T he politics and economics of international relations: An introduction to globalization

1. The politics and economicsof international relations:An introduction to globalization Lars Niklasson, DeputyProfessor Political Science, Linköping University

2. Whatare the major challengesin the global context (politics and economics)? • Whatare the mostdesirableends for global politics? My suggestions: • Handling environmental problems • Developmentof the global south: livingconditions etc. • Is it ok to havecars and refrigerators in India? • Developing democracy and goodgovernance in all countries • (Furtherdevelopmentof the global north, a win-win situation?) • What instruments areavailable to reachtheseends? Will the economy/societyreach the goals? Howare relations betweencountriesregulated? • Global economic integration (globalization): a threat or an opportunity? • Trade, finance, labor standards, knowledgeproduction • Global politics (1): the regulationof the economy • International organizations, governments, NGOs etc. • Global politics (2): specific support for development • Aid, global collaboration, security arrangements etc.

3. Three themesof the course • 1. What is globalization? • Perspectives, theories • Explanations, old and new • 2. Whatare the effects? Is it good or bad? • Economicdevelopment, jobs, qualityoflife, modernization • Environmentalimpact, equalopportunities • Values: Cosmopolitanism, localness, virtues etc. • 3. Whatare the causes? (Whatcan be done?) • Structuralchange: technology, the economy • The roleofregulation: Whodecides? How?

4. What is globalization? • Economic integration of the world • Globalizedfirms, exporters, global valuechains • Howcanwe understand it? • Consequences: good or bad? • Causes: whatcan be done? • Whoare the winners and losers? • Localfirms? • Workers? • The uneducated? • The global south?

5. Howcanweevaluateglobalization? • Manypoliciesareends to means: • Trade policy • Financial systems • Whatare the ultimate ends (values)? • Economicdevelopment, reductionofpoverty • Environmentalimprovement • Qualityoflife, equality,fairness, autonomy, freedom? • Liberal, nationalist and criticalperspectives • Local traditions AND modern cosmopolitanism? • Social science is mainlyaboutends to means • Whatcanstates, markets and communities do? • Howcantheywork the best? What kind ofregulation is needed?

6. Perspectives on globalization • Optimists (economists) vs pessimists (sociologists) • Economictheorypredictslongtermgains for everyone (consequences) • Sociologistsseestruggles for powerbehind the scenes (causes) • Political scientists study the process ofregulatorychange (politics) • Methods and assumptionsvary

7. Optimists/Economists • Economictheorypredictslongtermgains for everyone • Win-win situation, potential harmonyof interests • Consequencesmoreimportantthancauses? • Morespecific: • Highlymathematicaltheories • Abstract and general, ”ceterisparibus”, assumesrationality • Ignore short-term losers • A smart roadmap or a utilitarian religion? • A naive viewoffirms, markets and societies? • Whatdoes it take to achieve the desired end?

8. The globalizers • Martin Wolf (2004): WhyGlobalization Works • Globalization ”has broughtbenefits to hundredsof millions ofpeople and helpedsecure the biggestever falls in the proportion ofhumanity in extreme poverty. The challengeremains to spread the opportunitiesofglobalizationmorewidelythaneverbefore. For thatweneedbetterstates and betterpolicies.” (page ix)

9. Pessimists/Sociologists • Sociologistsseestruggles for powerbehind the scenes • Zero-sum, fundamental conflictsareunsolvable • Causesmoreimportantthanconsequences? • Morespecific: • Qualitativetheories • Specifictime and place, static, focus on values and struggles for power • US firms and thirdworldgovernments vs the poorpeasants? (Hegemony) • Focus on short-term winners and losers, ignore long-term gains (?) • Markets aresociallyconstructed: politics and power • What is their alternative? A naive viewof the state? • Whatdoes it take to achieve the desired end?

10. The anti-globalizers • The International Forum on Globalization: Alternatives toEconomicGlobalization, 2002: • Againstcorporateglobalization: ”bigfirms get toomuchpower and ruin the resourcesof the planet” • Localeconomiesbetterthan exports and integration • Cultural and economicdiversity is needed • Local and national politicalpower, democracy • = similarto the progressive movement in the 1890s? • = based on othervalues? Othereconomictheories?

