SO408 AP Comparative Government & Politics You have now been exposed to three different sources that attempt to explain globalization. Since this is a course in Comparative Government after all, your groups (group of 3) task will be to compare and contrast (what was similar & what was different) the three sources in terms of A. the definition of globalization B. the causes of globalization C. the political dimensions of globalization D. the economic dimensions of globalization Globalization is the process of expanding and intensifying linkages between states, societies, and economies. Entire societies are now directly connected to global affairs. Globalization makes domestic issues more subject to international influence and makes local events more influential around the world, posing two challenges to the study of comparative politics as it blurs the line between domestic and international politics. A process that results in a growing inter-connectedness of the world leads to increasing interdependence of economies, political systems, and societies on a global scale results in countries becoming more sensitive to the decisions or actions of others and more vulnerable to the effects of others choices and actions. Presentation: Economic Geography Technology Costs of communication and transportation down Containerization Just-in-time manufacturing Internet, computers, cell phones Government policies Shift to monetarism and neoliberal economic policies that started around 1980 Deregulation, privatization, open borders Reduced the role of government in regulating economic transactions Creation of WTO lowered tariffs on imports/exports Government policies Removal of government controls on exchange rates allowed $ to travel around the world seeking the best return at the lowest risk ($1.5 trillion/day) Impact of IMF and World Bank policies on developing economies in response to various financial/debt crises (see above) SAPs structural adjustment policies Goal is to help country pay off debt and get economy growing This usually takes the form of extreme free-market strategies, such as deregulating banking sectors, removing trade barriers, privatizing natural resources and government industries, devaluing currencies, strictly adhering to balanced budgets, changing national law to make an environment more conducive to foreign investment, and building up export economies. Globalization is a causal process Impacts the degree of globalism Globalism is a condition or effect of the process The existence of a network of connections that span more than one region of the world Can be measured and described thin vs. thick How would you try to measure the extent of globalism that exists? (Think-Pair-Share) Dimensions of globalism Economic: long distance flows of goods, services and capital and the information and perceptions that accompany market exchanges Amount of trade (% of GDP), FDI (foreign direct investment), Political: embassies, memberships in international organizations, participation in UN security missions, treaties, Social: personal contacts, information flows, proximity, Movements of ideas, information, images and of people, who carry ideas and information Dimensions of globalism Political engagement Personal contact Technological connectivity Environmental Long distance transport of material in the atmosphere or oceans or of biological substances such as pathogens or genetic materials that affect human health and well being Military Long distance networks in which force and the threat or promise of force are deployed index.org/static/pdf/rankings_2015.pdf New technology Centrality of information made possible by instant communication Increasing trend toward standardization of economic and social products Growing cross-nation integration Mutual vulnerability stemming from greater interdependence Globalization is associated with three nonstate or superstate entities: 1) multinational corporations (MNCsfirms that produce and market goods in more than one country); 2) nongovernmental organizations (NGOsnational and international groups, apart from any state, that focus on specific policy goals); and 3)intergovernmental organizations (IGOsgroups like the United Nations and the European Union that are created by states to focus on certain policies). International organizations may be part of an international regime, defined as the fundamental rules and norms of politics, a set of institutions that empower and constrain states and governments. They link states and shape their relationship to each other, usually with relation to some specific issue (such as greenhouse gases or trade). Concerning sovereignty, some people argue that states may give up sovereignty in favor of integration under international organizations. These organizations, they argue, will be able more effectively to tackle critical global issues and politics, and they predict that violent conflict will decline. Others argue that globalization will lead to fragmentation, as globalization is fostering the emergence of such violent international actors and movements as globalized crime and terrorism. Concerning democracy, some argue that IGOs and NGOs increasingly act as international watchdogs, and that in the long term, global politics will become more transparent and responsive. Others argue that globalization will lead to a weakening of democratic institutions, as international actors are not directly elected and so lack the direct public accountability so necessary to republican governance. IGOs and NGOs may suffer from a democratic deficit, an idea first raised with regard to the EU. Basic Economics for Comp Gov Command economy An economic system in which most prices, property, and production are directly controlled by the state Market economy An economic system in which individuals and firms freely exchange goods and