The politics and economics of
international relations:
An introduction to globalization
Lars Niklasson, Deputy Professor
Political Science, Linköping University
What are the major challenges in the global
context (politics and economics)?
• What are the most desirable ends for global politics? My suggestions:
• Handling environmental problems
• Development of the global south: living conditions etc.
• Is it ok to have cars and refrigerators in India?
• Developing democracy and good governance in all countries
• (Further development of the global north, a win-win situation?)
• What instruments are available to reach these ends? Will the economy/society
reach the goals? How are relations between countries regulated?
• Global economic integration (globalization): a threat or an opportunity?
• Trade, finance, labor standards, knowledge production
• Global politics (1): the regulation of the economy
• International organizations, governments, NGOs etc.
• Global politics (2): specific support for development
• Aid, global collaboration, security arrangements etc.
Three themes of the course
• 1. What is globalization?
• Perspectives, theories
• Explanations, old and new
• 2. What are the effects? Is it good or bad?
• Economic development, jobs, quality of life, modernization
• Environmental impact, equal opportunities
• Values: Cosmopolitanism, localness, virtues etc.
• 3. What are the causes? (What can be done?)
• Structural change: technology, the economy
• The role of regulation: Who decides? How?
What is globalization?
• Economic integration of the world
• Globalized firms, exporters, global value chains
• How can we understand it?
• Consequences: good or bad?
• Causes: what can be done?
• Who are the winners and losers?
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Local firms?
Workers?
The uneducated?
The global south?
How can we evaluate globalization?
• Many policies are ends to means:
• Trade policy
• Financial systems
• What are the ultimate ends (values)?
• Economic development, reduction of poverty
• Environmental improvement
• Quality of life, equality, fairness, autonomy, freedom?
• Liberal, nationalist and critical perspectives
• Local traditions AND modern cosmopolitanism?
• Social science is mainly about ends to means
• What can states, markets and communities do?
• How can they work the best? What kind of regulation is needed?
Perspectives on globalization
• Optimists (economists) vs pessimists (sociologists)
• Economic theory predicts longterm gains for everyone (consequences)
• Sociologists see struggles for power behind the scenes (causes)
• Political scientists study the process of regulatory change (politics)
• Methods and assumptions vary
Optimists/Economists
• Economic theory predicts longterm gains for everyone
• Win-win situation, potential harmony of interests
• Consequences more important than causes?
• More specific:
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Highly mathematical theories
Abstract and general, ”ceteris paribus”, assumes rationality
Ignore short-term losers
A smart roadmap or a utilitarian religion?
A naive view of firms, markets and societies?
What does it take to achieve the desired end?
The globalizers
• Martin Wolf (2004): Why Globalization Works
• Globalization ”has brought benefits to hundreds of millions of people and
helped secure the biggest ever falls in the proportion of humanity in extreme
poverty. The challenge remains to spread the opportunities of globalization
more widely than ever before. For that we need better states and better
policies.” (page ix)
Pessimists/Sociologists
• Sociologists see struggles for power behind the scenes
• Zero-sum, fundamental conflicts are unsolvable
• Causes more important than consequences?
• More specific:
• Qualitative theories
• Specific time and place, static, focus on values and struggles for power
• US firms and third world governments vs the poor peasants? (Hegemony)
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Focus on short-term winners and losers, ignore long-term gains (?)
Markets are socially constructed: politics and power
What is their alternative? A naive view of the state?
What does it take to achieve the desired end?
The anti-globalizers
• The International Forum on Globalization: Alternatives to Economic
Globalization, 2002:
• Against corporate globalization: ”big firms get too much power and ruin the
resources of the planet”
• Local economies better than exports and integration
• Cultural and economic diversity is needed
• Local and national political power, democracy
• = similar to the progressive movement in the 1890s?
• = based on other values? Other economic theories?
What do they disagree about?
• Consequences of policy (eg. free trade)
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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 states work
• Causes of policy
• By the rich, for the rich?
• By liberals, against organized interests, to have a dynamic society?
• Research methods
• Abstract vs descriptive, quantitative vs qualitative
Can we find out who is right?
• Values are normative
• Only a personal choice?
• Where do they lead? Logical testing?
• Facts can be investigated empirically
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How were the policies selected? What were the motives? (process-tracing)
Who decided? (different conceptions of democracy, global governance)
How are the policies meant to work? (program theory)
How do they work in practice? (implementation)
What are the effects of the policies? (evaluation)
• General theories (economics)
• Case-studies of particular situations (political science, sociology)
Theoretical perspectives for evaluating and
explaining regulation (policies)
• International Political Economy
• The politics of the economy (”political economy”)
• National and international, a broad agenda
• From International Relations
• States as actors
• Normative paradigms?
