or elsewhere, and lesser agencies...would thus enjoy enhanced powers of denial and evasion vis-a-vis any aspirant 'hegemon'" (13).
The history of the current global economic structure is examined.
The overview of the book is then examined.
Ch. 1: Introduction: Globalization - a Necessary Myth?
It has become commonly held that we live in an age of radical change, where global interdependence directly affects social life in ways that are unprecedented. This understanding stems from, at least in large part, the forces of economic liberalization and interconnection.
This book approaches this issue with caution. Is it truly the case that national choice has become constrained by international capital? While it is clear that things have changed, this book attempts to put those changes within a perspective that is freed from the commonly held assumptions about global interdependence.
The following five points are argued:
1. the currently intensely interconnected economy is not unprecedented
2. companies that are able to truly span nations, ie., transnational corporations, are not as common as would be commonly assumed
3. there are not massive amounts of capital concentrations pouring into less developed countries. In fact, developed countries continue to be the bedrock of capital investment.
4. globalization is not world-wide: trade, for example, is concentrated among the largest players: the US, EU and Japan.
5. the three countries mentioned in the previous point do have the capacity to overwhelm the logic of capital (2).
The authors outline some potential origins of the myth of globalization. They then paint pictures of two types of economic organization with different degrees of internationalization: the inter-national economy and the globalized economy.
"An inter-national economy is one in which the principal entities are national economies" (8). This economic organization does not entail a radical systemic shift from the period of the Pax Britannia of the gold standard before WWI. Countries are still able to dictate economic policy that may not be to the benefit of global capital.
"A globalized economy is a distinct ideal type from that of the inter-national economy and can be developed by contrast with it. In such a global system distinct national economies are subsumed and rearticulated into the system by international processes and transactions. The inter-national economy, on the contrary, is one in which processes that are determined at the level of national economies still dominate and international phenomena are outcomes that emerge from the distinct and differential performance of the national economies"(10). In such a globalized economy, national governance is difficult to enact and enforce. Additionally, MNCs would necessarily have to be TNCs. Also, labor's ability to unionize and act as a balance against the power of capital would also be eroded. Finally: "A final and inevitable consequence of globalization is the growth in fundamental multipolarity in the international political system In the end, the hitherto hegemonic national power would no longer be able to impose its own distance regulatory objectives in either its own territories or elsewhere, and lesser agencies...would thus enjoy enhanced powers of denial and evasion vis-a-vis any aspirant 'hegemon'" (13).
The history of the current global economic structure is examined.
The overview of the book is then examined.
Cerny: Globalization and the Changing Logic of Collective Action
PG Cerny, “Globalization and the changing logic of collective action,” Theory and Structure in International Political Economy: An International Organization Reader 49, no. 4 (1999): 595-625.
Globalization has changed the way that rational decisions are made. No longer is the state the unitary locus of collective action problems. There are not a plurality of structural drivers of decision making.
"Globalization is defined here as a set of economic and political structures and processes deriving from the changing character of the goods and assets that comprise the base of the international political economy--in particular, the increasing structural differentiation of those goods and assets" (596).
"In particular, I argue that the more that the scale of goods and assets produced, exchanged and/or used in a particular economic sector or activity diverges from the structural scale of the national state--both from above (the global scale) and from below (the local scale)--and the more that those divergences feed back into each other in complex ways, then the more that the authority, legitimacy, policymaking capacity, and policy-implementing effectiveness of states will be challenged from both without and within. A critical threshold may be crossed when the cumulative effect of globalization in strategically decisive issue-areas undermines the general capacity of the state to pursue the common good or the capacity of the state to be a true civil association; even if this threshold is not crossed, however, it is arguable that the role of the state both as playing field and as unit becomes structurally problematic" (597).
Collective action problems are typically addressed from the level-of-analysis of the agent. Cerny argues that this may not be helpful and instead deploys a structural account of decision making capacity: "Choices are always made within specific 'structured fields of action'" (597).
While all assets are goods and all goods are assets, the distinction made in this piece is between those things meant to be kept for their value, including means of production, and those things intended for exchange. Similar distinctions have been made by others between industry and trade or use value and exchange value.
The history of political-economies of scale is analyzed. This I did not document.
10 hypotheses are put forward that are quite interesting, and rely on a nuanced understanding of system, structure and equilibrium. From the final hypothesis: "Finally, under these conditions the state will lose its structural primacy and autonomy as a unitary actor in the international system. The anarchy of the international system will no longer be one of states competing for power but one of nonfeudal rivalries and asymmetric cooperation among a range of interests and collective agents reflecting differentiated economic activities with diverse goods/assets structures..The main question that remains to be asked is whether such a system will tend toward chaos or toward a certain stability of a plurilateral kind" (625).
Globalization has changed the way that rational decisions are made. No longer is the state the unitary locus of collective action problems. There are not a plurality of structural drivers of decision making.
"Globalization is defined here as a set of economic and political structures and processes deriving from the changing character of the goods and assets that comprise the base of the international political economy--in particular, the increasing structural differentiation of those goods and assets" (596).
"In particular, I argue that the more that the scale of goods and assets produced, exchanged and/or used in a particular economic sector or activity diverges from the structural scale of the national state--both from above (the global scale) and from below (the local scale)--and the more that those divergences feed back into each other in complex ways, then the more that the authority, legitimacy, policymaking capacity, and policy-implementing effectiveness of states will be challenged from both without and within. A critical threshold may be crossed when the cumulative effect of globalization in strategically decisive issue-areas undermines the general capacity of the state to pursue the common good or the capacity of the state to be a true civil association; even if this threshold is not crossed, however, it is arguable that the role of the state both as playing field and as unit becomes structurally problematic" (597).
Collective action problems are typically addressed from the level-of-analysis of the agent. Cerny argues that this may not be helpful and instead deploys a structural account of decision making capacity: "Choices are always made within specific 'structured fields of action'" (597).
While all assets are goods and all goods are assets, the distinction made in this piece is between those things meant to be kept for their value, including means of production, and those things intended for exchange. Similar distinctions have been made by others between industry and trade or use value and exchange value.
The history of political-economies of scale is analyzed. This I did not document.
