Perspectives on Globalization

1. Perspectives on Globalization Causes, consequences and strategies (Economics and Politics) Lars Niklasson, Political Science, Linköping University

2. Course requirements • (MIER 7,5 hp, Swedish master 15 hp) • Active participation in the seminars • Three mixed groups • MIER: Seminar on challenges • MIER: Take-homeexam • Swedish master: More seminars & short paper

3. The idea of the course • 1. Howpoliticsimpacts on the economy/firms • Regulation, Institutions, Governance etc. • 2. Howeconomics (firms) impacts on politics • Structuralchange, globalization, lobbying etc. • General theories (IR) • PoliticalEconomy (oftenmotives, explanations) • Comparisons • It is all aboutGlobalization!

4. What is globalization? • Economic integration of the globe: • Wecanbuycheapthings • Jobs get outsourced • The thirdworldwins or looses? • Pollution or greener technologies? • Power shiftsto global firms? • Power shifts from the US to China? • Europeneedstochange a lot?

5. Topicsof the debate:Is everythingyouheartrue? Inevitable (?) changethroughtechnology and the integration of markets (Whatmore?) Leadstoincreasedcompetitionbutalso new markets Financialimbalance: Western governmentshave deficits and loans from China. Firmshavemoney. Countriesneedlowertaxes? and investments in skills Firmsneedto understand new customers, brands, goodlocation and flexibility/networking (Energy shortage?)

6. The critique, I • 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? • = othervalues? Othereconomictheories?

7. The critique, II • ”It’stoo neoliberal”: • Toomuchderegulation, toomuchbelief in the market • Butsomestrategiesare the oppositeof liberalism: • State support to make firmscompetitive • Neo-mercantilism (i.e. toolittle liberalism? A bad mix?) • = What is the manifest strategy/-ies? • Whatworks in theory? In practice? • Whatareourcorevalues? Howcanthey be promoted?

8. Aims and ambitions • Understandingkeyissues in the global economy& politics • Production, finance, trade, development, environment • Government and business • Politicsshapes the economy (firms): institutions • The economy (firms) has an impact on politics • A varietyofperspectives • Economics, Politics, IR/CP, Sociology • Combineand contrast, tobringoutassumptions • Ravenhill, Schmidt, K&L, MLD&KSA

9. Questions • What is globalization? (production, trade, finance) • What is global regulation? (WTO, Kyoto etc) • How is national politics relevant? • How is policy/regulation/institutions relevant? • State support for businesss • (Will globalizationchange the models?) • Whyare the Nordic countriesdoingwell? • What is private and transnational regulation? Howdoes it have an impact? (ideas)

10. Perspectives on globalization • Globalization is (in brief) an ongoing transformation and integration of the economy, with implications for politics • Inevitable? Uniform? What are the drivers/causes? • Can it be ”controlled” by politics? Can we make it “good”? • A threat or an opportunity? Moregoodthan bad? • ”Intended” effects: More wealth in more countries; win-win, short-term problems (flexibility) • Unintended effects: Poverty, environmental, big profits, degradation of industry • We need to understand it better: the drivers

11. Criteria for evaluatingglobalization • Growth • Moreopportunities or morerestrictions? • Less government support for business? • Quality of life • Welfare, living standards (developingcountries?) • Democracy • Accountability? Leadership? • Unintendedconsequences?

12. What is globalization? (Ravenhill 2011: intro) • Economic integration: FDI and TNCs • International/Global • From mercantilism to integration • Bretton Woods 1944 • American hegemony • From embedded liberalism to neoliberalism? • The crisis 2008-09: whatdoes it show? • Whycrisis? Whyrescuepackages? • (IPE as a new subfield) • SeealsoMcGrew (2011) table 9.3

13. Howcanwestudyglobalization? • Several research paradigms (Watson 2011) • Different kinds of causality (McGrew 2011) • My solution: • A list of factors, from structural to cultural • Additive, successivefactors: all are relevant, but in different ways • Untangle the mess ofcausalfactors! Set them in relation toeachother. • (Lichbach & Zuckerman 1998: ComparativePolitics)

14. A list of successive factors Structures: Economy, technology Institutions: International regulation International politics and Paths Domestic politics National patterns: variety of regulation Ideas: scientific and normative Fashions: follow the trends