• Nationalism, liberalism, critical perspectives
• From Political science
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Causal explanations: domestic and international politics
Interests, institutions, ideas
(The bureaucratic politics of international organizations)
Democracy as a norm: what kind is possible, feasible? (”Global governance”)
(Implementation studies)
Why do we need theories?
• They interpret the facts, help us see patterns
• Causality: why did it happen?
• Evaluation: good or bad?
• We can treat theories as hypotheses and search for falsification
• We can understand the actors’ theories/ideas/motives
• Theories help us make predictions
• Theories can be used to mobilize support for action (=politics)
• But: theories may be infused with assumptions and values
• Is rationality a simplifying assumption or a norm?
• Is constructivism an eye-opener or hidden marxism?
Three paradigms
• Economic nationalism
• Liberalism
• Critical perspectives
Table 1.2 Comparing the perspectives
Aspect
Economic nationalist
Liberal
Critical
Historical origins
15th century
19th century
19th century
Major figures
Hamilton, List, Strange
Smith, Ricardo, Keohane
Marx, Lenin, Cox
Variants
Mercantilism, Realism
Free trade, Interdepend.
Marxism, feminism
Level
State-centric, atomistic
Pluralist atomistic
Global structure
Human nature
Aggressive
Cooperative
Malleable
Units
States
Firms, states, NGOs etc.
Class, gender, planet
View of the state
Unitary actor
Diverse intersts
Class interest groups
View of TNCs
Beneficial/harmful
Beneficial
Exploitative
Behavioural dynamic
State as rational actor
Rational actor, failure
Dominance, exploitation
Market relations
Potentially negative
Positive
Exploitative
System structure
Anarchy, conflict
Cooperative, interdep.
Hierarchy, conflict
Game metaphor
Zero sum
Positive sum
Zero sum
Hegemony
Dominant state
Cooperation
Hegemony in state society
International institutions
Not significant
Important
Serves wealthy interests
States versus markets:
Neoliberals vs neomercantilists
Issue
Neoliberal
paradigm
Neomercantilist paradigm
Trade policy
Take away barriers
Use barriers strategically
Key value
Competition
Competitiveness
Key mechanism
Comparative advantage
Survival of the fittest
Infant industries
Innovation systems
Economic paradigm Schumpeter, Ricardo etc. Mercantilism: List
The single market
Strategic trade theory
Endogenous growth theory?
Causal explanations (”methods”)
• A. Deductive (IR) vs inductive (pol sci)
• Start from theory or build theory from data (cases)
• Statistics, case studies & comparisons
• Theories on a high level of abstraction or ”middle ground”
Causal explanations, cont’d
• B. Pol sci: Rational abstractions (RC) vs Understanding processes
• The logic of unintended outcomes (game theory) vs how did it happen?
• Assuming preferences vs explaining change of preferences
Causal explanation, cont’d
• C. Processes: The three I’s (Political science & Sociology)
• Interests (winners/losers): a too quick explanation. Rationalists
• Institutions (rules) shape the arena, explains variety. Liberals (?)
• Ideas explain variety and where interests come from. Constructivists
• Ideas: Liberalism, Nationalism and Critical perspectives!
Focus on politics
• What are the drivers for change?
• Structural change (technology, economy):
• Winners and losers (interests)
• Filtered through regulation (institutions)
• Paths or unintended consequences
• Interpretations, ideas (often from Economics)
• How we think about globalization
• Hegemonic power? (USA)
• Bureaucratic power by the international organizations?
• Who are the actors?
• Firms, industry associations, NGOs, regulators, politicians
• How are winning coalitions formed within and across governments?
• Facts, values & rhetoric; more friends than enemies
• Very complex processes behind the scenes
The role of ideas and their actors
(from chapter 13)
• Ideas are mental images, worldviews, ideologies, norms, identities
• Constructivists in IR and Political Science: ideas influence behavior
• Reality is socially constructed = dominant interpretation
• ”Another world is possible” (World Social Forum)
• One step beyond rationalism: where do preferences come from?
• Epistemic communities: experts and policy sectors, ”iron triangles”
• Policy coordination and competition, coalition-building
• Several versions:
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Ideas represent interests (Gramsci, Cox), hegemony/dominance
Look for interests in dominant ideas & the missing perspectives (poststructuralism)
Ideas are promoted by actors to change policies
Ideas become embedded in institutions: institutions are biased
Old and new globalization
• What explains change over time?
