Globalization | 3 Development & Crisis Monday, December 6, 2010

1. Globalization | 3 Development & Crisis Monday, December 6, 2010

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7. Globalization | 3 • Structure of the class • Recap • IHT special issue • Stiglitz on development; a glance at China • Globalization and high-tech industries • Crisis

8. Globalization | 3 • Recap • The state of affairs: this is a time of major changes. • We need a conceptual machinery to understand and describe what is going on; • Given such an understanding, we could evaluate both what we can do in this context (tools and policies), and what we should aim for (goals and norms). • Globalization is a possible conceptual umbrella under which we can try to describe the current state of the world. • Distinguish: • globalization as a social scientific concept (compare: Durkheim’s anomie); • globalization as a political/ideological, normatively loaded concept (compare: communism); • globalization in everyday, non-technical use (compare: Oedipus complex). • Judt: “Like earlier narratives of endless improvement, the story of globalization combines an evaluative mantra (“growth is good”) with the presumption of inevitability: globalization is with us to stay, a natural process rather than a human choice.” (IFL 2010: 193)

9. Globalization | 3 • Recap • Two fundamental questions: • Is globalization an adequate concept for the task of describing the current state of affairs? • Is it, e.g., specific enough? • Is globalization a new phenomenon? • Are there lessons to be learned from (recent/modern) history? • Are we witnessing unprecedented processes? • Steger: “debating whether the concept is useful as a social scientific instrument of analysis and debating whether the process is politically viable or ethically acceptable” (VSI 2000: 13)

10. Concept

11. History

12. Globalization | 3 • Is globalization an adequate concept for the task of describing the current state of affairs? • What does the concept capture? • Steger: • “'globalization is happening' contains three important pieces of information: first, we are slowly leaving behind the condition of modernity that gradually unfolded from the 16th century onwards; second, we are moving toward the new condition of (postmodern) globality; and, third, we have not yet reached it.” • 4 features: • The creation of new and the multiplication of existing social networks and activities that increasingly overcome traditional political, economic, cultural, and geographical boundaries. • The expansion and the stretching of social relations, activities, and interdependencies. • The intensification and acceleration of social exchanges and activities. • People becoming increasingly conscious of growing manifestations of social interdependence and the enormous acceleration of social interactions.

13. Globalization | 3 • Held & McGrew: • Relevant scale: • “In seeking to differentiate global networks and systems from those operating at other spatial scales, such as the local or the national, the globalist analysis identifies globalization primarily with activities and relations which crystallize on an interregional or intercontinental scale” • Important dimensions of change: • “Central to this globalist interpretation is, nonetheless, a conception of global change involving a significant reconfiguration of the organizing principles of social life and world order. Three aspects of this are identified in the globalist literature; namely, the transformation of dominant patterns of socio-economic organization, of the territorial principle, and of power.”

14. Globalization | 3 • Held & McGrew: • The debate:

15. Globalization | 3 • Held et al.: • Concept specificity: • Spatio-temporal dimensions: • Extensity of global networks • Intensity of global interconnectedness • Velocity of global flows • Impact propensity of global interconnectedness • Organizational dimensions: • Infrastructure • Institutionalization • Pattern of stratification • Modes of global interaction

16. Globalization | 3 • Hirst & Thompson: • Inter-national vs. globalized economy • Present economic landscape not unprecedented, but in fact less open than that of 1870-1914 (e.g. workforce circulation); • No massive shift of investment and employment from advanced to developing countries (?); • Trade, investment and financial flows concentrated in only a few regions; • Markets not beyond great power regulation and control.

17. Globalization | 3 • Is globalization a new phenomenon? • Giddens: modernity radicalized • “Rather than entering a period of post-modernity, we are moving into one in which the consequences of modernity are becoming more radicalised and universalised than before.” • Modernity • Pace of change; • Scope of change; • Nature of institutions. • Sources of dynamism: • Time-space distanciation; • Disembbeding; • Reflexivity.

