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A joint Initiative of Ludwig-Maximilians-Universität and Ifo Institute for Economic Research
CESifo Area Conference on
Global Economy
CESifo Conference Centre, Munich
30 - 31 January 2004
Globalization and Values
John Whalley
CESifo
Poschingerstr. 5, 81679 Munich, Germany
Phone: +49 (89) 9224-1410 - Fax: +49 (89) 9224-1409
E-mail: [email protected]
Internet: http://www.cesifo.de
First Draft
Globalization and Values
John Whalley*
Universities of Western Ontario, Peking, and Warwick
NBER and CESifo
Abstract
This paper discusses a central theme in the globalization debate
usually neglected by economists, namely the interaction between
globalization forces and societally based value systems (or the social fabric
at global, national, and community levels. Value systems (social norms or
implicit arrangements) are much discussed in sociological literature going
back to Comte, Durkheim, Parsons, and others. The key to this literature is
the idea that the behaviour and identity of the whole (society) is defined by
more than the sum of its parts (individuals), and society has to be
considered as a distinct entity. Parsons suggested that value systems can be
thought of as constraints (such as honesty) defined by society by accepted
by individuals as collectively rationale in constraining individual
behaviour. He also suggested that collective rationality does not rest on
individual self interest alone as recent socio-biology literature on genetic
determination is taken by some to suggest. The issue taken up here is if the
existence of value systems is accepted, how they might interact as societies
and their economies integrate (globalise). Processes of value system
competition, displacement, joint assimilation occur naturally to economists,
but seem little studied by sociologists who seemingly place less stress on
analytical comparative statics. Scenarios for value system interaction under
globalization are discussed in the text, and related to Huntington’s wellknown characterization of globalization as a clash of civilizations.
January 2004
*
This is a first draft of a paper to be presented at a CESIFO conference on “Dissecting Globalization” in
Venice, July 22/23, 2004. It draws on discussions with Jan Aart Schoelte, Richard Higgott, Andrew
Cooper, and Bob Young. I am grateful to Josh Svatek and Edgar Cudmore for research support.
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1.
Introduction
The globalization debate revolves around a growing set of repeatedly asked but ill
defined questions; is globalization good or bad; does it hurt the poor; has it gone too far;
should it be stopped, banned, or even imprisoned? Anti globalization literature in turn
spans many subareas, covering the impacts on the power of multinational companies,
corporatism, branding, outsourcing, financial mania and other elements. These are taken
up in Klein (2002), Greider (1997) and also discussed in Deardorff (2003). The reality as
Higgott (2002) has repeatedly pointed out is that globalization is a much more widely
used and extensively contested concept than is widely understood; something we all talk
about, have opinions over, are not quite sure what it is, but keeps globalization
researchers gainfully employed. Whatever globalization is, there is little doubt that
people are talking about it, and globally. Alan Greenspan, for instance, suggested in a
recent speech that WTO trade liberalization should be accelerated to protect
globalization, without fully specifying the interest of the Federal Reserve in this matter,
what globalization and WTO trade liberalization really were, and why, anyway,
globalization was in need of protection.
The spirit in which this paper is written is that, whatever globalization is, it is
stimulating a fusion of academic research and conceptualisation which inevitably crosses
conventional disciplinary boundaries. In the process it is weakening (and even partially
removing) so many of the firewalls that seem to exist between our present separate
discourses in social studies (economics, politics, and sociology, for instance). In this
paper I try to bring thinking from economics to bear in a discussion of what the
relationships between value systems and globalization that be, and how they might evolve
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in the future. My hope is to contribute to the emerging wholism of disciplinary based
analysis that globalization (whatever it is) seems to be propelling.
Values is a term which seems to frighten economists if taken out of its immediate
narrower context of models focused on markets, prices, and based on individual utility
and profit maximizing behaviour (as, say, in Debreu’s (1959) Theory of Value). In its
broader form, the term conjours up connotations of Comte, Marx, Durkheim,
sociologists, and many long words. It conveys the idea that social structures operate in
ways in which the behaviour and interests of the totality (society) represent more than the
separate interests of the sum of its parts. This is to the point that commitment to societal
values (such as community, trust and honesty) are seen as separate motivators of
individual behaviour, and the quality of the social fabric (whatever that is, also) is
potentially a central element underlying economic and most other human behaviour. It
raises the prospect of becoming embroiled in introspective discussion found in sociology
literature, more so than the application of clear deductive logic in mathematical form
which typifies modern economics discourse.
