Grabel, I. 2003. Averting crisis? Assessing measures to manage financial integration in emerging economies. Cambridge Journal of Economics 27, no. 3: 317-336.
Grabel highlights five distinct types of risk that are brought about when a country adopts neoliberal policy reforms. These are outlined in Table 1 (319) and are the following types of risk: currency, flight, fragility, contagion and sovereignty. Alternative policies are then outlined in Table 2 (322).
Showing posts with label Capitalism. Show all posts
Showing posts with label Capitalism. Show all posts
Tuesday, March 24, 2009
Friday, March 6, 2009
Wood: Empire of Capital
Wood, EM. 2003. Empire of Capital. Verso.
If one makes arguments of the nature that the US is an imperial body, they are routinely countered that the US does not control any territory. This is, of course, true. However, this misses the fact that there is an imperial force at work in the world, that it originates and derives power from the system hegemon and that it all operates within the capitalist system.
Wood highlights the driving power of capital to continually search for higher returns as being the ultimate source of global imperialism. This imperialism does not have the same characteristics as did previous imperialistic eras; no longer is there a search for territory or direct rule. Instead, this imperialism is a control of a different and more amorphous type: the logic of capitalism.
Military expansionism is another piece of this puzzle: the US in particular possesses massive amounts of military power, and this is used as the ultimate prop for regulatory frameworks that are necessary for the further promotion of capitalism.
If one makes arguments of the nature that the US is an imperial body, they are routinely countered that the US does not control any territory. This is, of course, true. However, this misses the fact that there is an imperial force at work in the world, that it originates and derives power from the system hegemon and that it all operates within the capitalist system.
Wood highlights the driving power of capital to continually search for higher returns as being the ultimate source of global imperialism. This imperialism does not have the same characteristics as did previous imperialistic eras; no longer is there a search for territory or direct rule. Instead, this imperialism is a control of a different and more amorphous type: the logic of capitalism.
Military expansionism is another piece of this puzzle: the US in particular possesses massive amounts of military power, and this is used as the ultimate prop for regulatory frameworks that are necessary for the further promotion of capitalism.
Tuesday, January 13, 2009
Freeman: Single Peaked Vs. Diversified Capitalism
FREEMAN, RB. 2000. Single Peaked Vs. Diversified Capitalism: The Relation Between Economic Institutions and Outcomes. NBER Working Paper.
From the abstract: "Capitalist countries have historically had quite different labour market institutions and social policies. Do these differences produce sufficiently different economic outcomes to identify a single peak set of institutions? This paper shows that: 1. Labour market institutions have large effects on distribution, but modest hard-to-uncover effects on efficiency. 2. Institutional diversity is increasing among advanced countries, as measured by the percentage of workers covered by collective bargaining. 3. The case for the US having the institutions for peak economy status rests on its 1990s full employment experience, which arguably counter balances its high level of economic inequality. The historical pattern whereby some capitalist countries do better than others in some periods...then run into problems is more consonant with the view that capitalism permits national differences in institutions to persist than with the view that all economies must converge to a single institutional structure" (abstract).
"The labour market is potentially the most idiosyncratic market in advanced capitalism" (1).
The single peaked model of capitalism would argue that it would be possible for the US to achieve a full employment status with the right kind of labor market institution. A Diverse Capitalism approach would understand this to be problematic. In a diverse capitalism approach, "To move from one peak to a higher one or to the global optimum req1uires that the economy descend from the local peak before it ascends the higher one" (3). "The expense of changing institutions permits variety in the institutional environment" (3). There are a variety of different "landscapes", ie., the relationship between a kind of institutional labor market relationship and a certain kind of desired output. These provide an opportunity for comparative analysis. There is also a normative element to this analysis: it is possible to analyze the variety among countries by different metrics, with obviously different results.
There is then a various analysis of different forms in which a capitalist economy can form, as well as an exploration of whether or not the US represents a "Peak Economy".
The paper ends with three questions posed. As a summary:
Do different labor institutions and organization affect economic performance in different ways? Yes. Not in an absolute deterministic way, but yes.
Will distinct characteristics between institutions continue as the global economy becomes more integrated? Yes. Because institutions become embedded, because values differ and because different institutions do not preclude the same output.
Does the US represent a "peak economy"? No.
UPDATE:
There is a great variety in different capitalist countries in their institutional structure and consistency. From the US to Japan to Germany, three very successful capitalist countries operate with three very different kinds of institutional milieus. This study examines the claim that there is only one form of institutional structure and consistency that is agreeable to the interests of global finance and capital. This is identified as the single peaked verses diverse capitalist thesis.
The reason that there can be a multitude of structures within capitalist organization is that there are large costs associated with transitioning from one institutional structure to another.
If the single-peaked hypothesis was correct, it would be possible to note a few things: firstly, there would be one clear set of institutions that could be emulated; these should persist over time; countries who fall around the peak should be able to conform to these institutions and achieve gains in growth, and there should be long-term global convergence towards homogenous institutions of capitalism.
From the abstract: "Capitalist countries have historically had quite different labour market institutions and social policies. Do these differences produce sufficiently different economic outcomes to identify a single peak set of institutions? This paper shows that: 1. Labour market institutions have large effects on distribution, but modest hard-to-uncover effects on efficiency. 2. Institutional diversity is increasing among advanced countries, as measured by the percentage of workers covered by collective bargaining. 3. The case for the US having the institutions for peak economy status rests on its 1990s full employment experience, which arguably counter balances its high level of economic inequality. The historical pattern whereby some capitalist countries do better than others in some periods...then run into problems is more consonant with the view that capitalism permits national differences in institutions to persist than with the view that all economies must converge to a single institutional structure" (abstract).
"The labour market is potentially the most idiosyncratic market in advanced capitalism" (1).
The single peaked model of capitalism would argue that it would be possible for the US to achieve a full employment status with the right kind of labor market institution. A Diverse Capitalism approach would understand this to be problematic. In a diverse capitalism approach, "To move from one peak to a higher one or to the global optimum req1uires that the economy descend from the local peak before it ascends the higher one" (3). "The expense of changing institutions permits variety in the institutional environment" (3). There are a variety of different "landscapes", ie., the relationship between a kind of institutional labor market relationship and a certain kind of desired output. These provide an opportunity for comparative analysis. There is also a normative element to this analysis: it is possible to analyze the variety among countries by different metrics, with obviously different results.
There is then a various analysis of different forms in which a capitalist economy can form, as well as an exploration of whether or not the US represents a "Peak Economy".
The paper ends with three questions posed. As a summary:
Do different labor institutions and organization affect economic performance in different ways? Yes. Not in an absolute deterministic way, but yes.
Will distinct characteristics between institutions continue as the global economy becomes more integrated? Yes. Because institutions become embedded, because values differ and because different institutions do not preclude the same output.
Does the US represent a "peak economy"? No.
UPDATE:
There is a great variety in different capitalist countries in their institutional structure and consistency. From the US to Japan to Germany, three very successful capitalist countries operate with three very different kinds of institutional milieus. This study examines the claim that there is only one form of institutional structure and consistency that is agreeable to the interests of global finance and capital. This is identified as the single peaked verses diverse capitalist thesis.
The reason that there can be a multitude of structures within capitalist organization is that there are large costs associated with transitioning from one institutional structure to another.
If the single-peaked hypothesis was correct, it would be possible to note a few things: firstly, there would be one clear set of institutions that could be emulated; these should persist over time; countries who fall around the peak should be able to conform to these institutions and achieve gains in growth, and there should be long-term global convergence towards homogenous institutions of capitalism.
Thursday, January 1, 2009
Frieden: Will Global Capitalism Fail Again?
Frieden, J. 2006. Will Global Capitalism Fall Again? Presentation for BRUEGEL's Essay and Lecture Series. Brussels, June.
"Over the past thirty years, the world economy has become increasingly integrated. Despite continued conflict over globalization, most people--especially in the industrialized nations--appear to accept that an international system in which goods and capital can move quite freely among countries has become the normal state of affairs, and is likely to continue for the foreseeable future" (7).
However, while there is agreement that a certain kind of phenomena is occurring, there is no consensus as to whether or not this change is occurring for the better. Many look back to the most notable previous era of globalization, that occurring in the years previous to 1914, and note that the system produced stable economic growth, high degrees of convergence over a great many of years. Understanding if our current economic system will fail requires that we possibly explore how the previous system failed.
"Why could the first era of global capitalism not be restored? It was not for lack of trying. For twenty years after World War I ended, statesmen and diplomats engaged in round after round of conferences and consultations. The nations of the world signed treaties, created international organizations, and committed themselves to new obligations, in unprecedented measure. Yet nothing seemed to work" (11).
"The underlying sources of weakness in the international economic order after 1918 were political" (11).