services Capitalism The combination of a market economy with private property rights Requires the state to provide security, protect property & contract rights, and provide a stable medium of exchange (money supply) Behaviors are driven by incentives, both positive and negative (invisible hand) Mixed economy An economic system in which decisions about how resources should be used are made partly by the private sector and partly by the government, or the public sector Governments intervene and regulate capitalist economies externalities Public goods safety nets Almost all economies in the world today are variations of this type Liberal Market Economies (LMEs) Consumer capitalism Rely heavily on market relationships to govern economic activity Minimal role for government Government focuses on ensuring that market relationships function properly USA & UK Coordinated Market Economies (CMEs) Producer capitalism Firms, banks, financiers, unions and government consciously coordinate their actions through interlocking ownership and participation In the political system, this is called a democratic neo-corporatist interest group system Germany & Japan When many people think about globalization, economics is what typically comes to mind. Scholars tend to point to several specific institutions and regimes as vital components of economic globalization: the Bretton Woods System, globalized trade, and global communication. Also called the Washington Consensus Rolling back the states control over the market Privatization, deregulation, trade & financial liberalization (Neo-liberal Economics) Vital components Globalization of trade & finance FDI (foreign direct investment) China owns over $1 trillion in US Treasury bonds MNCs (?) GEs profits in 2010 = $14 billion (> Haitis GDP) No US taxes paid since the profits were earned overseas People In 2010 nearly one-quarter of a billion people moved across international borders The Bretton Woods System is a postwar economic regime created to expand economic relations and promote trade liberalization. Three important institutions emerged from the Bretton Woods System: the International Monetary Fund (IMF), the World Bank, the General Agreements on Tariffs and Trade (GATT), later replaced by the World Trade Organization (WTO). While trade has always had a strong international component, globalized trade has become increasingly extensive and intensive, tying markets, producers, and labor together in a way that had not existed previously. Examples of this trend has been the increase in foreign direct investment (the purchase of assets in a country by a foreign firm) and increased immigration resulting from globalized labor. Optimists argue that economic globalization leads to greater prosperity, as wealth is diffused more effectively through open markets for goods, labor, and capital, increasing standards of living worldwide. Jobs created; people moved out of poverty world- wide (definition: extreme poverty = $1.25/day) Walmart effect Economic development is amplified by expanded global communication, which has broken down many of the traditional barriers to trade. Perhaps the best-known example of this intersection among globalized labor, technology, and markets is offshore outsourcing, the process by which a firm moves its work to a secondary business in order to lower costs and/or increase production. Critics say that globalization hurts workers as this increased trade, foreign investment, and offshore outsourcing leads firms and countries to engage in a race to the bottom, driving down wages, weakening regulations, and undermining sources of economic stability. Many workers left behind or left out Jib Jab Big Box Mart Critics also fear the weakening of state capacity and autonomy, as globalized businesses are increasingly able to avoid government taxation, oversight and public accountability, replacing state power with a small cartel of powerful corporations that lack any national or democratic control. Also creates increased dependence on other countries for critical resources Founded in 1944 one of the worlds largest sources of development assistance. bringing a mix of finance and ideas to improve living standards and eliminate the worst forms of poverty. Owned by more than 184 member countries helps each developing country onto a path of stable, sustainable, and equitable growth. The World Bank President is by tradition a national of the largest shareholder, The United States In summary The World Bank borrows money (issues bonds) and gets contributions. It then loans that $ to countries for educational, economic, and industrial projects. Works through the International Bank for Reconstruction and Development (IBRD) It also provides experts and expert advice to the borrowers. World Bank policies force impoverished countries to prioritize debt repayment over human need, divert resources from health, education, and clean water. the Bank makes it easier for companies to fire workers and to change their labor laws to weaken the collective power of workers. The World Bank raises most of its funds by issuing bonds [sold to] pension funds, labor unions, churches, municipalities, and universities Those bond buyers, in rich countries, are the recipients of profits earned from the poorest countries. (World Bank Bonds Boycott) an international organization of 184 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of development; and to provide temporary assistance to countries to ease balance of payments adjustments. the central institution of the international monetary system the system of international payments and exchange rates among national currencies It aims to prevent crises in the system by encouraging countries to adopt sound economic policies; it is also a fund that can be tapped by members needing temporary financing to address balance of payments problems. It is the lender of last resort Structural Adjustment Programs (SAPs) Economic policies which countries must follow in order to qualify for new World Bank and IMF loans and help them make debt repayments on older debts owed to commercial banks, governments, and the World Bank. Conditionality requirement that countries meet certain conditions to be eligible to receive international assistance or to join certain international clubs (like EU or WTO) Describe the main features of each of the 4 paths to economic growth: ISI, EOI, neo- liberalism & state capitalism What are SAPs? Why are they disliked? 