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Structural factors like environment and geography (Jared Diamond)
Western dominance (”the global historical approach”) over the poor
Western culture for success (”the cultural approach”) – the poor are bad
”The institutional approach”: people are the same, but the institutions differ
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Inventions in warfare, production, New technology
Good governance: the rule of law, ownership
Democracy, politics to balance the economy
Investments in human capital
Investments to catch-up
The development of cooperation
The world economy 1400-1800
• Many powerful regions around 1400:
• The Middle East, China, India, Africa, The Americas, Europe
• European trade and finance: Italy, Flanders, The Hanseatic League
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Trade, production, finance, shareholding
Culture and education, the renaissance
Political stability and rule of law
Sovereign territorial states, state formation
• European domination: trade, wars, colonies
• Triangular trade
• Challenges: Poitiers 732, the Mongols 1241, the Turks at Vienna 1529 and 1683
• What was the impact? South America (Spain) vs North America (England)
The world economy 1800-1945
• The industrial revolution from ca 1750
• Mechanized production, the factory system, a labor market
• Foreign supply and demand were necessary
• Why Britain? Why then? Scientific knowledge, liberal state, naval power
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• Structural forces, government action or institutions and entrepreneurs?
France, Germany, the US, Japan
Smith: specialization (against the East India Company)
Ricardo: comparative advantage (Box 4.4)
Marx: exploitation
• Pax Britannica: similar to the present situation?
• The gold standard, capital flows, unilateral free trade 1846
• The empire, balance of power 1815-1914, gradually UK vs Germany
• Imperialism inevitable?
• Interwar economic failure 1919-39
• The League of Nations (Woodrow Wilson): utopian liberalism?
The world economy after 1945
• The Cold War 1945-89
• Western alliances, multilateralism, ”embedded liberalism” (Ruggie)
• Realists: competition brings stability (Carr)
• Liberals: self-restraint by the winners is the key to peace (Ikenberry)
• But: there are many actors within governments (Allison on the Cuban missile crisis)
• The Eastern block
• Decolonization in the south: French resistance
• South East Asia: NICs
• The Post Cold War Era 1990-2010
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North: Varieties of capitalism
South: BRICS & Least Developed Countries
Technological change, economy etc.
After Bretton Woods: Unilateralism? Minilateralism? Weaker international
organizations?
Focus on regulation
• How is globalization regulated?
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Trade
Finance
Production
Labor, gender
Environment
Development
• By whom?
• How does it change?
Multi-level regulation
• By whom?
• International organizations: WTO, IMF, UN
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• Intergovernmental or supranational?
• North vs south? Sector vs sector? (epistemic communities)
Regional organizations: EU, Nafta, Asean etc
Specific treaties: Kyoto
Transnational regulation, networks/epistemic communities, private actors
Regulation implemented/transposed by states
• Actors:
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States?
Politicians: domestic politics: winners vs losers? Institutions, discourses
Bureaucrats: self-interested or idealists? discourses, fashions
NGOs: who is organized?
Three possible scenarios for transnational
governance: where do the ideas come from?
Source: Djelic &
Kleiner 2006
Experts
(OECD)
Statist
(WTO)
Community (ICN)
Rule makers vs
rule followers
Separate
Separate
Combined
Product of
governance
process
Standards
Binding rules
Beliefs
Mode, logic of
rule making
Expert driven
Political
negotiations
Negotiations,
Expert input
Mode, logic of
rule monitoring
”Expert awe”
Coercion,
constraints
Socialization
+/-
Presupposes
legitimacy
Efficient
Easy to start
The global governance architecture:
are the policies coordinated? Yes/no!
• Specific regulation of each area (trade, environment etc)
• Fragmentation/Specialization, ”silos”
• Conflicting goals! Agreement impossible?
• Case: Clean tech (environmental protection + economic growth)
• Implies competing epistemic communities
• Who is invited? Only governments? NGOs?
• Are ministries competing or collaborating?
• Two-level games to win at home and abroad?
• Two dimensions: the sector and the level
• Implies that political factors are important in globalization
How are conflicting policies (”wicked problems”)
implemented in various countries?
• Joint projects, if possible (such as clean tech)
• Separated (ignored?)
• Different organizations, negotiations, decisions by courts?
• Integrated, to be dealt with at a lower level
• Multipurpose organizations, mainstreaming
• Political: Local governments
• Civil servants: multipurpose agencies
• Synergies? Common values or ambitions?
• Decoupling or deliberation (by politicians, civil servants, the public?)
• Experimentalist governance?
