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The Politics of International Economic Relations : Session 8 12 December 2006

The Politics of International Economic Relations : Session 8 12 December 2006. Globalization. What is Globalization?

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The Politics of International Economic Relations : Session 8 12 December 2006

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  1. The Politics of International Economic Relations: Session 812 December 2006

  2. Globalization • What is Globalization? • The intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa (Giddens 1990) • De-territorialization – or … the growth of supraterritorial relations between people (Scholte 2000)

  3. Globalization • A global economy … in which distinct national economies and, therefore, domestic strategies of national economic management are increasingly irrelevant (Hirst and Thompson 1999) • The international integration of markets in goods, services, and capital (Garrett 2000) • The integration of the world economy (Gilpin 2001)

  4. Globalization and State (Colin Hay) • Impact of globalization on the autonomy, capacity, and sovereignty of the nation state • Politics of Globalization (Drivers) • Globalization of Politics (Process of GG) • Structural, ideational and strategic dimensions • Implications of globalization, interpretation, actors’ reaction

  5. Theses • The Hyperglobalization Thesis (Logic of no alternative) • Capital invests where return on investment is highest (and perfect information) • Markets in goods and services fully integrated (national economies must be competitive to survive) • Capital mobility (exit costs are zero)

  6. Theses • Return of investment maximized through low labor costs, flexible labor markets, lowest rates of corporate taxation • Welfare state in decline (as its provisions represent no comparative advantage=lost capital) • Predictions: • “Economic globalization gives mobile international investors the upper hand over domestic political authorities” • “Capital will exit high-taxation regimes, highly regulated labor markets, strict environmental regulations and high union density….

  7. Theses • Convergence, Dual Convergence, Divergence • Convergence among models or varieties of capitalism • Dual Convergence: Institutional factors influencing state’s response (liberal market vs. coordinated market economies) • Divergence?

  8. Theses • The Golden Straightjacket • “Once your country puts on the GoldenStraightjacket, its political choices get reduced to Pepsi or Coke - to slight nuances of taste, slight nuances of policy, slight alterations in design to account for local traditions, some loosening here or there, but never any major deviation from the core golden rules. Governments ... which deviate too far from the core rules will see their investors stampede away, interest rates rise and stock market valuations fall” (Thomas Friedman).

  9. Theses • Regulatory Chill • Race to the Bottom (“pollution havens”) • Race to the Top • Stuck at the Bottom

  10. Another explanation? • Diminished capacity of state vs. the globalization of problems (limited capacities in light of increasing externalities) • e.g. tragedy of the commons (PD-situation) • When do states start to act?

  11. Another explanation?

  12. Evidence assessed? • Dependent variable: • State retrenchment • Public Spending in highly open economies (government expenditures/GDP) • Workforce employed by state • In defense: started recently (institutions are sticky), control for demographic pressures (including health care and unemployment),

  13. Evidence assessed? • Dependent variable: • Convergence or dual convergence

  14. Evidence assessed? • Independent variable: • Globalization • Capital and goods flows pre 1914 (imports and exports/GDP) • “Stateness” and Openness (Garrett, Rodrik), reaction to globalization, increase of government expenditures, government programs attractive to mobile finance and production, political parties • Investors’ preferences (market access, proximity to markets, labor skills, living conditions) • Triadization (FDI in same triad) • Intra-regional trade increases, etc…

  15. Conclusions • Overall complex empirical picture • Hyper-globalization thesis can not be supported with existing data • Yet, idea of globalization may have narrowed field of democratic choice • Lack of effective institutions in the global arena?

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