Global Trade and Global Social Issues

Annie Taylor, Caroline Thomas

• Publisher: Routledge
• Year: 2005
• ISBN:
  9781134675746
• Edition: 1
• Topic: Ciencias físicas
• Subtopic: Geografía

In Global Trade and Social Issues leading academics and NGO workers offer a much-needed counterweight to the liberal consensus. A critical reflection on the whole project of restructuring world trade, this is essential reading for those working in international political economy, development studies, international relations and environmental studies.

1

TRADE IN CONTEXT

Approaches to globalization

Simon Eagle

Introduction

Globalization is increasingly heralded as an important new development in economic, social, cultural and political life. Anthony Giddens has even made the claim that it is ‘a concept which deserves a central place in the lexicon of the social sciences’ (Giddens 1990: 51). Recent transformations in the international political economy have contributed to the current vogue for globalization. It is common for a whole host of developments and innovations in the world economy to be grouped under the rubric of the globalization of finance and production. Trade is arguably the driving force in this new globalized economy. In part this is due to the differentiation of production processes which results in manufacturing systems being functionally integrated across different areas of the world economy. The importance of trade in this changing world system is also underlined by the fierce competition to drive down costs, and therefore prices, through sales abroad. This chapter argues that, in order to understand the nature and implications of changes to the trade system and the world economy more generally, it is important to go beyond the orthodox debate over globalization and to focus on the phenomenon of international capital and the social forces associated with it.

What may be termed the orthodox debate over globalization has important implications for how we understand the emerging trade system. This chapter focuses upon two influential and competing contributions to this orthodox debate. The first part of the chapter considers the position of the economist Ohmae. The second section examines the position of Hirst and Thompson. The third section, through a critical assessment of these positions, establishes some of the limitations of the orthodox debate over globalization. The fourth part of the chapter outlines some implications for our understanding of the changing world trade system, including the need to consider qualitative as well as quantitative indicators of changes in the international economy.

Ohmae’s borderless world

According to Ohmae (1990), what we might call the ‘strong’ economic globalization thesis emerges in response to new empirical developments within the global political economy. Writing primarily as a management theorist and strategist, Ohmae is principally concerned with the implications of these developments for firms if they are to reap the benefits of this emergent global marketplace. However, the main concern here lies with the theoretical implications of Ohmae’s analysis for how we are to interpret recent tendencies in the development of capitalism.

Ohmae’s central argument is that increasingly processes of economic globalization are rendering the state obsolete. Technological developments have intensified internationally mobile flows of information, capital, technology and industrial capacity, thus creating a single integrated interlinked economy (ILE). These developments have generated new structures of competition in the global economy which sever once and for all the historical association between state power and relative economic success.

An isle is emerging that is bigger than a continent – the Interlinked Economy of the Triad (the United States, Europe, and Japan), joined by aggressive economies such as Taiwan, Hong Kong and Singapore.

(Ohmae 1990: xi)

Today if you look closely at the world Triad companies inhabit, national borders have effectively disappeared and, along with them, the economic logic that made them useful lines of demarcation in the first place.

(Ibid.: 172)

(Little attention is given to how this ILE interacts with other areas in the world, nor to possible strategies for the development of those excluded).

Crucially, Ohmae claims that it is no longer accurate to think of the world economy as divided into discrete national units, nor is it appropriate to think of many multinational firms as having a distinct national identity. A number of factors have combined to generate these developments. Foremost here are developments in transport and communications technologies which have transformed the environment in which firms operate. This transformation has involved a shift from an environment in which variable costs were the norm, to one in which fixed costs are increasingly prevalent. With the increased speed of technological change – shortening the life-cycle of many products – less time is permitted for such costs to be recouped.¹ The implication of such collapsing time-scales is that it becomes imperative for firms to launch new products simultaneously in all appropriate markets within the ILE in order to recover investments before a given product is outmoded (Ohmae 1990: 117).

Ohmae does not suggest that this global market can be readily supplied with homogenous global products. On the contrary, he is clear about the segmented nature of markets in the ILE. In this sense the development of the ILE is viewed as an expression of the increasing power marshalled by consumers. Greater availability of information regarding product labels and product performance has empowered consumers and been a key factor in changing the nature of competition (Ohmae 1990: 44). The requirement to be sensitive to local needs and tastes has implications for the globalization strategies that firms should pursue (ibid. chapters 5–7).