"International political problems introduced great instability into the inter-war political economy, but I would focus attention on an even more important source of conflict: domestic politics. For in addition to international political conditions conducive to a functioning, integrated international economy, there are also domestic political requisites. And in my view, the principal problems that affected and infected the international economy in the inter-war period were domestic and political" (12).
"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. They agreed on requiring the domestic economy to pay the price necessary to realize the benefits of integration into the world economy. And what was that price? What did it mean for the national economy to, as they said, 'take the strain?' Typically it meant allowing, or forcing, prices, profits, and wages to drop in response to adverse terms of trade or other shocks" (12).
Domestic politics did not represent such a constraint on elites controlling the flexibility of prices, wages in the interest of global economic stability. This was mainly because countries were either only slightly democratic or not democratic, and that organized labor had yet to establish itself firmly.
"To summaries 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. Keynes drew his conclusions early on: it was, he said exceedingly dangerous 'to apply the principles of an economics, which was worked out on the hypothesis of laissez-faire and free competition, to a society which is rapidly abandoning these hypotheses'" (14).
"Despite the warnings from Keynes and others, when difficulties arose in the 1920s, and especially in the 1930s, there was initially little or no political viable response" (15).
"The lessons of history are rarely simple. But there are some things we can learn from the experiences of the past century, especially from how the first era of global capitalism fell and how it rose again. In the aftermath of the age of globalization that ended in 1914, attempts to restore and sustain the system led to a resounding failure and a terrible backlash. While that backlash may not have been justifiable, it was at least understandable" (30).
"Compromises between globalism and nationalism, and between social reforms and markets, permitted the Western economies to grow rapidly and stably after World War II...Today capitalism is at least as global as it was in the decades before 1914, which raises the specter of a return to the failures that ended that earlier episode of global capitalism. And so the central challenge of our portion of the twenty-first century will be to avoid a repetition of past tragedies, of both sorts...This will require a delicate balancing act...The first part of it is to build and sustain a functioning, integrated, international political and economic order...The second part of the balancing act is to create and sustain domestic political and economic conditions that allow enduring support for international commitments" (31).
"Over the past thirty years, the world economy has become increasingly integrated. Despite continued conflict over globalization, most people--especially in the industrialized nations--appear to accept that an international system in which goods and capital can move quite freely among countries has become the normal state of affairs, and is likely to continue for the foreseeable future" (7).
However, while there is agreement that a certain kind of phenomena is occurring, there is no consensus as to whether or not this change is occurring for the better. Many look back to the most notable previous era of globalization, that occurring in the years previous to 1914, and note that the system produced stable economic growth, high degrees of convergence over a great many of years. Understanding if our current economic system will fail requires that we possibly explore how the previous system failed.
"Why could the first era of global capitalism not be restored? It was not for lack of trying. For twenty years after World War I ended, statesmen and diplomats engaged in round after round of conferences and consultations. The nations of the world signed treaties, created international organizations, and committed themselves to new obligations, in unprecedented measure. Yet nothing seemed to work" (11).
"The underlying sources of weakness in the international economic order after 1918 were political" (11).
"International political problems introduced great instability into the inter-war political economy, but I would focus attention on an even more important source of conflict: domestic politics. For in addition to international political conditions conducive to a functioning, integrated international economy, there are also domestic political requisites. And in my view, the principal problems that affected and infected the international economy in the inter-war period were domestic and political" (12).
"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. They agreed on requiring the domestic economy to pay the price necessary to realize the benefits of integration into the world economy. And what was that price? What did it mean for the national economy to, as they said, 'take the strain?' Typically it meant allowing, or forcing, prices, profits, and wages to drop in response to adverse terms of trade or other shocks" (12).
Domestic politics did not represent such a constraint on elites controlling the flexibility of prices, wages in the interest of global economic stability. This was mainly because countries were either only slightly democratic or not democratic, and that organized labor had yet to establish itself firmly.
"To summaries 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. Keynes drew his conclusions early on: it was, he said exceedingly dangerous 'to apply the principles of an economics, which was worked out on the hypothesis of laissez-faire and free competition, to a society which is rapidly abandoning these hypotheses'" (14).
"Despite the warnings from Keynes and others, when difficulties arose in the 1920s, and especially in the 1930s, there was initially little or no political viable response" (15).
"The lessons of history are rarely simple. But there are some things we can learn from the experiences of the past century, especially from how the first era of global capitalism fell and how it rose again. In the aftermath of the age of globalization that ended in 1914, attempts to restore and sustain the system led to a resounding failure and a terrible backlash. While that backlash may not have been justifiable, it was at least understandable" (30).
"Compromises between globalism and nationalism, and between social reforms and markets, permitted the Western economies to grow rapidly and stably after World War II...Today capitalism is at least as global as it was in the decades before 1914, which raises the specter of a return to the failures that ended that earlier episode of global capitalism. And so the central challenge of our portion of the twenty-first century will be to avoid a repetition of past tragedies, of both sorts...This will require a delicate balancing act...The first part of it is to build and sustain a functioning, integrated, international political and economic order...The second part of the balancing act is to create and sustain domestic political and economic conditions that allow enduring support for international commitments" (31).
Monday, December 15, 2008
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 7, 2008
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).
Thursday, December 4, 2008
Moran: Foreign Expansion as an Institutional Necessity for US Corporate Capitalism
Moran, “Foreign Expansion as an Institutional Necessity for US Corporate Capitalism: The Search for a Radical Model,” World Politics 25, no. 3 (1973): 369-386.
"Is foreign economic expansion in some sense an 'institutional necessity' for corporate capitalism in the United States? Is there something inherent in the internal dynamics of American capitalism that creates such strong pressures for foreign private investment that the US Government must consider the creation and preservation of an international system that facilitates such expansion to be among our most vital national interests? What yardstick can measure the opportunities, the needs, the necessity of investing abroad, or the cost and risk if the option of foreign private investment is threatened?" (369).
Moran explains briefly theories of imperialism stemming from developed countries' perceived inability to reabsorb surplus value or surplus capital. It is argued that these countries must absorb this excess production through conspicuous consumption, military growth or foreign investment. Moran argues that developed countries do not, in fact, have a hard time absorbing extra surplus, as they are the most attractive for capital investment. What about reliance on investment in under developed countries because of raw material dependencies? Moran also argues that the US could rely on domestic production of raw materials but does not. "...direct economic penetration to secure natural resources is not a compelling need for the functioning of corporate capitalism in the United States" (370).
"...foreign investment has always been and will continue to be a 'convenience' more than a 'necessity,' and foreign economic expansion is not an 'institutional need' of US corporate capitalism" (371).
"In this paper I will argue that an emphasis on the stake that multinational corporations have in direct foreign expansion is more plausible than the models of surplus capital" (371). "Concentrating only on US manufacturing companies, I will show why the pressures to invest abroad are much stronger and the costs of giving up the foreign option are much higher in corporate decision-making than conventionally understood by either neoclassical or neo-0Marxist analysis" (372).
"The study of corporate growth in the United States shows that economic expansion abroad results from the struggle to expand and defend the capacity to exact oligopoly rents" (379).
"The study of the product cycle and the growth of the firm explains why the largest, the fastest growing, and the most technologically advanced American manufacturing companies have been under intense pressures to expand into other countries, both developed and underdeveloped. This intensity is far greater than is revealed by conventional figures on relative profitability; it is an intensity that has indeed been intrinsic to the dynamics of unstable imperfect competition in the United States" (385).
"But there is something fundamental to American corporate capitalism...that creates strong pressures for foreign investment. As long as American corporations exercise their virtues of inventiveness and aggressiveness, their government will feel intense, even frantic pressures to create and preserve and international system that facilitates foreign economic expansion" (386).
"Is foreign economic expansion in some sense an 'institutional necessity' for corporate capitalism in the United States? Is there something inherent in the internal dynamics of American capitalism that creates such strong pressures for foreign private investment that the US Government must consider the creation and preservation of an international system that facilitates such expansion to be among our most vital national interests? What yardstick can measure the opportunities, the needs, the necessity of investing abroad, or the cost and risk if the option of foreign private investment is threatened?" (369).
Moran explains briefly theories of imperialism stemming from developed countries' perceived inability to reabsorb surplus value or surplus capital. It is argued that these countries must absorb this excess production through conspicuous consumption, military growth or foreign investment. Moran argues that developed countries do not, in fact, have a hard time absorbing extra surplus, as they are the most attractive for capital investment. What about reliance on investment in under developed countries because of raw material dependencies? Moran also argues that the US could rely on domestic production of raw materials but does not. "...direct economic penetration to secure natural resources is not a compelling need for the functioning of corporate capitalism in the United States" (370).