• Focus on particular situations
• Key person to make the decision
What are the effects of international
regulation? An empirical question!
• How are the new rules implemented?
• Are they implemented, resisted or taken advantage of?
• National governments pick and choose
• Are the new rules similar to the old ones?
• Varities of capitalism: LME vs CME
Pressures on national politicians
• A race to the bottom, convergence?
• Or room for many strategies?
• Still, a need to take action proactively
• Germany
• France
Economic development:
the most valuable end of globalization?
• 1. What has happened?
• A big success? China and India vs the rest? Asia vs Africa?
• New labels: Third World, Global South, Emerging Markets
• What is development? How can we measure it?
• GNP vs Social objectives, Human Development Index, considers distribution
• 1947-81: Keynesianism, weak and/or corrupt elites, domestic barriers
• Redistribution, New International Economic Order, G77, (Cold War context)
• NICs: market and state? Exports and protection? Global value chains
• Japanese influence, authoritarian states
• 1982-2009: Debt crisis, ”Washington Consensus”: structural adjustment, NGOs
• Governance, democracy, sustainability, poverty reduction, debt relief, the rise of China and
India
• MDG 2015, greater emphasis on domestic enabling conditions, coordination
• Present interpretation: Internal and external causes are linked
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 crisis of Keynesianism + an epistemic community = Thatcher, Reagan
• Neoliberalism = the implementation of neoclassical economics
• Market fundamentalism, neglect of inequality and poverty?
• Effects?
• Questionable effect: The NICs: success due to the market (or developmental states)?
• Failures: Asian crisis 1997: premature liberalization? US crisis: Enron
• No effect: Mexico, Argentina, Africa: structural adaptation but crisis or little growth
• Was it implemented?
• Internal disagreements: shock therapy or gradual change
• A variety of implementation: the whole package vs pick and choose
• Resistance prevented full implementation
• Renewed focus on good governance: rule of law (=state!) How to get it?
What has happened, cont’d
• Lesson learned?
• Asia (NICs, China, India) vs Africa: institutional factors?
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Integration in the global economy, value chains
Market and Developmental states
Good governance: authoritarian states
US support during the Cold War
• Washington consensus too simple?
• Disliked but successful?
• Aid is difficult
• Taking over vs supporting self-sustaining processes
• Where to begin? Good governance? Economic integration?
Disagreement about causes and cures
• Why are some contries poor?
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Exploitation: colonialism
Bad starting position (resources, cheap labor)
Bad policies for catch-up?
Bad governance: colonialism?
Bad support (aid)
• The exceptions: the NICs, China, BRIC, (Ireland)
• Protectionism vs openness
• The developmental state
• Washington consensus
Economic development, cont’d
• 2. Are the policies good or bad?
• Liberals: Policies have been bad, markets are key, modernization stages, the success of the
NICs: exportoriented industrialization (EOI)
• Nationalists: Developmental policies are needed (NICs), governance is key, import
substitution (ISI), Latin America, NICs too? Confucianism?
• Critics: Aim to control the third world, external exploitation, dependency, falling value of
exports (terms of trade), vulnerable to external shocks
• 3. Why have policies changed?
• Interests: North vs South? China. A variety of 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, bureaucratic politics?
• Ideas: Modernization vs dependency, NIEO vs Washington Consensus
• 4. Where will it lead?
• Exploitation or development? Good governance? Will Africa change?
The post-2015 UN development agenda
(Thematic think piece, 2013)
• Aid for trade
• External demand can raise incomes and living standards
• Support productive capacity and trade-related bottlenecks
• Climate change 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
Four deeper investigations:
write a paper on one, attend at least two
• 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
The regulation of the environment:
an end in itself and a restriction on other aims
• 1. What has happened? Global problems need global solutions?
• ”The tragedy of the commons”, but what are fair rules for all?
• Can they have cars and refrigerators in India?
• Environmental problems are cause and effect of other problems
• Human-centered environmentalism vs ecologism (light-dark green)
• Sustainability means many things: growth as problem or solution?
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What should be sustained? Resources, production, living standards in the north and south?
Brundtland Commission: environmental, social and economic sustainability
A restriction and influence on other policies: ”intergenerational equity”
Overconsumption and irresponsible production: North or South? China!
Ecological shadows
Aid projects: environmental assessments, participatory development
Trade as problem or solution? Race to the bottom?
The regulation of the environment, cont’d
• 2. Is it good or bad?