While some form of global organization becomes imperative for firms to be successful in this environment, neither a hierarchical nor a centralized form of corporate organization is seen as desirable. Ideally, only a minimal number of corporate functions such as finance and personnel, are retained at the global level. Local managers are highly autonomous and local markets are commonly best served through direct productive investments which can create a full ‘insider’ position supported by a complete business system, including research and development. Hence the desirability of what Ohmae calls ‘equidistance’ as a mark of commitment to truly global organization. This involves the separation of ‘international’ from ‘domestic’ headquarters so as to prevent privileging home operations at the expense of those overseas (Ohmae 1990: chapters 2 and 6). These developments have encouraged the formation of strategic alliances between firms so as to share the risks involved in the outlay of such huge fixed costs and to create a more competitive force through the combination of complementary firm-specific advantages. Enlisting knowledge and expertise regarding local markets and practices is seen to smooth the path of expansion into new markets.

For Ohmae, these developments represent a qualitatively new phase of global capitalism. It is precisely this erosion of the ties between state and capital which is the kernel of his analysis. Trade remains central to the expansion of these strategic alliances between firms from different areas of the inter-linked economy. The increasing number of such alliances accounts for the dramatic increases in the levels of foreign direct investment (FDI) in the 1980s (UNCTAD 1993).

The implications of this ‘borderless world’

Ohmae’s analysis is primarily an economic model of globalization in which the social and political world is subordinated to economic forces. In this borderless world, ‘it is economic activity that defines the landscape on which all other institutions, including the apparatus of state-hood must operate’ (Ohmae 1995b: 41). Those who are willing (not to mention able) to engage most fully with this process of economic globalization and participate actively in the self-regulating ILE can reap the benefits.

In this vision, global firms are seen as capable of the maximally efficient allocation of resources in response to the demands of increasingly well-informed consumers in a progressively integrated and self-regulating world market (ibid.). All forms of political intervention which seek to regulate or condition the expansion of the ILE come to be seen as anachronistic, distorting market outcomes and inimical to what he terms ‘global logic’. Whilst governments are viewed as obstacles to the ability of consumers to access the cheapest goods and services, new ‘region-states’ have emerged as a defining feature of the new economic landscape.

Unlike these new regional economies, the accumulated political baggage of nation-states renders them ill-suited to the task of nurturing economic growth in the ILE. The wide variations in terms of wealth-creating capacity that persist within nation-states are said to generate the tensions which will lead to the latter’s eventual demise. States, we are told, are artificial constructs which through enormous redistributive activity attempt to conceal the extent to which different sectors and regions are vulnerable to, or competitive in terms of, world markets. Such efforts will ultimately prove futile in the face of increasing globalization. By contrast, the success of region-states is in large part due to the direct nature of their links, especially in the form of productive investment, with the wider ILE.

Though not always explicitly made by Ohmae, this position would seem to rest upon a number of assumptions. At this global level, resource allocation is efficiently accomplished by corporate decisions in response to consumer choices. Hence, multinational firms are viewed as the most efficient means of overcoming a number of failures in external markets. Moreover, FDI is seen to entail a number of benefits for host economies. According to this position FDI provides risk capital, reduces the dependence on external debt and generally strengthens the external position of recipient countries. FDI is also claimed to enhance business practices and provide a spur to innovation through the introduction of technology and new management practices. Furthermore, the strategic networks of MNC activity are seen to provide channels which provide host economies with access to international product and capital markets. In sum, it is claimed that FDI improves both domestic and international competitiveness and the domestic rate of return to capital. These claims lie at the heart of the ‘economic liberal’ case that increasing economic integration will maximise welfare.

In this account the nature of political authority and the implications of its exercise in the ILE are framed in a highly one-dimensional way. What is problematic here is not that states are portrayed as structures of domination and control, but rather that it is contended that this is all that states amount to. This position may be contrasted with other analyses of the changing global political economy where political institutions are also viewed in terms of their capacity to provide security. Ohmae seems to portray nation-states as mere bastions of privilege or the handmaidens of special interests. He gives numerous examples of ‘pork barrel’ politics which form the core of his argument here (Ohmae 1996, especially chapters 4–5). Moreover, not only are the criteria for the success of given nation-states particularly narrow – centred only around ideas of economic competitiveness – but, more contentiously, Ohmae assumes that the logic of globalization serves the interests of all.

On the question of the perceived obsolescence of the state, Ohmae is at times unclear. Sometimes he suggests national borders have almost disappeared, at other times they remain barriers to freer trade. Generally, however, in this account, technological developments have enabled firms to expand trade and FDI linkages. Importantly, globalization, whilst viewed as the linear product of the actions of individual capitalist firms, is said to possess certain significant structural properties. This latter point is apparent in so far as any attempts to defy this ‘global logic’ are seen as futile. In this sense actors seem to be merely the executioners of preordained structural forces. There is no choice but to succumb to the globalization process. What is clear is that such liberalization as has occurred is welcomed as a positive development.