6. Political economy involves the study of the relationship between states and markets. (a) Define economic liberalization. (b) Describe the actions governments take in pursuing a policy of economic liberalization regarding TWO of the following: Subsidies Tariffs Ownership of companies and firms Foreign direct investment (c) Identify one international organization that promotes economic liberalization. (d) Explain one reason for pursuing economic liberalization. (e) Explain one reason for resisting economic liberalization. #1 ISI (Import Substitution Industrialization) Based on mercantilism (state-controls economy) State plays a strong role in the economy Protective Tariffs or non-tariff barriers are used to restrict imports & protect new industries State actively promotes domestic production of products that it used to import A policy that stated that a developing country should protect its new industries by placing restrictions on international trade, thus allowing its new industries to grow until they were strong enough to compete on the international market. Governments took on the role of business owner, creating wholly or partly government-owned industries that supplied the domestic market with key goods. (para-statals) Relatively successful at first. Brazil, Mexico and Turkey saw very rapid economic growth throughout the 1950s and 60s. But, Protecting industry from competition in the long run resulted in inefficient industries that could not compete on the international market. These industries were hard to change vested interests of managers and employees caused resistance These industries couldnt compete with enough exports to balance imports. Countries had to borrow and often werent able to re-pay debt crises IMF & World Bank to the rescue at a price. SAPs Based on mercantilism State plays a strong role in the economy Tariffs or non-tariff barriers are used to protect domestic industries Economic production is focused on industries that have a niche in the international market. Export goods and services Exploit natural resources or less-expensive labor Seeks to integrate into the global economy Weakness? Dependent on world economic & market conditions Like rentier states Sensitive to currency fluctuations Exchange rates AKA: Economic Liberalization (Capitalist, Free Market) State involvement is reduced as the economy is opened up Foreign investment is encouraged (FDI) Often forced on countries through SAPs (structural adjustment programs) when ISI or EOP fail. Common principles and features of SAPS Export-led growth Eliminate/reduce trade barriers (tariffs, quotas, paperwork, etc.) Privatization and liberalization Sell off government-owned industries Reduction of government subsidies Deregulation Relies on efficiency of the free market to promote growth SAPs Require Balanced budgets Cuts in public services Cuts in government programs Threaten the sovereignty of national economies because an outside organization is dictating a nations economic policy. Late 19 th century pro-business policies of Porfirio Diaz (EOI) Modernizing authoritarian FDI created vast wealth for the upper classes; the poor were left behind After the revolution PRI party dominated 20 th century Mexico Supported the broad working class Nationalized oil industry, re-distributed land & practiced ISI PEMEX was used a the states piggy bank Deficit spending the norm Suffered through a series of debt crises 1976, 1982, 1994 (peso devaluation, presidential candidate assassinated, Zapatista rebels) Rescued by US and IMF (SAPs) Moved toward neo-liberalism Joined the GATT (the predecessor of WTO) and NAFTA NAFTA Shift toward exports (from 25% to 80+% of GDP) Created regional differences Northern Mexico prospered FDI: maquiladores + cheaper labor to export to US Southern Mexico fell behind Farmers hurt by imported agricultural products from US Increased dependency on US When the US sneezes, Mexico catches a cold. 2008 recession hit hard GDP down 6.5% in 2009 Mexico has the highest number of free- market trade agreements of any country in the world Mexicos GINI index is one of the highest in the world Neo-liberalism has made inequality worse Made worse by poor governance, crime & corruption Today Mexico is one of the top 20 economies in the world Tries to blend the powers of the state with the powers of capitalism. It depends on government to pick winners and promote economic growth. national champions But it also uses capitalist tools such as listing state-owned companies (enterprises) (SOEs) on the stock market and embracing globalization. State capitalism includes some of the worlds most powerful companies. The 13 biggest oil firms are all state backed Worlds largest national gas company Russias Gazprom China Mobile 600 million customers Saudi Basic Industries Corporation chemicals Sberbank Russia Europes 3 rd largest bank Dubai Ports 3 rd largest ports operator Emirates airline (Dubai) growing 20%/yr Also manage huge pools of capital Sovereign wealth funds (SWFs) The Chinese state is the biggest shareholder in the countrys 150 biggest companies and guides and goads thousands more. It shapes the overall market by managing its currency, directing money to favored industries and working closely with Chinese companies