15. Factors and literature Literature Ravenhill Ravenhill Ravenhill Ravenhill Schmidt, K&L Schmidt, MLD&KSA MLD&KSA Factors • Structures • Institutions • Politics and Paths • Domesticpolitics • National patterns • Ideas • Fashions

16. Research paradigms (Watson 2011) • International Relations • Realism (states as short-termrationalactors) • Liberalism (states as long-termrationalactors with a motive to cooperate) • Marxism (normative critique of capitalism) • International/Global PoliticalEconomy • Liberalism (Smith) vs Mercantilism/Nationalism (List) • Seealso: ”Comparativeadvantage” (Hiscox box 4.8) • (ComparativePolitics) • Rationalism/interests, structures, ideas: combinations • (American vs British School in IR)

17. Fourwaystostudyglobalization

18. Causes and effects (Hay 2011) • Hyperglobalizationtoo strong: Economists’ assumptions • Perfect integration of markets, esp.capital? Exit costless? • Cheaplabor best? Welfare always a cost? • (Financialcapital vs. industrialists/investors) • The state a source ofcompetitiveness? (Neomercantilism) • Convergence? LME/CME responddifferently • Globalized problems difficulttohandle: freeriders • Effect: Retrenchment? Other drivers of policy change • Cause: Globalization? Difficulttomeasure(Regionalization?) • Why no convergenceofinterest rates? (Shouldtheyconverge?)

19. Logics of globalization(McGrew 2011) • Economy or multidimensional processes? • De-territorialization, difficult to separate domestic from international, global division of labor • Rescaling, regions • Increasingtrade, withinTNCs • Specialization and competition • Finance, investments, production • Deindustrialization of the north • Labor migration from south to north • But: ”Beijing consensus” = statecapitalism

20. The causes of globalization

21. Weneedtostudy policy, politics and practice (Schmidt 2002) Policy withoutpolitics: assumes interests and paths, overlooks alternatives and culture Practiceswithout policy/politics: economic determinism and paths Politicswithout policy/practice: ideaswithouteconomicfactors, institutions and interests = economicbackgroundfactors + politics (ideas) Push and pull (IR too abstract and theoretical, not empirical, p 60f)

22. 1. Structures • Is globalization driven by backgroundforcessuch as technology and economy? • IT • China, India, BRICs etc. • Outsourcing of production (Thun) • New markets • (Because of deregulation?) • Are all countriesaffected in the same way? • Firms (and governments) do different things

23. The globalisingfirm (Thun 2011) • Production: outsourcing, valuechains • Why now? Trade liberalization, developmental states in Asia/relocation of American firms • Hierarchies or markets and networks. Captive? • Upgrading of the subcontractors? Competition? • Nation states too small and too big? • China: local diversity, slow development of cars • Also sales: new markets, new values • Variety? Are all firmssimilar? • Good or bad?

24. China, India etc. • ”We” seecheaplabor, competitors • They get higherliving standards, education etc. • Largeincrease in living standards in China and India • Energy consumption goes up • TheybuymoreEuropeangoods • How do theyorganizetheireconomies and societies? • From suppliersto new firms? • Foxcon at the Pearl River Delta = Iphone • Compare Wales, Ireland, Mexico etc.

25. Implications for globalization Inevitablecauses, uniform effects? Resistance is meaningless?

26. 2. Institutions (global regulation) • Regulatoryframeworks (rules, organisations) shapesome of the effectsofglobalization. Whatrules? Enoughrules? • Trade (Winham 2011, Ravenhill 2011) • Money and finance (Helleiner 2011, Pauly 2011) • Environment (Dauvergne 2011) • Development (Wade 2011, Phillips 2011) • Transnational regulation (MLD&KSA 2006) • Soft regulation (Mörth 2006) • Howdid the rulesdevelop? (part 3) • International politics, paths, ideas etc.

