Globalization

Stefan A. Schirm

• Publisher: Routledge
• Year: 2006
• ISBN:
  9781134135202
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Globalization is the first volume which systematically encompasses the debates and the results of research of political scientists on all core aspects of the interrelation between politics and economics in the process of globalization.

This volume shows how research on globalization has reached a degree of differentiation and depth that makes it necessary and attractive to assess the state-of-the-art and perspectives for further research. With contributions from international experts including Andreas Busch, Nadine Haase and Edgar Grande.

1 Analytical overview

State of the art of research on globalization

Stefan A. Schirm

1 Questions, hypotheses and theoretical approaches

Is the state being weakened by globalization? Does national economic policy converge under the competitive pressure of globalization? Who is gaining or losing from globalization, and why? For the last ten years, these questions have been in the focus of public debate and political science research. Meanwhile, research has produced substantial empirical analyses on many aspects of globalization, leading to a substantiation of some arguments and to a weakening of others. While the coverage of globalization in the media is often still shaped by special interests and myths, political science has achieved cognitive progress in several instances. These advances in political science research benefited from economics and included several fields of political science, especially “international relations”, “comparative politics” and “political economy”. In view of the increasingly differentiated research on globalization, this volume attempts to systematically present the core fields and results of research on globalization focusing on the advances made in the last ten years.

The aim of this introductory chapter is to deliver a selective overview of the most important issues and results of research and to delineate the links between the core topics. This chapter does not attempt to introduce the following specialized chapters, a task which is undertaken in each of these chapters. The overview will be guided by three arguments. First, research on globalization is increasingly based on connecting the above-mentioned fields of political science into “international political economy” (see Frieden and Lake 2000; Grieco and Ikenberry 2003; Oately 2006; Schirm 2004a), thus leading to a partial integration of formerly more separated approaches to the study of empirical questions. Second, research has been increasingly converging around an actor-centred and theoretically guided approach to the empirical analysis of globalization. Third, contrary to the dominant focus in the mid-1990s on the “weakening of the nation-state”, globalization research recently centres around the persistent role and autonomy of national politics and institutions vis-à-vis globalization.

Theoretical approaches to globalization are based on different claims in political science and often recur to economics and sociology. One way to distinguish the approaches is to focus on the theoretical role globalization plays as an analytical variable. Part of the studies conceptualizes globalization as a dependent variable in analysing how power, ideas, institutions or interests cause and shape globalization. These works employ such theories as neorealism, liberalism, constructivism and institutionalism. In other parts of research, globalization is conceptualized as an independent variable in the analysis, for example, of the reform of the welfare state, of the convergence or divergence of national economic policies and global economic governance. Studies focus on the impact of globalization on the state, interest groups and societies and on the questions on governmental autonomy in economic policy making vis-à-vis global competition. These works are often guided by theories of the state, by institutionalism (“varieties of capitalism”), approaches from economics (trade theories etc.), societal norms (constructivism) and interests (liberalism).

Another way to structure the multitude of theoretical approaches to globalization is to examine the different cognitive goals pursued: (1) If the impact of globalization on state and society is to be explained, then globalization is mostly analysed as a structural, ideational or power-related phenomenon. (2) If the – converging or diverging – reactions to globalization are to be analysed, then national policy autonomy, interests, institutions and societal values build the explicative focus. (3) If multilateral forms of governing globalization (such as international organizations and global governance) shall be examined, then theories are employed which focus on cooperation and conflict (such as neorealism and regime theory), on public-private-partnership-hypotheses, principal-agentarguments and on the potential domestic causes (such as interests and norms) for the foreign economic policy responses of governments. These questions and arguments are often connected in such a dense way that they can hardly be separated clearly. Most of today’s research is characterized by actor-centred approaches, which emphasize the role of governments, international organizations, private business, non-governmental organizations and so on. as the driving or reacting forces vis-à-vis globalization. Therefore, in large parts of research, globalization is no more examined as an anonymous structure, as a “process without a subject” (Hay 2002: 379).

The theoretically guided analysis of empirical questions has increasingly benefited from recurring to economics in the last years. Authors such as Frankel, Frieden and Rogowski, Garrett, Hall and Soskice, Mosley, Swank and so on. integrate approaches from political science and economics reaching from qualitative to quantitative methods (see also Chapters 7, 10 and 11). Recently, the question on the causes of our knowledge on and perception of globalization is also frequently examined. This “ideational matter of globalization“ (Rosamond 2003: 669) is largely studied through discourse analyses, which focus on the meanings attached to globalization beyond its empirically measurable dimensions and processes. Normative approaches to research on globalization, which could often be observed in the mid-1990s, have ceded and given way to analytical approaches. Therefore, the precondition is now given to reach conclusions on the possibilities for the future governance of globalization based on plausible proof and reasoning on the causal implications globalization had so far. Summing up, research on globalization today shows a refreshing cognitive pragmatism by avoiding normative interpretations and pretentious postulates on the superiority of single theories. Instead, research focuses on the – often competing – uses of theoretical approaches in order to explain empirical puzzles.