• Liberals: Common interests, market solutions such as clean tech, the Kuznets
curve, socialist exploitation, regulations open for government failure
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Environmental economics: 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 comparative advantage
• Nationalists: Cooperation difficult, market failure, environmental standards
improve competitiveness
• Critics: Power, inequalities, capitalist exploitation
• Ecologists: nature in focus, limited resources. Economics irrelevant. A need to
add process standards to product standards in the WTO (eco-labels?)
The regulation of the environment, cont’d
• 3. Why has it happened?
• Interests:
• Environmentalism due to affluence, disasters & end of cold war
• Victims & NGOs
• Institutions:
• International negotiations on climate change: 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 economics of climate change vs sceptics
• Green parties & activists normalized, co-opted, mainstreamed
• Domestic regulation, IOs mainstreamed, firms are proactive
• Ideas: Scientists and authors form epistemic communities (with ministries, NGOs,
researchers): light and dark green
• 4. Where will it lead? Win-win solutions or conflicts?
Globalization is about a new logic of production:
transnational production
• 1. What has happened? A new industrial revolution?
• The logic of production has changed (= a structural factor)
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From integrated firms to networks: global value chains
Post-fordist production, break-up/networking, outsourcing, collaboration
Changes in technology, transport, management, trust, consumer demand
To be near markets and inputs (cheap and skilled labor, technology, resources)
• Nearness, skills, infrastructure rather than low cost (East Asia vs Africa!)
• ”Foreign Direct Investment” to get control over resources in other countries
(vs portfolio investment)
• Market-conforming regulation: open, more uniform
• Fair competition, no subsidies, no protection?
Transnational production, cont’d
• 2. Is it good or bad?
• Liberals: Long-run benefits, opportunities for all
• TNCs bring resources, capabilities, taxes, productivity, dynamism, spillovers to local firms,
better values. The success of East Asia
• Nationalists: Support national champions, control TNCs. Loss of autonomy
• Critics: Exploitation of labor and environment (TNC + third world gov’ts)
• Transfers in the interest of the firm, avoid paying taxes, foreign rules, political influence
• New International Economic Order 70s
• An empirical question. Net effects depend on policy.
• Gov’t control, technological upgrading? Protect infant industries?
• Gov’t weak bargaining position
• Attractiveness vs national interest. Changing attitudes
• A need for more regulation?
Transnational production, cont’d
• 3. Why has it happened?
• Structural factors: Better transport, new technology, global finance, demand
• Interests: exporters
• Exploit technological comparative advantage (Vernon) or foreign ownership (Dunning)
• Oligopolistic business structure (Hymer)
• Bigger sales & markets to invest in R&D
• Institutions: USA + EU + WTO?
• US Policy to support investments in non-communist countries
• Policies: cold war, liberalization, Export Processing Zones
• Lack of strong owners for American firms, weak unions, weak state?
• Ideas: liberalism vs collectivism?
• 4. Where will it lead?
• The competition state: focus on competitiveness
• Depends on what the BRICs want?
The regulation of trade
• 1. What has happened? Trade and FDI explosion due to TNCs
• Protectionism after WWI, freer trade after WWII
• Reduction of tariffs and other barriers (NTB, non-tariff barriers)
• ”Embedded liberalism” (Ruggie)
• Multilateralism: (ITO), GATT and WTO, UNCTAD
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GATT principles: Non-discrimination, reciprocity, transparency
But 1974-2005 Multifibre Agreement
Later focus on barriers beyond borders = competition policy
No agreements except Bali. Dispute Settlement Mechanism is operative
• Regionalism: EU, Nafta etc (building blocs or stumbling blocks?)
• Bilateralism: FTAs such as TTIP
• Unilateralism: EU open for ”Everything but arms” from LDCs
The regulation of trade, cont’d
• 2. Is it good or bad?
• Liberals: Growth for all, especially Asia
• Nationalists: Strategic protectionism to protect or to force others
• Critics: Exploitation, erosion of old life styles, labor, environment, social policy
• Key issues
• Comparative advantages, win-win? (Ricardo)
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Labor productivity and factor endowments, origins irrelevant
Specialization and dynamic effects for growth, spread of technology
Cheap inputs from abroad and a push to increase productivity
Puzzling intra-industry trade and intra-firm trade
Employment-creating vs employment-displacing effects
Health standards (NTB) used to discriminate against imports
• Is modernization good or bad? Effects on the environment?
Key issues, cont’d
• What is ok to protect and support? (Mercantilists, nationalists)
• Infant industries, technology, agriculture, culture
• Unequal exchange? Unfair start, freezing status quo, concentration of power
• Are critics captured by organized losers? (= the trade policy perspective)
• Is the south weak in the WTO?