"...foreign investment has always been and will continue to be a 'convenience' more than a 'necessity,' and foreign economic expansion is not an 'institutional need' of US corporate capitalism" (371).
"In this paper I will argue that an emphasis on the stake that multinational corporations have in direct foreign expansion is more plausible than the models of surplus capital" (371). "Concentrating only on US manufacturing companies, I will show why the pressures to invest abroad are much stronger and the costs of giving up the foreign option are much higher in corporate decision-making than conventionally understood by either neoclassical or neo-0Marxist analysis" (372).
"The study of corporate growth in the United States shows that economic expansion abroad results from the struggle to expand and defend the capacity to exact oligopoly rents" (379).
"The study of the product cycle and the growth of the firm explains why the largest, the fastest growing, and the most technologically advanced American manufacturing companies have been under intense pressures to expand into other countries, both developed and underdeveloped. This intensity is far greater than is revealed by conventional figures on relative profitability; it is an intensity that has indeed been intrinsic to the dynamics of unstable imperfect competition in the United States" (385).
"But there is something fundamental to American corporate capitalism...that creates strong pressures for foreign investment. As long as American corporations exercise their virtues of inventiveness and aggressiveness, their government will feel intense, even frantic pressures to create and preserve and international system that facilitates foreign economic expansion" (386).
Wednesday, November 26, 2008
Gill and Law: Global Hegemony and the Structural Power of Capital
S Gill and D Law, “Global Hegemony and the Structural Power of Capital,” Global Governance: Critical Concepts in Political Science 33, no. 4 (2004): 475-499.
"In this chapter we distinguish between direct and structural forms of power. We relate these to the concepts of hegemony, historic bloc and the 'extended' state, in our analysis of present-day capitalism. In so doing we seek to meet two major challenges. The first is to integrate better 'domestic' and 'international' levels of analysis. The second, related challenge, is to theorize the complementary and contradictory relations between the power of states and the power of capital" (93).
The authors start by distinguishing between the realist concept of hegemony and the Gramscian concept. The former argues that there is direct control of one over another, typically one state over another. The later concept argues that there is a set of structural forces that can exist that can create order. "A hegemonic order was one where consent, rather than coercion, primarily characterized the relations between classes, and between the state and civil society" (93).
"Our contribution here mainly concerns the theory of power. We assume that theories of power and hegemony must subsume both normative and material, structural and existential...dimensions of social relations. Part of the richness of Gramschi's concepts is that they combine these elements. Because of this, they offer clues for overcoming the gulf between structure and agency. We believe a possible key to the resolution of the structure-action problem in social theory more generally, and international relations theory in particular may be through the development of mediating concepts such as structural power and historical bloc" (94).3
We may be moving towards a post-Fordian conception of production, which is obviously global. Therefore, we must look at hegemony, blocs and the state from the perspective of the global. This involves a revolution in the social forms of accumulation. This has been referred to as a regime of accumulation. "A regime therefore broadly encompasses the forms of socio-economic reproduction which together constitute the conditions of existence of economic development in a particular historical period of epoch. As such there may be different regimes of accumulation...coexisting at any point in time" (95).
The post-WWII regime of accumulation was very successful at promoting growth in industrialized countries for four reasons. Firstly, the core (the US) was stable and secure. Secondly, the US was able to sustain growth through demand created through deficits and militarism. Thirdly, the system was sustained through "embedded liberalism". Finally, inexpensive inputs, especially oil.
"In a structural sense, what was occurring in the post-war period was the emergence of a globally integrated economy whilst political regulation at the domestic level was becoming ever-more comprehensive" (97).
The authors put emphasis on the emergence of capital markets as a crucial aspect of the establishment of capitalism as a socio-economic system. They expand on this by offering myriad examples of the power of international oligopolistic capital.
"At the international level, the bargaining power of transnational corporations would be reduced if most national governments were able to co-ordinate their regulations and financial concessions. however, even supposedly like-minded, and wealthy countries...like the EC have not been able to seriously discuss, let alone achieve this goal" (106).
"In this chapter we distinguish between direct and structural forms of power. We relate these to the concepts of hegemony, historic bloc and the 'extended' state, in our analysis of present-day capitalism. In so doing we seek to meet two major challenges. The first is to integrate better 'domestic' and 'international' levels of analysis. The second, related challenge, is to theorize the complementary and contradictory relations between the power of states and the power of capital" (93).
The authors start by distinguishing between the realist concept of hegemony and the Gramscian concept. The former argues that there is direct control of one over another, typically one state over another. The later concept argues that there is a set of structural forces that can exist that can create order. "A hegemonic order was one where consent, rather than coercion, primarily characterized the relations between classes, and between the state and civil society" (93).
"Our contribution here mainly concerns the theory of power. We assume that theories of power and hegemony must subsume both normative and material, structural and existential...dimensions of social relations. Part of the richness of Gramschi's concepts is that they combine these elements. Because of this, they offer clues for overcoming the gulf between structure and agency. We believe a possible key to the resolution of the structure-action problem in social theory more generally, and international relations theory in particular may be through the development of mediating concepts such as structural power and historical bloc" (94).3
We may be moving towards a post-Fordian conception of production, which is obviously global. Therefore, we must look at hegemony, blocs and the state from the perspective of the global. This involves a revolution in the social forms of accumulation. This has been referred to as a regime of accumulation. "A regime therefore broadly encompasses the forms of socio-economic reproduction which together constitute the conditions of existence of economic development in a particular historical period of epoch. As such there may be different regimes of accumulation...coexisting at any point in time" (95).
The post-WWII regime of accumulation was very successful at promoting growth in industrialized countries for four reasons. Firstly, the core (the US) was stable and secure. Secondly, the US was able to sustain growth through demand created through deficits and militarism. Thirdly, the system was sustained through "embedded liberalism". Finally, inexpensive inputs, especially oil.
"In a structural sense, what was occurring in the post-war period was the emergence of a globally integrated economy whilst political regulation at the domestic level was becoming ever-more comprehensive" (97).
The authors put emphasis on the emergence of capital markets as a crucial aspect of the establishment of capitalism as a socio-economic system. They expand on this by offering myriad examples of the power of international oligopolistic capital.
"At the international level, the bargaining power of transnational corporations would be reduced if most national governments were able to co-ordinate their regulations and financial concessions. however, even supposedly like-minded, and wealthy countries...like the EC have not been able to seriously discuss, let alone achieve this goal" (106).
Friday, October 10, 2008
Gibson-Graham: The End of Capitalism (as we knew it)
Gibson-Graham, J., The end of capitalism (as we knew it), Blackwell Publishers.
Gibson and Graham provide a post-structural, feminist critique of orthodox Marxism. They conclude that Marxists have actually hurt their chances of overthrowing capitalism because they have engaged in a discourse that allows capitalism to be something larger, stronger and more intimidating that it actually is. The capitalist beast is not as imposing a beast as Marxism has painted it out to be. “Marxism has produced a discourse of Capitalism that ostensibly delineates as object of transformative class politics but that operates more powerfully to discourage and marginalize projects of class transformation…Marxism has contributed to the socialist absence through the very way in which it has theorized the capitalist presence” (Gibson and Graham 1997:252) Gibson and Graham provide a scathing critique of Marxist interpretation of globalization. These two authors fall into the Held and McGrew globalization skeptics position as they do not believe that the “penetration” or “immanent penetration” of capital into every corner of the earth is a reality, or that if such a reality did start to occur, that it could not be stopped.
They compare the “rape-script” with the “globalization-script” in one of their more striking passages. The “rape-script” allows all of us to see women as being rape-able and men as being possible rapists. Gibson and Graham take parts of the rape-script from Sharon Marcus where she, “challenges the inevitability of the claim that rape is one of the ‘real, clear facts of women’s lives’” (Gibson Graham 1997:121). We, by extension, are to challenge the reality that globalization/capitalism is one of the real, clear facts about the existence of citizens throughout the world.
This understanding of how the discourse surrounding rape has reinforced the idea that women are rape-able, open and vulnerable while men are hard, strong and potential violators helped to shape Gibson and Graham’s ideas surrounding globalization. The penetrating power of globalization has become, in many circles, an inevitability. Global capital will permeate and enter into any of the open, vulnerable developing countries. This has created a discourse that speaks us and shapes us; the globalization-script, and the eventualities it implies, may not be a reality. We are asked by the authors to reevaluate the potential for community based exchange that do not reinforce the dominant, globalization-script.
We must not become the victim of capitalism, we must make ourselves powerful. Even if our power is not initially evident, it becomes something greater as we reclaim the dialogue and shape it to our ends. This is how we make globalization lose its erection. This is how we create a world that is not dominated by one homogenizing economic system and dialogue.