Whether or not this characterization adequately captures the concerns of
economists, relatively little has emerged from economists on social value systems. They
have seemingly been content on the whole to take the position that those who are
concerned about the impacts of, say, trade liberalization on the social structure of
communities raise important issues, but these do not appear in conventional economic
models. No formal conceptualizations exist to guide discussion, with no firm evidence of
the existence of this separate entity. In more extreme form, economists sometimes
(inadvertently in my view) come across as portraying individuals raising such issues as
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not fully understanding the central economic issues at stake with the unfortunate
implication that they should be paid less attention to in economic policy debate.
This paper consciously takes a different and more sympathetic approach. It accepts
for sake of argument that value systems and society do constitute some definable entity
within a wider social structure, and that society is a wider entity within which economies
operate as a part. It sees the main focus of literature in other disciplines (sociology,
political science) as describing, classifying, and rationalizing alternative
conceptualizations of social value systems. I suggest this literature is inevitably
inconclusive, with lengthy discussions on the historical evolution of social structures,
whether social structures can be adequately represented by equilibrium process (or
whether conflict and discrete change is the norm), whether collectively held value values
are consistent with individual rationality, what forms of social value systems best
represent different entities (communities, nations, families, civilizations) along with
various speculations and arguments as to how value systems may evolve in the future
given historical patterns from the past.
Building on this literature I attempt to discuss value systems from viewpoints that
seem more natural to economists who are used to working with analytical structures that
can be used for comparative static analysis. I ask a wide range of questions, answering
none but suggesting a refocusing of debate in the area. If value systems exist, how do
they jointly interact, change, and adapt when societies are subjected to various shocks
associated with globalization, such as market integration, increased speed of transactions,
more rapid technical progress, economic marginalization and others. When does one
value system come to dominate or subsume another if, say, market based integration
occurs across economies, and if economies exist within value systems, so that some form
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of interconnection / interpenetration of value systems inevitably occurs with
globalization. Can value systems blend one with another under the influence of
globalization, assimilating features of each? Can the value systems of weaker societies
effectively become dysfunctional and collapse, and what are the consequences if this
happens? What might happen when one value system is myopically (or naively)
transplanted to another society; and what can be the impact on economic and wider social
performance? Are the impacts of value system erosion or strengthening on economic
performance likely to be large or small compared to existing estimates of conventional
economic impact of market liberalization? How should effects on value systems be
traded off against more conventional economic impacts of policy reform, such as the
gains from trade when trade liberalization occurs.
My purpose is solely to transplant into other disciplines the discourse of
economists in ways which other disciplines may find helpful, and pose for economists
issues raised by other disciplines in language closer to theirs. In the process the idea is
ultimately to transfer analytical techniques from economics into the discourse of other
disciplines for the purposes of discussing globalization effects. I also offer the suggestion
that in some cases (but not all) the impacts on social value systems of globalization
maybe as, if not more important, for evaluating what impacts globalization has than those
raised in more conventional economics literature (such as the impacts of trade
liberalization on consumption, production, and welfare). I suggest that analytical
economics literature, such as that on tax competition, policy coordination, currency
competition (bimetallism), the design of international institutions and other topics can be
drawn on and results from these used to suggest how value systems could interact in
various circumstances. Discussions of value system interaction involved in such current
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global disputes/clashes as US-China trade and in the WTO follow, as does a discussion of
the relationship of the discussion here to Huntington’s (1996) well-known
characterization of globalization as a clash of civilizations. I also ask what form for
either a global or subglobal objective function makes sense when evaluating value system
change under globalization inspired by changes such as international policy reform.
The unsurprising conclusion I offer is that value system interactions under
globalization are complex and likely there is no general statement as to what outcomes
will be observed in general since there are many scenarios as to how things might unfold.
While this may not be a comforting conclusion to analytical economists seeking clean
general statements from tight formalized models allowing deductive logic to be carefully
applied, value system interaction still seems to me to be a potentially important area for
the discussion of the impacts of globalization and hence should perhaps not be dismissed
by economists lightly. If gains (or losses) from globalization go beyond conventional
gains from trade, and if globalization pressures which modify societal values both for
better and for worse are (as I believe) central to the globalization process, then this may
be an area worthy of other economists attention also.
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2.
Value Systems and Social Thought
For the purposes of the current discussion, I use the term value system largely in
the sense of Parsons (1937) as relating to shared beliefs and values within a group of
individuals living in a society which constrain and partially determine individual
behaviour. Some examples of shared norms might be that all individuals should be
honest and truthful in their dealings with each other; that we should individually offer
help where possible to others in difficulty, and that theft and aggressive behaviour to
others will not be used. How and why value systems embodying such norms come about
I will return to later.1 In literature in the humanities a wider notion of values
characterizes them as embodied in the literature, music, art, architecture and other forms
of expression valued by members of society as a distinctive representation and
manifestation of collective identity. Cunningham and Reich (1994) document the
emergence of Western societies from prehistory to the present day in these terms,
equating the evolution of Western values with the development of Western civilization.
