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

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The Politics of International Economic
Relations Session 812 December 2006
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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)

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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)

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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

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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)

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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 advantagelost 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.

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Theses

• Convergence, Dual Convergence, Divergence
• Convergence among models or varieties of
  capitalism
• Dual Convergence Institutional factors
  influencing states response (liberal market vs.
  coordinated market economies)
• Divergence?

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Theses

• The Golden Straightjacket
• Once your country puts on the Golden
  Straightjacket, 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).

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Theses

• Regulatory Chill
• Race to the Bottom (pollution havens)
• Race to the Top
• Stuck at the Bottom

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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?

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Another explanation?
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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),

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Evidence assessed?

• Dependent variable
• Convergence or dual convergence

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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

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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?