10 hypotheses are put forward that are quite interesting, and rely on a nuanced understanding of system, structure and equilibrium. From the final hypothesis: "Finally, under these conditions the state will lose its structural primacy and autonomy as a unitary actor in the international system. The anarchy of the international system will no longer be one of states competing for power but one of nonfeudal rivalries and asymmetric cooperation among a range of interests and collective agents reflecting differentiated economic activities with diverse goods/assets structures..The main question that remains to be asked is whether such a system will tend toward chaos or toward a certain stability of a plurilateral kind" (625).
Frieden: Will Global Capitalism Fall Again?
J Frieden, “Will Global Capitalism Fall Again?,” Presentation for BRUEGEL's Essay and Lecture Series. Brussels, June (2006).
The world is increasingly integrated through goods and capital flows and communication. One group of people sees this as the status quo. Another group of people finds this trend to be problematic. "Whether an integrated global economy will be maintained is one of the great questions of our age" (7).
Figure 1 (8):
Before WWI, the global integration of the economy was robust and provided for long-term growth and stability. The international monetary order, the gold-standard, was king. Labor and capital mobility provided for efficient investment where needed. While there were some tensions, especially surrounding rising powers, these paled in comparison to the rich growth that took place. This all was brought to its knees in a very short period.
"Why could the first era of global capitalism not be restored? It was not for lack of trying" (11).
"The classical international economy of the gold standard era rested upon a consensus among elites about the priority of international economic commitments. IN virtually every country, for virtually all of this period, economic and political leaders agreed that governments needed to ensure that their economies would adjust quickly to changing international economic conditions, rather than the other way around" (12).
"To summarize and generalize, the first age of globalization worked because it was economically and politically feasible for governments to do what was necessary to sustain their international economic commitments. It was not restored after World War I because these enabling conditions were no longer present" (14).
The breakdown of the free-market order after WWI was rebelled against. The previous order did not emphasize a redistributive, or ameliorative branch of policy in response to the encroachment of the market. As people recovered from The Great War, they were forced to reevaluate priorities. Many rejected the free-market in whole, but accepted it in part: it would form part of the new global order, along with state-based policies that were socialist, nationalist or both.
Bretton Woods was also established, in part, to help the transition back to a global capitalist order after WWII through an international structure that attempted to mitigate some of the excesses of capitalism that were previously experienced. These policies were so successful that they eventually led to an increased push for more free market based approaches.
"The first era of globalisation collapsed because there was no effective political and policy response to changing economic and social conditions. It did not fail, in my view, for technical or objective economic reasons, but rather for political-economy reasons" (19).
The concern expressed by the author is that the current stage of global integration represents the potential beginning of a backlash against economic integration, as the political-economy has not been structured in such a way as to mitigate the negative effects of this integration on large segments of the population. Frieden explores the current (2006) position of the US in relation to domestic pressures emerging from global economic integration (ie., deficits, rising inequality, etc).
Will capitalism die again? Maybe. But there are many things we can do to make sure that this doesn't happen.
The world is increasingly integrated through goods and capital flows and communication. One group of people sees this as the status quo. Another group of people finds this trend to be problematic. "Whether an integrated global economy will be maintained is one of the great questions of our age" (7).
Figure 1 (8):
Before WWI, the global integration of the economy was robust and provided for long-term growth and stability. The international monetary order, the gold-standard, was king. Labor and capital mobility provided for efficient investment where needed. While there were some tensions, especially surrounding rising powers, these paled in comparison to the rich growth that took place. This all was brought to its knees in a very short period.
"Why could the first era of global capitalism not be restored? It was not for lack of trying" (11).
"The classical international economy of the gold standard era rested upon a consensus among elites about the priority of international economic commitments. IN virtually every country, for virtually all of this period, economic and political leaders agreed that governments needed to ensure that their economies would adjust quickly to changing international economic conditions, rather than the other way around" (12).
"To summarize and generalize, the first age of globalization worked because it was economically and politically feasible for governments to do what was necessary to sustain their international economic commitments. It was not restored after World War I because these enabling conditions were no longer present" (14).
The breakdown of the free-market order after WWI was rebelled against. The previous order did not emphasize a redistributive, or ameliorative branch of policy in response to the encroachment of the market. As people recovered from The Great War, they were forced to reevaluate priorities. Many rejected the free-market in whole, but accepted it in part: it would form part of the new global order, along with state-based policies that were socialist, nationalist or both.
Bretton Woods was also established, in part, to help the transition back to a global capitalist order after WWII through an international structure that attempted to mitigate some of the excesses of capitalism that were previously experienced. These policies were so successful that they eventually led to an increased push for more free market based approaches.
"The first era of globalisation collapsed because there was no effective political and policy response to changing economic and social conditions. It did not fail, in my view, for technical or objective economic reasons, but rather for political-economy reasons" (19).
The concern expressed by the author is that the current stage of global integration represents the potential beginning of a backlash against economic integration, as the political-economy has not been structured in such a way as to mitigate the negative effects of this integration on large segments of the population. Frieden explores the current (2006) position of the US in relation to domestic pressures emerging from global economic integration (ie., deficits, rising inequality, etc).
Will capitalism die again? Maybe. But there are many things we can do to make sure that this doesn't happen.
Sunday, December 14, 2008
Garrett: The Causes of Globalization
Garrett, Geoffrey, “The Causes of Globalization,” Comparative Political Studies 6-7, no. 22 (2000): 941.
"The most important causes of globalization differ among the three major components of international market integration: trade, multinational production, and international finance" (941).
This piece explores the drivers of globalization. The author argues that it is not problematic to claim that globalization is changing the world; the biggest issue becomes anything other than that platitude.
"Throughout, I define globalization somewhat narrowly as the international integration of markets in goods, services and capital" (942).
"I examine four contending perspectives on the big picture: What explains the rapid pace of international market integration in recent decades?" (942). The first point of view claims that this global integration is not unique or new, as current integration is finally catching up to levels before WWI. "I argue, however, that notwithstanding the aggregate similarities between the two periods, core features of the contemporary world economy are without historical precedent" (942).