This chapter is structured as follows. The next section delineates the dimensions and causes of globalization as well as the most important divisions on its interpretation. I then turn to the interlinked core elements of research in the last ten years and to their theoretical conceptualizations as well as empirical findings: the debate on the convergence and divergence of national economic policies, the question of a “weakening of the state”, a “race to the bottom” of welfare and environmental standards and the discussion about the advantages and disadvantages of free trade for national economies and specific interest groups. These sections are followed by a short appraisal of research on the possibilities of multilateral and private governance of the world economy. The chapter ends with conclusions on the perspectives for further research.

2 What is globalization?

The different definitions of globalization in the research community increasingly converge around a common understanding of globalization as an integration of markets, a cross-border interconnectedness of economic spaces and thus a denationalization of economic processes. Therefore, economic globalization shall be defined here as the increasing share of private cross-border activities in the total economic output of countries. With this basic definition, globalization can be measured as the share of foreign trade, foreign direct investment and financial transactions in the gross domestic product of a country or a region and as a share in the world product. This definition encompasses the magnitude and the development of economic globalization beyond individual perceptions, non-economic aspects of transnationalization (such as culture) and political “globalization” (on global governance, see section 6). The data clearly show that the share of crossborder activities in national product(s) has risen considerably in the last decades and therefore give empirical substance to the claim of an increasing integration of national economies (see Tables 1.1 and 1.2).

The numbers also show the limits of globalization (and the consequences of the stock market and regional financial crises for FDI flows after 2001). However, while the share of cross-border activities increased, the largest part of

Table 1.1 Growth of world trade compared to world real GDP

Table 1.2 Growth of foreign direct investment inflows compared to world real GDP

national product is still and persistently created and consumed within national economies. It is also interesting to note that globalization possesses a regional focus, as more than two-thirds of world trade, foreign direct investment and financial transactions occur between the industrialized countries of the OECD (Organization for Economic Cooperation and Development) plus some emerging economies such as Brazil and Malaysia (see Table 1.3). Therefore, accurately spelt, globalization is an “OECDization plus”. The problem of many developing countries seems not to be a negative impact of globalization but instead, no impact at all because they are (nearly) not affected by globalization.

Research shows a widespread consensus on the crucial role of governmental decisions regarding the causes of globalization. Technical novelties such as the internet, the containerization of trade and new financial instruments on stock markets doubtlessly eased the cross-border activities of private actors. But increased globalization since the 1970s would not have been possible without the decisions of national governments to liberalize world trade, to open financial markets and to de-regulate markets in general (on the causes of globalization see Garrett 2000; Hirst and Thompson 1996: 1–98; Schirm 2002a: 33–56). International governmental organizations such as the World Trade Organization (WTO), its predecessor, the General Agreement on Tariffs and Trade (GATT) and the International Monetary Fund (IMF) played a decisive role for the reduction of trade barriers and for the stabilization of growing financial flows (debt and

Table 1.3 Share of OECD countries in world trade and foreign direct investment

investment). Therefore, globalization has been an intended process with which the involved governments aimed at stimulating national and worldwide growth. This strategy of liberalization corresponded to the change in the economic policy paradigm in the 1970s and 1980s in many industrialized countries away from (neo-)Keynesianism (see Gourevitch 1987; Hall 1987; Helleiner 1994: 123–68; Schirm 2002a: 57–101). In sum, globalization has been crucially a result of decisions made by democratically legitimized governments on the national level and of agreements reached in international organizations, which were also dominantly influenced by the democratically legitimized governments of industrialized countries. Thus, liberalization can also be reversed, if voters wish it so.