Gibson and Graham then encourage us to go out and foster community based economic systems that value people. We are not to become subjects in the dominant discourse, but rather work on being stewards of our rhetoric and speak ourselves into a new discourse that does not build capitalism up into something that it is not. Gibson and Graham see globalization not as a real phenomenon that is inevitably creating one economic playing field where we will all gather. It is, on the other hand, a real phenomenon with limited scope whose real size has been artificially, and perversely, enlarged through an inaccurate discourse. The power to reshape our world does not lie in the hands of a few elite capitalists shaping the world in the interest of capital mobility, or politicians shaping the world in the interests of national capital or of global stability. The power to shape the world lies in the hands of individuals who are stewards of their rhetoric.
Gibson and Graham provide a post-structural, feminist critique of orthodox Marxism. They conclude that Marxists have actually hurt their chances of overthrowing capitalism because they have engaged in a discourse that allows capitalism to be something larger, stronger and more intimidating that it actually is. The capitalist beast is not as imposing a beast as Marxism has painted it out to be. “Marxism has produced a discourse of Capitalism that ostensibly delineates as object of transformative class politics but that operates more powerfully to discourage and marginalize projects of class transformation…Marxism has contributed to the socialist absence through the very way in which it has theorized the capitalist presence” (Gibson and Graham 1997:252) Gibson and Graham provide a scathing critique of Marxist interpretation of globalization. These two authors fall into the Held and McGrew globalization skeptics position as they do not believe that the “penetration” or “immanent penetration” of capital into every corner of the earth is a reality, or that if such a reality did start to occur, that it could not be stopped.
They compare the “rape-script” with the “globalization-script” in one of their more striking passages. The “rape-script” allows all of us to see women as being rape-able and men as being possible rapists. Gibson and Graham take parts of the rape-script from Sharon Marcus where she, “challenges the inevitability of the claim that rape is one of the ‘real, clear facts of women’s lives’” (Gibson Graham 1997:121). We, by extension, are to challenge the reality that globalization/capitalism is one of the real, clear facts about the existence of citizens throughout the world.
This understanding of how the discourse surrounding rape has reinforced the idea that women are rape-able, open and vulnerable while men are hard, strong and potential violators helped to shape Gibson and Graham’s ideas surrounding globalization. The penetrating power of globalization has become, in many circles, an inevitability. Global capital will permeate and enter into any of the open, vulnerable developing countries. This has created a discourse that speaks us and shapes us; the globalization-script, and the eventualities it implies, may not be a reality. We are asked by the authors to reevaluate the potential for community based exchange that do not reinforce the dominant, globalization-script.
We must not become the victim of capitalism, we must make ourselves powerful. Even if our power is not initially evident, it becomes something greater as we reclaim the dialogue and shape it to our ends. This is how we make globalization lose its erection. This is how we create a world that is not dominated by one homogenizing economic system and dialogue.
Gibson and Graham then encourage us to go out and foster community based economic systems that value people. We are not to become subjects in the dominant discourse, but rather work on being stewards of our rhetoric and speak ourselves into a new discourse that does not build capitalism up into something that it is not. Gibson and Graham see globalization not as a real phenomenon that is inevitably creating one economic playing field where we will all gather. It is, on the other hand, a real phenomenon with limited scope whose real size has been artificially, and perversely, enlarged through an inaccurate discourse. The power to reshape our world does not lie in the hands of a few elite capitalists shaping the world in the interest of capital mobility, or politicians shaping the world in the interests of national capital or of global stability. The power to shape the world lies in the hands of individuals who are stewards of their rhetoric.
van der Pijl: Transnational Classes and International Relations
van der Pijl, K., 1998. Transnational Classes and International Relations, Routledge.
Van der Pijl provides a Marxist cut on globalization and capital accumulation. He looks at how the structure of international capitalism has grown and changed over time. He begins by looking at original accumulation and moves on through liberal internationalism, state monopoly tendency, corporate liberalism eventually landing us in our current state of neo-liberal organization. In this understanding of globalization, we can see that fractions of capital eventually create class fractions with one fraction being the hegemonic system of structuring and organizing global capitalism due to contingent circumstances.
Van der Pijl analyses systems of capitalism using two tools: commodification and socialization. The commodification of things is what originally created classes and is what shapes capitalism. In original accumulation, the earliest form of capitalism, van der Pijl points out that, “the primordial process in which capital itself crystallizes as a quasi-independent social force, imposing its discipline on a pre-existing social infrastructure by penetrating and transforming it, is commodification…This implies that the use value aspect of an element or item of social production…has to be subordinated to the exchange value aspect” (van der Pijl 1998:37). This initial subordination of use value to exchange value is the very first movement towards a globalized world.
Van der Pijl would claim that commodification has become ubiquitous in our society. When coupled with fetishism, defined as the phenomenon in which modern society resembles the most primitive community and the ascription of animate spirit and magical powers to dead objects, commodification becomes a divine tool allowing people to justify and ethically adjudicate between decisions using the mana and taboo of the market (van der Pijl 1998 11-4). This is a world where everything is either already commodified or in the process of being commodified, a world where everything is a product and every decisions comes from the deified market. This creates an atomized society.
This process of commodification also creates classes. Van der Pijl notes that classes form from exploitative social relationships. With the increasing intensity of commodification, there are more opportunities to create wealth. Through these increased opportunities to create wealth, there are also increased opportunities to exploit workers through the appropriation of unpaid labor. This process of increasing ability to exploit workers and appropriate unpaid labor is a class producing process.
The ameliorating response to this atomized society is socialization . This is defined as, “the planned or otherwise normatively unified interdependence of functionally divided social activity” (van der Pijl 1998:138). This planned activity must be carried out to reunite society again after the commodification of everything. Van der Pijl points out that the result of commodifying, land, labor and money, the three most difficult things to commodify, a process of socialization must occur to bring unity, calm and balance to society. Van der Pijl sees the process of socialization to be undertaken by a group of people that he refers to as the cadres. These people seem to fulfill two functions in van der Pijl’s account: they are the technicians who run the increasingly complicated process of capitalist production and those who, from a position of elite authority (though under the authority of the capitalist), control the mitigating processes of socialization.
Van der Pijl’s interpretation of the increasing speed and intensity of global interconnection has to do with his fractions of capital creating class fractions. “It is our thesis that the capacity of fractions of capital to appropriate a share of the total mass of profits shapes the sense of identity of a particular segment of collective capital with the momentary functioning of the system, short-circuiting the general interest with the special one” (van der Pijl 1998:58). When this general interest is short-circuited with a special one, a hegemonic economic structure emerges. This is taken, in van der Pijl’s example, to then be represented in the Lockean heartland. However, there are also contender states that question the legitimacy and challenging the preeminence of the hegemonic states. This dance between the hegemonic and contender states is represented in what van der Pijl calls a natural tendency, “towards global unification represented by capital, and by the fact that every concrete state/society complex is ultimately held together by a specific structure of power and authority mediating its relations with other such complexes” (van der Pijl 1998:64).
The Lockean heartland, representing the hegemonic economic structure of the time, is not entirely contingent or deterministic. Van der Pijl says that, “the internationalization of capital, then, historically does not evolve as an economic process in a fixed landscape of sovereign states. It is an aspect of a process of expansion of the state/society complex in which capital crystallized under what proved to be the most favorable conditions” (van der Pijl 1998:83 emphasis added). Whatever the most favorable conditions for capital at the time were contingent on the prevailing fraction of capital. The deterministic aspect of this function is that capital will always flourish and be attracted to the most favorable conditions for its reproduction.
The van der Pijl view of increasing speed and intensity of global interconnection, or globalization, can be seen as a mixture of determistic and contingent factors. Fractions of capital create class fractions which end up controlling hegemonic economic regimes and thus Lockean states. Their control is contingent on whatever fraction of capital is hegemonic at the time. Their control is also determistic because the logic of capital accumulation is such that it will always search out increasingly complex forms of exploitation and appropriation of unpaid labor, thus, in van der Pijl’s model, creating class distinction and class conflict. Also, the determistic process of commodification leading to fetishism creates the need for the quasi-contingent process of socialization undertaken by the cadre class. This cadre class is the ultimate protector and technician working for the global capitalist order, but also, in the eyes of van der Pijl, the class that can eventually lead us beyond the natural contradictions that occur within a global system of capitalism.
Van der Pijl provides a Marxist cut on globalization and capital accumulation. He looks at how the structure of international capitalism has grown and changed over time. He begins by looking at original accumulation and moves on through liberal internationalism, state monopoly tendency, corporate liberalism eventually landing us in our current state of neo-liberal organization. In this understanding of globalization, we can see that fractions of capital eventually create class fractions with one fraction being the hegemonic system of structuring and organizing global capitalism due to contingent circumstances.
