Andrews, DM. 1994. Capital mobility and state autonomy: toward a structural theory of international monetary relations. International Studies Quarterly: 193-218.
Capital mobility, it is argued in this piece, has become restrictive enought to be highlighted as a structure in the international system. This paper introduces the "capital mobility hypothesis". Also, it argues against generalizing about the effects that capital mobility will have on all states.
In exploring others who have looked at this topic: "In essence, the central claim of these theorists is that when capital is highly mobile across international borders, the sustainable macroeconomic policy options available to states are systematically circumscribed. International financial integration, so the argument goes, has raised the costs associated with pursuing monetary policies that diverge from regional or international trends. While differences in national preferences, the causal beliefs of policymakers and institutional affiliations may help shape particular patterns of adaptation, proponents of what may be termed the 'capital mobility hypothesis' maintain that changes in the external constraint confronting all states constitute a structural cause of observed shifts in the patterns of states' monetary policy behavior over time" (193-4).
"The central claim associated with the capital mobility hypothesis is that financial integration has increased the costs of pursuing divergent monetary objectives, resulting in structural incentives for monetary adjustment" (203).
Showing posts with label State Autonomy. Show all posts
Showing posts with label State Autonomy. Show all posts
Wednesday, March 25, 2009
Monday, March 23, 2009
Garrett and Lange: Political Responses to Interdependence
Garrett, G, and P Lange. 1991. Political Responses to Interdependence: What's" Left" for the Left? International Organization 45, no. 4: 539-564.
"One line of criticism is from scholars of international political economy. Many argue that in an era of great economic interdependence there is little scope for partisan governments to pursue distinctive and independent economic policies, even if these are desirable from the standpoint of domestic political competition. Instead, the trade openness of national economies, the integration of financial markets, the competitiveness of global markets in goods and services, and, more generally, the free flow economic resources across national frontiers in response to market forces all combine to create powerful constraints against autonomous national strategies. Furthermore, this policy convergence is often seen to center on reducing government intervention in the economy and on liberating market forces, thereby severely circumscribing...the prospects for distinctive leftist strategies" (539-40).
If one generally explores the different leftist parties of Europe, they will find that they all generally embrace market oriented solutions.
"This article argues, however, that while the effects of interdependence clearly have been great, they have not eliminated partisan economic separation between the left and the right. Ever-increasing integration of and competition in the world economy have heightened incentives for all governments to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets. This, in turn, has altered the policy instruments through which governments can pursue their partisan objectives. It has not, however, rendered these objectives infeasible" (541).
"One line of criticism is from scholars of international political economy. Many argue that in an era of great economic interdependence there is little scope for partisan governments to pursue distinctive and independent economic policies, even if these are desirable from the standpoint of domestic political competition. Instead, the trade openness of national economies, the integration of financial markets, the competitiveness of global markets in goods and services, and, more generally, the free flow economic resources across national frontiers in response to market forces all combine to create powerful constraints against autonomous national strategies. Furthermore, this policy convergence is often seen to center on reducing government intervention in the economy and on liberating market forces, thereby severely circumscribing...the prospects for distinctive leftist strategies" (539-40).
If one generally explores the different leftist parties of Europe, they will find that they all generally embrace market oriented solutions.
"This article argues, however, that while the effects of interdependence clearly have been great, they have not eliminated partisan economic separation between the left and the right. Ever-increasing integration of and competition in the world economy have heightened incentives for all governments to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets. This, in turn, has altered the policy instruments through which governments can pursue their partisan objectives. It has not, however, rendered these objectives infeasible" (541).
Hardie: The Power of the Markets?
Hardie, I. 2005. The power of the markets? The international bond markets and the 2002 elections in Brazil. Review of International Political Economy 13, no. 1: 53-77.
"The data show that international bond market investors did not exit Brazil before the elections, putting in question whether they were the source of the riser in the cost of government borrowing that Mosley and others see as indicative of the market's strength. This suggests that our understanding of the actors responsible for market movements remains incomplete. The article, therefore, challenges the idea, common within international political economy, of 'the market' as a single entity, with common actions and policy preferences. The data presented here strongly suggest 'the market' is in reality made up of multiple heterogeneous actors often lacking any unity of opinion or purpose. After Lula's election victory, market prices recovered and the data show that international investors increased their investments in Brazil, despite slower policy implementation than market practitioners desired and the new government's social agenda. This supports a questioning of the true breadth of investors' policy interests and, therefore, influence" (53; from abstract)
Mosley (2003) makes the claim that developed countries experience narrow constraints from financial markets and that developing countries experience broad constraints. This piece criticizes whether or not developing countries really experience broad constraints, arguing that Brazil was still able to operationalize its social policies. "Instead, the dramatic negative fall in market prices before the Brazilian election, which caused not only an increase in the cost of international borrowing but also a severe, at times total, reduction in its availability, suggests that the distinction between developed and developing world may more significantly be seen in the strength of overall market constraint than in its breadth" (55).
One key aspect of this study, and building upon Mosely again and others, is the disaggregation of financial and market actors and an attempt to explore their separate motivations.