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Doha development round 2001-06 failed
Against new issues, insist on implementation of old agreements
The like-minded group, G20, G90, Cotton-4, The Cairns group
Textiles move 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
The regulation of trade, cont’d
• 3. Why has it happened?
• Hegemony? Stability and economic interdependence
• US policies to support non-communist countries
• MNCs & Asia (cheap labor, stable societies) = interests
• The development of GATT and breakdown of WTO = institutions
• Increasingly difficult to reach agreement
• The breakdown of Keynesianism, triumph of Monetarism = ideas
• Driven by EU/France (Abelal 2007)
• Bureaucratic politics of the WTO and EU?
• What is the role of NGOs? (interests vs ideas)
• 4. Where will it lead?
• Are policies implemented?
• Increased conflicts?
The regulation of labor
• 1. What has happened?
• From national to global division of labor
• Gender, race and ethnic patterns vary over time
• From mass production/Taylorism/Fordism/mass consumption…
• Deskilled, replacable. Today: Call centers
• …to flexible work organization/Diversified Quality Production/Post-fordism
• Greater variety of skills, the role of teams, Lean production
• From human capital to structural capital
• Follow scripts/standardized procedures/software
• Greater competition. Losers and winners (”project nomads”?)
• Deindustrialization, greater ”flexibility”, migration
What has happened, cont’d
• The rise of China and India: wealth and cheap products, social tensions
• Production moved from other Asian countries, few Chinese brands, suppression of
unions
• Blue-collar jobs in China, white-collar jobs in India. To be Bangalored = outsourced
• Workers’ rights: how to regulate firms?
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Home state extraterritorial rules
Multilateral rules: WTO/ILO (unnecessary, profit reduction or protectionism?)
Codes of conduct, campaigns, select cases, Global Compact 2000
ILO created because of labor unrest 1919
US labor organizations have become critical of hegemony, used to be supporters
Peasants’ alliances
The Peoples’ Global Action against Free Trade and the WTO (PGA)
The regulation of labor, cont’d
• 2. Is it good or bad?
• Liberals: specialization (and trade) drives growth (Smith), better to be poor in
a rich country, Increased wealth will lead to higher standards
• Nationalists: States must protect strategic sectors, various strategies/niches
• Critics: Countries (and women) are depedent/locked-in, begins with European
exploitation and protection.
• 3. Why has it happened?
• Interests: US business vs labor & right-wing populism, NGOs, governments
• Institutions: WTO is limited, ILO is weak
• Ideas: ”Globaliztion demands lower standards”
• 4. Where will it lead? Who will put pressure on governments?
The regulation of gender,
socially constructed roles of man/woman
• 1. What has happened?
• IR and IPE are blind to gender, but gender helps understanding the
economy:
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Economic assumptions overlook important differences
Unpaid work in the home should be made visible
Different rates of participation in the workforce. Insecure work, lower pay
Feminization of poverty: single mothers, larger burden for supporting family
Globalization of reproductive work: prostitution, domestic services, brides
Women work in EPZs: smaller hands, more compliant
• Is it better than rural work and the local culture?
The regulation of gender, cont’d
• 2. Is it good or bad?
• Liberals: Trade creates jobs for women in manufacturing. Discrimination is a barrier
to growth
• Nationalists: The state should focus on wealth creation
• Critics: Gender is a key axis of power in society, discrimination
• 3. Why has it happened?
• Interests: Feminism as a movement. (Equality of the sexes vs women)
• Institutions: UN conferences, normative commitment and institutionalization,
International organizations: mainstreamed
• Ideas: Feminism vs equality of the sexes
• 4. Where will it lead?
• To change: measure all costs (unpaid reproductive work), equal pay, child care
The regulation of knowledge production
(part of chapter 13)
• 1. What has happened?
• The knowledge economy: the importance of R&D
• Science and technology as drivers for innovations
• Universities important sources for ideas and skilled labor: collaboration with firms
• Patents encourage diffusion of technology and protects inventor and investor
• Should medicine for HIV/AIDS be patented? WTO-TRIPS allows some copies
• Knowledge-based services have the highest value
• Information technology has many consequences
• New organization of work: individual work and the break-up of firms
• New solutions in areas like medicine
• New markets for leisure products
• The digital divide: across generations?
• Half-truths, bad history and wishful thinking?
The regulation of knowledge production,
cont’d
• 2. Is it good or bad?
• Liberals: Entrepreneurs drive change, productivity and competitiveness
• Nationalists: Subsidies needed for competitiveness
• Critics: Privatization, deregulation, de-unionization, flexible labor markets.