Van der Pijl analyses systems of capitalism using two tools: commodification and socialization. The commodification of things is what originally created classes and is what shapes capitalism. In original accumulation, the earliest form of capitalism, van der Pijl points out that, “the primordial process in which capital itself crystallizes as a quasi-independent social force, imposing its discipline on a pre-existing social infrastructure by penetrating and transforming it, is commodification…This implies that the use value aspect of an element or item of social production…has to be subordinated to the exchange value aspect” (van der Pijl 1998:37). This initial subordination of use value to exchange value is the very first movement towards a globalized world.
Van der Pijl would claim that commodification has become ubiquitous in our society. When coupled with fetishism, defined as the phenomenon in which modern society resembles the most primitive community and the ascription of animate spirit and magical powers to dead objects, commodification becomes a divine tool allowing people to justify and ethically adjudicate between decisions using the mana and taboo of the market (van der Pijl 1998 11-4). This is a world where everything is either already commodified or in the process of being commodified, a world where everything is a product and every decisions comes from the deified market. This creates an atomized society.
This process of commodification also creates classes. Van der Pijl notes that classes form from exploitative social relationships. With the increasing intensity of commodification, there are more opportunities to create wealth. Through these increased opportunities to create wealth, there are also increased opportunities to exploit workers through the appropriation of unpaid labor. This process of increasing ability to exploit workers and appropriate unpaid labor is a class producing process.
The ameliorating response to this atomized society is socialization . This is defined as, “the planned or otherwise normatively unified interdependence of functionally divided social activity” (van der Pijl 1998:138). This planned activity must be carried out to reunite society again after the commodification of everything. Van der Pijl points out that the result of commodifying, land, labor and money, the three most difficult things to commodify, a process of socialization must occur to bring unity, calm and balance to society. Van der Pijl sees the process of socialization to be undertaken by a group of people that he refers to as the cadres. These people seem to fulfill two functions in van der Pijl’s account: they are the technicians who run the increasingly complicated process of capitalist production and those who, from a position of elite authority (though under the authority of the capitalist), control the mitigating processes of socialization.
Van der Pijl’s interpretation of the increasing speed and intensity of global interconnection has to do with his fractions of capital creating class fractions. “It is our thesis that the capacity of fractions of capital to appropriate a share of the total mass of profits shapes the sense of identity of a particular segment of collective capital with the momentary functioning of the system, short-circuiting the general interest with the special one” (van der Pijl 1998:58). When this general interest is short-circuited with a special one, a hegemonic economic structure emerges. This is taken, in van der Pijl’s example, to then be represented in the Lockean heartland. However, there are also contender states that question the legitimacy and challenging the preeminence of the hegemonic states. This dance between the hegemonic and contender states is represented in what van der Pijl calls a natural tendency, “towards global unification represented by capital, and by the fact that every concrete state/society complex is ultimately held together by a specific structure of power and authority mediating its relations with other such complexes” (van der Pijl 1998:64).
The Lockean heartland, representing the hegemonic economic structure of the time, is not entirely contingent or deterministic. Van der Pijl says that, “the internationalization of capital, then, historically does not evolve as an economic process in a fixed landscape of sovereign states. It is an aspect of a process of expansion of the state/society complex in which capital crystallized under what proved to be the most favorable conditions” (van der Pijl 1998:83 emphasis added). Whatever the most favorable conditions for capital at the time were contingent on the prevailing fraction of capital. The deterministic aspect of this function is that capital will always flourish and be attracted to the most favorable conditions for its reproduction.
The van der Pijl view of increasing speed and intensity of global interconnection, or globalization, can be seen as a mixture of determistic and contingent factors. Fractions of capital create class fractions which end up controlling hegemonic economic regimes and thus Lockean states. Their control is contingent on whatever fraction of capital is hegemonic at the time. Their control is also determistic because the logic of capital accumulation is such that it will always search out increasingly complex forms of exploitation and appropriation of unpaid labor, thus, in van der Pijl’s model, creating class distinction and class conflict. Also, the determistic process of commodification leading to fetishism creates the need for the quasi-contingent process of socialization undertaken by the cadre class. This cadre class is the ultimate protector and technician working for the global capitalist order, but also, in the eyes of van der Pijl, the class that can eventually lead us beyond the natural contradictions that occur within a global system of capitalism.
Panitch and Gindin: Global Capitalism and American Empire
Panitch, L. & Gindin, S., 2004. Global Capitalism and American Empire, Merlin Press.
The causes of globalization are seen by Panitch and Gindin to be fairly standard for Marxist scholars. In the beginning of their “Rethinking Imperialism” chapter, they note that, “There is a structural logic to capitalism that tends to its expansion and internationalization. This was famously captured in Marx’s description in the communist Manifesto of a future that stunningly matches our present” (Panitch and Gindin 2004:13). They then go on to quote Marx’s explanation of the international nature of capital expansion. However, this standard, initial accumulation of capital is complicated by the tool of capitalist accumulation: imperialism and the theory of inter-imperial rivalry.
The authors contrast the traditional account of inter-imperial rivalry with an account that takes the capitalist state to be the most important actor in the consolidation of capital as opposed to theories of economic states or crises. In the traditional account, imperialism was the tool of capitalist nations to internationalize capital. This was the result of a theory of crisis being seen as the impetus for capital expansion beyond national borders. Because this dynamic was occurring in a number of different countries, there would be a number of different imperial powers. The new markets would also eventually be saturated, thus causing home markets to suffer an exhaustion of consumption and the imperial nations would turn against one another. This is the space that inter-imperial rivalry occurred.
Panich and Gindin explain why this interpretation of inter-imperial rivalry was misinformed. In the opinion of these authors, the inter-imperial rivalry theorists were wrong because they were defective in their treatment of the dynamics of capital accumulation, they mistakenly used the theory of crisis to explain capital expansion, they failed to understand the spatial dimensions of internationalization, they mistakenly assumed that exhaustion of consumption within capitalist countries would lead to crisis and finally they wrongly stated that the deepening of capital would lead to less choice (Panich and Gindin 2004:17-8). What the authors conclude is that these theories of inter-imperial rivalry were only looking at very early stages of capitalism. This current iteration of capitalism that we are experiencing is based on a different set of drivers.
The authors then go on to explain how the capitalist state must be a more vital aspect of theorizing capitalist imperialism. They say that, “Capitalist imperialism, then, needs to be understood through an extension of the theory of the capitalist state, rather than derived directly from the theory of economic stages or crises” (Panich and Gindin 2004:18). Panich and Gindin focus on the contingent aspects of capital accumulation and adaptation to contradictions in capitalism. They see earlier Marxist thought as relying on a much too simple understanding of the separation of the economic and the political. The true nature of the interaction between the economy and politics is much more nuanced.
The inter-imperialist rivalry paradigm was changed by Panich and Gindin to incorporate global capitalist expansion without tension occurring between major capitalist nations. This global capitalist order needed a hegemonic power that drove the expansion and the unification of the capitalist states and, in this current iteration of capitalism, this leader was found in the United States. In Panich and Gindin’s version of globalization, there are two realms of capital: domestic and international. The interest of domestic capital was trumpeted by proponents of the old inter-imperialist rivalry theory of capitalist expansion. However, in this new version of capitalist expansion, the tension is not between the interests of capital from two industrialized nations, but rather the expansion of capital is in the interest of global capital more generally. This is seen as being a response to the instability that occurred after the first occurrence of globalization .
Therefore, we see national interest undermined by global capital interests. The U.S. takes control of the operation and standardization of rules for this capital, but not entirely in their own interest. Other nations are willing to submit to the leadership of the United States because order is valued more highly than domestic capital interests. Two world wars and a global depression allowed nations to see the value of a stabilizing, international capital order controlled through one hegemonic leader. “The point is that we need to distinguish between the expansive tendency of capitalism and its actual history. A global capitalist order is always a contingent social construct: the actual development and continuity of such an order must be problematized” (Panich and Gindin 2004:14-5).
Through this account of capital expansion, Panich and Gindin show us how a contemporary, Marxist account of globalization takes into consideration the changes brought about by the increased intensity and speed of global connections. The rules and structure of international capital changed in the last half of the 20th century. Before this time, they were primarily controlled by the interest of certain nations. Now, they have moved into the realm of post-national control. Still, capital accumulation is seen as being a deterministic driver of international affairs, but the structure and the rules that it follows are to be contingent. If capital does not deterministically create the rules and structure that govern capitalism, we have opened up the possibility for substantial change that has little to do with initial capital accumulation.
The causes of globalization are seen by Panitch and Gindin to be fairly standard for Marxist scholars. In the beginning of their “Rethinking Imperialism” chapter, they note that, “There is a structural logic to capitalism that tends to its expansion and internationalization. This was famously captured in Marx’s description in the communist Manifesto of a future that stunningly matches our present” (Panitch and Gindin 2004:13). They then go on to quote Marx’s explanation of the international nature of capital expansion. However, this standard, initial accumulation of capital is complicated by the tool of capitalist accumulation: imperialism and the theory of inter-imperial rivalry.
