Globalization

Port of Singapore, October 2008 (Tan)

What is globalization? Existence of one global economy (or the process of bringing about one global economy).  Affects domestic politics, international relations, international economics, culture, sci/tech . . . .  (Think of an example of how globalization affects each of these. Can you think of other areas affected by globalization?)

Examples:
How globalization affects domestic politics:  Because economies intertwined, some sectors win, others lose.  Dying textile industry in the US cries out for protection against invasion of Chinese products.

How globalization affects international relations:  Because things move across borders so quickly, have to work with other nations to combat threat of terrorism.

How globalization affects international economics:  Markets for goods are international. Crises can be easily internationalized.  Supply chains are international.  Firms can shop for the cheapest location for their operations. 

How globalization affects culture:  Tastes, fashions, foods, movies.

How globalization affects science and technology:  500 million cellphones in China. Implications for politics and economics. Fear of Jasmine Revolution (2011)

How globalization affects other areas: ????

How is globalization coming about? Through technology (particularly communications), transport, and POLICY (free trade/Reagan-Thatcher).

What are some ways we can see globalization?

• Internationalization of finance ("electronic herd")
• Internationalization of production (textiles, autos, offshoring)
• Democratization of technology

To get benefits of global economy, have to put on policy "golden straitjacket" based on Washington Consensus.  To critics, have to become capitalist, consumerist, McDonalds-heavy, unhealthy, office-bound, secular, cut off from nature, polluting, exploiting the poor for the cheapest wage, benefit the global elite.

Washington Consensus (US Economic Ideas)

A.  Deregulation

Get the state out of the way of the private sector (quotas, tariffs, rules; improve competition; let businesses decide where to invest)

Deregulate capital markets (let investors decide where the put their money instead of the state picking winners)

Deregulate the local economy to foster competition (reduce subsidies).

B.  Privatization

Private sector most important engine of economic growth (not industrial policy)

Privatize state-owned industries and utilities (improve competition, get better services)

Privatize pensions (more efficient, get state out of the activity, keep budget down)

C.  Smooth macro-economy

Maintain a low rate of inflation and price stability

D.  Small, good government (Government best which governs least)

Limit size of government (shrink the bureaucracy, so not in competition with private)

Limit size of government budget (return initiative to the private sector, keep in balance)

Reduce corruption (skews public will, wastes resources).

Promote transparency in decision making (so capital will be used better).

E. Promotion of free trade

Lower tariffs (force domestic firms to be competitive or get out of business and use capital more productively).

Allow foreign investment (some put restrictions up).

Eliminate domestic monopolies.

Encourage exports.

Keep a convertible currency.

Open business, financial markets to foreign investment.

Controversies with globalization:

• Does everyone have to be a member? Can you opt out of globalization? Are the big powers (particularly the US) forcing it down the throats of developing nations? What happens if you opt out?
• If you open the door to globalization, do you have to let everything in? Consumerism? McDonalds? MTV? Scantily clad women in ads?
• Getting into Washington Consensus shape can require pain for citizens, especially the poor (balanced budget, fewer subsidies).
• Overall economic welfare improved by participating but not all benefit equally and some lose big time (becoming a source of opposition or backlash against globalization).
• Is globalization inevitable? Is a debate moot?

Two country cases:

INDIA "poster child" of globalization.

Development of IT industry, taking advantage of offshoring/outsourcing, Bangalore, Chennai, entrepreneurship. India was ready to take advantage of globalization (engineers, software, IITs, aspiring entrepreneurs).

Has made many and dramatic changes to participate in globalization, economic reform since 1991.  Strong protectionist tradition (ISI), high taxes, large state sector, few foreign goods (troubled relationship with Coke and IBM), slow growth (Hindu Rate of Growth), license raj.

But, globalization has critics even here. Hindu nationalists who oppose spreading of Valentine's Day. Gandhians who oppose relentless industrialization.

VENEZUELA originally adopted globalization values, along with much of Latin America. But, trend back to the left in Latin America: Venezuela, Ecuador, Bolivia.  Jorge Castaneda (Foreign Affairs article): "The left stressed social improvements over macroeconomic orthodoxy, egalitarian distribution of wealth over its creation, sovereignty over international cooperation, democracy over governmental effectiveness."

Venezuela backlash with poor/losers in globalization supporting socialism, supporting rise of Hugo Chavez (elected 1999).  Opposition to Free Trade Area of the Americas as in service of US interests to penetrate Latin America (not in LA countries' interests to open, become more efficient producers, find comparative advantages, have access to US market . .. ). One scholar describes Chavez as "an eclectic blend of populism, nationalism, militarism, and, most recently, socialism."  Has been able to buy supporters domestically due to oil wealth (will drop in oil price embolden domestic challengers?); this gives Venezuela more globalization options than many other countries have.

Practice Essay Questions for the Final Exam

A) Write a memo to President Barack Obama on how the US should deal with China or India (CHINA OR INDIA, not both).  The best essays will be framed in terms of one of the theoretical approaches to international relations.  They will also bring in the countries' domestic politics and how that impacts US relations with that country.  Material from classes on each country, democracy, democratization, development, and terrorism might be useful to consider in your answer.

B)  The European Union may in the near future take its place as a new superpower alongside the US. Given your experience simulating the European Union and what you have learned about the countries of Europe and the EU as an organization, do you believe this is likely?  How should the US respond to encourage or forestall this occurrence?  Consider the approaches to international relations in your answer.

Updated: August 25, 2011.

Author: tanp@uncw.edu