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Globalization: Trends &
Explanations
Lecture 21 – Thursday, 29 November
J A Morrison
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You’ll remember that we began
the course by setting up one of the
biggest puzzles in IPE:
How do we explain globalization
and de-globalization?
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Today, we’ll return to that question.
Using the theoretical and empirical
insight you’ve gained since, we’ll
try to offer a more robust answer
to that puzzle.
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On Thursday, we’ll evaluate
globalization normatively.
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Globalization: Trends &
Explanations
I. Theory: Studying Globalization
II. Empirics: Observing
Globalization
III.Soc Sci: Explaining the Variation
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Globalization: Trends &
Explanations
I. Theory: Studying Globalization
II. Empirics: Observing
Globalization
III.Soc Sci: Explaining the Variation
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I. STUDYING GLOBALIZATION
1. Defining Globalization
2. The Implications of Globalization
3. The Determinants of Globalization
So, what is this phenomenon
“globalization”?
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The literal meaning of globalization is
rendering things global. (OED)
A more precise formulation would run:
“fundamental changes in the spatial and
temporal contours of social existence,
according to which the significance of space
or territory undergoes shifts in the face of a
no less dramatic acceleration in the
temporal structure of crucial forms of human
activity.” (Stanford Encycl. of Philosophy)
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Globalization, then, is really about the
elimination of differences across space
and the changes in life that follow as a
result.
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I. STUDYING GLOBALIZATION
1. Defining Globalization
2. The Implications of Globalization
3. The Determinants of Globalization
Globalization has implications
for social, political, and
economic outcomes.
(We’re particularly interested in the latter two.)
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The Social Implications
• The Division of Labor in Society
(1893)
• Globalization affects social
organization
• Mechanical Solidarity: bonds
forced by proximity
– E.g. members of same tribes
• Organic Solidarity: bonds
developed by interdependence
Émile Durkheim
– E.g. individuals with similar internal
characteristics
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Consider, for instance,
the power of the tubes…
(Ted Stevens)
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RickRolling.
(BTW: You’ve been RickRoll’d.)
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Economic Implications
• Development: Does globalization make
the pie bigger?
• Distribution: Who enjoys the gains brought
by globalization?
– Developed countries?
– Developing countries?
– MNCs?
– Consumers?
– Capital?
– Labor?
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Political Implications
• Reorganization of the International
System
– Non-state actors (MNCs, NGOs, &c) become
major players in IP
– Changes in distribution of power
• Changes in Accountability
– States respond to different groups than do
MNCs or NGOs
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Power Transfer: States  Firms
(?)
• Key Ingredients
– Some multinational corporations (MNCs) are
bigger than some states
– Capital is “footloose”—free to relocate
• Results
– States compete for MNCs and the benefits
they bring
– Shifting responsibilities: who is to blame for
externalities?
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I. STUDYING GLOBALIZATION
1. Defining Globalization
2. The Implications of Globalization
3. The Determinants of Globalization
What determines the level of
globalization?
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Transport & Communication
Costs
Shipping/
Communication
Shipping by Sea
New York-London
Shipping by Air
New York-London
Cost of a 3-minute
Phone Call
New York-London
1930
1990
$95
$29
in ocean freight and post charges
per short ton
in ocean freight and post charges
per short ton
$0.68
$0.11
per passenger mile
per passenger mile
$244.65
$3.32
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When the World Shrank
•
•
•
•
•
•
1522: Magellan Sails around the World
1827: Steamship crosses Atlantic
1861: Transcontinental Telegraph
1869: Transcontinental Railroad
1927: Lindbergh’s Transatlantic Flight
1989: Creation of WWW
And…
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The iPhone
(29 June 2007)
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The story here is clear.
These developments work like a
one-way ratchet: once the
iPhone is invented, there is no
uninventing it.
(Sorry Micro$oft)
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Contrived Barriers to
Globalization
• Linguistic and Cultural Barriers
– Language overlap increases/decreases (e.g.