The authors contrast the traditional account of inter-imperial rivalry with an account that takes the capitalist state to be the most important actor in the consolidation of capital as opposed to theories of economic states or crises. In the traditional account, imperialism was the tool of capitalist nations to internationalize capital. This was the result of a theory of crisis being seen as the impetus for capital expansion beyond national borders. Because this dynamic was occurring in a number of different countries, there would be a number of different imperial powers. The new markets would also eventually be saturated, thus causing home markets to suffer an exhaustion of consumption and the imperial nations would turn against one another. This is the space that inter-imperial rivalry occurred.
Panich and Gindin explain why this interpretation of inter-imperial rivalry was misinformed. In the opinion of these authors, the inter-imperial rivalry theorists were wrong because they were defective in their treatment of the dynamics of capital accumulation, they mistakenly used the theory of crisis to explain capital expansion, they failed to understand the spatial dimensions of internationalization, they mistakenly assumed that exhaustion of consumption within capitalist countries would lead to crisis and finally they wrongly stated that the deepening of capital would lead to less choice (Panich and Gindin 2004:17-8). What the authors conclude is that these theories of inter-imperial rivalry were only looking at very early stages of capitalism. This current iteration of capitalism that we are experiencing is based on a different set of drivers.
The authors then go on to explain how the capitalist state must be a more vital aspect of theorizing capitalist imperialism. They say that, “Capitalist imperialism, then, needs to be understood through an extension of the theory of the capitalist state, rather than derived directly from the theory of economic stages or crises” (Panich and Gindin 2004:18). Panich and Gindin focus on the contingent aspects of capital accumulation and adaptation to contradictions in capitalism. They see earlier Marxist thought as relying on a much too simple understanding of the separation of the economic and the political. The true nature of the interaction between the economy and politics is much more nuanced.
The inter-imperialist rivalry paradigm was changed by Panich and Gindin to incorporate global capitalist expansion without tension occurring between major capitalist nations. This global capitalist order needed a hegemonic power that drove the expansion and the unification of the capitalist states and, in this current iteration of capitalism, this leader was found in the United States. In Panich and Gindin’s version of globalization, there are two realms of capital: domestic and international. The interest of domestic capital was trumpeted by proponents of the old inter-imperialist rivalry theory of capitalist expansion. However, in this new version of capitalist expansion, the tension is not between the interests of capital from two industrialized nations, but rather the expansion of capital is in the interest of global capital more generally. This is seen as being a response to the instability that occurred after the first occurrence of globalization .
Therefore, we see national interest undermined by global capital interests. The U.S. takes control of the operation and standardization of rules for this capital, but not entirely in their own interest. Other nations are willing to submit to the leadership of the United States because order is valued more highly than domestic capital interests. Two world wars and a global depression allowed nations to see the value of a stabilizing, international capital order controlled through one hegemonic leader. “The point is that we need to distinguish between the expansive tendency of capitalism and its actual history. A global capitalist order is always a contingent social construct: the actual development and continuity of such an order must be problematized” (Panich and Gindin 2004:14-5).
Through this account of capital expansion, Panich and Gindin show us how a contemporary, Marxist account of globalization takes into consideration the changes brought about by the increased intensity and speed of global connections. The rules and structure of international capital changed in the last half of the 20th century. Before this time, they were primarily controlled by the interest of certain nations. Now, they have moved into the realm of post-national control. Still, capital accumulation is seen as being a deterministic driver of international affairs, but the structure and the rules that it follows are to be contingent. If capital does not deterministically create the rules and structure that govern capitalism, we have opened up the possibility for substantial change that has little to do with initial capital accumulation.
Friday, February 8, 2008
Milner: Globalization, Development, and International Institutions
Milner, Helen V. (2005). Globalization, Development, and International Institutions: Normative and Positive Perspectives (Vol. 3, 833-854): Cambridge Journals Online.
This text is a call to approach the study of international institutional efficacy from a different angle. In that, the article does much in a very short space. What is says is important, though it is quite general in certain aspects, especially in its treatment of “normative” theory.
Milner begins by wondering how one could begin to truly assess the effectiveness of international institutions like the IMF. Surely a counterfactual must be deployed, but this is problematic in itself. “Counterfactuals cannot be answered directly because they presume a situation which did not occur and rely on speculation about what this hypothetical world would have been like” (834). Researchers are thus left to make inference based on longitudinal comparisons and cross-sectional comparisons of data that is available in situations where certain countries were more or less effected by IMF (for instance) lending.
She also understands that the role of the counterfactual has been criticized by “normative” scholarship. She claims that, “combining normative and empirical scholarship may be unusual, but fruitful” (834). The goals of this paper is to review recent studies on the IMF/WB/WTO, to look at scholarship on international institutions and then to connect this all back to “normative” theory.
She reviews Stiglitz, Easterly, Vreeland, Stone and Pogge. She then looks at the history of international economic institutions since WWII, and the uneven instances and evidence of growth that has arisen out of the less developed world. Milner then explores for reasons that international institutions exist: they constrain great powers, they provide information and improve transaction costs, they allow for reciprocity in international relations and they are a catalyst for domestic political reform.
Then, four sources of institutional problems are identified: Firstly, they have no impact. Secondly, they are controlled by hegemons. Thirdly, they are controlled by private interests, specifically investors. Fourthly, they are not internally accountable.
We are then treated with a brief trek through “normative” scholarship. This specifically focuses on the role that institutions should play in the international system. She looks at Rawls and disagrees with his notion of a national consensus, arguing for a global consensus regarding distribution. Secondly, she puts for the assertion (already mentioned) that counterfactual approaches to understanding theory are lacking in substance and credibility. Finally, she makes the claim that narrowly defined nationalist politics need to change.
She concludes by prescribing that further research in this area should be focus on, “the actual effects of international institutions, rather than debates about whether they are autonomous agents” (849).
Stone: Lending Credibility
Stone, Randall W. (2002). Lending credibility : the International Monetary Fund and the post-communist transition. Princeton, N.J.: Princeton University Press.
Dependent variable: the effect of the institution to elicit control over a recipient country.
The question is whether or not international institutions have the ability to exert control over independent, sovereign countries. Other IR perspectives are concerned whether or not domestic interest groups and issues of distribution will blunt the influence of international institutions. Stone believes that both of these perspectives are partially correct (2).
He then embarks on a project of examining the counterfactual of whether or not IMF policies have had an independent effect on changing the policies of recipient countries. Firstly, he defines the, "effects that IMF intervention is expected to have" (3). Secondly, he advances a statistical methodology to examine to what degree IMF interventions effect policy change. He finds that, if the IMF can not show that they will be able to enforce policy, these policies will not be followed. Thirdly, he attempts to examine his statistical conclusions by looking at case-studies in
Stone then claims that inflation and GDP growth rates are highly correlated. "The significance of these results is that countries with higher inflation grew more slowly, or declined more rapidly, and attracted less foreign direct investment. Furthermore, it was the poor rather than the relatively wealthy who suffered most from inflation: high inflation caused income inequality to increased" and, "Taming inflation was the most urgent task facing post-Communist countries, because high levels of inflation threatened to derail all other aspects of their reform programs" (7).
Inflation is especially important for Post-Communist countries for the following reasons: inflation, "warps the incentives of firms, preventing industrial restructuring"; "inflation undermines the confidence of international investors"; and; "high inflation leads to a skewed distribution of wealth" (8-9).
"Inflation does not arise primarily because someone benefits from inflation per se; it arises primarily because politicians find it difficult to resist the short-term temptations that lead to inflation" (10). "In principle…the IMF can substitute for entrenched domestic institutions by monitoring compliance with stabilization programs and offering rewards and punishments that tip the balance of incentives in favor of the full-commitment equilibrium" (11). "Under favorable circumstances, a virtuous circle can arise, in which IMF intervention, government policies, and international investment reinforce one another" (11). "The picture becomes somewhat more complex, however, when we consider that the IMF's own credibility is in question" (11). "The conclusions show that the IMF's credibility problem is indeed severe, and consequently the organization's effectiveness is compromised in some of the most important countries. At the same time, this study finds ample evidence that the IMF has exerted significant influence over the economic policies of Post-Communist countries" (12).