11. What do theydisagreeabout? • Consequencesof policy (eg. freetrade) • The long-term: gains for all or only for some? • The south: better or worse? • The environment: better or worse? • = liberalism vs socialism on how markets and stateswork • Causesof policy • By the rich, for the rich? • By liberals, againstorganized interests, to have a dynamicsociety? • Research methods • Abstract vs descriptive, quantitativevs qualitative

12. Canwefindoutwho is right? • Valuesare normative • Only a personal choice? • Where do theylead? Logicaltesting? • Factscan be investigatedempirically • Howwere the policiesselected? Whatwere the motives? (process-tracing) • Whodecided? (different conceptionsofdemocracy, global governance) • Howare the policiesmeant to work? (program theory) • How do theywork in practice? (implementation) • Whatare the effectsof the policies? (evaluation) • General theories (economics) • Case-studies ofparticular situations (political science, sociology)

13. Theoreticalperspectives for evaluating and explainingregulation (policies) • International PoliticalEconomy • The politicsof the economy (”politicaleconomy”) • National and international, a broad agenda • From International Relations • States as actors • Normative paradigms? • Nationalism, liberalism, criticalperspectives • From Political science • Causalexplanations: domestic and international politics • Interests, institutions, ideas • (The bureaucraticpolitics of international organizations) • Democracy as a norm: what kind is possible, feasible? (”Global governance”) • (Implementation studies)

14. Why do weneedtheories? • They interpret the facts, helpusseepatterns • Causality: whydid it happen? • Evaluation: good or bad? • Wecantreattheories as hypotheses and search for falsification • Wecan understand the actors’ theories/ideas/motives • Theorieshelpus make predictions • Theoriescan be used to mobilize support for action (=politics) • But: theoriesmay be infusedwithassumptions and values • Is rationality a simplifyingassumption or a norm? • Is constructivism an eye-opener or hidden marxism?

15. Three paradigms • Economic nationalism • Liberalism • Criticalperspectives

16. Table 1.2 Comparing the perspectives

17. States versus markets:Neoliberals vs neomercantilists

18. Causalexplanations (”methods”) • A. Deductive (IR) vs inductive (pol sci) • Start from theory or buildtheory from data (cases) • Statistics, case studies & comparisons • Theories on a high level of abstraction or ”middleground”

19. Causalexplanations, cont’d • B. Pol sci: Rationalabstractions (RC) vs Understandingprocesses • The logicofunintendedoutcomes (game theory) vs howdid it happen? • Assumingpreferences vs explainingchangeofpreferences

20. Causalexplanation, cont’d • C. Processes: The threeI’s (Political science & Sociology) • Interests (winners/losers): a tooquickexplanation. Rationalists • Institutions (rules) shape the arena, explainsvariety. Liberals (?) • Ideasexplainvariety and where interests come from. Constructivists • Ideas: Liberalism, Nationalism and Criticalperspectives!

21. Focus on politics • Whatare the drivers for change? • Structuralchange (technology, economy): • Winners and losers (interests) • Filteredthroughregulation (institutions) • Pathsor unintendedconsequences • Interpretations, ideas (often from Economics) • Howwethinkaboutglobalization • Hegemonicpower? (USA) • Bureaucraticpower by the international organizations? • Whoare the actors? • Firms, industry associations, NGOs, regulators, politicians • Howarewinningcoalitionsformedwithin and acrossgovernments? • Facts, values & rhetoric;morefriendsthanenemies • Verycomplexprocessesbehind the scenes

22. The roleofideas and theiractors(from chapter 13) • Ideasare mental images, worldviews, ideologies, norms, identities • Constructivists in IR and Political Science: ideasinfluencebehavior • Reality is sociallyconstructed = dominant interpretation • ”Another world is possible” (World Social Forum) • One step beyond rationalism: where do preferences come from? • Epistemiccommunities: experts and policy sectors, ”irontriangles” • Policy coordination and competition, coalition-building • Several versions: • Ideasrepresent interests (Gramsci, Cox), hegemony/dominance • Look for interests in dominant ideas& the missingperspectives(poststructuralism) • Ideasarepromoted by actors to changepolicies • Ideasbecomeembedded in institutions: institutions arebiased