Embree (1972) describes a similar process in very different terms for the emergence of
Vedic culture and values.
For the purposes of the discussion here and to keep things more manageable, I will
use a narrower concept of values even than Parsons. I will suggest that what economists
typically characterize as an economy, i.e. a set of individuals (or households) with
endowments, and preferences in an Arrow-Debreu (1954) pure exchange economy, or as
an economy also with production processes (inputs and outputs) as in an Arrow-Debreu
(1954) model with production, should in reality be seen as operating in a wider social
1
Other economists have previously discussed societal norms in terms of the way such norms can influence
individual behaviour, not with how they arise. Akerloff (1994) and Liebenstein (1950) are examples. The
economist most centrally credited with discussion of how societal norms and individual behaviour interact
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context in which value systems play a key role in facilitating the market based
transactions at the heart of an Arrow-Debreu world. My contention would be that, in
reality, no market based economy can function by relying on legal contracts alone to
detail what exchange or production activity is to actually take place. This is because
there are always elements of ambiguity in the execution of all contractual arrangements.
Put another way, successful implementation of the legal arrangements that economists
typically study in isolation from social value systems in reality will always require a
reasonably well functioning social value system.
One example might be the role of trust and honesty in market based transactions.
Given the inability in practice of individuals to fully synchronize the timing of all
transactions and to fully monitor the quality and reliability of goods upon delivery, if
buyers and sellers of commodities in markets do not trust each other to faithfully execute
what is agreed between them, market transactions will be difficult to execute and overall
economic efficiency will typically suffer. An example one could claim illustrates this
might be the behaviour of the economy in Russia after 1991, where market oriented
reforms were advocated by Western trained economists in part as property right
enhancing reforms which would hopefully make reversion to the previous regime of
collectivist central planning more difficult. One might claim the net result of the
resulting joint economic policy and social value system change was economic implosion
on a major scale, with perhaps a 35-50% fall in income per capita in Russia and most
other former Soviet republics in 7 years. This implosion reflected reversion to inefficient
barter trade, extensive tax evasion, and asset stripping in enterprises. A possible
explanation for this economic collapse might lie in the delayed emergence of supporting
is Veblen (1899), who used the term conspicuous consumption to indicate the consumption activity
undertaken for its effects on individual’s reputation with others.
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value systems (trust, honesty) for newly established market arrangements. The growth in
Russia since the financial crisis of 1998 could then be taken to represent the evolution of
supportive value system change for the market oriented reforms of 1991.
Whether this is merely one possible explanation for economic performance in
Russia or represents a central element that needs to be taken into account in discussing all
economic policy I will leave for others to debate; along with the related issue of whether
slower change in China which left value systems less disturbed could account for the
substantially superior growth performance in this case compared to Russia. The
contention for the purposes of this paper is that in reality all market based economies
need a supportive system of widely accepted social norms for individual behaviour for
their efficient functioning. If this system of values weakens (a weakened social fabric, if
you like), then the conjecture is that economic transactions usually become more complex
to execute; trust erodes; each transaction takes more time; and more resources are
devoted to verify the accuracy of completion of agreed contracts. Individuals have less
trust in ex post mechanisms to resolve disputes (returning goods, receiving refunds, etc),
and so a weakened social fabric impairs market based economic performance.
The literature on social thought does not deal with values in quite this way, but it
does suggest that there is a distinct entity termed society, and that, at least in older
thought, it both can be studied objectively and that it both constrains and determines
individual action. Sociologists over the years have devoted much energy to both
discussing both society and its associated value systems and as an economist I probably
do this literature poor justice in the way I bring it into my discussion, and almost certainly
misrepresent and even misunderstand much of it. If so, I ask for tolerance from
sociologist colleagues.
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My reading of sociological literature seems to trace the origin of the view that there
is a distinct objective entity called society which can be studied in its own right to the
enlightenment and to Auguste Comte. His ideas were formed during the French
Revolution, and the period following of political and social instability involving
republican governments, monarchy, and Napoleonic empire. Comte was concerned to
craft a social vision of France which would take France out of its instability and generate
social progress for all. He conceived of society as an organism progressively evolving
from simple to more complex forms. His aim was to discover the rules that governed
both the structure and evolution of social interactions, the implicit rules and institutions
which best organized society separate from the individuals who lived in the social
structure. The issue was to explain how social structure came about; how individual selfinterest was restrained by social conventions so that social stability ensues. He
emphasized the role of family, government, and religion in his vision of society.
Subsequent writers in the 19th century echoed and developed the notions that
society reflects something more than the sum of the individualistic behaviour of
individual participants, including thinkers that modern day economists think of as
espousing only individualistic behaviour, such as Marshall and Pareto (both of whose
views on these matters are discussed at length, along with those of Durkheim and Weber
by Parsons (1937)).