18. Globalization | 3 • Is globalization a new phenomenon? • Giddens: modernity universalized • “The declining grip of the West over the rest of the world is not a result of the diminishing impact of the institutions which first arose there but, on the contrary, a result of their global spread. The economic, political, and military power which gave the West its primacy, and which was founded upon the conjunction of the four institutional dimensions of modernity I shall shortly discuss, no longer so distinctly differentiates the Western countries from others elsewhere. We can interpret this process as one of globalisation, a term which must have a key position in the lexicon of the social sciences.” • Institutional dimensions of modernity & globalization: • Capitalism >> World capitalist economy; • Industrialization >> International division of labor; • Surveillance >> Nation state system; • Military power >> World military order.

19. Globalization | 3 • Is globalization a new phenomenon? • Belle époque globalization & the British Empire / Pax Britannica • Similarities • Scale & key regions • Trade • Ideology & language • Security arrangements • Differences • Dominant actors & fault lines • Technology & communication • Migration • Countercultures

20. Globalization | 3 • IHT special issue • E.g. Cohen, The Age of Possibility: • “Although there’s talk in the West of a new Age of Anxiety, the neurosis is in fact fairly narrowly confined. True, the unease lies in what is still by far the world’s largest economy — the United States — and is shared by the European Union. The problems there — of soaring deficits, high unemployment, aging baby-boomers and sporadic anti-immigrant anger — are intractable. Excess has given way to distress. Yummy money has dried up. But the vast bulk of the world’s population lives outside these enervated and overextended enclaves. For billions of human beings opportunity is expanding rather than contracting, if very unevenly. This is in fact the new Age of Possibility. • Times of such dramatic shift are dangerous. Consider Germany’s late 19th-century burst onto the European stage as a unified nation-state and the century of bloodshed and confrontation it took to resolve the German question. Consider the global upheavals that cemented America’s 20th-century rise and Britain’s imperial decline. I don’t believe the power transition in progress today is any less dramatic.”

21. Globalization | 3 • Stiglitz on development • Where to start? • “Development is a process that involves every aspect of society, engaging the efforts of everyone: markets, governments, NGOs, cooperatives, not-for-profit institutions.” • What’s at stake: • “About 80 percent of the world's population lives in developing countries, marked by low incomes and high poverty, high unemploy-ment and low education. For those countries, globalization presents both unprecedented risks and opportunities. Making globalization work in ways that enrich the whole world requires making it work for the people in those countries.”

22. Globalization | 3 • Stiglitz on development • Two schools of economic thought • The Washington Consensus • Market vs. State • “These policies focused on minimizing the role of government, emphasizing privatization (selling off government enterprises to the private sector), trade and capital market liberalization (eliminating trade barriers and impediments to the free flow of capital), and deregulation (eliminating regulations on the conduct of business). Government had a role in maintaining macro-stability, but the attention was on price stability rather than on output stability, employment, or growth. There was a large set of dos and don'ts: do privatize everything, from factories to social security; don't have the government involved in promoting particular industries; do strengthen property rights; don't be corrupt. Minimizing government meant lowering taxes—but keeping budgets in balance.”

23. Globalization | 3 • Stiglitz on development • Alternative view: • “While markets are at the center of any successful economy, government has to create a climate that allows business to thrive and create jobs. It has to construct physical and institutional infrastructure—laws ensuring, for instance, a sound bank-ing system and securities markets in which investors can have confidence that they are not being cheated.” • One argument: • “What separates developed from less developed countries is not just a gap in resources but a gap in knowledge, which is why investments in education and technology—largely from government—are so important.”