Latin; English)
– Cultural diversity also rises and falls
• Politically-Imposed Restrictions
– Restrictions on economic interchange (tariffs,
&c)
– Restrictions on information flow (e.g. “Great
Firewall of China”)
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Unlike the transport &
communication costs—which
generally just fall over time—
these “contrived” barriers to
globalization can vary over time.
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This raises an important question:
If the level of globalization may
fluctuate, how has the level of
globalization changed over time?
How does it vary across space?
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Globalization: Trends &
Explanations
I. Theory: Studying Globalization
II. Empirics: Observing
Globalization
III.Soc Sci: Explaining the Variation
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Globalization encompasses more than
just “economic” phenomena…
But we typically use “economic”
measures to determine the level of
globalization.
Specifically, we look at the amount of
movement of: people, goods &
services, and capital.
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II. OBSERVING GLOBALIZATION
1. Globalization Across Time
2. Globalization Across Space
First, let’s look at this crosstemporally.
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Measures of Globalization
• Trade: Share of Exports in World Output
– Peaked in 1913
– This point was not surpassed until 1970 (G&I, 5)
• Capital: Flows relative to National Income
– Level of integration still has not reached the levels
achieved among developed countries between 1870
and 1913 (G&I, 217)
• Migration: Movement relative to World
Population
– More people crossing borders in 1900 than today
(Hatton & Williamson, 1998; Ratha & Xu, 2008.)
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World Exports/GDP (in constant dollars)
Average Tariffs on Imported Manufactured Goods
1875
1913
1931
1950
1985
2000
13.5%
20%
30%
18%
5.7%
3.6%
Germany
5%
17%
21%
26%
5.7%
3.6%
Italy
9%
18%
46%
25%
5.7%
3.6%
UK
0%
0%
n.a.
23%
5.7%
3.6%
Canada
n.a.
26%
n.a.
n.a.
9.0%
4.8%
US
45%
44%
48%
14%
4.6%
3.0%
France
Two Eras of Globalization
• Two Eras
– 1st Age: Mid-19th Century to 1914
– 2nd Age: 1945 to Present
• Similar Causes
– Revolutions in transportation &
communication
– Commitment by states to decrease
impediments
• Two Different Stories
– Trade: Share of exports in world output
peaked in 1913 and was not surpassed until
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II. OBSERVING GLOBALIZATION
1. Globalization Across Time
2. Globalization Across Space
Now, let’s examine this crosssectionally.
Which countries are the most
globalized today?
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World’s Most Globalized
A. T. Kearney/Foreign Policy Magazine Globalization Index. (Pub 2007)
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World’s Least Globalized
A. T. Kearney/Foreign Policy Magazine Globalization Index. (Pub 2007)
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Those numbers capture the
total volume of globalization in
those countries.
But which rely most heavily on
foreign integration?
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Trade Dependence & Economic Size
(1
of 2)
Trade (% of GDP)
Economic Size
(GDP – Global Top 20)
Japan
20
2
Argentina
22
17
Brazil
23
11
US
26
1
India
28
12
Australia
46
15
China
49
6
Italy
56
7
France
56
5
UK
58
4
Country
Source: World Bank, World Development Indicators 2003
Trade Dependence & Economic Size
(2 of
2)
Trade (% of GDP)
Economic Size
(GDP – Global Top 20)
Spain
62
10
Mexico
64
9
Germany
67
3
Russian Federation
69
16
South Korea
87
13
Canada
87
8
Switzerland
88
18
Sweden
89
20
Netherlands
130
14
Belgium
169
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Country
Source: World Bank, World Development Indicators 2003
How about the USA?