23. Old and new globalization • Whatexplainschange over time? • Structuralfactors like environment and geography (Jared Diamond) • Western dominance (”the global historical approach”) over the poor • Western culture for success (”the cultural approach”) – the poorare bad • ”The institutional approach”: peopleare the same, but the institutions differ • Inventions in warfare, production, New technology • Goodgovernance: the ruleoflaw, ownership • Democracy, politics to balance the economy • Investments in human capital • Investments to catch-up • The developmentofcooperation

24. The worldeconomy 1400-1800 • Manypowerful regions around 1400: • The MiddleEast, China, India, Africa, The Americas, Europe • Europeantrade and finance: Italy, Flanders, The Hanseatic League • Trade, production, finance, shareholding • Culture and education, the renaissance • Politicalstability and ruleoflaw • Sovereign territorial states, state formation • Europeandomination: trade, wars, colonies • Triangulartrade • Challenges: Poitiers 732, the Mongols 1241, the Turks at Vienna 1529 and 1683 • Whatwas the impact? South America (Spain) vs North America (England)

25. The worldeconomy1800-1945 • The industrial revolution from ca 1750 • Mechanizedproduction, the factory system, a labor market • Foreignsupply and demandwerenecessary • Why Britain? Whythen? Scientificknowledge, liberal state, naval power • Structuralforces, government action or institutions and entrepreneurs? • France, Germany, the US, Japan • Smith: specialization(against the East India Company) • Ricardo: comparativeadvantage (Box 4.4) • Marx: exploitation • Pax Britannica: similar to the present situation? • The gold standard, capitalflows, unilateral freetrade1846 • The empire, balanceofpower 1815-1914, gradually UK vs Germany • Imperialism inevitable? • Interwareconomicfailure 1919-39 • The League of Nations (Woodrow Wilson): utopian liberalism?

26. The worldeconomyafter 1945 • The Cold War 1945-89 • Western alliances, multilateralism, ”embedded liberalism” (Ruggie) • Realists: competitionbringsstability (Carr) • Liberals: self-restraint by the winners is the key to peace (Ikenberry) • But: therearemanyactorswithingovernments (Allison on the Cuban missilecrisis) • The Eastern block • Decolonization in the south: Frenchresistance • South EastAsia: NICs • The Post Cold War Era 1990-2010 • North: Varietiesofcapitalism • South: BRICS & LeastDevelopedCountries • Technologicalchange, economy etc. • AfterBretton Woods: Unilateralism? Minilateralism? Weaker international organizations?

27. Focus on regulation • How is globalizationregulated? • Trade • Finance • Production • Labor, gender • Environment • Development • By whom? • Howdoes it change?

28. Multi-levelregulation • By whom? • International organizations: WTO, IMF, UN • Intergovernmental or supranational? • North vs south? Sector vs sector? (epistemiccommunities) • Regional organizations: EU, Nafta, Asean etc • Specifictreaties: Kyoto • Transnational regulation, networks/epistemiccommunities, private actors • Regulationimplemented/transposed by states • Actors: • States? • Politicians: domesticpolitics: winners vs losers? Institutions, discourses • Bureaucrats: self-interested or idealists? discourses, fashions • NGOs: who is organized?

29. Three possible scenarios for transnational governance: where do the ideas come from?

30. The global governancearchitecture:are the policiescoordinated? Yes/no! • Specificregulationofeach area (trade, environmentetc) • Fragmentation/Specialization, ”silos” • Conflictinggoals! Agreementimpossible? • Case: Clean tech (environmentalprotection + economicgrowth) • Impliescompetingepistemiccommunities • Who is invited? Onlygovernments? NGOs? • Areministriescompeting or collaborating? • Two-level games to win at home and abroad? • Two dimensions: the sector and the level • Impliesthatpoliticalfactorsareimportant in globalization