Several positions mark the interpretation of the consequences of globalization (see the overviews in Drezner 2001; Held and McGrew 2000; Morton 2004; Rosamond 2003). They shall be subsumed under two groups in the following:

1. One group of authors argues that the state is weakened by globalization because it is limited to its territory while the private actors of globalization move across borders and can thus evade the control of the state with more ease. Susan Strange (1996: 65) articulates this position when stating that Transnational Corporations (TNCs) increasingly possess a “parallel authority alongside governments in matters of economic management”. Kenichi Ohmae (1995) even sees the “The End of the Nation State” and the “Rise of Regional Economies” approaching. According to Vincent Cable (1995), the state is “diminished” by a “loss of economic power”. These hypotheses of a weakening of the nation state dominated the debate in the 1990s.
2. A second group of authors considers these arguments on the implications of globalization as exaggerated and sees the state as politically capable to shape globalization. Daniel Drezner (2001: 78) concludes after a review of empirical results of research on globalization that TNCs are embedded to a higher degree in national political institutions than often claimed and that states can decide on the degree of adjustment to globalization: “globalization is not deterministic”. Robert Wade had already opposed the argument of a de-nationalization of the economy in 1996 and wrote: “reports of the death of the national economy are greatly exaggerated”. Mosley (2000) and Garrett (1998b) acknowledge the pressure by global financial markets on the state to conduct a stability- and world market-orientated policy, but observe autonomy in other areas such as diverging policies with regard to the use of governmental budgets and latitude for different party politics. After the analysis of several case studies, Linda Weiss concludes that globalization has indeed strengthened the relevance of political institutions for socio-economic changes (Weiss 1998, 2003). Summing up, research is controversial as to the form of changes brought by globalization but agrees upon an increasing integration of national economies.

Globalization constitutes a new challenge for the nation state insofar as it exposes national governments to changed costs and benefits for economic policy decisions. These changes stimulate an adjustment to the expectations of global markets in order to retain or attract increasingly mobile resources (Frieden and Rogowski 1996; Garrett 1998a; Schirm 2002a: 33–56; Wolf 2004). With this impact, globalization as the growing share of cross-border activities in the total economic product changes the conditions for governmental as well as private actions. States and companies compete more and on a global scale for comparative advantages and markets due to the increased mobility of capital, technology and production. This does not necessarily imply a weakening of the state. Even if governments lose influence on transnational actors, they are not necessarily weakened with regard to basic tasks of the state such as the provision of suitable conditions for growth and wealth. Obviously states can be affected by global competition in different ways and to different degrees (see above).

With regard to the public interest in economic wealth and welfare, globalization implies changing constraints for governments through a modification of the costs and benefits of specific economic policies. Economic success as a core element of a government’s chances for sustaining its power and for re-election is increasingly dependent on a successful use of mobile resources. Protectionist and interventionist policies seem to reach only suboptimal results in the long run compared to approaches orientated towards the world market. A combination of export-led growth and protectionism, like in China in the 1990s, links interventionism and world market orientation but seems to be viable only temporarily and is subject to considerable pressures as the liberalizations show, which China has been and still is undertaking in the course its membership of the WTO (see Saich 2000). The connection between wealth and world market integration is underlined by the fact that those countries which integrated most into the world economy are also those with the highest level of wealth – the industrialized countries. At the same time, the countries showing a poor performance with regard to wealth are often those with a low degree of openness to world markets. This long-term correlation between the degree of participation in world markets in form of direct investment, financial transactions as well as trade on the one hand and the level of wealth on the other is empirically substantiated in numerous studies on industrialized as well as developing and newly industrializing countries (see e.g. Frankel 2000; Oatley 2006: 366f; Wolf 2004: 143, 161; Dollar and Kray 2001; The Economist 29 September 2001: 10–15). Thus, wealth and growth seem to correlate positively with openness to world markets. Obviously, this connection does not imply that all domestic groups in a given country benefit to the same degree. The internal distribution of wealth and growth is only partially driven by the form of a country’s global integration (see section 5), but instead is predominantly shaped by the national distribution of political power and by socio-economic structures. These can be very asymmetrical, especially in many newly industrializing and developing countries (see Chapter 9).

3 The debate on convergence and divergence

Research has reached a widespread consensus on the competition-enhancing effects of globalization for states and companies. First, companies have to adjust to global competition if they wish to compete on world markets into which their home markets are increasingly integrated. Second, states are also increasingly competing with each other on the world market for locational advantages for investment and production (see Cerny 2000; Garrett 1998a; Krugman and Obstfeld 2003). As globalization eases the cross-border movement of resources, th...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Figures
• Tables
• Contributors
• Preface
• 1 Analytical overview
• 2 The development of the debate
• 3 Fiscal policy and adjustment
• 4 Taxation and cooperation
• 5 Money and power
• 6 Political transnationalization
• 7 Business and governance
• 8 Public–private partnerships
• 9 Political conditions for economic growth
• 10 Regionalism in the world economy
• 11 Transformation and trade liberalization