The second point of view is that of technological determinism. "The case for technologically determined view of globalization is far stronger with respect to international finance than to multinational production or trade" (942).
The third perspective: the costs of government closure from international trade are exclusively high and this promotes countries to open their doors to the benefits to be gleaned from increased economic interdependence. However, the author argues, "It is hard to argue that increasing opportunity costs of closure provide a persuasive account of the globalization of finance" (943).
The fourth point of view: "The final big picture perspective on globalization also accepts the critical role of government policy, but argues that the phenomenon is essentially a political construct that does not improve the economic conditions of society as a whole" (943). Has there been an ideological driver (maybe Reagan/Thatcher?) that pushed us in this direction?
The details of these arguments I did not document.
"Figure 4 summarizes my assessment of the contending big picture arguments about the causes of globalization" (975).
(976)
"The most important causes of globalization differ among the three major components of international market integration: trade, multinational production, and international finance" (941).
This piece explores the drivers of globalization. The author argues that it is not problematic to claim that globalization is changing the world; the biggest issue becomes anything other than that platitude.
"Throughout, I define globalization somewhat narrowly as the international integration of markets in goods, services and capital" (942).
"I examine four contending perspectives on the big picture: What explains the rapid pace of international market integration in recent decades?" (942). The first point of view claims that this global integration is not unique or new, as current integration is finally catching up to levels before WWI. "I argue, however, that notwithstanding the aggregate similarities between the two periods, core features of the contemporary world economy are without historical precedent" (942).
The second point of view is that of technological determinism. "The case for technologically determined view of globalization is far stronger with respect to international finance than to multinational production or trade" (942).
The third perspective: the costs of government closure from international trade are exclusively high and this promotes countries to open their doors to the benefits to be gleaned from increased economic interdependence. However, the author argues, "It is hard to argue that increasing opportunity costs of closure provide a persuasive account of the globalization of finance" (943).
The fourth point of view: "The final big picture perspective on globalization also accepts the critical role of government policy, but argues that the phenomenon is essentially a political construct that does not improve the economic conditions of society as a whole" (943). Has there been an ideological driver (maybe Reagan/Thatcher?) that pushed us in this direction?
The details of these arguments I did not document.
"Figure 4 summarizes my assessment of the contending big picture arguments about the causes of globalization" (975).
(976)
Das: Globalization and the Anti-Globalization Lobby
DK Das, “Globalization and the Anti-Globalization Lobby.” 2005.
This paper begins by denouncing the rabid anti-globalization protests, specifically in their iteration in Santiago, Chile in 2004. It is clear the author's distaste for these protesters' positions and methods. The author is keen to admit that globalization has winners and losers, but concludes that an objective account of the phenomena will show that the overall results of globalization are positive for the world's poor.
"This paper provides a dispassionate and objective analysis of favorable and unfavorable impact of globalization over global poverty and concludes that, all things considered, globalization has not hurt the poor segments of populations. On an average the incidence of poverty in the world has declined. Furthermore, expanding globalization is more likely to assist in achieving the first MDG than not and the large anti-globalization lobby needs to thoughtfully restrain itself" (4).
What is globalization? It has taken on a multi-disciplinary form that is necessarily hard to pin down. "From an economic point of view, globalization represents a process of increasing international division of labor and growing integration of national economies through trade in goods and services, cross-border corporate investment, capital flows and migration of human resources. Like economic growth, it is a complex meta-process" (4).
Globalization, in the view of the author, is responsible for the alleviation of large swaths of poverty in India and China. Sub-Saharan Africa can be seen as an example of a region that did not buy into the logic of globalization and therefore suffers from economic stagnation and no investment.
Das argues against the homogenizing effects of globalization on culture. Consumption does not reflect deep culture, but rather superficial culture. The effects are exceedingly week.
The author also claims that many anti-globalism arguments are empirically wrong or exceedingly weak and that, "The [arguments] that are valid, can easily be rectified" (8).
"Economists believe that at an aggregate level globalization is a substantial boon. If one sheds polemics and looks at globaliztiaon in a pragmatic manner, one finds that it is essentially a benevolent force that creates opportunities for rapid growth and faster poverty alleviation in the economies that are ready for it" (8).
The author admits that globalization can hurt the poor in the short run; a country must have established adequate legal and governance to deal with the effects of increased international competition.
What about globalization's affect on poverty? Overall, poverty has declined, though not universally.
Is GDP a good measure of well being? It's not perfect, but a pretty good proxy.
In the end, anti-globalists should find a better thing to be so worked up about. According to the author, globalization has done tremendous good.
This paper begins by denouncing the rabid anti-globalization protests, specifically in their iteration in Santiago, Chile in 2004. It is clear the author's distaste for these protesters' positions and methods. The author is keen to admit that globalization has winners and losers, but concludes that an objective account of the phenomena will show that the overall results of globalization are positive for the world's poor.
"This paper provides a dispassionate and objective analysis of favorable and unfavorable impact of globalization over global poverty and concludes that, all things considered, globalization has not hurt the poor segments of populations. On an average the incidence of poverty in the world has declined. Furthermore, expanding globalization is more likely to assist in achieving the first MDG than not and the large anti-globalization lobby needs to thoughtfully restrain itself" (4).
What is globalization? It has taken on a multi-disciplinary form that is necessarily hard to pin down. "From an economic point of view, globalization represents a process of increasing international division of labor and growing integration of national economies through trade in goods and services, cross-border corporate investment, capital flows and migration of human resources. Like economic growth, it is a complex meta-process" (4).
Globalization, in the view of the author, is responsible for the alleviation of large swaths of poverty in India and China. Sub-Saharan Africa can be seen as an example of a region that did not buy into the logic of globalization and therefore suffers from economic stagnation and no investment.
Das argues against the homogenizing effects of globalization on culture. Consumption does not reflect deep culture, but rather superficial culture. The effects are exceedingly week.
The author also claims that many anti-globalism arguments are empirically wrong or exceedingly weak and that, "The [arguments] that are valid, can easily be rectified" (8).
"Economists believe that at an aggregate level globalization is a substantial boon. If one sheds polemics and looks at globaliztiaon in a pragmatic manner, one finds that it is essentially a benevolent force that creates opportunities for rapid growth and faster poverty alleviation in the economies that are ready for it" (8).