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Source: Bureau of Economic Analysis, Dept. of Commerce
US Foreign Direct Investment, Selected Years
(as percent of US GNP/GNI)
US Direct Investment Abroad
Foreign Direct Investment in the
US
1914
7%
3.5%
1929/30
7%
1%
1960
6%
1%
1996
20%
16%
2001
23%
15%
Source: OECD, World Development Indicator
Here, then, is the story with the
US:
 While we have traditionally
depended on the global
economy very little, we have
become increasingly reliant in
recent years.
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So, we have both crosstemporal and cross-sectional
variation.
The over all level of
globalization has varied across
time.
And the degree to which
individual countries are
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As social scientists, we ask:
how do we explain this
variation?
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Globalization: Trends &
Explanations
I. Theory: Studying Globalization
II. Empirics: Observing
Globalization
III.Soc Sci: Explaining the Variation
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III. EXPLAINING THE VARIATION
1. Cross-Temporal Variation
2. Cross-Sectional Variation
Let’s begin with the crosstemporal variation.
The first question is: why did the
variation in the level of
globalization vary over the
course of the 19th & 20th
Centuries?
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(At this point, dozens of theories
should come rushing to the fore
of your minds!)
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Structure of International
System
• Hegemonic stability theory: distribution of
power shapes states’ incentives and
supports market stability
– Kindleberger: integration of financial system
– Krasner: trade openness
• International Regimes
– Keohane: possible to maintain openness
“after hegemony”
– Ikenberry: regimes resolve asymmetries of
power
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Domestic Institutions
• Domestic representation: do workers or
capitalists hold the reigns of power?
(Polanyi, Eichengreen)
• Do domestic institutions favor integration?
(Bailey, Goldstein & Weingast)
• Welfare state: safety nets make populace
more amenable to globalization (Rodrik)
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Cognitive Explanations (Ideas)
• Identities: WWI redefined identities &
interests from collaborative to conflictual
(Eichengreen)
• Strategies: how to make free trade
compatible with states’ domestic policy
concerns (Irwin, Keynes, Hull)
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Interests/Values
• How do those in power understand their
interests? (Frieden; Schonhardt-Bailey)
• What are our policy priorities?
– Growth
– Equality
– Stability
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A Key Point: Remember that
there is nothing inevitable about
globalization. The course was
reversed dramatically in 1914,
and it could be reversed again.
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We might also wonder about
the different character of these
two periods.
How do we explain the different
character of the two eras? Why
the different policy bundles?
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III. EXPLAINING THE VARIATION
1. Cross-Temporal Variation
2. Cross-Sectional Variation
How might we explain the
cross-sectional variation?
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Values: Jihad vs McWorld
• Benjamin R. Barber; 1992 article in
Atlantic Monthly
• McWorld
– Preference for liberalization & globalization
– Economics over politics
• Jihad
– Tradition and “traditional values”
– Nation-state and/or religion over economics
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How do the Values Compare?
Source: World Values Survey, pooled sample 1995-2001
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Strategies: Many Recipes
• Washington Consensus (Williamson)
– Open markets
– Conservative fiscal & monetary policy
• Latin American Model
– Import Substitution Industrialization (ISI)
– “Keynesian” macroeconomic policy
• China & India
– Hybrid Model; “Sequenced” liberalization
– Export oriented industrialization  “Neomercantilism”
 There is continued debate about which countries
adopted which models and about the performance
of each!
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Politics: Alliances & History
• Gowa, Allies, Adversaries, & Int’l Trade
(1992)
 Integration follows security policy
– Security is more important
– Help your friends, not your enemies
– Integration strengthens alliances
• Influence of History
– Soviet bloc is slowly entering Western
economic alliance
• EU: let’s not fight anymore!
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Economic Explanations
• Development & Integration are highly
correlated
• Most assume that integration  growth
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But Dani Rodrik reverses that...
“A sound overall development strategy that
produces high economic growth is far more
effective in achieving integration with the world
economy than a purely integrationist strategy that
relies on openness to work its magic. In other
words, the globalizers have it exactly backwards.
Integration is the result, not the cause, of economic
and social development.” (59)
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Are there other explanations?
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