31. Howareconflictingpolicies (”wickedproblems”) implemented in variouscountries? • Joint projects, ifpossible (such as cleantech) • Separated (ignored?) • Different organizations, negotiations, decisions by courts? • Integrated, to be dealtwith at a lowerlevel • Multipurposeorganizations, mainstreaming • Political: Localgovernments • Civil servants: multipurposeagencies • Synergies? Common values or ambitions? • Decoupling or deliberation (by politicians, civil servants, the public?) • Experimentalistgovernance? • Focus on particular situations • Key person to make the decision

32. Whatare the effectsof international regulation? An empiricalquestion! • Howare the new rulesimplemented? • Aretheyimplemented, resisted or taken advantageof? • National governments pick and choose • Are the new rulessimilar to the old ones? • Varitiesofcapitalism: LME vs CME

33. Pressures on national politicians • A race to the bottom, convergence? • Or room for manystrategies? • Still, a need to take action proactively • Germany • France

34. Economicdevelopment:the mostvaluable end ofglobalization? • 1. What has happened? • A bigsuccess? China and India vs the rest? Asia vs Africa? • New labels: Third World, Global South, Emerging Markets • What is development? Howcanwemeasure it? • GNP vs Social objectives, Human Development Index, considers distribution • 1947-81: Keynesianism, weak and/or corruptelites, domesticbarriers • Redistribution, New International Economic Order, G77, (Cold Warcontext) • NICs: market and state? Exports and protection? Global valuechains • Japaneseinfluence, authoritarianstates • 1982-2009: Debtcrisis, ”Washington Consensus”: structuraladjustment, NGOs • Governance, democracy, sustainability, povertyreduction, debt relief, the riseof China and India • MDG 2015, greateremphasis on domesticenablingconditions, coordination • Present interpretation: Internaland externalcausesarelinked

35. The rise and ”stall” of the Washington Consensus (from chapter 13) • 1940-1970: embedded liberalism = state and firms • 1980-1997: the state as problem, the market as solution • Why? The crisisof Keynesianism + an epistemiccommunity = Thatcher, Reagan • Neoliberalism = the implementation ofneoclassicaleconomics • Market fundamentalism, neglectofinequality and poverty? • Effects? • Questionableeffect: The NICs: successdue to the market (or developmentalstates)? • Failures: Asiancrisis 1997: prematureliberalization? US crisis: Enron • No effect: Mexico, Argentina, Africa: structural adaptation butcrisis or littlegrowth • Was it implemented? • Internaldisagreements: shocktherapy or gradualchange • A varietyof implementation: the wholepackage vs pick and choose • Resistanceprevented full implementation • Renewed focus on goodgovernance: ruleoflaw (=state!) How to get it?

36. What has happened, cont’d • Lessonlearned? • Asia (NICs, China, India) vs Africa: institutionalfactors? • Integration in the global economy, valuechains • Market and Developmentalstates • Goodgovernance: authoritarianstates • US support during the Cold War • Washington consensus too simple? • Dislikedbutsuccessful? • Aid is difficult • Taking over vs supportingself-sustainingprocesses • Where to begin? Goodgovernance? Economic integration?

37. Disagreementaboutcauses and cures • Whyaresomecontriespoor? • Exploitation: colonialism • Bad starting position (resources, cheaplabor) • Bad policies for catch-up? • Bad governance: colonialism? • Bad support (aid) • The exceptions: the NICs, China, BRIC, (Ireland) • Protectionism vs openness • The developmentalstate • Washington consensus

38. Economicdevelopment, cont’d • 2. Are the policiesgood or bad? • Liberals: Policieshavebeen bad, markets arekey, modernizationstages, the successof the NICs: exportorientedindustrialization (EOI) • Nationalists: Developmentalpoliciesareneeded(NICs), governance is key, import substitution (ISI), Latin America, NICs too? Confucianism? • Critics: Aim to controlthe thirdworld, externalexploitation, dependency, fallingvalueof exports (terms oftrade), vulnerable to externalshocks • 3. Whyhavepolicieschanged? • Interests: North vs South? China. A varietyof interests. • Abdelal 2007: French socialists + EU drive the liberal agenda & regulation by international organizations • Institutions: The World Bank, UNCTAD, WTO, G77/G20, NGOs • WB: US-dominated, secrecy, bureaucraticpolitics? • Ideas: Modernization vs dependency, NIEO vs Washington Consensus • 4. Wherewill it lead? • Exploitation or development? Goodgovernance? Will Africachange?