Thus Marx (see the discussion in Avineri (1978)) developed a class based
framework of society, with individuals (or households) seen as members of classes and
history as reflecting class struggles. Durkheim (1933) saw society as evolving from
segmented traditional societies to organized modern societies. His study of society (in
Siedman’s (2004) words) was of “shared institutions, cultural beliefs, and social
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conventions that are irreducible to individual psychology.” Weber (1951, 1957) studied
the underlying social value systems of Western Europe and China, seeking in part to
explain why religious value systems in Europe had generated the Industrial Revolution,
and why this same process had not happened in Imperial China.
Later writers developed more sophisticated and complex conceptualisations of both
society and value systems. Parsons (1933) saw actions of individuals within any social
structure as reflecting both individually based choice and jointly accepted constraints on
these choices determined simultaneously with social structure. Parsons explicitly rejected
notions of Darwinian natural selection and survival as accounting for social order on the
basis of individual self interest as appeared in later socio-biology literature (see Dawkins
(1997) and Wilson (1975)). Instead social order arose from a process of social
coordination and cultural consensus. In this, the needs and motivations of the individual
and the role requirements of the social entity needed to fit each other. Social disorder
arose from allocative conflict; divisions over who gets what. Disruption of social order
was inevitable to some degree as societies were subject to external shocks. If social order
were to break down all together, coercive force of the state (police, military, law) would
be resorted to so as to restore social order.
In Parsons’ approach to society, individuals have both identification with and a
sense of ownership in society as a whole. Individuals are attached to class, ethnic, racial
and other groupings, and also in modern states to national communities; communities of
national citizens. Parsons did not discuss global identity, and how a process of
globalization might eventually fuse separate national identities into a combined and
multifaceted global identity. In later literature, Berger and Luckmann (1967) further
developed Parsons’ ideas asserting an objective reality for society which they saw (again
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in Siedman’s (2004) words) as “part of a more encompassing supra-human order of
nature or the divine. Social institutions are granted authority not by mere human but by
divine decree, natural law, or historical destiny. Religion, philosophy, myth, and science
have been the chief symbolic strategies of social legitimation. They re-establish everyday
perceptions of the social world as an objective order that can ground our subjective
experience as orderly, coherent, and purposeful.”
Subsequent sociologists, such as Blau (1975) and Collins (1986) further developed
what they thought to be a scientific theory of social structure. Collins saw all human
beings as “sociably conflict-prone animals”. Blau explained how social order prevailed
using a theory of social structure reflecting individual distributions across a range of
social metrics (gender, age, race, income), some of which were discrete (race) and others
continuous (income).
Sociological literature of more recent vintage departs from much of this earlier
literature in a variety of ways which today are taken as fundamentally challenging the
Parsonian view of society. Conflict theory, as advanced by Dahrendorf (1959), suggested
that role structures within society inevitably generate conflict and hence societies
continually change and evolve; ideas taken further in the reformulation and extension of
Parson’s ideas by Giddens (1973) under the term structuralism. Notions of symbolic
interactionism were developed by Blumer (1969) and Roch (1979) as a new societal
construct, and phenomenological sociology and ethnomethodology followed with
Garfinkel (1967) and Girourel (1973).
In even more recent sociological literature on globalization Beck (1997) in
influential work focuses on the need to understand what he calls a “world risk society”,
looking at ecological and technological questions of risk, and their social and political
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implications. This forms the basis for Beck’s call for a ‘Cosmopolitan Manifesto’ to
address the joint-evolution of global and local communities responding to issues which
national politics cannot adequately address.
In other influential contemporary writings, Wallerstein (2001) emphasizes the need
to unthink the paradigms of 19th century social thought that limit of discussion of
contemporary realities such as globalization. Wallerstein’s world-systems analysis is less
a theory of the social dimensions of the modern world than a critique of how scientific
social enquiry is currently undertaken. Castells (2004), in an influential 3 volume piece
tries to account for the complex intertwinings of progressive and reactionary forces
underpinning globalization and its related forces, which he suggests are changing what he
sees as our current perplexing world. The objectives of anti globalization movements are
discussed in this work, along with their economic and political implications.
For the purposes of the discussion here, I simply take all of this literature as the
basis for the conjecture that individuals do have collective identity, and that this
collective identity both constrains and influences individual behaviour and needs to be a
central part of analysis of the effects of globalization, including that by economists. In
the narrower sphere of the operation of the global economy, as globalization in the form
of market based integration moves forward, the conjecture is that an evolving
multifaceted global social fabric will inevitably evolve which if working well will more
easily facilitate market based transactions, and if working poorly will retard progress.