The author admits that globalization can hurt the poor in the short run; a country must have established adequate legal and governance to deal with the effects of increased international competition.
What about globalization's affect on poverty? Overall, poverty has declined, though not universally.
Is GDP a good measure of well being? It's not perfect, but a pretty good proxy.
In the end, anti-globalists should find a better thing to be so worked up about. According to the author, globalization has done tremendous good.
Monday, December 8, 2008
Marquez: Bilateral Trade Elasticities
J Marquez, “Bilateral Trade Elasticities,” Review of Economics and Statistics 72, no. 1 (1990): 70-77.
"This paper estimates income and price elasticities for bilateral world trade....The paper finds that bilateral trade elasticities exhibit enough of a dispersion to suggest that the direction of trade is sensitive to changes in income and prices" (70).
The findings of this article are the following: bilateral trade elasticities differ quite a bit from one relationship to another. "Out of 56 elasticity estimates, 8 are negative, 25 vary between 0.1 and 2.0, and 23 are greater than 2" (72). Additionally, countries can be grouped as to whether they tend to have low income elasticities or high elasticities: "The 'low' income elasticity countries are Japan and LDCs; the 'high' income elasticity countries are Canada, Germany, the United Kingdom, the United States and other industrialized countries; the income elasticities for OPEC's bilateral imports are near unity" (72). Thirdly, import elasticities stemming from OPEC countries are near zero, as they mainly compromise oil.
"Using bilateral trade shares as weights, table 2 estimates the multilateral elasticities implied by the bilateral estimates of table 1. Based on a comparison to previous estimates...the aggregate income elasticities are consistent with the literature...The estimated price elasticities are also consistent with the literature: they are negative, range between -0.5 and -1.1, and are statistically significant" (74).
"This paper estimates income and price elasticities for bilateral world trade....The paper finds that bilateral trade elasticities exhibit enough of a dispersion to suggest that the direction of trade is sensitive to changes in income and prices" (70).
The findings of this article are the following: bilateral trade elasticities differ quite a bit from one relationship to another. "Out of 56 elasticity estimates, 8 are negative, 25 vary between 0.1 and 2.0, and 23 are greater than 2" (72). Additionally, countries can be grouped as to whether they tend to have low income elasticities or high elasticities: "The 'low' income elasticity countries are Japan and LDCs; the 'high' income elasticity countries are Canada, Germany, the United Kingdom, the United States and other industrialized countries; the income elasticities for OPEC's bilateral imports are near unity" (72). Thirdly, import elasticities stemming from OPEC countries are near zero, as they mainly compromise oil.
"Using bilateral trade shares as weights, table 2 estimates the multilateral elasticities implied by the bilateral estimates of table 1. Based on a comparison to previous estimates...the aggregate income elasticities are consistent with the literature...The estimated price elasticities are also consistent with the literature: they are negative, range between -0.5 and -1.1, and are statistically significant" (74).
Wallerstein: The Capitalist World-Economy: Essays
I Wallerstein, The Capitalist World-Economy: Essays (Cambridge University Press, 1979).
Ch. 1: The Rise and Future Demise of the World Capitalist System: Concepts for Comparative Analysis:
Wallerstein begins by exploring the phenomena of the industrial revolution. Some argued that this was the penultimate state of human development. Others, most notably Marx, argued that there were yet further states through which society must develop. Wallerstein briefly questions whether or not it is possible to skip stages, and argues that, if we are living in a world system, a world economy, than stages cannot be skipped. If they could be, then they would not be stages.
"Leaving aside the now defunct minisystems, the only kind of social system is a world-system, which we define quite simply as a u8nit with a single division of labor and multiple cultural systems" (5).
The author makes a distinction between world economies and world empires as global systems.
"World empires are basically redistributive in economic form" (6).
"By a series of accidents...northwest Europe was better situated in the sixteenth century to diversify its agricultural specialization and add to it certain industries...than were other parts of Europe. Northwest Europe emerged as the core area of this world-economy..." (18). "Capitalism was from the beginning an affair of the world-economy and not of nation-states" (19).
"There are today no socialist systems in the world-economy any more than there are feudal systems because there is only one world-system. It is a world-economy and it is by definition capitalist in form" (35).
Ch. 1: The Rise and Future Demise of the World Capitalist System: Concepts for Comparative Analysis:
Wallerstein begins by exploring the phenomena of the industrial revolution. Some argued that this was the penultimate state of human development. Others, most notably Marx, argued that there were yet further states through which society must develop. Wallerstein briefly questions whether or not it is possible to skip stages, and argues that, if we are living in a world system, a world economy, than stages cannot be skipped. If they could be, then they would not be stages.
"Leaving aside the now defunct minisystems, the only kind of social system is a world-system, which we define quite simply as a u8nit with a single division of labor and multiple cultural systems" (5).
The author makes a distinction between world economies and world empires as global systems.
"World empires are basically redistributive in economic form" (6).
"By a series of accidents...northwest Europe was better situated in the sixteenth century to diversify its agricultural specialization and add to it certain industries...than were other parts of Europe. Northwest Europe emerged as the core area of this world-economy..." (18). "Capitalism was from the beginning an affair of the world-economy and not of nation-states" (19).
"There are today no socialist systems in the world-economy any more than there are feudal systems because there is only one world-system. It is a world-economy and it is by definition capitalist in form" (35).
DiMaggio: Culture and Economy
P DiMaggio, “Culture and Economy,” The Handbook of Economic Sociology 27 (1994).
"The purpose of this chapter is to review critically research on the relationship between culture and economy. Most of us are accustomed to the view, assimilated by social research and theory, that economic relations influence ideas, worldviews, and symbols. That the reverse is true, that aspects of culture shape economic institutions and affairs, is less well understood and therefore richer in implication for economic sociology and for interdisciplinary conversations. Therefore I emphasize the impact of culture on the economy and only secondarily consider economic effects on culture" (27).
DiMaggio argues crucially two things: that every economic process can be seen as having crucial cultural aspects and also that these economic processes, in part because of their irreducible cultural components, must be seen granularly and not approached globally or with universal characteristics.