Job-less growth. Digital divide.
• 3. Why has it happened?
• Interests: Big firms need input from the universities, which need funding
• Institutions: Mission-oriented research councils, tax-deductions
• Ideas: Knowledge is a key to competitiveness and a public good
• 4. Where will it lead? Support for new vs old firms (”lock-in”)
The regulation of finance:
the monetary system & financial markets
• 1. What has happened in the monetary system?
• Bretton Woods 1944: a need for stability and openness. Keynes
• IMF (balance of payments) and IBRD/World Bank (investments for rebuilding)
• US funds to buy American goods: the Marshall Plan, military spending, FDI
• Organizations owned by the member states: voting rights etc.
• Mundell & Fleming dilemma (1960): You can only have two of three
• Capital flows/fixed exchange rates/autonomy
• Currencies fixed to the dollar, fixed to gold. Adjustments for productivity
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Outflow of dollars, more dollars than gold (Triffin dilemma).
Japanese and European currencies undervalued: 1971 floating dollar.
Led to inflation, higher interest rates, more FDI in the US + More domestic spending 80s
1985 G5 Plaza accord to reduce the value of the dollar, 1987 G7 Louvre
What has happened, cont’d
• A change of paradigm in the 80s
• Monetarism, the Washington consensus, deregulation of finance
• European integration: the single market, the Euro
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EMS (ECU, ERM) to avoid stronger DM & inflation in other countries
1992: Floating currencies in the UK and Sweden
EMU 1992, Euro 2002, ECB, SGP 1997.
OCA? No instrument for adjustment? Devaluation, transfer payments, labor mobility
• Dollarization in other countries. Should the Chinese currency float?
• The Euro crisis 2009: due to cheaper credit for the PIIGS
• Greek debt underreported: 15% rather than 6% of GDP
• Solutions: European bonds or reduced budget deficits?
What has happened, cont’d
• USA and China: a risky relationship
• The US spends on imported Chinese goods (Walmart etc.)
• China invests in US bonds, the US can have low interest rates & large debt
• American overspending: war in Iraq, tax cuts, housing boom
• China dependent on exports for employment
• The Chinese currency is undervalued
• Benefits Chinese firms and American consumers
• Difficult for American firms to sell to Chinese customers
• More consumption, less investments in the US
• Difficult for the US to repay loans
• Chinese firms are rich; China needs to invest in pensions, the environment etc
What has happened, cont’d
• What has happened in the financial system? deregulation, innovation,
crises
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”Eurocurrency market” = other currencies
New technologies, increasing capital flows
Deregulation from 1974: open to foreigners and other sectors
New instruments such as derivatives: reduced risks or increased betting?
Sovereign wealth funds by governments
Hedge funds: betting?
Pension funds, institutional investors
What has happened, cont’d
• Third world debt: reinvested profits from oil, to industrialize or buy oil
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1979: US higher interest rates to avoid inflation, reduced demand, led to recession
Third world: Higher interest rates and more difficult to sell.
Mexico 1982: Reduced demand for oil, unable to pay loans for industrialization
IMF Structural Adjustment Programs: liberalization, ”Washington Consensus”
NAFTA 1993 locked Mexico into liberal policies
• Crises mid 90s Mexico, Thailand: A problem with the countries or the system?
• 1999 Financial Stability Forum, G20
• The crisis in 2008: started in the US: bad regulation, shadow banks
• ”Ninja loans”, risks passed on to others, hidden risks
• Subsidies to the banks, ”lender of last resort” = moral hazard
• Stronger role for G20 and IMF. The dollar questioned as reserve currency
Financial deregulation and the crisis 2008
(from chapter 13)
• Deregulation 1998-2008
• Why crisis?
• Too little regulation or badly executed?
• Too rationalistic mathematical trading models? Bad economics?
• Why deregulation and more risk-taking by the banks?
• Galbraith: fading memory of 1929
• Deregulation is a powerful idea
• The financial community is a political actor for personal gain
• Capture: over the long-term and at key events
• Bad governments or bad markets?
Table 1.1 Interpretations of
the Asian financial crisis
Liberal
Nationalist
Critical
Causes
State capitalism,
Lack of transparency
Overrapid liberalization
Lack of regulation
Power of financial
interests, systemic flaws
Key issie(s)
Corruption,
lack of liberal practices
Clash of Anglo-American
vs Asian values
Human suffering due to
financial collapse
Lessons
Increase transparency
and good practice in
developing countries
Limit financial speculation Reform international
through state policies
financial system, defend
national system
The regulation of finance, cont’d
• 2. Is it good or bad?
