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The Political
Economy of
Globalization
Globalization Defined
Globalization broadly refers to
the expansion of global
linkages, the organization of
social life on a global scale,
and the growth of a global
consciousness, hence to the
consolidation of world
society…
Globalization Defined
…Such a definition captures
much of what the term
commonly means, but its
meaning is disputed. It
encompasses several large
processes; definitions differ
in what they emphasize.
Globalization Defined
…Globalization is historically
complex; definitions vary in the
particular driving force they
identify. The meaning of the term
is itself a topic in global
discussion; it may refer to “real”
processes, to ideas that justify
them, or to a way of thinking
about them…
Globalization Defined
…The term is not neutral!
Definitions express different
assessments of global
change. Among critics of
capitalism and global
inequality, globalization now
has an especially pejorative
ring.
Globalization Defined
Do you get
it???
Globalization Defined
How about an easier
definition…something
that makes sense that
I can understand…OK
then, let’s try this….
Globalization Defined
Question: What is
Globalization?
Answer: Princess Diana’s
death.
Question: How come?
Answer:
An English
princess…
…with an Egyptian
boyfriend…
…crashes in a
French tunnel…
…riding in a
German car…
…with a Dutch
engine…
…driven by a
Belgian
chauffeur…
…who was drunk
on Scottish
whiskey…
…followed closely by Italian
paparazzi…
…on Japanese motorcycles…
…she was treated by an American
doctor…
…using Brazilian medicines…
…All this
interesting
information has
been supplied to
you by a Brit…
…using American
Apple
technology…
…And you’re
probably reading
this on a
Chinese-made
computer…
…that uses
Taiwanese
chips…
…and a Korean
monitor…
…assembled by
Bangladeshi
workers…
…in a Singapore plant…
…transported by
Pilipino
sailors…working
on Greek ships…
…hijacked by
Somali pirates…
…released by
French
mercenaries…
…then unloaded by
Romanian dock
workers in
Rotterdam…
…and brought to your store by
Bulgarian truck drivers…
…where you buy it
from a Polish
sales assistant…
…and that, my
friends, is
Globalization!!!
But seriously….
The following definitions
represent currently
influential views from
academia:
Friedman, The Lexus and the
Olive Tree, 1999
“[T]he inexorable
integration of markets,
nation-states, and
technologies to a
degree never witnessed
before in a way that is
enabling individuals,
corporations and
nation-states to reach
around the world
farther, faster, deeper
and cheaper than ever
before…the spread of
free-market capitalism
to virtually every
country in the world.”
Robertson, Globalization, 1992
“The compression of
the world and the
intensification of
consciousness of
the world as a
whole…concrete
global
interdependence
and consciousness
of the global whole
in the twentieth
century.”
Waters, Globalization, 1995
“A social process in which the
constraints of geography on social
and cultural arrangements recede and
in which people become increasingly
aware that they are receding.”
Albrow, The Global Age, 1996
“The historical
transformation constituted
by the sum of particular
forms and instances of
…[m]aking or being made
global (i) by the active
dissemination of practices,
values, technology and
other human products
throughout the globe (ii)
when global practices and
so on exercise an
increasing influence over
people’s lives (iii) when
the globe serves as a focus
for, or a premise in
shaping human activities.”
McMichael, Development and
Social Change, 2000
“Integration
on the basis
of a project
pursuing
‘market rule
on a global
scale’”.
Mittelman, The Globalization
Syndrome, 2000
“As experienced from below,
the dominant form of
globalization means a
historical transformation:
in the economy, of
livelihoods and modes of
existence; in politics a loss
in the degree of control
exercised locally…and in
culture, a devaluation of a
collectivity’s
achievements…
Globalization is emerging
as a political response to
the expansion of market
power… [I]t is a domain of
knowledge.”
4 Types of Globalization
1. Economic –
involves longdistance flows of
goods, services
and capital, as
well as the
information and
perceptions that
accompany
market
exchange.
4 Types of Globalization
2. Military – refers
to long-distance
networks of
interdependence
in which force
and the threat of
promise of force,
are employed
(ex. Nuclear
power).
4 Types of Globalization
3. Environmental –
refers to longdistance transport
of materials in the
atmosphere of the
oceans, or of
biological
substances such as
pathogens or
genetic materials,
that affect human
health and wellbeing.
4 Types of Globalization
4. Social and Cultural
– involves the
movement of ideas,
images, and people;
religious and
scientific
knowledge; and the
imitation of one
society’s practices
and institutions by
others – which
sociologists refer to
as “isomorphism.”