27. The global traderegime(Winham 2011) • Repeal of the CornLaws 1848: new majority • Protectionism in the 1870s. • USA 1930 (Smoot-Hawley) vs 1934 (RTAA) • GATT 1947 (No ITO 1948) • Non-discrimination, ”Mostfavored nation” • ”Safeguards” as limits • Environmentalconcerns are barriers • Fair to developingcountries? • Severalrounds, increasedscope (table 5.1) • WTO 1994, ministerialconferences, DSU

28. Regional TradeAgreements, RTAs (Ravenhill 2011) EU, Nafta, Asean etc. (table 6.1) Logic: FTA, Customs union, Common market, EMU Politicalmotives: confidence, security, joint power, lock-in reforms, satisfyvoters, easier implementation Economicmotives: protectingsectors, deeper integration, betterthanunilaterism (scale) But: thirdpartiesmay be cheaper (”trade diversion”) Conflictswith WTO, ACP-countries /Lomé

29. RTAs, continued Nestedwithsecurity, neoliberal ideas, contagion Winners and losers, Strategictradetheory Deeper integration becauseofitsownmomentum (neofunctionalism) or intergovernmentalbargaining? Increasedtradebecauseof RTAs? Steppingstone (easier) och stumbling block (complexity) for global negotiations?

30. Money and finance (Helleiner 2011) • The gold standard=fixedexchange rate, breakdown 1930 • International causes: changeofhegemon • Domesticcauses: interventionist policies, speculation • Bretton Woods and the dollar: IMF, IBRD, (GATT) • Motives: reduced risks, national autonomy • Whyglobalization: diversification, efficiency • Risks: unstable, ”impossibletrinity” (autonomy, openness, stableexchange rates) • Distrbutiveconsequences

31. Money and finance, continued • The strong dollar allowed the US tofinance deficits • Loss of benefits for the US, loss ofstability? • Managedexchange rates 1982Plaza, 1987 Louvre • Manipulating competitiveness? • China buying dollars tokeeptheircurrencylow? • EMU and the Euro • (Why has it failed? Is it still needed? Whatcan be done?)

32. Global financialcrises (Pauly 2011) Allocatesresourceswhereneeded? Unstable? Lenderof last resort vs Moral hazard-> regulation Moredifficultto interpret information: uncertainty Coordinatedpolicies or discipline by the market? Loss ofpoliticalsovereignty Bank regulation: systemic risk, public and private BIS, Basel Committee etc. (box 8.3) Illiquidity or insolvency? (Firms and countries) The crisis 2008: solved, butmoresystemic risk, highcosts

33. Environment (Dauvergne 2011) Stockholm, Rio, Kyoto, Johannesburg, Copenhagen Growthtoreducepoverty? Kuznetscurve Trade for efficiency, standards, technologies Unequalconsumption etc. Distance from effects, pollution havens GEF: Assistanceto the south benefits the north Regimesare Common: Weak implementation? Ozon (CFC substitutes) vs Climatechange and Forests

34. Development (Wade 2011) • China and India grow fast. 38% ofworld population • Betterwithmoreglobalization? Trade? • Inequality • Governmentfailureworsethan market failure? • Industrial/militarypolicies for growth (mercantilism) even in the US

35. Development(Phillips 2011) • Modernization and catchingup vs dependency • EastAsia: dueto the market or the state? Export • Import-substitutingindustrialization, ISI • The Washington Consensus: onesize fits all • Governance, statecapacity, ownership etc. • ”The poorareexcluded from globalization” or ”globalized markets imposeobstaclestodevelopment”

36. Transnational regulation(MLD & KSA 2006) • A process of re-orderingregulationbeyond the state • ”Transnational” is morehumblethan ”global” • Moreactors, soft modes ofregulation and sanction • What: Governancewithout/withgovernment, networks • Regulatorystates, regulation as distrust • By whom? Epistemiccommunities (Politicsbelow) • Institutionalframes, fields, homogenization, ideas, forces • Ideastravel: translation, hybridization, institutionalization • Multi-level interaction

37. Transnational regulation: ”private regulation” • Lawfirms in competitonregulation (Morgan 2006) • Transnational social space, actors, institutions • EU and US competitionregulation, need for advice from transnational lawfirms • Standard-setting in accounting (Botzem & Quack 06) • Globalizationoffinancialreporting and auditing • OECD, EU, UK alternative models. IASC • Shifttofinancial market regulation

38. Soft law: a new kind ofregulation • Soft regulation: ”suggestions”? (Mörth 2006) • Governance: soft law, public/private, networks • Collaboration = Deliberativedemocracybeyond the state? • Dahl, Held, Dryzek, Hirst • Compare EU: OpenMethodofCoordination(=no mandate) • Dynamics of soft law (Jacobsson & Sahlin-Andersson 2006) • Diversification and convergence • Non-stateorganizationsinterrelatewithstates • Rule-setting, monitoring, agenda-settings (interrelated) • Authority by organizing, expertise, association. Webs.