abroad. How can the state regulate the companies that it also runs? How can it stop itself from throwing good money after bad? How can it remain innovative when innovation requires the freedom to experiment? SOEs crowd out small entrepreneurial firms They gobble up capital and amass bad debts Highly susceptible to corruption SOEs are great sources of jobs and patronage vested interests anyone? TI Corruption index for China? Russia? Often reinforces corruption because it increases the size and range of prizes for the victors. Ruling elites not only have the government apparatus but also huge corporate resources at the disposal Exacerbates the income gaps within societies Gives rise to oligarchs and princelings The WTO is a powerful international (supranational) organization, responsible for regulating international trade, settling trade disputes, and designing trade policies through meetings of its member countries. Works to lower trade barriers by negotiating multilateral trade agreements involving Tariffs; trade & environment; anti-dumping and subsidies; investment; competition policy; trade facilitation; transparency in government procurement; intellectual property.. Why U.S. Taxpayers Are Paying Brazilian Cotton Growers. Protest groups Labor unions, environmentalists, socialists, anarchists Key issues for the protestors Income inequality, labor protection and environmental standards Youtube 37-62 How much power should government have? Active government control of major economic sectors What values should government pursue? Economic equality Community Supports private property and markets but believes that the state has a strong role to play in regulating the economy and providing benefits to the public Very common in Europe Seeks to balance freedom and equality Corresponds to Liberalism in America 11/14/ Dimensions of globalization Processes that facilitate transnational or global interaction From Appardurai, Modernity at Large 11/14/ Global flows of money Huge volume: $1.5 trillion daily Goods: $15 trillion annually 11/14/ Capabilities to distribute and disseminate Information Images 11/14/ Spread of technology Interpenetration of borders 11/14/ Ease of movement Volume of movement Tourists, immigrants, refugees, exiles, guest workers 11/14/ 11/14/ Global spread of Ideas Values Social movements Ideology Jib Jab Big Box Mart How the Greek Financial Crisis Hurts the US (NPR) A brief review of late 20 th century history 1945 WWII ends 1948 Cold War (USSR vs. USA) 1. a world divided 2 superpowers US & allies (NATO, SEATO, etc.) USSR & allies (Warsaw Pact) Berlin Wall non-aligned nations 2. Competition Nuclear weapons (MAD) Space Olympics A brief review of late 20 th century history 1948 Cold War (USSR vs. USA) 3. proxy wars Korea Vietnam Afghanistan Dozens of Marxist guerilla movements 1989 USSR collapse Berlin Wall down Making sense of this Brave New World Three possible futures (as seen in 1990s) Fukuyama The triumph of democratic capitalism The End of History and the Last Man modernization theory see chapter 1 in ONeil History (in a Marxist interpretation) ends not with pure communism, but with universal democratic-capitalism Huntingtons Clash of Civilizations (1993) Conflict would occur between civilizations based on cultural differences, not ideological ones. Conflicts shift from a bi-polar to a multi-polar world Barbers Jihad vs. McWorld (1992) 11/14/ Benjamin R. Barber, 1996 In considering the evidence for globalization, some scholars have argued that connections between regions around the world have existed for centuries, and that globalization is not a new phenomenon. They argue that we should not assume that what is occurring now is so unique that the past has nothing to teach us. Other scholars say that globalizations effect is exaggerated. Sovereignty remains a critical demand for people around the world, and many countries have tightened controls to combat terrorism, stifle dissent, or respond to economic crisis. Even in the area of economics, international trade is only a quarter of the global GDP, and countries still exhibit a strong home bias in economic activity. Finally, with regard to societal changes, globalization has failed to produce cultural homogeneity. While people may feel that globalization is inevitable, it can be limited or reversed by such things as economic crisis or public opposition. BenefitsProblems Economies of countries that engage well with the international economy have consistently grown much faster than those countries that try to protect themselves. Average + 2 % There are social and economic costs to globalization. Trade liberalization rewards competitive industries and penalizes uncompetitive ones, and it requires participating countries to undertake economic restructuring and reform. Long term benefits Intermediate term dislocation costs High social costs for those people affected BenefitsProblems Countries that have had faster economic growth have been able to improve living standards and reduce poverty. Cheaper imports also make a wider range of products accessible to more people and, through competition, can help promote efficiency and productivity. Wal-Mart effect Some countries have been unable to take advantage of globalization and their standards of living are dropping further behind the richest countries. The gap in incomes between the richest and poorest countries has grown. BenefitsProblems Improved wealth due to the economic gains of globalization has led to improved access to health care and clean water which, in turn, has increased life expectancy. >85% of the worlds population can expect to live to at least 60. Doubled in last 100 years Increased trade and travel have facilitated the spread of human, animal and plant diseases, like HIV/AIDS, SARs, and Ebola, across borders. Globalization has also enabled the introduction