Globalization and the North
Stage 1
Pre – 1492
The First
“Globalizers”
Globalization and the North
Prior to Columbus,
most economic
activity was
local.
Globalization and the North
Armies were the entities that covered
vast distances in pursuit of conquest.
Globalization and the North
Vikings and Marco
Polo are
examples of preColombian
“globalizers”
who brought
with them exotic
foods, spices,
crafts, etc…
Globalization and the North
Chinese and Arab
traders moved
goods across
Asia, the Middle
East, and North
Africa.
Globalization and the North
Stage 2
1492-1945
Empire and a
Colonial Division of
Labor
Globalization and the North
Beginning in the fifteenth
century, European powers
financed explorations to
Africa, Asia, and the Western
Hemisphere. Soon these
explorations turned to
conquest and a “colonial
division of labor.”
Globalization and the North
Foreign lands produce the raw
materials and the “mother country”
produces the manufactured products
(a price scissors).
Globalization and the North
Slave trade
expands in North
America.
Globalization and the North
Stage 3
1945 – 2012
New Divisions
Globalization and the North
The pre-1945 divisions of labor
have changed radically in the last
few decades. While the richer
countries of Europe and North
America along with Japan still
largely export industrial
products, among the poorer
nations, six groups have
emerged:
Globalization and the North
1. Big Emerging
Markets –
Mexico, Brazil,
Argentina, South
Africa, China,
India, Indonesia,
Korea, Turkey.
These countries
are still
relatively poor.
Globalization and the North
2. Would-be BEMs – Colombia, Venezuela,
Chile, Greece, Portugal, Thailand, and
Malaysia. They have moved beyond clothing
and electronics into more diversified
industrial and service sectors.
Globalization and the North
3. OPEC Nations – these are the oilexporting countries
Globalization and the North
4. Former Communist
Economies –
despite a relatively
high state of
industrialization,
most of the 26
former Soviet Bloc
nations are
struggling and
finding it difficult to
compete.
Globalization and the North
5. Raw Materials
Exporters and
Light
Manufacturers –
about 40
countries have
little heavy
industry and are
suppliers of raw
materials.
Globalization and the North
6. Least Developed
Countries – about
60 countries, mostly
in Africa, are so
poor that their
economic
connection with the
rest of the world is
limited to minimal
trade and
investment and
dwindling foreign
aid.
Globalization’s Institutions
The beginning: Bretton Woods
The Bretton Woods system of
monetary management
established the rules for
commercial and financial
relations among the world's
major industrial states in the
mid-20th century.
Globalization’s Institutions
The Great Depression and
World War Two led to a
collapse of banks and trade.
Globalization’s Institutions
The US emerged from this crisis
with half the globe’s industrial
production and 4/5ths of its gold
reserves. US negotiators were in
a good position to ensure the
new Bretton Woods rules favored
continued US economic
dominance.
Globalization’s Institutions
The Bretton Woods vision
was to create public
institutions to anchor each
of the three pillars of
global economic activity:
Globalization’s Institutions
1. Production –
World Bank:
Designed to help
with
reconstruction
after the war and
to assist longterm production
in poorer
countries.
Globalization’s Institutions
2. Finance –
International
Monetary Fund
(IMF):
Oversees the
international and
financial and
monetary order
(loans).
Globalization’s Institutions
3. Trade – GATT: later changed to the
World Trade Organization (WTO)
The institution set up to free
restrictions on trade.
Theoretical Aspects of
“Neo-Liberalism”
1. Rule of
the “free
market”
Neo-Liberalism
2. Cuts in
social
services
(SAPs)
Neo-Liberalism
3. De-regulation of
businesses /
corporations
Neo-Liberalism
4. Privatization of public
services
Neo-Liberalism
5. Elimination of the
concept of “community” or
“common good”
Globalization and the South
Terms and
Concepts
Globalization and the South
Less Developed Countries (LDCs)
…are highly disadvantaged and
have a limited ability to advance
their interests and compete with
the economic giants in the
North..
Globalization and the South
Newly Industrializing Countries
(NICs)
…are usually placed by analysts as
being in the South, but in some
cases can be classified as a
developed market economy (i.e.
South Korea, Portugal, Mexico.
Globalization and the South
Least Developed Countries
(LLDCs)
…are the lowest third of the lowincome countries and are
experiencing a decline in
absolute conditions over the last
2 to 3 decades.
Globalization and the South
Approaches to
Development
Globalization and the South
1. Liberal – development can be achieved
within the existing structure. Focus is on
GNP, trade levels, employment and wage
statistics. Recipe for success? Free trade,
free investment, and other unimpeded
economic exchange will eventually create
prosperity for all.