39. The post-2015 UN development agenda(Thematicthinkpiece, 2013) • Aid for trade • Externaldemandcanraiseincomes and living standards • Support productivecapacity and trade-relatedbottlenecks • Climatechange adaptation • Coherence in policy formulation is being sought between the international rules and policies underpinning human rights standards, the trading system and environmental protection efforts • Rio+20: The Future We Want • Green economy, technology transfers to LDCs, exemptions from TRIPS • = using the market to drive change

40. Fourdeeperinvestigations: write a paper on one, attend at leasttwo • Glenn, John: Globalization. North-South perspectives, Routledge, 2007 • Rudra, Nita: Globalization and the Race to the bottom in developing countries. Who really gets hurt? Cambridge, 2008 • Walter, Andrew & Sen, Gautam: Analyzing the Global Political Economy, Princeton, 2009 • Williams, David: International development and global politics, Routledge, 2012

41. The regulationof the environment:an end in itself and a restriction on otheraims • 1. What has happened? Global problems need global solutions? • ”The tragedyof the commons”, butwhatare fair rules for all? • Cantheyhavecars and refrigerators in India? • Environmental problems are cause and effectofother problems • Human-centeredenvironmentalism vs ecologism (light-dark green) • Sustainabilitymeansmanythings: growth as problem or solution? • Whatshould be sustained? Resources, production, living standards in the north and south? • Brundtland Commission: environmental, social and economicsustainability • A restriction and influence on otherpolicies: ”intergenerationalequity” • Overconsumption and irresponsibleproduction: North or South? China! • Ecologicalshadows • Aidprojects: environmentalassessments, participatorydevelopment • Trade as problem or solution? Race to the bottom?

42. The regulationof the environment, cont’d • 2. Is it good or bad? • Liberals: Common interests, market solutions such as cleantech, the Kuznetscurve, socialist exploitation, regulationsopen for governmentfailure • Environmentaleconomics: market failure, incentives or regulation • World Bank: Poverty as a root cause • Regulation by the market: eco-labels • Environmental standards: fair competition or unfair limitation on comparativeadvantage • Nationalists: Cooperationdifficult, market failure, environmental standards improvecompetitiveness • Critics: Power, inequalities, capitalist exploitation • Ecologists: nature in focus, limitedresources. Economics irrelevant. A need to add process standards to product standards in the WTO (eco-labels?)

43. The regulationof the environment, cont’d • 3. Why has it happened? • Interests: • Environmentalismdue to affluence, disasters& end ofcoldwar • Victims & NGOs • Institutions: • International negotiations on climatechange: US vs China, India • UN conferences Stockholm 1972, Rio 1992, Johannesburg 2002, Rio 2012 • UN Framework Convention on Climate Change, Kyoto Protocol (COP) • IPCC Stern Review 2006: The economicsofclimatechange vs sceptics • Green parties & activistsnormalized, co-opted, mainstreamed • Domesticregulation, IOs mainstreamed, firmsareproactive • Ideas: Scientists and authors form epistemiccommunities (withministries, NGOs, researchers): light and dark green • 4. Wherewill it lead? Win-win solutions or conflicts?

44. Globalization is about a new logicofproduction:transnational production • 1. What has happened? A new industrial revolution? • The logicofproduction has changed (= a structuralfactor) • From integratedfirms to networks: global valuechains • Post-fordistproduction, break-up/networking, outsourcing, collaboration • Changes in technology, transport, management, trust, consumerdemand • To be near markets and inputs (cheap and skilledlabor, technology, resources) • Nearness, skills, infrastructureratherthanlowcost (EastAsia vs Africa!) • ”ForeignDirect Investment” to get control over resources in othercountries (vs portfolio investment) • Market-conformingregulation: open, more uniform • Fair competition, no subsidies, no protection?