• Liberals: Long-run growth, fiscal discipline reduces excess spending, makes it more
difficult for governments to avoid fundamental problems
• Nationalists: Loss of autonomy/democracy
• Critics: Need to slow down (Tobin tax), Instability, inequality, costs shifted to
taxpayers/the public
• 3. Why has it happened?
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•
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Hegemony? The role of the US (Bretton Woods, Washington Consensus)
Bureaucratic politics at IMF?
Interests: Investors, US, EU
Institutions: unable to handle crises
Ideas: Monetarism, political integration
• 4. Where will it lead? Regulation increases moral hazard?
The regulation of security (hegemony):
more important than the economy?
• 1. What has happened?
• US economic policy to further foreign policy goals at some times (high politics)
• From Cold War bipolarity and military-industrial complex, to new perspectives
• From states to individuals, from military to social issues, states are problems
• Epistemic communities!
• Humanitarian intervention and intervention in domestic conflict, R2P
• Failed states, local warlords funded by valuable resources such as ”conflict minerals” for
computers etc.
• Global terrorism: marginalized fanatics with economic needs? (”human security”)
• Clash of civilizations? War on terror: impacts?
• Economic statecraft: Aid (carrots, conditionality) and sanctions (sticks)
• Impact is dependent on the context and the clarity of the motives. Humanitarian effects.
• Economic sanctions: Is it best to isolate or to boost interdependence?
• Transnational crime: Latin America, Europe
• Pandemics, viruses such as HIV/AIDS: WHO
The regulation of security, cont’d
• 2. Is it good or bad?
• Liberals: Militarists & pacifists, economic interdependence and trade make
peace
• Nationalists: Industrial strength important for military strength. Defence
procurement
• Critics: Economic interests and power politics. Structural violence.
• 3. Why has it happened?
• Interests: The military-industrial complex? Economy? Fanatics?
• Institutions: NATO weak? WHO? Difficult to fund developmental aid?
• Ideas: Traditional security vs human security
• 4. Where will it lead? Rebuilding of Iraq, Afghanistan?
The regulation of global governance,
the system of world order
• 1. What has happened?
• The whithering of states? Still the only legitimate representative of the people?
NGOs, International organizations
• From welfare to competition state, from national to international economy
• Attractiveness to TNCs
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The ”national security state”
From US hegemony to the BRICS
Major rules and organizations only change after wars. The post-WWII order
Governance/regimes: Multi-level, multi-actor
• States create international organizations, which force states to comply (WTO, IMF) or
influence them (ILO, OECD). WTO vs ILO (States in a Prisoners’ Dilemma)
• Structural power: by whom? TNCs, business organizations? NGOs, Global civil society?
”Uncivil groups”, ”the covert world”. A variety of interests in each category!
• Transnational networks too! (”private authority”) The UN Global compact 2000
The regulation of global governance, cont’d
• 2. Is it good or bad?
• Liberals: Some global regulation is needed to protect the rule of law
• Nationalists: Intergovernmental arrangements are acceptable
• Critics: Global democracy is desirable but not feasible
• 3. Why has it happened?
• Interests: Firms and politicians take initiatives, NGOs
• Institutions: Intergovernmental organizations only change by consensus
• Ideas: Democracy can only be national vs must be global
The regulation of global governance, cont’d
• 4. Where will it lead? Challenges:
• Development and growth:
• Material and social investments needed. Power and resources to the poor.
• Environmental impact? Lack of coordination. The role of financial crises
• Equality and justice (fairness or redistribution?):
• Better or worse with globalization? (Asia vs Africa?) Winners and losers: right-wing populism
• The fair trade movement: resource prices and labor standards
• ”Make poverty history”: against northern protectionism etc.
• Democracy and regulation:
• Are the IMF and other IOs undermining national democracy? (Why national debts?)
• Should IOs be reorganized? More open to stakeholders?
• Coleman & Porter (2000): Six criteria to judge the degree of democracy surrounding a regime/organization:
transparency, openness to direct participation, quality of discourse, representation, effectiveness and fairness
• Is supranational democray better than intergovernmental?
• Is overlapping regulation good or bad? Lack of accountability vs pressures on governments
Conclusions
• What have we learned?
• The three paradigms help us understand positions
• Conflict or win-win situation? Development + environment + the north?
• Where will it lead?
• Structural change will continue
• International and domestic politics
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Interests: winners vs losers? A variety of background characteristics
Ideas: liberals, nationalists and critics
Institutions: structures the conflict!
Epistemic communities build coalitions based on a story/interpretation