Culture can have many effects on economics, from defining interests (either constituting them or regulating them) and position the norms of market interaction.
If culture is so important, why don't we see it in economic analysis? DiMaggio argues that, in part, it is a matter of parsimony: economic analysis relies on parsimonious models and culture does not lend itself to such accounts.
The chapter then goes on in great detail to outline different cultural aspects to economic life. I skimmed.
"The purpose of this chapter is to review critically research on the relationship between culture and economy. Most of us are accustomed to the view, assimilated by social research and theory, that economic relations influence ideas, worldviews, and symbols. That the reverse is true, that aspects of culture shape economic institutions and affairs, is less well understood and therefore richer in implication for economic sociology and for interdisciplinary conversations. Therefore I emphasize the impact of culture on the economy and only secondarily consider economic effects on culture" (27).
DiMaggio argues crucially two things: that every economic process can be seen as having crucial cultural aspects and also that these economic processes, in part because of their irreducible cultural components, must be seen granularly and not approached globally or with universal characteristics.
Culture can have many effects on economics, from defining interests (either constituting them or regulating them) and position the norms of market interaction.
If culture is so important, why don't we see it in economic analysis? DiMaggio argues that, in part, it is a matter of parsimony: economic analysis relies on parsimonious models and culture does not lend itself to such accounts.
The chapter then goes on in great detail to outline different cultural aspects to economic life. I skimmed.
Swedberg: The New Battle of Methods
R Swedberg, The New battle of Methods. (Univ., Sociologiska institutionen, 1990).
"As the 'cold war' between economics and the other social sciences draws to a close, new scientific discoveries are being threatened by the single-minded vision of the economic imperialists" (33).
This article begins by wondering where the line will be drawn between the study of economics and other social science endeavors. "It is my contention that economic imperialism is threatening to set off a new 'battle of methods," and this is something that could have very negative consequences for economics..." (33). The author focuses on the Methodenstreit battle that came to represent early iterations of the tension between economics and other social sciences, specifically in battles between economists who argued for a more historical approach and those who worked with purely analytical approaches, most notably the marginal utility approach of Menger, etc. Webber is seen as bringing both camps together in a school of thought that brought both history and theory to bear on economic problems. This was called the socioeconomic school.
The author wonders if the rationalistic approaches of authors like Becker are not isolating economics once again. This isolation and attempt to explain everything using economic methodologies is referred to as "economic imperialism" by Swedberg (36).
"As the 'cold war' between economics and the other social sciences draws to a close, new scientific discoveries are being threatened by the single-minded vision of the economic imperialists" (33).
This article begins by wondering where the line will be drawn between the study of economics and other social science endeavors. "It is my contention that economic imperialism is threatening to set off a new 'battle of methods," and this is something that could have very negative consequences for economics..." (33). The author focuses on the Methodenstreit battle that came to represent early iterations of the tension between economics and other social sciences, specifically in battles between economists who argued for a more historical approach and those who worked with purely analytical approaches, most notably the marginal utility approach of Menger, etc. Webber is seen as bringing both camps together in a school of thought that brought both history and theory to bear on economic problems. This was called the socioeconomic school.
The author wonders if the rationalistic approaches of authors like Becker are not isolating economics once again. This isolation and attempt to explain everything using economic methodologies is referred to as "economic imperialism" by Swedberg (36).
Sunday, December 7, 2008
Spiro: The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets
DE Spiro, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets (Cornell University Press, 1999).
"The successful resolution of the disequilibrium in global balance of payments caused by the oil price revolution was one of the most remarkable achievements of the postwar era. Nearly 500 billion petrodollars were recycled from oil producers with a capital surplus to countries with trade deficits. A major threat to the international economic system was overcome, and the stability of that system was preserved. This book asks how the challenge of recycling petrodollars was successfully resolved" (1).
In the 70s and early 80s, OPEC nations raked in much money through oil exports and did not balance this income with a similar level of imports. In other words, they ran a budget surplus based on export income. The global balance of payments, therefore, required that other nations run a net deficit in total trade.
"Recycling petrodollars was the process by which the oil exporters' surplus financed deficits elsewhere in the world. Recycling challenged cooperation among the advanced industrialized democracies and the stability of the international economic system in the distribution of trade deficits...and in the distribution of capital" (1-2).
The deficit requirement led to a situation where cooperation was potentially tenable. Nations may try to protect themselves from these spending pressures through protectionism, however, this was sure to fail if all nations participated. Then, if nations did decide to shoulder part of the deficit, competition could intensify between a variety of nations vying for petrodollar supports for their deficit spending.\
"For the sake of the stability of the international monetary system, only one nation could have assumed the role of providing a key currency for recycling. Without such leadership, there was a strong possibility of mutually destructive competition for capital. Yet this form of leadership also carried with it the potential for exorbitant privileges. If the United States competed for capital unilaterally, and then made other nations come to terms for access to that capital, the result would be predatory leadership that was not in anyone's interest except that of the United States" (4).
A variety of contending explanations are offered for petrodollar recycling:
Market Forces:
"Neoclassical economists believe that the price mechanism...comes about automatically when individuals are permitted free access to supply and demand...When free markets are allowed to develop, international cooperation and harmony are automatic" (6).
Institutions:
"The problem that liberal institutionalism addresses is the difficulty nation-states have in reaching cooperative agreements, even when they share interests in cooperation" (8).
Hegemony:
"According to structural realists, stability in the international political economy is provided when one nation serves as a leader or 'hegemon'" (9).
Ch 2: Defining the Principles of Allocation:
"This chapter explores the problem American policy makers perceived in petrodollar recycling, the threats of that problem to international cooperation, and the meaning of that threat to the shared concept of international legitimacy. I examine the agreed-upon and legitimate roles of authoritative leadership and of international markets in distributing balance-of-payments financing...What was considered legitimate, and what constituted illegitimate intervention in the system" (19).
"A necessary precondition of the smooth functioning of international financial markets is the provision (by a hegemonic power) of the three goals of an international monetary order: confidence, liquidity, and a balance-of-payments adjustment mechanism" (21).