How global value system arrangements change for better or for worse under globalization
(integration) across individual nation states is the issue. This leads directly into several
debates. How we might both evaluate and quantify the positive and negative influences of
value system change and adaptation when discussing such policy initiatives as trade
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liberalization is one, for example. I discuss these and other issues in the following
sections to illustrate how economic thinking might suggest how globalization and socially
based value systems might intertwine and jointly evolve.
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3.
The Globalization Process Seen as External Shocks Affecting Value
Systems
A central difficulty with the globalization literature is that the term means different
things to different disciplines and even researchers within disciplines, and hence
discussing its effects can involve many different discussions which it is hard to
simultaneously join.
To economists globalization is typically growing trade, ever more foreign
investment, increased speed of transactions in financial markets, international diffusion of
technology, internationally mobile labour, and other facets of ever deeper economic
integration across national borders. With a concern over these dimensions of
globalization come analyses of such issues as tax competition, cooperative treaty based
arrangements in the face of strategic non-cooperative national incentives, macro policy
coordination, outsourcing, labour immobility, and other matters.
To political scientists, globalization suggests challenges to national authority
structures, the possible transfer of nation state functions to supra-national authorities, the
operation of trans-national political processes, constraints on the autonomy of national
authorities, and the reidentification of national citizenry within a new emerging global
identity. Model based analyses of these issues inevitably imply different approaches
from those used by economists.
To modern sociologists (following Beck (1997)) globalization is a process seen as
elevating global risk, with implications for social structure at all levels (global, national,
local). Stress occasioned on local communities, and the impact of large adjustments in
globally interdependent labour markets in which larger production units (multinationals)
dominate becomes a major focus with a concern over marginalization. How global
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values can be formed as a fusion of separate national values (if it is possible) is a natural
question to ask, as is what happens to local social structures as global integration occurs.
Yet again, with yet a different direction is suggested in any analytically based modelling.
To those in the anti globalization movement (such as Klein (2001) a key issue is
the role played by globalization in elevating corporate concentration in intensifying
global corporate power via outsourcing, branding, and integrated global markets in which
to sell goods. But it is also the manic capitalism of Greider (1997) and the mad money of
Strange (1995); the negative elements of McDonaldization discussed in Ritzer (2000),
influenced through media misrepresentation and portrayal as Glassner (1999) claims to
document.
It may well be that globalization debate should quite appropriately encompass all
of the above concerns and more. If globalization represents a move to global collective
identity with preserved distinctiveness is it a global fusion of values which
simultaneously implies global synthesis and conflict among of nationally based social
systems. If so, how should we approach it from an analytical viewpoint, trying to
understand what processes may unfold. Clearly, some level of abstraction and
simplification is inevitable, and in the process many of these issues cannot be adequately
covered. The dilemma for an analytically based researcher is that it is not clear how links
between globalization and values can best be approached when a framework which spans
all of the concerns of the current disciplinary divides clearly seems to be beyond reach.
The path I follow here is to accept for now that the market based economic policy
components of globalization (such as trade liberalization, for instance) may need be
considered in their wider social context.
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I also accept that the discussion in the previous section suggests that literature on
social thought dating back to Comte (and earlier) and subsequently developed by
Durkheim, Parsons, and others into its most modern forms points in the direction that
models of individual optimising behaviour as usually formulated by economists may be
incomplete in not capturing notions of social values or constraints on individual
behaviour that socialization suggests. Whether this is reasonable criticism of economic
modelling is not a matter I pass judgement on, but adopt these as working hypotheses
given the profile that concerns over potential impacts on the social fabric play in
globalization debate.
This then becomes a position that the central Arrow-Debreu model of general
equilibrium (for either an exchange or production economy) should ideally be embedded
within a wider model of a social system where social values influence individual
behaviour, and also affect the functioning of market based allocative arrangements. A
wholism is seemingly needed for models of economic behaviour if they are to have full
credibility to those from other disciplines in shedding light on the impacts of
globalization. The example I give earlier is that where trust is less firmly established
between market participants, the time taken to execute transactions may be longer; the
monitoring applied to product quality or integrity may be lengthier, and other negative (or
positive) effects on economic behaviour from changed value systems may follow.
The choice of joint economy-wide construct and representation of social value
system then affects the claimed outcomes of any given policy or other change taken to
reflect the process of globalization. For example, in a somewhat trivial formalization of a
socially embedded model of market behaviour, one could conceive of an economy as
having two groups of workers, urban and rural. Urban workers labour market
17
transactions with urban employers might involve small transactions costs, since these
groups already know and trust each other, and similarly for rural workers transacting with
rural employers. However, rural workers moving to urban areas might face significantly
higher transactions costs (especially in the short run) if trust is not already established
between migrating rural workers and urban employers. Alternative, with disjoint urban
and rural networks with consumption externalities in which average and marginal
network values differ, and where differences in average values of networks affect
migration between urban and rural areas rather than marginal values, inefficient
migration can occur.