"The data show that international bond market investors did not exit Brazil before the elections, putting in question whether they were the source of the riser in the cost of government borrowing that Mosley and others see as indicative of the market's strength. This suggests that our understanding of the actors responsible for market movements remains incomplete. The article, therefore, challenges the idea, common within international political economy, of 'the market' as a single entity, with common actions and policy preferences. The data presented here strongly suggest 'the market' is in reality made up of multiple heterogeneous actors often lacking any unity of opinion or purpose. After Lula's election victory, market prices recovered and the data show that international investors increased their investments in Brazil, despite slower policy implementation than market practitioners desired and the new government's social agenda. This supports a questioning of the true breadth of investors' policy interests and, therefore, influence" (53; from abstract)
Mosley (2003) makes the claim that developed countries experience narrow constraints from financial markets and that developing countries experience broad constraints. This piece criticizes whether or not developing countries really experience broad constraints, arguing that Brazil was still able to operationalize its social policies. "Instead, the dramatic negative fall in market prices before the Brazilian election, which caused not only an increase in the cost of international borrowing but also a severe, at times total, reduction in its availability, suggests that the distinction between developed and developing world may more significantly be seen in the strength of overall market constraint than in its breadth" (55).
One key aspect of this study, and building upon Mosely again and others, is the disaggregation of financial and market actors and an attempt to explore their separate motivations.
Wednesday, January 14, 2009
Garrett: Global Markets and National Politics
Garrett, G. 2005. Global Markets and National Politics: Collision Course or Virtuous Circle? International Organization 52, no. 04: 787-824.
"The nation-state is purportedly an outmoded and beleaguered institutional form, on a collision course with the ever more international scale of markets. Policy autonomy, if not de jure sovereignty, is considered the primary casualty. Governments competing for mobile economic resources are thought to have little choice but to engage in a policy race to the neoliberal bottom, imperiling the efficacy and legitimacy of the democratic process itself" (787-8).
"This article puts under the analytic microscope the proposition that global markets trump national politics as social forces. I focus on the relationships between three dimensions of integration into international markets-trade in goods and services, the multinationalization of production, and financial capital mobility-and the macroeconomic policy choices of the advanced industrial countries up until the mid-1990s" (788).
It is possible to look at globalization as the cause of constraints on domestic policy, especially in certain cases in regard to finance capitalism. However, it is not the case that domestic policies have been uniformly constrained.
"There are two basic reasons why globalization constraints on policy choice are weaker than much contemporary rhetoric suggests. First, market integration has not only increased the exit options of producers and investors; it has also heightened feelings of economic insecurity among broader segments of society...Second, although there are costs associated with interventionist government...numerous government programs generate economic benefits that are attractive to mobile finance and production" (788-9).
"It should be a central objective of globalization research to see how these two sets of dynamics-capital's exit threats versus popular demands for redistribution, and the economic costs and benefits of interventionist government-play out in different contexts. In this article I point to two sources of variation. The first concerns differences among various facets of market integration and aspects of government policy choice...The second source of variation concerns domestic political conditions. Countries in which the balance of political power is tilted to the left continue to be more responsive to redistributive demands than those dominated by center-right parties...In summary, I do not believe that 'collision course' is the correct metaphor to apply to the panoply of relationships between interventionist national economic policies and global markets. Peaceful coexistence is probably a better general image...One might go further to argue that, even in a world of capital mobility, there is still a virtuous circle between activist government and international openness. The government interventions emblematic of the modern welfare state provide buffers against the kinds of social and political backlashes that undermined openness in the first half of the twentieth century" (789).
"Market integration is thought to affect national policy autonomy through three basic mechanisms. These are trade competitiveness pressures, the multinationalization of production, and the integration of financial markets" (791). Governments stand in the way of efficient trade blocs, and thus are pressured to reduce their size to become more competitive. If governments spend, they must recoup that through taxes or borrowing, one of which harms firms' competitiveness and the other makes money more expensive through raising interest rates. The ability of firms to export production easily is another concern of globalization theorists. If companies can take their production and easily emigrate to another country who has a more favorable production environment, this will help to spurn on the race to the bottom. The third point in this discussion involves the integration of finance. This wave of money can move around the globe at the speed of light, threatening stability if governments do not meet their demands.
"In this section I have made two basic points. First, there are three different facets of globalization that many consider to constrain national autonomy...Second, contemporary arguments about these globalization pathways are nothing new. One could transplant much of the work published in IO in the 1970s on interdependence and dependency into the 1990s globalization literature without fearing for its rejection as outmoded. Indeed, with appropriate changes in lexicon, the same could be said for Adam Smith" (795-6).