"The successful resolution of the disequilibrium in global balance of payments caused by the oil price revolution was one of the most remarkable achievements of the postwar era. Nearly 500 billion petrodollars were recycled from oil producers with a capital surplus to countries with trade deficits. A major threat to the international economic system was overcome, and the stability of that system was preserved. This book asks how the challenge of recycling petrodollars was successfully resolved" (1).
In the 70s and early 80s, OPEC nations raked in much money through oil exports and did not balance this income with a similar level of imports. In other words, they ran a budget surplus based on export income. The global balance of payments, therefore, required that other nations run a net deficit in total trade.
"Recycling petrodollars was the process by which the oil exporters' surplus financed deficits elsewhere in the world. Recycling challenged cooperation among the advanced industrialized democracies and the stability of the international economic system in the distribution of trade deficits...and in the distribution of capital" (1-2).
The deficit requirement led to a situation where cooperation was potentially tenable. Nations may try to protect themselves from these spending pressures through protectionism, however, this was sure to fail if all nations participated. Then, if nations did decide to shoulder part of the deficit, competition could intensify between a variety of nations vying for petrodollar supports for their deficit spending.\
"For the sake of the stability of the international monetary system, only one nation could have assumed the role of providing a key currency for recycling. Without such leadership, there was a strong possibility of mutually destructive competition for capital. Yet this form of leadership also carried with it the potential for exorbitant privileges. If the United States competed for capital unilaterally, and then made other nations come to terms for access to that capital, the result would be predatory leadership that was not in anyone's interest except that of the United States" (4).
A variety of contending explanations are offered for petrodollar recycling:
Market Forces:
"Neoclassical economists believe that the price mechanism...comes about automatically when individuals are permitted free access to supply and demand...When free markets are allowed to develop, international cooperation and harmony are automatic" (6).
Institutions:
"The problem that liberal institutionalism addresses is the difficulty nation-states have in reaching cooperative agreements, even when they share interests in cooperation" (8).
Hegemony:
"According to structural realists, stability in the international political economy is provided when one nation serves as a leader or 'hegemon'" (9).
Ch 2: Defining the Principles of Allocation:
"This chapter explores the problem American policy makers perceived in petrodollar recycling, the threats of that problem to international cooperation, and the meaning of that threat to the shared concept of international legitimacy. I examine the agreed-upon and legitimate roles of authoritative leadership and of international markets in distributing balance-of-payments financing...What was considered legitimate, and what constituted illegitimate intervention in the system" (19).
"A necessary precondition of the smooth functioning of international financial markets is the provision (by a hegemonic power) of the three goals of an international monetary order: confidence, liquidity, and a balance-of-payments adjustment mechanism" (21).
Soros: The Capitalist Threat
G Soros, “The Capitalist Threat,” Atlantic Monthly 279, no. 2 (1997): 45-58.
"Although I have made a fortune in the financial markets, I now fear that the untrammeled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our open and democratic society. The main enemy of the open society, I believe, is no longer the communist but the capitalist threat" (45).
The problem with communism and Nazism is that they both purport to have handles on the ultimate truth of society and the world. This simply is not possible because our experimentation on the world is necessarily over determined: "We live in the same universe that we are trying to understand, and our perceptions can influence the events in which we participate" (46).
"Insofar as there is a dominant belief in our society today, it is a belief in the magic of the marketplace. The doctrine of lassiez-faire capitalism holds that the common good is best served by the uninhibited pursuit of self-interest" (48).
"Although laissez-faire doctrines do not contradict the principles of the open society the way Marxims-Leninism or Nazi ideals of radical purity did, all these doctrines have an important feature in common: they all try to justify their claim to truth with an appeal to science" (48).
"Economic theory has managed to create an artificial world in which the participants' preferences and the opportunities confronting participants are independent of each other, and prices tend toward an equilibrium that brings two forces into balance. But in financial markets prices are not merely the passive reflection of independently given demand and supply; they also play an active role in shaping those preferences and opportunities" (50).
"By taking the conditions of supply and demand as given and declaring government intervention the ultimate evil, laissez-faire ideology has effectively banished income or wealth redistribution. I can agree that all attempts at redistribution interfere with the efficiency of the market, but it does not follow that no attempt should be made. The laissez-faire argument relies on the same tacit appeal to perfection as does communism" (52).
"The time is ripe for developing a conceptual framework based on our fallibility. Where reason has failed, faillibility may yet succeed" (58).
"Although I have made a fortune in the financial markets, I now fear that the untrammeled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our open and democratic society. The main enemy of the open society, I believe, is no longer the communist but the capitalist threat" (45).
The problem with communism and Nazism is that they both purport to have handles on the ultimate truth of society and the world. This simply is not possible because our experimentation on the world is necessarily over determined: "We live in the same universe that we are trying to understand, and our perceptions can influence the events in which we participate" (46).
"Insofar as there is a dominant belief in our society today, it is a belief in the magic of the marketplace. The doctrine of lassiez-faire capitalism holds that the common good is best served by the uninhibited pursuit of self-interest" (48).
"Although laissez-faire doctrines do not contradict the principles of the open society the way Marxims-Leninism or Nazi ideals of radical purity did, all these doctrines have an important feature in common: they all try to justify their claim to truth with an appeal to science" (48).
"Economic theory has managed to create an artificial world in which the participants' preferences and the opportunities confronting participants are independent of each other, and prices tend toward an equilibrium that brings two forces into balance. But in financial markets prices are not merely the passive reflection of independently given demand and supply; they also play an active role in shaping those preferences and opportunities" (50).
"By taking the conditions of supply and demand as given and declaring government intervention the ultimate evil, laissez-faire ideology has effectively banished income or wealth redistribution. I can agree that all attempts at redistribution interfere with the efficiency of the market, but it does not follow that no attempt should be made. The laissez-faire argument relies on the same tacit appeal to perfection as does communism" (52).
"The time is ripe for developing a conceptual framework based on our fallibility. Where reason has failed, faillibility may yet succeed" (58).
Rosenberg: Can Economic Theory Explain Everything?