In this setting, if the desirability of trade liberalization were considered in a
traditional small open economy Arrow-Debreu model it would (in the absence of
complicating factors such as other distortions, rent shifting, market structure, infant
industry considerations) be welfare improving, but if considered in a simple socially
embedded structures of the form sketched out above it could be welfare worsening due to
the higher transactions costs involved for workers who relocate. Such socially embedded
models in either simple or more refined form seem little considered by modern
economists since general analytical results are difficult to obtain, and there is a tradition
of separation of discussion of policy impacts from sociological literature. But using
numerical simulation methods such models incorporating differential transactions costs
could probably be built and might produce the results sketched out here. Chia and
Whalley (1995) for example have produced a numerical model of welfare worsening
service trade liberalization using a related transactions cost approach. An implication
might be that the concerns of globalization protesters over trade liberalization on the
grounds that negative impacts on social structure, values, and culture might occur, could
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have more analytic credibility than economists seem presently inclined to accept. Using
a numerical simulation approach, one might also ask both how globalization shocks could
impact value systems in some simple socially contextual models, and how the
interaction/interpenetration of value systems themselves in turn could provide feedback
effects that could also influence the perceived impacts of globalization in economic
terms.
Prior to this, it is necessary to first discuss the inevitable, namely what
globalization is and how it might be represented in any such schematic modelling
exercises. One way to proceed may be to view globalization as a process of integration
or interaction between societies which reflects changes in both market based
arrangements and value systems, but both become enmeshed independently of the type of
change considered. Economic integration inevitably generates changes in social value
systems which then themselves also impact social and economic performance. There are
many issues of definition involved in implementing such a scheme including what the
entities are whose value systems entwine in this way. Is it nation states, sub-national
communities, or civilization as Huntington (1997) suggests? Whichever is chosen (and
maybe all need to be considered), I will, for now, suggest that analytic models of
interaction will need to be developed accordingly.
Thus, if globalization is viewed in narrower economic terms as deeper market
based integration, I would suggest that one place to begin in analyzing its effects is to
accept that the differing social systems surrounding market activities in national
economies inevitably also come into contact as this process moves forwards. A move
from, say, autarky to free trade will in some way change the social systems of the
countries involved as, say, Chinese trade with Americans using mechanisms of social
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interaction that accompany market transactions. Maybe transactions across social
systems are inherently more difficult to execute than those within socially homogeneous
borders. Maybe these difficulties recede with the passage of time. Maybe the social
systems of each entity themselves change in the process and are in some way enriched.
Maybe mutual distrust intensifies with unsatisfactory market transactions across social
structures. Maybe all of the above can occur to some degree; but change of some form in
social systems for better or worse results from market based globalization such as
lowering of trade barriers and deeper economic integration. Similar outcomes could be
claimed for other forms of economic globalization, such as increased cross border
investment, labour flows, globalization speeded financial market activity, heightened
transfer of technology and other processes. Formalizing and eventually quantifying both
the social value system consequences of these changes and feedback effects as value
systems themselves change and further modify outcomes is the challenge.
Social system (or value) differences in addition, clearly influence and may even
constrain how economic globalization may unfold as a process. For instance, the limited
trade between, say, most African economies and OECD countries is variously ascribed to
infrastructural problems in Africa (including civil war), transportation problems, macro
economic instability and other factors. But if value systems are so different across social
structures that market based transactions across the OECD/Africa divide are inherently
more difficult to execute than across other divides, then evaluating what the key
differences in value systems are may offer an alternative approach to speeding market
integration and offer a new way of thinking as to how to promote more of this trade.
Value system differences might also limit technological diffusion, provide barriers to
labour mobility, and have other (to economists) unanticipated effects.
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Simply put then, the conjecture I offer is that the process of globalization (whatever
it is) influences social value systems (whatever they are), and changes in them (again
whatever they are) influence how globalization plays out as a process in terms of its
impacts on economic and social performance indicators. The size and importance of
these interactions is for now inevitably only the subject of conjecture. These are sharply
competing views of society and social structure. Many types of economic models could
be built to analyze them. Many elements of globalization could be considered. But the
conjecture that the effects stemming from interactions between value systems and
globalization could be substantial seems to this author, at least, as worthy of further
investigation.
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4.
