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Globalization
Class 22 – Tuesday, 4 May 2009
J A Morrison
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Agenda: Globalization
I. Theory: Studying Globalization
II. Empirics: Observing Globalization
III. Soc Sci: Explaining the Variation
IV.Assessment: Evaluating
Globalization (Next Time)
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Agenda: Globalization
I. Theory: Studying Globalization
II. Empirics: Observing Globalization
III. Soc Sci: Explaining the Variation
IV.Assessment: Evaluating
Globalization (Next Time)
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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?
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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 relocated
• 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”)
 These barriers are variable over time.
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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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Agenda: Globalization
I. Theory: Studying Globalization
II. Empirics: Observing Globalization
III. Soc Sci: Explaining the Variation
IV.Assessment: Evaluating
Globalization (Next Time)
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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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Globalization across Time
• 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.)
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World Exports/GDP (in constant dollars)
16
14
Percent
12
10
8
6
4
2
0
1820
1870
1900
1913
1929
1950
Year
1960
1970
1980
1992
2000
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%
45%
44%
48%
14%
4.6%
3.0%
France
US
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 1970
– Money & Migration: Still haven’t rivaled previous
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levels
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 vs. 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
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Country
Source: World Bank, World Development Indicators 2003
Trade Dependence vs. Economic Size
(1 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
Trade in the US Economy
Percentage
45
40
35
30
25
20
15
10
5
0
1879
c.1900 c.1910
1929
1939
Merchandise Exports/GDP
1950
1960
1970
1980
1990
1997
Merchandise Exports/Production
US Financial Inflow and Outflow 1960-2002
1200
$ Billions
1000
800
600
400
200
0
1960
1965
1970
1975
1980
1985
1990
1995
Financial Outflow (US' claims on assets abroad)
Financial Inflow (Foreigners' claims on US' domestic assets)
Source: Bureau of Economic Analysis, Dept. of Commerce
2000
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
So, we have both cross-temporal
and cross-sectional variation.
The over all level of globalization
has varied across time.
And the degree to which individual
countries are globalized varies by
the country.
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As social scientists, we ask: how do
we explain this variation?
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Agenda: Globalization
I. Theory: Studying Globalization
II. Empirics: Observing Globalization
III. Soc Sci: Explaining the Variation
IV.Assessment: Evaluating
Globalization (Next Time)
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III. EXPLAINING THE VARIATION
1. Cross-Temporal Variation
2. Cross-Sectional Variation
Let’s begin with the cross-temporal
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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Explanations of Cross-Temporal
Variation of Globalization
• Economics: Changes in Market Reactions
(Eichengreen)
• Politics
– Warfare (Eichengreen)
– Distribution of power (Kindleberger; Krasner)
• Values: Nationalism vs Universalism (e.g.
Fascists versus Liberals)
• Strategies: Experimentation with different
policy bundles (e.g. Smoot-Hawley, RTAA)
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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 this crosssectional 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
– 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 (Kiko!)
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Economic Explanations
• Development & Integration are highly
correlated
• Most assume that integration  growth
• 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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(Quick Note: Colander is going to
bring Rodrik here next spring for a
talk. Stay tuned!)
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Are there other explanations?
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Agenda: Globalization
I. Theory: Studying Globalization
II. Empirics: Observing Globalization
III. Soc Sci: Explaining the Variation
IV.Assessment: Evaluating
Globalization (Next Time)
59
Final Exam
• Distributed this Friday; Due Wednesday, 13 May by
5:30
• Write three Responses with some choice (total 1700
words)
• Rules listed Online
• Tough Exam
– Generate Separation
– Culminating Experience
• How to Prepare
– Organize & Polish Notes
– Get slides & lectures before the exam
– Review Discussion Questions
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