45. Transnational production, cont’d • 2. Is it good or bad? • Liberals: Long-runbenefits, opportunities for all • TNCs bringresources, capabilities, taxes, productivity, dynamism, spillovers to localfirms, bettervalues. The successofEastAsia • Nationalists: Support national champions, controlTNCs. Loss ofautonomy • Critics: Exploitationoflabor and environment (TNC + thirdworldgov’ts) • Transfers in the interestof the firm, avoidpayingtaxes, foreignrules, politicalinfluence • New International Economic Order 70s • An empiricalquestion. Net effectsdepend on policy. • Gov’tcontrol, technologicalupgrading? Protect infant industries? • Gov’tweakbargaining position • Attractivenessvs national interest. Changingattitudes • A need for moreregulation?

46. Transnational production, cont’d • 3. Why has it happened? • Structuralfactors: Better transport, new technology, global finance, demand • Interests: exporters • Exploittechnologicalcomparativeadvantage (Vernon) or foreignownership (Dunning) • Oligopolistic business structure (Hymer) • Biggersales & markets to invest in R&D • Institutions: USA + EU + WTO? • US Policy to support investments in non-communistcountries • Policies: coldwar, liberalization, Export ProcessingZones • Lack of strong owners for Americanfirms, weak unions, weakstate? • Ideas: liberalism vs collectivism? • 4. Wherewill it lead? • The competitionstate: focus on competitiveness • Depends on what the BRICs want?

47. The regulationoftrade • 1. What has happened? Trade and FDI explosion due to TNCs • Protectionismafter WWI, freertradeafterWWII • Reductionof tariffs and otherbarriers (NTB, non-tariff barriers) • ”Embedded liberalism” (Ruggie) • Multilateralism: (ITO), GATT and WTO, UNCTAD • GATT principles: Non-discrimination, reciprocity, transparency • But 1974-2005 MultifibreAgreement • Later focus on barriersbeyondborders = competition policy • No agreementsexcept Bali. Dispute Settlement Mechanism is operative • Regionalism: EU, Nafta etc (buildingblocs or stumbling blocks?) • Bilateralism: FTAs such as TTIP • Unilateralism: EU open for ”Everything but arms” from LDCs

48. The regulationoftrade, cont’d • 2. Is it good or bad? • Liberals: Growth for all, especiallyAsia • Nationalists: Strategicprotectionism to protect or to force others • Critics: Exploitation, erosion of old lifestyles, labor, environment, social policy • Keyissues • Comparativeadvantages, win-win? (Ricardo) • Labor productivity and factorendowments, origins irrelevant • Specialization and dynamiceffects for growth, spreadoftechnology • Cheap inputs from abroad and a push to increaseproductivity • Puzzling intra-industrytrade and intra-firmtrade • Employment-creating vs employment-displacingeffects • Health standards (NTB) used to discriminateagainst imports • Is modernizationgood or bad? Effects on the environment?

49. Keyissues, cont’d • What is ok to protect and support? (Mercantilists, nationalists) • Infant industries, technology, agriculture, culture • Unequalexchange? Unfair start, freezing status quo, concentrationofpower • Arecriticscaptured by organized losers? (= the trade policy perspective) • Is the southweak in the WTO? • Doha development round 2001-06 failed • Against new issues, insist on implementation of old agreements • The like-mindedgroup, G20, G90, Cotton-4, The Cairns group • Textilesmove to China? • Patents/TRIPS/IPR makes medicine expensive • TRIMS/Investment protection: a necessary limit on governments? • Special and differential treatment not enough? • Legitimacy? A democratic deficit? Intergovernmental! • Transparency, accountability, participation

50. The regulationoftrade, cont’d • 3. Why has it happened? • Hegemony? Stabilityand economicinterdependence • US policies to support non-communistcountries • MNCs & Asia (cheaplabor, stablesocieties) = interests • The developmentof GATT and breakdownofWTO = institutions • Increasinglydifficult to reachagreement • The breakdownof Keynesianism, triumphof Monetarism = ideas • Driven by EU/France (Abelal 2007) • Bureaucraticpoliticsof the WTO and EU? • Whatis the roleof NGOs? (interests vs ideas) • 4. Wherewill it lead? • Arepoliciesimplemented? • Increasedconflicts?