Value System Competition, Collapse, Assimilation, Fusion, and
Conflict
Rather than simply characterizing the constraints which value systems and societal
influences more broadly place on individual behaviour in a sociological tradition, and
assessing the historical evolution of social structures to unearth tendencies for future
patterns, the inclination of economists in this discussion likely lies in developing an
understanding of how value systems change and impact on societal performance under
globalization shocks to national societies and economies. Such an approach is in the
tradition of comparative static analysis which typifies much economic theorizing, and is
set out in Samuelson (1947), Hicks (1939) and in subsequent literature. To implement
such an approach, one would first formalize a joint model of societal interactions with
economic behaviour characterized by an equilibrium structure, and then attempt to assess
how behaviour in the model would change if various shocks to the system occurred, such
as policy driven global economic integration or changes in social arrangements such as
new communications technologies.
One might ask such questions as how would value systems compete under such
changes? Could it be they could partially or wholly assimilate taking features from each
as economic integration occurred? Could there be an outcome in which value systems of
smaller social entities imploded and were subsumed in alternative structures? Is some
form of cooperation between value systems possible, such that cooperative outcomes of
strategic games of interaction between value systems could be generated by globalization
shocks? And what if the values from one society were to be naively (or myopically)
implanted to another, could perverse or unfair outcomes result?
22
In the process of performing such comparative statics one would have to ask what
types of process of change for value systems represent social improvement and which
social regress, and according to which criteria? And quantitatively, is it possible to assess
whether the effects attributed to value system change are likely to be large or small
compared to traditional effects usually studied by economists such as gains from trade.
The model used to represent both the value systems at issue, and the characteristics
of the globalization shocks would both be central to such an undertaking. Differential
adjustment costs of the type sketched out above could be one simple formulation.
Another could be an explicit economic network structure in which preferences of
individuals were defined not only over their own consumption, but over the consumption
of others. Such a formalization has been recently used by Bhattarai and Whalley (2003)
to analyze the effects of global liberalization in such areas as telecoms in a network
structure. Applied to social value systems these could be models of disjoint or
overlapping networks covering subsets of societies, with a value to each network going
beyond the immediate direct benefits of consumption of goods to individuals. These are
at best sketches of very simple and rudimentary formalizations of social value system
interactions with economic behaviour, but they might provide a starting point for such
investigations.
In conducting comparative static exercises in such a formalization, there are also
several strands of recent economic literature that might be able to be drawn on for such
analyses, depending on the types of globalization shocks considered. These involve
formal models of either how jurisdictional policies interact under assimilation, how
coordination between policies might or might not improve things, and how international
institutions are best designed given the incentives involved. The tax competition literature
23
(Wilson (1999)) analyzes the possibilities for races to the top or bottom in inter
jurisdictional tax rates, as mobile factors move between jurisdictions and tax bases
expand and contract. International macro policy coordination literature (Obsfeld and
Rogoff (1995)) among other things discuss the benefits to joint intervention in
multicountry macroeconomic policies and the gains to coordination more generally.
Myatt, Shin, and Wallace (2002) and Currie and Levine (1993) provide a more focused
discussion of games of coordination in this setting. Recent discussion of international
institution arrangements (Stiglitz (2002), and Bagwell and Staiger (1999, 2001, 2003))
focuses on the considerations involved in framing international rules and organizing
institutional processes to restrain individual country incentives to depart from globally
beneficial arrangements.2
How then might value systems interact and compete with one another, and what
might the tax competition literature suggest? Suppose two societies one with a high level
and one with a low level of trust were to integrate. Would shared or common levels of
trust emerge somewhere between the two, or could there be a race to the top (both high
levels of trust) or the bottom (both low levels of trust) as transactions moved between the
two types of value systems. Likely, as in tax competition literature, either outcomes may
apply but exploring the conditions for one outcome or the other could well be
informative. Another conjecture might be that much like the role of national currency in
the global economy, the persistence of multiple value systems in the long run might not
well characterize an efficient globality. If values must be shared for common and joint
use, my values if I connect or transact with you become yours and yours mine. Just as
bimetallism in the long run is not viable as a global specie mechanism, so multiple value
systems might not be able to prevail in a long run homogenized globality. Literature on
2
See also Whalley’s review of Bagwell and Staiger (2003)
24
tax competition from Kanbur and Keen (1993), Zodrow and Mieszkowski (1986), could
be relevant here. Interacting in either noncooperative Nash form (Wildasin (1988)) or
cooperative form (Burbidge et al (1997) might also be analyzed.
This discussion, however, presumes that all individuals are fully globally
connected with all others under globalization, and for all purposes. If subsets of
interconnections (transactions) can remain disjoint from each other (either spatially or
functionally, or both) then distinct value subsystems might survive. If homogenisation is
the trend, however, which one prevails is a central issue. Just as in cellphones and VCRs,
the determination of the common standard becomes the issue. Questions of how common
value systems emerge mirror those of the emergence of common standards for shared
technologies.