"First, there are strong parallels between recent arguments about the constraining effects of globalization on national autonomy and those all the way back to the eighteenth century about the domestic effects of market integration...My second point is that, up until the mid-1990s, globalization has not prompted a pervasive policy race to the neoliberal bottom among OECD countries, nor have governments that have persisted with interventionist policies invariably been hamstrung by damaging capital flight...This is not to say, however, that no facet of globalization significantly constrains national policy options. In particular, the integration of financial markets is more constraining than either trade or the multinationalization of production. But even here, one must be very careful to differentiate among various potential causal mechanisms. Talk of lost monetary autonomy only makes sense if one believes that the integration of financial markets forces governments to peg their exchange rates to external anchors of stability. On recent evidence, the credibility gains of doing so are far from overwhelming; indeed, noncredible pegs...have promoted the most debilitating cases of financial speculation and instability. On the other hand, the costs of giving up the exchange rate as a tool of economic adjustment are great, and economies that allow their currencies to float freely seem to benefit as a result. Governments simply should not feel any compunction to give up monetary autonomy in the era of global financial markets" (823).
"My analysis is...considerably more bullish about the future of the embedded liberalism compromise than some of its earlier advocates suggest" (824).
"The nation-state is purportedly an outmoded and beleaguered institutional form, on a collision course with the ever more international scale of markets. Policy autonomy, if not de jure sovereignty, is considered the primary casualty. Governments competing for mobile economic resources are thought to have little choice but to engage in a policy race to the neoliberal bottom, imperiling the efficacy and legitimacy of the democratic process itself" (787-8).
"This article puts under the analytic microscope the proposition that global markets trump national politics as social forces. I focus on the relationships between three dimensions of integration into international markets-trade in goods and services, the multinationalization of production, and financial capital mobility-and the macroeconomic policy choices of the advanced industrial countries up until the mid-1990s" (788).
It is possible to look at globalization as the cause of constraints on domestic policy, especially in certain cases in regard to finance capitalism. However, it is not the case that domestic policies have been uniformly constrained.
"There are two basic reasons why globalization constraints on policy choice are weaker than much contemporary rhetoric suggests. First, market integration has not only increased the exit options of producers and investors; it has also heightened feelings of economic insecurity among broader segments of society...Second, although there are costs associated with interventionist government...numerous government programs generate economic benefits that are attractive to mobile finance and production" (788-9).
"It should be a central objective of globalization research to see how these two sets of dynamics-capital's exit threats versus popular demands for redistribution, and the economic costs and benefits of interventionist government-play out in different contexts. In this article I point to two sources of variation. The first concerns differences among various facets of market integration and aspects of government policy choice...The second source of variation concerns domestic political conditions. Countries in which the balance of political power is tilted to the left continue to be more responsive to redistributive demands than those dominated by center-right parties...In summary, I do not believe that 'collision course' is the correct metaphor to apply to the panoply of relationships between interventionist national economic policies and global markets. Peaceful coexistence is probably a better general image...One might go further to argue that, even in a world of capital mobility, there is still a virtuous circle between activist government and international openness. The government interventions emblematic of the modern welfare state provide buffers against the kinds of social and political backlashes that undermined openness in the first half of the twentieth century" (789).
"Market integration is thought to affect national policy autonomy through three basic mechanisms. These are trade competitiveness pressures, the multinationalization of production, and the integration of financial markets" (791). Governments stand in the way of efficient trade blocs, and thus are pressured to reduce their size to become more competitive. If governments spend, they must recoup that through taxes or borrowing, one of which harms firms' competitiveness and the other makes money more expensive through raising interest rates. The ability of firms to export production easily is another concern of globalization theorists. If companies can take their production and easily emigrate to another country who has a more favorable production environment, this will help to spurn on the race to the bottom. The third point in this discussion involves the integration of finance. This wave of money can move around the globe at the speed of light, threatening stability if governments do not meet their demands.
"In this section I have made two basic points. First, there are three different facets of globalization that many consider to constrain national autonomy...Second, contemporary arguments about these globalization pathways are nothing new. One could transplant much of the work published in IO in the 1970s on interdependence and dependency into the 1990s globalization literature without fearing for its rejection as outmoded. Indeed, with appropriate changes in lexicon, the same could be said for Adam Smith" (795-6).
"First, there are strong parallels between recent arguments about the constraining effects of globalization on national autonomy and those all the way back to the eighteenth century about the domestic effects of market integration...My second point is that, up until the mid-1990s, globalization has not prompted a pervasive policy race to the neoliberal bottom among OECD countries, nor have governments that have persisted with interventionist policies invariably been hamstrung by damaging capital flight...This is not to say, however, that no facet of globalization significantly constrains national policy options. In particular, the integration of financial markets is more constraining than either trade or the multinationalization of production. But even here, one must be very careful to differentiate among various potential causal mechanisms. Talk of lost monetary autonomy only makes sense if one believes that the integration of financial markets forces governments to peg their exchange rates to external anchors of stability. On recent evidence, the credibility gains of doing so are far from overwhelming; indeed, noncredible pegs...have promoted the most debilitating cases of financial speculation and instability. On the other hand, the costs of giving up the exchange rate as a tool of economic adjustment are great, and economies that allow their currencies to float freely seem to benefit as a result. Governments simply should not feel any compunction to give up monetary autonomy in the era of global financial markets" (823).
"My analysis is...considerably more bullish about the future of the embedded liberalism compromise than some of its earlier advocates suggest" (824).
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