A Rosenberg, “Can Economic Theory Explain Everything?,” Philosophy of the Social Sciences 9, no. 4 (1979): 509-27.
The article begins by wondering why homo economicus has made a comeback. It argues that this concept was previously not taken as being very seriously descriptive, and that it was merely an analytical tool for getting the theory of neo-classical behavior off of the ground. People didn't actually believe that agents were utility maximizing calculators; nor did they understand the actions of firms to take on characteristics that were driven entirely by strictly defined maximizing behavior. Homo economicus was a helpful way to make lower level assumptions that were able to aggregate up to more macro level economic behavior.
Rosenberg highlights Becker's contribution to the increasing importance of homo economicus. Becker's approach assumes maximizing behavior, relatively efficient markets and static preferences across culture and class. This argument is elegant and constructed to be widely explanatory. Rosenberg goes through the assumptions of the theory with an eye towards picking apart its logic.
The article is an excellent dissection of Becker's work, and whether or not it represents a truly economic explanation of all human behavior through models of rationality, choice and preferences. The author is skeptical that it meets any of the above goals, though he also contends that it is a remarkably accomplished piece that might make the case for homo economicus and the pervasive explanatory power of economics more thoroughly than others.
The article begins by wondering why homo economicus has made a comeback. It argues that this concept was previously not taken as being very seriously descriptive, and that it was merely an analytical tool for getting the theory of neo-classical behavior off of the ground. People didn't actually believe that agents were utility maximizing calculators; nor did they understand the actions of firms to take on characteristics that were driven entirely by strictly defined maximizing behavior. Homo economicus was a helpful way to make lower level assumptions that were able to aggregate up to more macro level economic behavior.
Rosenberg highlights Becker's contribution to the increasing importance of homo economicus. Becker's approach assumes maximizing behavior, relatively efficient markets and static preferences across culture and class. This argument is elegant and constructed to be widely explanatory. Rosenberg goes through the assumptions of the theory with an eye towards picking apart its logic.
The article is an excellent dissection of Becker's work, and whether or not it represents a truly economic explanation of all human behavior through models of rationality, choice and preferences. The author is skeptical that it meets any of the above goals, though he also contends that it is a remarkably accomplished piece that might make the case for homo economicus and the pervasive explanatory power of economics more thoroughly than others.
Robinson and Gallagher: The Imperialism of Free Trade
R Robinson and J Gallagher, “The Imperialism of Free Trade,” Economic History Review 6, no. 1 (1953): 1-15.
The authors begin by arguing that standard definitions and explorations of imperialism and empire are lacking, as they focus solely on formal rule. "The conventional interpretation of nineteenth-century empire continues to rest upon study of the formal empire alone, which is rather like judging the size and character of icebergs solely from the parts above the water line" (1).
One argument put forth and reinforced through example is that both standard, 19th century accounts of imperialism as well as radical critiques of imperialism reinforced one another in understanding imperialism as formal rule as opposed to less formal economic control.
"To sum up: the conventional view of Victorian imperial history leaves us with a series of awkward questions. In the age of 'anti-imperialism' why are all colonies retained? Why were so many more obtained? Why were so many new spheres of influence set up? Or again, in the age of 'imperialism', as we shall see later, why was there such reluctance to annex further territory? Why did decentralization, begun under the impetus of anti-imperialism, continue? In the age of laissez-faire why was the Indian economy developed by the state? These paradoxes are too radical to explain as merely exceptions which prove the rule or by concluding that imperial policy was largely irrational and inconsistent...The contradictions, it may be suspected, arise not from the historical reality but from the historians' approach to it. A hypothesis which fits more of the facts might be that of a fundamental continuity in British expansion throughout the nineteenth century" (5).
"Therefore, the historian who is seeking to find the deepest meaning of the expansion at the end of the nineteenth century should look not at the mere pegging out of claims in African jungles and bush, but at the successful exploitation of the empire, both formal and informal, which was then coming to fruition in India, in Latin American, in Canada and elsewhere" (15).
The authors begin by arguing that standard definitions and explorations of imperialism and empire are lacking, as they focus solely on formal rule. "The conventional interpretation of nineteenth-century empire continues to rest upon study of the formal empire alone, which is rather like judging the size and character of icebergs solely from the parts above the water line" (1).
One argument put forth and reinforced through example is that both standard, 19th century accounts of imperialism as well as radical critiques of imperialism reinforced one another in understanding imperialism as formal rule as opposed to less formal economic control.
"To sum up: the conventional view of Victorian imperial history leaves us with a series of awkward questions. In the age of 'anti-imperialism' why are all colonies retained? Why were so many more obtained? Why were so many new spheres of influence set up? Or again, in the age of 'imperialism', as we shall see later, why was there such reluctance to annex further territory? Why did decentralization, begun under the impetus of anti-imperialism, continue? In the age of laissez-faire why was the Indian economy developed by the state? These paradoxes are too radical to explain as merely exceptions which prove the rule or by concluding that imperial policy was largely irrational and inconsistent...The contradictions, it may be suspected, arise not from the historical reality but from the historians' approach to it. A hypothesis which fits more of the facts might be that of a fundamental continuity in British expansion throughout the nineteenth century" (5).
"Therefore, the historian who is seeking to find the deepest meaning of the expansion at the end of the nineteenth century should look not at the mere pegging out of claims in African jungles and bush, but at the successful exploitation of the empire, both formal and informal, which was then coming to fruition in India, in Latin American, in Canada and elsewhere" (15).
North: Structure and Change in Economic History
DC North, Structure and change in economic history (Norton).
Preface:
"The objective of this book is to provide a new framework for analyzing the economic past. A new framework is needed because the analytical tools used by economic historians have failed to come to grips with the central issues in economic history: explaining the institutional structure which underlies and accounts for performance of an economic system, and explaining changes in that structure" (xi).
Early theory of the history of markets focused on the gains made from trade through specialization and a clear division of labor. However, the author argues that those who constructed these decisive models did not take into consideration the costs that are related to this specialization. "These transaction costs underlie the institutions determining the structure of political-economic systems" (xi).