24. Globalization | 3 • Stiglitz on development • Regional differences • Asia • Latin America • Former communist countries • Africa • Key issues • Equity and justice • Education • Health • Environment • Economic security

25. Globalization | 3 • Stiglitz on development • The role of the state is crucial: • “The list of potential arenas for government action is large. Today, nearly everyone agrees that government needs to be involved in providing basic education, legal frameworks, infrastructure, and some elements of a social safety net, and in regulating competition, banks, and environmental impacts.” • Education is the fundamental ingredient of development: • “Development is about transforming the lives of people, not just transforming economies. Policies for education or employment need to be looked at through this double lens: how they promote growth and how they affect individuals directly. Economists talk about education as human capital: investment in people yields a return, just as investment in machinery does. But education does more. It opens up minds to the notion that change is possible, that there are other ways of organizing production, as it teaches the basic principles of modern science and the elements of analytic reasoning and enhances the capability to learn.”

26. Globalization | 3 • Stiglitz on development • Pillars of development • Markets • Governments • Individuals • Communities • Is the world flat? • “Not only is the world not flat: in many ways it has been getting less flat.”

27. Globalization | 3 • Development in China • Particularities: • More investment than in any other economy • Focus on manufacturing • Rapid growth • Challenges & opportunities: • Structural change (unavoidable for future growth) • Social & political change • Not the only successful development strategy

28. Globalization | 3 • Development in China

29. Globalization | 3 • Development in China >> India as an example of strategic alternatives

30. Globalization | 3 • Globalization & high-tech industries • Hart • “It has generally been understood that U.S.-based firms’ temptation to go overseas to gain access to lower labor costs is felt much more strongly in mature, low-tech industries than in emerging, high-tech industries—and thus that high-tech firms and workers in the United States are not as vulnerable to foreign competition as firms and workers in mature industries. But with the rise of China and India, this sanguine assessment has come under question. The U.S. lead in technologically sophisticated production—and the benefits in terms of employment and wealth creation—can no longer be taken for granted.” • Role of the MNE • Horizontal vs. vertical FDI

31. Globalization | 3 • Globalization & high-tech industries • Hart • China > destination for labor-intensive processes • India > destination for servicing • What about top jobs (education + skills)? • “Average base salaries for electronic engineers in the United States in 2006 were $82,000, in Japan $63,000, in Taiwan $20,000, and in China $10,000.10 When productivity per worker begins to approximate that of the United States, jobs are likely to move.”

32. Globalization | 3 • Globalization & high-tech industries • Hart > Key industries • Semiconductors • Cell phones • Software • Consumer electronics • Digital TV • PCs • Aircraft & aviation tech • Biotechnology

33. Globalization | 3 • Globalization & high-tech industries • Hart • There are (were?) still large gaps in terms of high tech intensity

34. Globalization | 3 • Globalization & high-tech industries • Hart • But even in high-tech changes are happening

35. Globalization | 3 • Globalization & high-tech industries • Hart > Trends

36. Globalization | 3 • Globalization & high-tech industries • Hart > Islands of competence • “In recent years, jobs in all of these industries, with the exception of biotechnology, grew more rapidly in East Asia than in the United States, albeit from a lower base. India experienced major growth in software and computer services jobs, while Korea, Taiwan, and China saw rapid expansion in employment in electronics manufacturing. One of the reasons for the relatively higher growth rate in high-tech jobs in East Asia is globalization, but globalization does not explain why the increase in jobs occurred in those countries as opposed to somewhere else.” • Venter on not playing God

37. Globalization | 3 • Globalization & high-tech industries • Hart > Recommendations • Look for ways to spread the wealth and jobs created in rising high technology industries (advanced software and biotechnology, for example) to the rest of the economy. • Do not put handcuffs on firms in either mature industries or high-tech industries that are increasingly competing with firms in Europe and Asia to prevent them from using globalization to remain internationally competitive. • Keep training scientists and engineers from around the world in U.S. colleges and universities, but try to induce as many as possible to stay in the United States to build U.S. competitiveness. • Keep training workers for expanding high-tech industries so these industries do not have to deal with shortages of skilled workers.

38. Globalization | 3 • Crisis • Stiglitz again • Comments