In some sense will the most efficient value system prevail, or can bad values drive
out good? For example, corruption once established in an economy can spread and drive
out pro social honest behaviour. Good (in some sense) values may not be able to
withstand individual incentives to adopt follow socially undesirable value structures from
elsewhere. A related issue is whether value systems of large entities will prevail over
those of smaller entities. This may well be the tendency based on the number of
transactions conducted by one or more agents using the larger society’s value system, but
the ability of values to change and modify under globalization shocks may differ from
society to society.
Can assimilation across value systems occur? Clearly this seems to be both likely
and even probably happening to some degree at the present. Chinese traders selling in
US markets learn US practices and vice versa, and from these experiences they also
change their own practices. A global value system might therefore be conceived as
25
possibly taking the best, in some sense, from all nationally based values to yield a
mutated but globally more efficient set of global norms.
Can local collapse in values occur? Where distinctive value systems operate in
relatively small and distinct societies, a move to a globalized or socially more widely
used value system may result in the submergence and near destruction of local value
systems. Traditional societies world wide seemingly bear testimony to these possibilities
occurring. Morrisseau (1999), for instance, discusses the near disintegration of local
community based value systems among North American Indian bands, and the social and
individual consequences which result.
What of naive transplantation of values from one society to another? Here clearly
undesirable outcomes can occur. Suppose society X collectively sees itself as embodying
a value system upheld by the rule of law and protection of individual rights and liberties,
and as a large society seeks (even if well intentioned) to transplant its own value system
abroad as a form of global social advancement. Suppose that the legal structure in the
receiving society is corrupted with bribeable judges, police officers and other elements of
a less then legally bound society. Corruption can intensify under such transplantation by
an elevation in the role of legal structure in the recipient society. One hears, for instance,
of traditional societies with complex informal rights to use, transit, or otherwise employ
land where formal systems of land title and registration are introduced with the purpose
of firming up property rights and allowing market trade in land with improved economic
efficiency as the objective. The result can be that informal rights remain as the respected
right serving to confuse new legal title, with new legal title used for the purposes of
mortgage access with resulting financial complexity in financial instruments and
confusion in title for productive use.
26
And what of the quantitative consequences of value system interaction of the type
speculated on above. Seemingly, where collective identity is a prime and perhaps the key
social value, the consequences of such process can be profound. Morriseau (1999)
documents gas sniffing, drug abuse, teenage pregnancy, and other personally retrograde
behaviour in North American Indian Bands attributed to the shared loss from the seeming
disappearance of collective identity. Morriseau documents how in such cases collective
healing is the route to reestablishment of both collective identity and individual self
worth. Seemingly in such cases, while hard to quantify, these elements of value system
interaction if occurring under globalization could well outweigh conventional Ricardian
gains from trade.
It is perhaps worth concluding this section with the brief comment that integrative
processes involving assimilation and mixing of social arrangements are not new and
characterize large parts of the human historical record. Embree (1972) for instance,
discusses how Hindu transitions reflect a long period of assimilation of different cultures
and traditions during the Vedic age (1500BC-600BC) which fused scattered populations
who spoke Dravidian Languages (the modern representatives of Tamil and Telugu),
embraced a wide range of different deities, and practiced a wide range of sacrificial and
warrior based practices, to name but a few. The fusion produced the golden Vedic age.
Many other instances could be cited. In this sense social integration under globalization
is hardly new. The central role of the economic component in modern globalization does
however seem to be a departure from earlier experiences, and so again the theorizing of
economists may thus have more to offer the current episodes.
27
5.
Concluding Remarks
This broad ranging piece focuses on how globalization interacts with social value
systems and collective identity, and through this overall societal performance may, in
some sense, be impacted by globalization. The thrust of the piece is to suggest that
economists may be able to contribute to a discussion of these issues by formalizing
simple notions of social value systems (collective identity) and conducting comparative
static analyses as to how societal performance might be impact by globalization shocks.
This contrasts with writings in the area from other disciplines.
My belief is that while much maligned at times by other social scholars, (see
Wallersteins (2001) call (p.258) “Away with economists” remark) economists can
nonetheless contribute to literature on globalization and social process by bringing their
analytical skills to bear. To think in terms of processes of interaction, competition,
cooperation and assimilation between value systems seems to be a productive route, and
in the process to more formally develop analytics and some comparative statics of
collective rationality than done thus far in this cursory piece.
At the end of the day there may be no objective truth, no firm science based on
clearly objective reason and no reality of Greek perfect forms that can guide
policymakers. But debate on globalization is now centre stage in our emerging global
polity, and my belief is that if economists enter this debate and offer their analytical skills
to other disciplines they have much to offer. The reshaping of what Castells (2004) sees
as a perplexing world in ways that are an improvement, through dispassionate and calm
discourse is to my taste more attractive than uninformed but through a tournament
between strongly held and loosely formed opinion on what links there could be between
social structure and global integration.
28
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