Countries that are more interesting to global hegemonic interests can not be expected to be controlled by the conditionality constraints of IMF policies. This is so because they can not be expected to control for inflationary policies when the IMF is a political institution that is controlled by hegemonic institutions. For example, if the
The credibility of the IMF conditionality is at stake. Stone promotes an agenda that argues that, if IMF conditionality is seen as being credible, i.e., if the sticks are seen as being real and painful, countries will listen to conditionality. However, if the countries do not believe that the conditionality is going to be enforced, they will evade making painful policy changes. Another aspect of his account is that, if a country is sufficiently interesting to global hegemon power and influence, they will also be increasingly able to evade
The remainder of the book is full of case-studies, of which I will not detail here, though they are quite informative.
Wednesday, February 6, 2008
Milner and Kubota: Why the Move to Free Trade?
Milner, HV, and K Kubota. 2005. Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries. International Organization 59, no. 01: 107-143.
This article traces two global trends that emerged out of the 1970’s and attempts to casually link them using statistical methods. The first trend that is highlighted is the increase in democracy. The second trend that she highlights is the global reduction in tariffs. Her dependent variable is the later, and independent the former.
She initially looks at alternative explanations for changing economic policies. Some focus on economic crises. Others talk about external, ideational pressure emanating from hegemonic forces. Finally, and oddly multicolliniar with her second example, some examine the rise of neoliberal policies as being a force that contributes to decreases in tariffs. She rejects these as being sufficient to explain the global decrease in trade tariffs. For her, this change is accounted for by the increase in global democracy.
Firstly, she makes a causal claim about her variables and tries to construct a qualitative argument for why they are connected. She claims that democracies are better than autocracies at freeing governance from selective interest groups (113). She also claims that the “selectorate”, the group of people that legitimize and support the rule of a politician, changes sufficiently in a democracy. The selectorate in a democracy will be interested in more free trade because this will benefit the whole population. In an autocratic regime, the selectorate will be a small interest group and they will be more interested in promoting protectionist measures (115-7).
“Democratization will thus enfranchise a new group of voters with preferences for lower levels of protectionism” (116).
“In sum, in developing countries where autocratic governments depend on support from a small selectorate and thus are not responsive to the overall population, the governments can employ extensive protectionism. Democratization, however, may break down the old coalition supporting protectionism, and can thus lead to change in the status quo” (117).
She goes on to deploy a (relatively) large-n study of 179 countries, Polity IV democracy numbers and relatively weak tariff numbers (by her own omission – p. 122). She finds, through OLS analysis, that there is a correlation between levels of democratization and decreased tariffs. This, she concludes, links up with her qualitative account of how democracy causes reductions in tariffs.
A critique of this paper could go something like this: the causation that she highlights is not very strong, though it clearly does exist. However, this weak causation does not at all mean that her qualitative story is legitimate. The drivers of the linkage between democracy and reduced tariffs could be one of many things, and this research project does little to promote a humble approach to understanding why a slight quantitative correlation may be present.
It is really interesting that there is some correlation between her independent and dependent variables. However, her case is weakly made and her qualitative story is full of holes.
Thursday, January 24, 2008
Polillo and Guillén: Globalization Pressures and the State
Polillo, Simone, & Guillén, Mauro. (2005). "Globalization Pressures and the State: The Worldwide Spread of Central Bank Independence". American Journal of Sociology, 110(6), 1764-1802. http://www.journals.uchicago.edu/doi/abs/10.1086/428685
“We agree that globalization has shifted power around the state. The existing literature, however, has not empirically explored the mechanisms that account for such a shift…The goal of this article is to analyze theoretically and empirically the impact of globalization on specific state structures, controlling for domestic macroeconomic and political characteristics” (1766). Specifically, this article examines central bank independence and its role as a response to the effects of globalization.
This article then goes on to examine the role of the central bank, and why CBI is an increasingly important phenomena. “…we focus our theoretical analysis on the impact of global institutional forces on central bank independence. We examine two types of effects: 1.) international coercive pressures that affect countries, including their dependency on foreign trade, investment and multilateral lending; and 2.) cross-national international influences that operate through the network of bilateral trade ties in the form of cohesion and role equivalence effects” (1773).
Three hypotheses are then put forth: “the greater the exposure to foreign trade, foreign investment or multilateral lending, the more independent the central bank” (1776). “The more a given country trades with other countries with an independent central bank, the more independent its own central bank because of normative pressure” (1778). “The more a country competes in trade against third countries with an independent central bank, the more independent its own central bank” (1780)
They then deploy a quantitative method to try to answer these three hypotheses. The dependent variable is a measure of CBI. The independent variables are many. I fear they suffer from a problem of multicolliniarity.
“Our results indicate that international coercive, normative and mimetic pressures explain the adoption of central bank independence, lending support for each of our hypotheses” (1788).
“The purpose of this article was to examine the impact of globalization on the state, using the specific case of the central bank and its independence from the executive branch as the empirical setting…We argued that, be cause of cross-national economic, political, and cultural competition in a context of globalization, the state is subject to coercive, normative and mimetic pressures. In response to these pressures, the state reorganizes itself, with a strong tendency toward emulating the organizational forms and practices adopted by other countries…Thus, globalization is transforming the state structures that deal with monetary policy” (1793).
Posen: Why Central Bank Independence does not Cause Low Inflation
Posen, Adam. (1993). "Why Central Bank Independence does not Cause Low Inflation: There is no Institutional Fix for Politics". In R. O'Brien (Ed.), Finance and the International Economy (pp. 41-66). Oxford: Oxford University Press.
There is increased zeal to make central banks independent and inflation fighters. It looks like it is a free lunch with the possible benefit of long-term economic growth. Posen argues that, “…the causal linkage between central bank independence and low inflation is illusory” (41). His claim is that it is, as the title of his piece indicates, a problem of politics.
“The institutional fix of an independent CB is supposed to offer protection from inflation through three mechanisms—increasing the credibility of commitments to prices stability, assuring a higher priority on inflation fighting in the net preference of the public sector, and putting up barriers to the monetization of government expenditure” (42). The first isn’t played out by the facts. The second may be slightly true, but CBs are also concerned about exchange rates and growth.
“An empirically supported explanation of the association between CB independence and low inflation can only be arrived at through a proper understanding of politics” (46). Democratic politics is not a tool that is going to settle institutional problems (as per his sub title to this section: Nothing Contentions is ever Settled in Democracies). Politically important and influential interest groups will always be involved in the creation of caustic institutions in certain political systems. This he calls the “interests not institutions” thesis (47).
“Financial sectors having universal banking are expected to have stronger anti-inflationary sentiment than those without,” and, “…the less regulatory power of the CB over the financial sector, the more strength of opposition to inflation by the sector is to be expected,” and, “Where a country’s party system is more fractionalized, financial expert opinion is expected to be less influential,” and, “…financial opposition to inflation is expected to be more effective in federal systems of government” (48-9).
“The fundamental argument of this paper, that there is no institutional ‘fix’ for the redistributive struggle over monetary policy, implies that CBs designed with similar degrees of statutory independence will offer significantly differing degrees of protection from inflation over time as they political situation alters” (53).
Down: Central Bank Independence, Disinflations, and the Sacrifice Ratio
Down, Ian. (2004). "Central Bank Independence, Disinflations, and the Sacrifice Ratio". Comparative Political Studies, 37(4), 399-434. http://cps.sagepub.com/cgi/content/abstract/37/4/399
This study looks at CBI and the phenomena of disinflation to see if there are any costs to having an independent central bank that controls for inflation strictly. It had typically been seen that CBI controlling for inflation was a “free lunch”, and that there were no adverse economic costs. However, this study attempts to show that there are costs associated with CBI controlling for inflation, specifically in the realm of disinflation.
Disinflations are, “policy-induced reductions in inflation” (400). Down claims that, “the economic contraction that tends to accompany a disinflation appears to be more severe when a central bank is politically autonomous” (400). These periods of policy induced economic reverse can be associated with negative effects on societal welfare, increased unemployment, slow or negative economic growth and other explicitly distributional effects.
Down also deploys the sacrifice ratio, which measures, “the cost, in terms of either output or unemployment, of a point reduction in inflation. It thus measures the relative cost of a reduction in inflation: the higher the ratio, the greater the relative cost” (401). Down concludes that, “CBI is positively associated with the sacrifice ratio,” and that, “political and institutional factors play an important part in determining the costs of disinflations, particularly the unemployment costs” (401).
He finds that the inflation-output sacrifice ratio is highly and positively correlated to CBI disinflationary policies. More gradual disinflation is also more highly correlated to the sacrifice ratio. However, while there is a relationship, there is also no clear and universal relationship between either the inflation-output or the inflation-unemployment sacrifice ratios and Down claims that both must be investigated in more detail.
He then deploys a quantitative method for measuring the relationship between sacrifice ratios and disinflation. He creates four models and uses an OLS regression. He concludes that, “…the most striking result to emerge from the analyses is the robust positive relationship between CBI and the unemployment and output costs of disinflations” (430). “In sum, the relative inflation aversion of policy makers appears to increase the costs they are iwlling to impose on society to reduce inflation” (430). “Put simply, althought CBI may generate long-run gains for the economy, it does appear to be associated with greater short-run costs. This in turn suggests that CBI may not offer the unequivocal free lunch many believe accompanies greater independence” (432).