39. Implications for globalisation? International regulation has an impact on the structuralforcesofglobalization (technology and economy) by setting limits to public and private action. International organizationsare an important arena for work on globalization? Private organisations are less visible. Not enough? Not the right policies? Etc.

40. 3. International politics and paths • International organizations: operations (and design) • IMF, World Bank, WTO (frozenideas?) • A motive for states to collaborate • From Realism/Nationalism to Liberalism. Marxism (Watson) • Theoretical or Normative positions? • Cooperation (Aggarwal & Dupont) • International negotiations • Rational, Rules of the game, Ideas. • Who is in power? • Pathdependence, difficult to change • Unintendedconsequences • (Transnational ideas)

41. International organizationsas arena for international politics • Whatarethey? • RTAs: EU, ASEAN, NAFTA etc. • Bretton Woods: IMF, IBRD, WTO • Environmentalagreements: Rio, Kyoto etc. • Financialregulation: BIS, BasleCommittee etc. • Transnational organizations

42. International organizations, continued • How do theyoperate? • Membership, stringency, scope, delegation, centralization: Becauseoftypeof problem? (Aggarwal & Dupont, table 3.1 Below) • States as members? Delegated powers? • Suprantional? Intergovernmental? Private? • Politics? Civil servants? Accountability? Democracy? • Whatrole for civil society, NGOs etc?

43. Motives for statestocooperate(Aggarwal & Dupont 2011) • Interdependence: economicgains in the long runbutpoliticalmotives in the short runto ”freeride” • Prisoners’ Dilemma (dominant strategytocheat) • ”Inhibitingfear” (mistakes): Assurance Game • Wheretomeet”: Battleof the Sexes • Mixed games, repeated games • Solutions: Insulation, corporatism, international regimes and organizations (enforcement, information, fairness) • Why?Hegemonicpower (realism), demand, paths, nesting, linkages (liberalism), ideas (constr.)

44. Institutional solutions

45. International negotiations • Intergovernmentalism = focus on negotiations by states (especially in the EU) • Whythese positions? Look inside the state: • Interests = domesticpolitics (below) • = governmenshelptheirexportingindustry (the winners) • Ideas = a convincingframing, discourse (below) • = a new economictheory, such as monetarism • Bargainingstrategies: interdependence, withinrules • Game theory (above), nested games

46. Path-dependence • Politicscontinuesalong a path • Some actions areeasierthanotherbecasueofpreviouschoices • International and national politics • Schmidt on UK, Germany, Francebelow • It is a logicof the situation (time and place: history) • Alsounintendedconsequences: new paths • Example: Rulings by the European Court ofJusticeon ”mutualrecognition” (implicit in the RomeTreaty?) • Neofunctionalism: crisesleadto action, a self-moving process

47. A kind ofpath: regulatoryfields(Jacobsson 2006) • International organizations make rules, evaluations • Embeddedstates (and agencies): Europeanization • States needtorespond = recreates the state • Rule-followersmorethanrule-makers? • (=the logicof the field? A kind ofpath?) • Scripts, translation, such as the EmploymentStrategy • Fragmentation (epistemiccommunties) • De-coupling

48. Transnational regulationdriven by networksofagencies • International competitionnetwork (Djelic & Kleiner) • From positive to negative views on trust • 1890 Sherman Antitrust Act led tomoremergers • Europe: Cartelsbetterthan the chaosofcompetition • Americaninfluenceafter WWII: Germany, EEC • 1990: EU, end ofcommunism, globalization • Inconsistent and conflictingregulation->coordination • Experts (OECD), statism (WTO) or community (ICN)

49. Three possible scenarios for transnational governance (table 14.2)

50. Transnational regulationby epistemiccommunities • Networksof central bankers (Marcussen 2006) • Central banks and theirgovernors • An epistemiccommunity, a network • Where do theymeet? BIS, IMF etc. • Networksproduce standards, knowledge and identity