8.1 Session on Globalization
Robert Gilpin, Chapter 10 “Globalization and Its Discontents”
in The Challenge of Global Capitalism
Note: most of these phrases are direct phrases from the book
Overall summary: Gilpin believes that both opponents and proponents of globalization
exaggerate their claims. He acknowledges economic, political and social inequality but
concludes that globalization is not always the culprit.
Economic globalization (integration of the world economy) has occurred at a much more
limited extent than people believe. He cites these examples:
 Postwar int’l economy has restored globalization to the same level as in
1913
 Economic impact of globalization is limited, applying really only to US,
W. Europe, Japan and the East Asian NICs
 Despite more open markets, imports and inward investments are small
relative to size of each domestic economy
 National borders are still barriers to int’l economic flows (eg Canada/US)
 International migration (labor) has declined since WWI
Gilpin makes gross generalizations of three contending perspectives on globalization:
1. Free Market (mostly economists, business men and political leaders)
- oppose strict regulations on market
- adoption of American values will lead to a more efficient use of the world’s
scarce resources
- world peace will be promoted because bonds among other democratic marketoriented societies will be strengthened
- financial and technology flows will equalize wealth and development in world
2. Populist, aka Nationalist perspective (organized labor, businesses competing
w/imports, economic nationalists, BOTH the right and the left)
- support trade protectionism, regional economic blocs and limits on multinational
corporations
- believes that globalization has created high unemployment and levels of
inequality (in industrializing countries), shrinking social programs, destruction of
culture and national political autonomy
3. Communitarian (environmentalists, human rights advocates)
- many beliefs overlap w/populists
- believes that globalization leads to environmental pollution, and a hierarchic and
exploitative world order
- international competitiveness and profit maximization have led to shrinking
welfare programs and homogenization of people into passive consumers
- differ from populists in that they are from the political left, and advocate a return
to world of self-sufficient closed communities
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Gilpin defines globalization as: the increasing linkage of national economies through
trade, financial flows and foreign direct investment by multinational firms. In this next
section, Gilpin attempts to make distinctions between “real” and “alleged” consequences
of economic globalization. He asserts that by proving that some alleged consequences of
economic globalization are exaggerations, then so must be social and political allegations
(ie globalization threatens democracy, destroys local autonomy, homogenizes
society).Gilpin covers these 4 issues in the debate: int’l distribution of wealth and power,
labor welfare, loss of national autonomy, and convergence of economic systems.
Int’l distribution of wealth and power
While a disturbing economic concentration of powers has occurred, Gilpin believes it’s
due to factors other than globalization. In the example of media and telecommunication
giants in the US, the concentration in power has more to do with technological and
domestic economic developments than with globalization. Gilpin also says that
competition can be good for consumers: using the car industry as an example, he shows
that global competition has led to reduced monopoly of the American car industry in the
US, bringing lower prices and higher quality cars to US consumers.
Gilpin states that hierarchy has existed throughout history and in every international
system. Furthermore he asserts that the distribution of wealth across developed and less
developed countries has not changed over the last half century. He also claims that if you
look at globalization over a longer period of time, you’ll see that it actually helped close
the economic and technological gap in Asian and Latin American countries.
Populists who say that the diffusion of technology to low-wage economies will increase
productivity and give them an advantage over developed countries like the US. Gilpin
considers Populist claim as an over-exaggeration, citing economists who show that when
technology increases in a country, so do the wages (thus reducing the economic
advantage of low-wage economies). Populists also fear a decline in developed countries’
relative share of wealth. Gilpin says that while this does happen, their standards of living
in developed countries have continued to rise.
In sum, the spread of industry to less developed countries can simultaneously take away
the comparative advantage that developed countries have AND give them more
advantage by expand its export market to these newly industrialized countries. Gilpin
urges developed countries to engage in the open markets, cautioning against
protectionism.
Labor Welfare in Industrialized Countries (unemployment)
Populists and Communitarians claim that globalization has resulted in stagnant real
wages, increased wage inequality, job insecurity and unemployment (especially in
Europe). Gilpin however, quotes American economists who blame inflexible labor
markets, overly generous welfare programs, nonwage benefits, and small economic
growth to Europe’s unemployment.
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Opponents of globalization claim that low-skilled US workers will lose jobs to cheap
labor abroad. Gilpin backs this up with economists who say while globalization has
caused low-skilled wages in the US to decline, it has simultaneously increased wages of
high-skilled workers in the US. Other economists, however, argue that this wage
inequality is due to technological developments that favor high-skilled labor to unskilled
labor. Overall, Gilpin believes (without adequate explanation) that it’s “highly doubtful
that low-wage imports…are as significant as opponents of globalization claim.”
“Race to the Bottom,” End of National Sovereignty and Convergence of Economic
System
Critics of globalization say market competition force states to decrease welfare services
and deregulation of businesses. Gilpin rebuts by saying that decreased welfare in the US
is more due to Reaganesque ideology, and that the largest US federal budget expense was
for middle-class entitlement programs. To give Gilpin some credit, he does conclude this
section by saying that the US is rich enough to take care of those left behind by rapid
economic and technological change (note he did not say “left behind by globalization”).
Loss of National Autonomy
Gilpin outlines reasons why critics say that globalization erodes state capacity. Then he
uses the US as an example of how states can “choose” macroeconomic independence by
not fixing exchange rates (in contrast to Europe). Gilpin points out that prior to
globalization, nation-states didn’t have much more autonomy and economic control than
they do now (except in times of war or the Great Depression, or rise of organized labor).
This assessment is limited to developed nations. In the end, international political
environments and developments within societies are more of a cause to shrinking state
control in economies than economic globalization.
Convergence of National Economic Systems
Free market components believe in a convergence of a new world order based on free
markets, individualism and freedom – all leading to global prosperity and world peace
(insert Disney music here). Populists and Communitarians reject convergence theories.
Samuel Huntington and Chalmers Johnson say that cultures are strong and will not
immediately adopt western values. Gilpin believes that integration of national economies
has encouraged countries to adopt New World Order institutions and practices, but has
not led to a homogenization of domestic economies. If anything, Gilpin thinks pop
culture is more a culprit of the homogenization of human values and behavior.
Conclusion
Gilpin says integration has really only happened in some economic sectors and is not as
“global” as critics say. He concludes with the case of East Asia as an illustration that
rapid shifts of international finance can cause international economic instability.
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