At the core of Ohmae’s analysis of the changing nature of the global market place is an argument that such developments signal the need for a fundamental change in the categories we bring to an analysis of the global political economy. This would challenge the validity of the concept of a national economy, seeing it as ‘an unnatural, even dysfunctional unit, in terms of which to think about or organize economic activity’ (Ohmae 1995b: 42). ‘We tend to think that a country’s economy consists of primary, secondary, and tertiary industries. Yet we should now think of the interlinked part of the world as having that spectrum of industries collectively instead of individually’ (Ohmae 1990: 14).

This suggests the need to rethink existing approaches to a number of related issues and categories concerning, for instance, the nature of national competitiveness and the proper role for government in enhancing it. For example, given the perception of the increasingly national character of multinational enterprise, it follows that national competitiveness can no longer reliably be conceived in terms of the stock of assets of a given country, including the assets of its multinational companies.

Disputing globalization: Hirst and Thompson

A number of writers have developed a quite distinct, and perhaps more sophisticated, response to the question of globalization, seeing a complex set of tendencies at work in the development of the contemporary capitalist system. In a critique underpinned with rigorous empirical analysis, Hirst and Thompson (1996) take issue with the model of globalization exemplified in Ohmae’s writings, challenging its analysis with respect to the nature and degree of recent changes in the global economy. Their book is a defence of the pertinence of the concept of an international economy, and the possibility of its regulation, in the form of a critique of what are perceived to be premature claims concerning the globalization process.

Important here is their insistence that globalization must involve the development of a qualitatively new economy rather than the intensification of international economic processes and relationships within the existing international economic structure (Dicken 1992). This is to be contrasted with an international economic order in which ‘the principal entities are national economies’ (Hirst and Thompson 1996: 8). The concept of an international economy which they advance is consistent with a high level of international economic activity. Indeed, they do not suggest that a return to autarchic economic blocs is either likely or desirable (Hirst and Thompson 1996: 16). Instead they, like Ohmae, readily take on board the contentious assumption that trade is necessarily beneficial.

That the world economy has indeed undergone important changes, most noticeably with respect to international investment, is not contested. Indeed, a key aspect of their argument is that it is possible and necessary to regulate international investment and, more generally, to construct effective governance structures for the international economy as a whole. However they insist that such developments do not represent the kind of ontological shift to a globalized economic system claimed by writers such as Ohmae. Too often, they argue, evidence quite compatible with an international economic structure is advanced as though it validated the claims of the globalists (Hirst and Thompson 1996: 7).

What then is the nature of Hirst and Thompson’s case against the ‘strong’ globalization thesis? They take issue with a number of claims. One argument advanced is that contemporary levels of trade and capital flows are not without precedent. Indeed they go further than this, suggesting that, relative to GDP levels, international trade and capital flows were probably more important before the first World War than they are today, both between rapidly industrializing countries themselves and between these and their various colonial territories (Hirst and Thompson 1996: 31). They also challenge the view that globalization signals the emergence of truly global firms, a-nationalistic in character.² Thus, ‘TNCs still rely upon their “home-base” as the centre of their economic activities despite all the speculation about globalization.’ Crucially, they demonstrate the skewed nature of many international economic flows by highlighting, for example, how most of the increase in international investment has taken place between OECD countries (Dicken 1992).

In contrast, therefore, to the globalization theorists, Hirst and Thompson are committed to the notion that recent developments do not constitute a qualitatively new phase in the development of the world economy and can, potentially at least, be subject to effective regulation within the context of an international economic order. In fact, the intensification of international investment relationships is an expected outcome of an international economy.

How are we to assess these competing accounts of the world economy and what are the implications of these debates for our understanding of trade in the contemporary capitalist order?

Globalization: a political dimension?

Hirst and ...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Contents
• List of tables
• List of contributors
• Acknowledgements
• List of acronyms
• Introduction
• 1 Trade in context: approaches to globalization
• 2 Trading human rights
• 3 Trade with a female face: women and the new international trade agenda
• 4 The trade and environment debate
• 5 Calls for a social trade
• 6 The WTO and issues associated with TRIPs and agrobiotechnology
• 7 New values and international organizations: balancing trade and environment in NAFTA
• 8 The World Trade Organization, social movements and ‘democracy’
• 9 Managing trade in a globalizing world: trade in public services and transnational corporations – the case of the global water industry
• 10 The World Trade Organization: technocracy or banana republic?
• 11 The global production of trade and social movements: value, regulation, effective demand and needs
• Index