Ch 1: The Issues
North begins by highlighting the assumptions and structure of a neoclassical model to exploring economic "performance" (4). The author outlines the assumptions of the model, that individuals make maximizing decisions that involve opportunity costs within a milieu of scarcity, and that this maximizing behavior involves motivation for increasing the capital stock, which is, according to North, "..a function of the stocks of physical capital, human capital, natural resources, technology and knowledge..." (4). "Under these conditions the growth of total output and the growth of output per capita will be determined by the fraction of income saved...and the rate of growth of population. If the fraction of income saved produces a growth of output just equal to the growth of the population then per capita income growth will be zero. On the other hand, a higher rate of saving than of population growth will produce a positive rate of per capital income growth" (5).
This model is just that, a representation of reality. "First of all, the model assumes an incentive structure that will allow individuals to capture the returns to society of investment at these margins, that is, private and social returns are equated. Second, it assumes no diminishing returns to the acquisition and application of new knowledge because of the ability at constant costs to increase the stock of natural resources. Third, it assumes that there is a positive return to savings; fourth, that the private and social costs of having children are equated; and finally, coincidence between people's choices and the desired results" (5). North goes through these assumptions and explains how they are limiting, and at most harmful and at least obfuscating (6).
"Laying bare the assumptions of the neoclassical model points the direction that I shall take in this book. Explaining economic performance in history requires a theory of demographic change, a theory of the growth in the stock of knowledge, and a theory of institutions in order to fill out the gaps in the neoclassical model briefly delineated above...The primary focus of the study is upon a theory of institutions. The building blocks of this theory are: 1. a theory of property rights that describes the individual and group incentives in teh system; 2. a theory of the state, since it is the state that specifies and enforces property rights; 3. a theory of ideology that explains how different perceptions of reality affect the reaction of individuals to the changing 'objective' situation" (7-8).
North claims that there is one more large problem that economic historians have to deal with: that of change in history, or structural change.
In the standard neoclassical model, change is considered within an ideal-type. North gives the example of a society with a fixed amount of land that experiences population growth. This will drive short term food prices up, rents from land up, and the purchasing power of wages down. North contends that this is all well and good, but another story will likely unfold if institutions are taken into account, specifically, he highlights two issues that an institutional account focuses on: the structure of the economic system as well as a more nuanced understanding of individual rationality. The remainder of the chapter compares different approaches to understanding collective action.
Ch 2: An Introduction to the Structure of Economies:
The chapter begins by exploring a brief history of thought vis-a-vis the relationship between resource availability and population growth. "...the argument of this book is straight forward. 1. There have been two major discontinuities in the population/resource rates in history; I shall call them the First and Second Economic Revolutions. 2. Between these two revolutions there have been periods of Malthusian population pressure which have been overcome sometimes by physiological and social responses, and sometimes by alterations in the efficiency of economic institutions which have altered the resource base" (16).
Preface:
"The objective of this book is to provide a new framework for analyzing the economic past. A new framework is needed because the analytical tools used by economic historians have failed to come to grips with the central issues in economic history: explaining the institutional structure which underlies and accounts for performance of an economic system, and explaining changes in that structure" (xi).
Early theory of the history of markets focused on the gains made from trade through specialization and a clear division of labor. However, the author argues that those who constructed these decisive models did not take into consideration the costs that are related to this specialization. "These transaction costs underlie the institutions determining the structure of political-economic systems" (xi).
Ch 1: The Issues
North begins by highlighting the assumptions and structure of a neoclassical model to exploring economic "performance" (4). The author outlines the assumptions of the model, that individuals make maximizing decisions that involve opportunity costs within a milieu of scarcity, and that this maximizing behavior involves motivation for increasing the capital stock, which is, according to North, "..a function of the stocks of physical capital, human capital, natural resources, technology and knowledge..." (4). "Under these conditions the growth of total output and the growth of output per capita will be determined by the fraction of income saved...and the rate of growth of population. If the fraction of income saved produces a growth of output just equal to the growth of the population then per capita income growth will be zero. On the other hand, a higher rate of saving than of population growth will produce a positive rate of per capital income growth" (5).
This model is just that, a representation of reality. "First of all, the model assumes an incentive structure that will allow individuals to capture the returns to society of investment at these margins, that is, private and social returns are equated. Second, it assumes no diminishing returns to the acquisition and application of new knowledge because of the ability at constant costs to increase the stock of natural resources. Third, it assumes that there is a positive return to savings; fourth, that the private and social costs of having children are equated; and finally, coincidence between people's choices and the desired results" (5). North goes through these assumptions and explains how they are limiting, and at most harmful and at least obfuscating (6).
"Laying bare the assumptions of the neoclassical model points the direction that I shall take in this book. Explaining economic performance in history requires a theory of demographic change, a theory of the growth in the stock of knowledge, and a theory of institutions in order to fill out the gaps in the neoclassical model briefly delineated above...The primary focus of the study is upon a theory of institutions. The building blocks of this theory are: 1. a theory of property rights that describes the individual and group incentives in teh system; 2. a theory of the state, since it is the state that specifies and enforces property rights; 3. a theory of ideology that explains how different perceptions of reality affect the reaction of individuals to the changing 'objective' situation" (7-8).
North claims that there is one more large problem that economic historians have to deal with: that of change in history, or structural change.
In the standard neoclassical model, change is considered within an ideal-type. North gives the example of a society with a fixed amount of land that experiences population growth. This will drive short term food prices up, rents from land up, and the purchasing power of wages down. North contends that this is all well and good, but another story will likely unfold if institutions are taken into account, specifically, he highlights two issues that an institutional account focuses on: the structure of the economic system as well as a more nuanced understanding of individual rationality. The remainder of the chapter compares different approaches to understanding collective action.
Ch 2: An Introduction to the Structure of Economies:
The chapter begins by exploring a brief history of thought vis-a-vis the relationship between resource availability and population growth. "...the argument of this book is straight forward. 1. There have been two major discontinuities in the population/resource rates in history; I shall call them the First and Second Economic Revolutions. 2. Between these two revolutions there have been periods of Malthusian population pressure which have been overcome sometimes by physiological and social responses, and sometimes by alterations in the efficiency of economic institutions which have altered the resource base" (16).
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