of cigarettes and tobacco to developing countries, with major adverse health and financial costs associated with that. BenefitsProblems Increased global income and reduced investment barriers have led to an increase in FDI which has accelerated growth in many countries. The increasing interdependence of countries in a globalized world makes them more vulnerable to economic problems like the Asian financial crisis in the late 1990s or the Great Recession of Video The New Rules of the Game from The Commanding Heights BenefitsProblems Improved environmental awareness and accountability has contributed to positive environmental outcomes by encouraging the use of more efficient, less polluting technologies and facilitating economies imports of renewal substitutes for use in place of scarce domestic natural resources. The environment has been harmed as agricultural, forest, mining and fishing industries exploit inadequate environmental codes and corrupt behavior in developing countries. Reduced biodiversity Negative impact on subsistence farmers BenefitsProblems Increasing interdependence and global institutions like WTO and World Bank, that manage the settlement of government-to- government disputes, have enabled international and economic tensions to be resolved on a rules based approach, rather than which country has the greatest economic or political power. It has bolstered peace as countries are unlikely to enter conflict with trading partners and poverty reduction helps reduce the breeding ground for terrorism. The major economic powers have a major influence in the institutions of globalization, like the WTO, and this can work against the interests of the developing world. BenefitsProblems Improved technology has dramatically reduced costs and prices changing the way the world communicates, learns, does business and treats illnesses. Trade liberalization and technological improvements change the economy of a country, destroying traditional agricultural communities and allowing cheap imports of manufactured goods. Can lead to unemployment if people do not have the new skills needed for the new sectors of the economy. BenefitsProblems Modern communications and the global spread of information have contributed to the toppling of undemocratic regimes and a growth in liberal democracies around the world. Modern communications have spread an awareness of the differences between countries, and increased the demand for migration to richer countries. Richer countries have tighten barriers against migrant workers Xenophobic fears have increased. Migrants are subject to exploitation by smugglers. BenefitsProblems The voluntary adoption of workplace standards for their internationalized production facilities in developing countries has made an important contribution to respect for international labor standards. MNCs pay 1.8 to 2 times the average wage in NICs and LDCs. Globalized competition can force a race to the bottom in wage rates and labor standards. It can also foster a brain drain of skilled workers, where highly educated and qualified professionals migrate to developed countries to benefit from the higher wages and greater career and lifestyle prospects. Creates severe skilled labor shortages in developing countries. BenefitsProblems International migration has led to greater recognition of diversity and respect for cultural identities which is improving democracy and access to human rights. Indigenous and national culture and languages can be eroded by the modern globalized culture. The McWorld effect The pushback is called the Jihad effect. How does this review of globalizations benefits and problems compare to the list of the Costs and Benefits of Globalization from the Briefing Paper? (pp 33-35) Any significant differences with the Benefits and problems? Video anti-globalization (10 min) Nations, states, countries Non-state actors MNCs (multi-national corporations) NGOs (non-governmental organizations) citizens groups Internal operate in one country only International International organizations UN, IMF, WTO, World Courts, NATO, 11/14/ Three schools Hyperglobalists Skeptics Transformationalists 11/14/ U.S. dominance over Media Finance Ideas U.S. also an importer 11/14/ Interactive process: globalization and localization affect each other Neologisms fragmegration chaord glocalization Jihad vs. McWorld 11/14/ Paradoxes Localizing in aims Glocalization Fragmegration Global in scope, organization Five scapes facilitate anti-globalization 11/14/ Political dissolution Yugoslavia Slovenia, Bosnia, Serbia, Macedonia Czechoslovakia Indonesia (East Timor) Moldova (Transnistria) Globalization (strongly affected by the rise of new technologies like cell phones and the Internet) can connect people though common interests instead of through national or ethnic identities. Some argue that globalization will continue to build global multiculturalism and international cosmopolitanism, leading to fewer tensions between people. They also argue that new technologies will lead to a globalized democracy by promoting civil- society groups. People will be connected through common interests instead of through national or ethnic identities. Think music: globalized hip hop or punk and the British invasion before that Critics of globalized democratization say that globalization overwhelms people with information and choices, leading to alienation and a public backlash. They argue that societal globalization is more likely to lead to nationalism and fundamentalism as people retreat into old identities rather than create new ones. 9/11 as a reaction to globalization?! Others say that globalization leads to identities that lack mass appeal being thrown away or driven out, replaced by what satisfies the widest public and the lowest common denominator. Local cultures, languages and traditions lost to McWorld