Watson: The Institutional Paradoxes of Monetary Orthodoxy
Watson, M. (2002). "The institutional paradoxes of monetary orthodoxy: reflections on the political economy of central bank independence". Review of International Political Economy, 9, 183-196. http://www.ingentaconnect.com/content/routledg/rrip/2002/00000009/00000001/art00007
“Academic studies of central banking typically divide into one of two traditions. For some, central bankers have shown that, once trusted to operate policy autonomously, they can consistently deliver low and stable inflation at no obvious cost in terms of output and employment…For others, however, this is to overemphasize the economic dimension of CBI” (183). CBI, in effect, is a tool derived from the political realm. Watson is here concerned with examining the literature on CBI, then showing that CBI can lead or promote problematic policy and then attempts to show that CBI was an effect of political pushing and pulling as opposed to economic drivers.
“The core of the intellectual case for CBI revolves around the assumption of a persistent inflationary bias built into politicians’ monetary policy preferences” (184). “There are two broad political economy challenges to this standard economic conclusion: one empirical, the other conceptual…The first…challenge suggests that CBI leads to superior inflation performance only when it is accompanied by labour market institutions that facilitate solidaristic wage bargaining…In contrast, the second…challenge suggests that the orthodox economics account of CBI mis-specifies the whole nature of monetary relations within contemporary capitalism” (185).
Watson then looks at the idea of path-dependency in the creation of CBIs, as well as the idea of a Grand Theory of CBIs. He finds that general theories of this sort are problematic. “…each time a general theory has been identified, it has been a different ‘general’ theory, which means that none of them have been actual, time-invariant, general theories at all” (189). While inflationary pressure has always been around, the nature and drivers of this pressure has changed as time progresses. On page 190 he provides a nice list of inflationary pressures by decade from the 60s to the 90s highlighting the different drivers that caused the pressure.
He looks then at the political logics for CBI. First, he highlights the issue of domestic distribution and finds that CBI is clearly a driver of distinct distributional policies, as credit is, in his words, “the sine qua non of distributional policies” (193). Additionally, he highlights how CBI is an “automatic pilot for policy” (193). This helps to shape the perspectives and expectations of market actors, and also provides for an outlet for unpopular policy interventions.
His first, economic conclusion, is that the assumption that CBI will create independent inflationary control misses the point that, “Money supply growth is determined as much by the actions of the private sector acting in its own interests as by the central bank acting in the public interest” (194). His institutional conclusion is that it is doubtful that CBI is the best institution to control for inflation. His political conclusion is that, “The decision to cede operational responsibility for the conduct of monetary policy should be seen as a statement of social intent” (195).
Thursday, January 17, 2008
Maxfield: Gatekeepers of Growth (Chapters 1-4)
Maxfield, Sylvia. (1997). Gatekeepers of growth : the international political economy of central banking in developing countries. Princeton, N.J.: Princeton University Press.
Maxfield examines the rise of central bank independence in the 90s and attempts to outline some of the drivers of this change. Firstly, the rise of central bank independence may seem counterintuitive, especially for someone who deploys a rationalist framework: why would political leaders give up control of such a powerful took that could effect their future power to such a great degree? Maxfield argues that the increasing globalization of financial markets if, “of central importance” (4). The cause of financial market’s increasing control over the independent decision making of politicians is the attempt to, “signal their [the politician’s] nation’s creditworthiness to potential investors” (4). “Specially, this book argues that the likelihood politicians will use central bank independence to try to signal creditworthiness is greater 1.) the larger their country’s need for balance of payments support, 2.) the greater the expected effectiveness of signaling, 3.) the more secure their tenure as politicians, and 4.) the fewer their country’s restrictions on international financial transactions” (4).
She then goes on to briefly, and helpfully, outline some of the main functions of central banks. “To control inflation policymakers seek an anchor for prices. The exchange rate system devised in Bretton Woods…provided an exchange rate anchor” (7). This broke down after the move to fiat money. This is one of the reasons that there needed to be a new anchor for the international financial system: central bank independence with a mandate to control for price flux.
One reason that central banks need to be independent is because market actors can anticipate the policy moves of politicized government groups more easily (8). Another reason is the great power of finance in the age of increased economic interdependence (9). Another reason that this has become a more important issue is the Maastricht Treaty for conformity with EU rules (10). The increasing focus on rationalism as a social science methodology helped to promote the move to central banks (11). There are “normative” arguments for the move to central banks, like increased economic performance, policy coordination, democratic accountability, though I found these to be a bit problematic (12-7).
Maxfield then goes on, in chapter 2 to highlight the political source of central bank independence (also the title of the chapter). She highlights different studies that identify different sources of the independence of central banks. Some identify the need for highly trained and independent technocrats. Some believe that there is more independence if there is less political polarization in a country, others if there is more. Some that sectors of the economy will press for independence because it is in their interest. Another main group looks at how central bank independence is contingent on the need of governments to raise finance. Yet another group looks at ideology as a factor in determining whether or not the central bank is independent.
“A potential explanation for the contradictory findings reported above is that financier’s abilities to exploit a nation’s international economic vulnerabilities shape the effectiveness of financial sector demands on government to protect central bank independence” (33).
She then highlights the ways in which international finance can incentivise the move on the part of states to make their central banks independent. She looks at FDI, foreign equity shares, international bank loans and foreign government bonds. She finds that the first three are relatively not going to effect the move towards an independent bank. However, foreign government bonds do much to signal a country’s creditworthiness to international finance.
The final chapters of the book examine different case studies. I did not read these.
Notermans: Policy Continuity, Poilcy Change, and the Political Power fo Economic Ideas
Notermans, Ton. (1999). "Policy Continuity, Policy Change, and the Political Power of Economic Ideas". Acta Poiltica, 34(3), 22-48.
Notermans argues that changes in economic policy stem not from ideational forces, but from material forces. Ideational forces are brought into the picture to simply justify the policy decision. Additionally, different theoretical frameworks can be manipulated in various ways to justify the needed policy response to the material drivers that a nation confronts.
“This article argues that the view that new economic ideas determine the character of new policies reverses cause and effect. More specifically, three hypotheses are advanced: 1.) Ideas exert n independent causal influence on policies by providing for continuity rather than change because economic policy-makers cling to the ideas and policies that were adopted in response to a traumatic event, even if the original constellation justifying such policies has long disappeared. 2.) The changes in macroeconomic policy regimes during this century have been driven by the need to correct cumulative price level disturbances… 3.) Because the timing and character of a regime change is determined by developments in financial and labour markets, it is largely exogenous to the political system” (23).
“In spite of fundamental theoretical differences between the two approaches, it is possible to derive Keynesian-type policies from neoclassical views and vice versa” (26). Notermans believes that, no matter what ideational approach you use, you will be able to manipulate that to produce any economic policy result. This means that people are just responding to material forces, and that ideational forces are tossed about. Eventually, this can be seen as securing economic policy that is more in line with neoclassical models, which tend to reflect reality more accurately. “Hence, policy convergence with the (long-term) neoclassical model is complete: macroeconomic policies need to prioritize price stability, and unemployment is to be tackled by supply-side policies” (27).
Notermans posits in section 4 of his article that ideas do not have a causal influence, even if different policy makers who hold different ideas posit different policies. This could simply mean that their interests diverge and that they are responding to material forces that they encounter. After making this claim, Notermans goes on to say that, since ideas are insufficient to explain macroeconomic change within the economic policies of
Only firms who respond to the dictates of the market will survive. However, a Darwinistic approach must take into account the idea of path-dependency, as opposed to pure environmental determinism. “…because the behavior an individual market actor faces is largely determined by the behavior of the other market actors, the case for environmental determination of economic outcomes is much weaker than commonly assumed” (32).
However, this aside, the current nature of the market necessitates price stability as the mechanism of Darwinistic selection and adaptation. “In a world where money serves as a store of value, price flexibility no longer necessarily serve s as the device through which markets will quickly return to equilibrium Instead, excessive changes of the general price level may severely disrupt the willingness to engage in productive activity and hence precipitate rather than mitigate economic crises” (33). Therefore, price stability is the holy grail, and markets will orientate around that for material reasons.
“Whereas ideas play no significant role in explaining regime changes, they do play an important role in accounting for regime inertia” (37). “In sum, to the extent that ideas do influence the development of macroeconomic management their influence is generally moderate as they tend to perpetuate a given regime even if the conditions which gave rise to that regime have long disappeared” (37).
Notermans goes on to highlight this ascertain by looking at the cases of
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