Globalization and the South
2. Structuralist – development can only be achieved
when the politico-economic organization of the world
is radically altered to bring development to the LDCs.
a. Dependencia model
b. Primary products / raw materials
c. Neo-Colonialism
Globalization and the South
3. Mercantilist – political considerations
govern international economics. Trade,
investment, and aid policies of the North are
meant to help the North, not the LDCs!
Globalization and the South
The results of LDC development attempts so
far…?
1. Disparity of wealth within
countries.
2. Disparity of wealth between
countries.
The effects of modernization?
1. Explosive population growth.
2. Rapid urbanization.
3. Industrial and environmental
dangers.
Capital Needs and Development
Globalization has enhanced
countries’ needs for capital,
which can be used to supplement
their own internal efforts to
improve socioeconomic
conditions. Countries need hard
currency such as dollars, euros,
and yen, which are acceptable in
private channels of international
economics.
Capital Needs and Development
The 4 Main
Sources of Hard
Currency
Capital Needs and Development
1. Loans – usually
extended by
private or
government
sources.
Problem: leads to
debt crises.
Capital Needs and Development
Economic
ramifications of
loans: bank
failures in the
North and
inability to pay
for social and
economic
development in
the South due to
large debts.
Political
ramifications of
loans: strains
between lending
and borrowing
countries and
political
instability in
countries that
are struggling to
pay off debt.
Capital Needs and Development
2. Private
investment
through MNCs –
Problem: LDCs are
disadvantaged
compared to the
countries of the
North.
Capital Needs and Development
…One study showed that average
LDC balance for the period of
1984-1990 showed a net inflow
of $132.1 billion in investment
capital into LDCs but an outflow
of $97.6 billion in profit taking for a net capital inflow of $34.5
billion…
Capital Needs and Development
…However, LLDCs fared poorly.
Example? Africa…which had a
net investment inflow of $8.9
billion, but a net profits outflow
of $20.6 billion. Thus MNC
activity in Africa cost the
continent $11.7 billion!
Capital Needs and Development
3. Trade – export earnings
do provide hard
currency.
Problems:
a. LDCs command
only 28% of world
export market.
b. Most LDCs suffer
from chronic trade
deficits.
c. Heavy
dependence on other
countries for primary
products.
Capital Needs and Development
4. Foreign Aid
– limitations
include….
Capital Needs and Development
A. Political considerations – most often
given on the basis of political-military
interest and not development needs.
B. Military content – in the 1980s and
90s, approximately half of all U.S. aid
involved military transfers.
C. Measuring recipient per capita aid –
in the 90s, LDCs received $11.80 per
capita (Israel received $617 per
capita).
Capital Needs and Development
D. Donor aid relative to wealth – of the top 18
industrialized countries, the U.S. was #1 in
total dollars given (11.4 billion in 1990), but
ranked #17 in amount given as total
percentage of GNP.
E. The way aid is applied – often used to fund
highly symbolic but economically unwise
projects such as airports, sports arenas, or
large government buildings. Inefficiency
and corruption also a problem.
Alternatives to Economic
Globalization?
Yes! Say critics,
based on several
core values:
Alternatives to Globalization?
1. New Democracy
…is an egalitarian
approach to
economics; every
person is a
participant in the
economy.
Alternatives to Globalization?
2. Subsidiarity
…“localizing”
purchases improves
the livability of the
local economy and
also reduces the
distance raw
material and final
products travel to
meet end users.
Alternatives to Globalization?
3. Ecological
Sustainability
…limit consumption
and exploitation.
Conserving
resources allows us
to meet today’s
needs without
compromising our
ability to meet
tomorrows.
Alternatives to Globalization?
4. Common Heritage
Ecological resources
(the commons)
cannot be
monopolized.
History, culture, and
civil services belong
to everyone.
Alternatives to Globalization?
5. Diversity of Indigenous Peoples
The collective and individual right to
maintain and develop our distinct
identities and characteristics…
Alternatives to Globalization?
6. Human Rights
“…a standard of living adequate for…health and wellbeing…including food, clothing, housing, medical
care, necessary social services, and the right to
security in the event of unemployment…” (United
Nations, 1948).
Alternatives to Globalization?
7. Jobs, Livelihood,
Employment
Alternatives to Globalization?
8. Food, Security,
and Safety
Alternatives to Globalization?
1. Equity
The “touchiest” of
the principles;
Could resources
– natural,
human, and
economic, be
distributed more
evenly?
Alternatives to Globalization?
10. Precautionary
Principles
When a practice or
product raises
potentially
significant threats
to harm to human
health or the
environment,
precautionary
action should be
taken to ban or
restrict it.