Globalisation is one of the most debated topics of our times and is said to transform the economic and social spheres around the globe in a drastic manner. However, globalisation is a highly complex concept and not easily graspable. There are two extreme points of view regarding the phenomenon of globalisation. One, termed ‘Hyperglobalist’ claims that the world is becoming inevitably borderless and that truly global companies are the primary actors in this globalised world; states are only required to provide basic infrastructure and public goods needed by the companies (See Ohmae: “The Borderless World”). A second extreme point of view, referred to as ‘Sceptical’, maintains that states are still the main actors in the global political economy and that the worldwide economic integration of today is not unprecedented in history (See Hirst and Thompson: “Globalization in Question”).
It will be the task of this work to thoroughly analyse the phenomenon of globalisation and to uncover its underlying causes and its consequences for states, companies and societies around the world. One of the essential questions to answer will be, whether globalisation is a ‘natural’ phenomenon connected to advancements in technology or a project driven by certain actors, namely the ‘Lockean heartland’ (primarily the United States and Great Britain). The introduction and analysis of the Lockean state/society complex will be vital in this respect.
In the first chapter, earlier forms of globalisation in history will be examined and embryonic forces that enabled future globalisation will be exposed. Following is a chapter about the changes in the global political economy since the end of the Second World War; various decisions and processes will be analysed that shaped the world in which we life today to a large extent.
Subsequently in the third chapter, the process of globalisation itself will be examined on both theoretical and practical levels in order to understand what brought it about and what will be its consequences. This is preceded by the addressing of the ‘agent-structure debate’ and its role in understanding globalisation. Finally the phenomenon of globalisation will be linked with the state/society complex of the ‘Lockean heartland’, which will provide new insights into globalisation, its causes and possibly even some about its future.
Contents
Introduction
I. Globalisation in history
II. Changes in the global political economy since the end of WWII
III. Understanding globalisation:
1. The agent-structure debate
2. Underlying forces that enabled globalisation
3. Effects of globalisation
4. Globalisation and the ‘Lockean heartland’
Conclusion
Bibliography
Introduction
Globalisation is one of the most debated topics of our times and is said to transform the economic and social spheres around the globe in a drastic manner. However, globalisation is a highly complex concept and not easily graspable. There are two extreme points of view regarding the phenomenon of globalisation. One, termed ‘hyperglobalist’ claims that the world is becoming inevitably borderless and that truly global companies are the primary actors in this globalised world; states are only required to provide basic infrastructure and public goods needed by the companies.[1] A second extreme point of view, referred to as ‘sceptical’, maintains that states are still the main actors in the global political economy and that the worldwide economic integration of today is not unprecedented in history.[2]
It will be the task of this work to thoroughly analyse the phenomenon of globalisation and to uncover its underlying causes and its consequences for states, companies and societies around the world. One of the essential questions to answer will be, whether globalisation is a ‘natural’ phenomenon connected to advancements in technology or a project driven by certain actors, namely the ‘Lockean heartland’. The introduction and analysis of this state/society complex will be vital in this respect.
In the first chapter, earlier forms of globalisation in history will be examined and embryonic forces that enabled future globalisation will be exposed. Following is a chapter about the changes in the global political economy since the end of the Second World War; in that chapter various decisions and processes will be analysed that shaped the world in which we life today to a large extent.
Subsequently in the third chapter, the process of globalisation itself will be examined on both theoretical and empirical levels in order to understand what brought it about and what will be its consequences, preceded by the addressment of the ‘agent-structure debate’ and its role in understanding globalisation. Finally the phenomenon of globalisation will be linked with the state/society complex of the ‘Lockean heartland’, which will provide insights into globalisation, its causes and possibly even some about its future.
I. Globalisation in history
Signs of economic globalisation appeared as early as in the middle-ages, when countries – primarily in Europe[3] – began to be linked through trade flows mainly carried out by merchants. However, as this happened primarily on a regional basis, the term internationalisation is more appropriate. The scale of these trade flows was relatively small and limited to a few products or (raw) materials, but this should increase in the time to come.[4]
By the end of the 14th century trade flows had expanded and at that time the first companies started to transcend borders; it is established that there were already as many as 150 Italian banking corporations operating multinationally at that time.[5] The Dutch and British East India Companies operating in vast geographical areas, which emerged in the course of the 17th century, were precursors of the Multinational Corporation that should arise in 20th century.[6] However, far more fundamental was the emergence of embryonic capitalism, which began with the capitalist agrarian revolution in England roughly in the 16th century with the establishment of the ‘triad’ of landlord, capitalist tenant and wage labourer; this paved the way for markets to play an ever more important role in economic and social life.[7]
In the 19th century the industrial revolution facilitated international trade and movements of people; geographical distances began to shrank due to new tech-nologies such as the railroad, telegraphy and later by the introduction of the telephone and the radio. Especially these two technologies provided the first means of true global communications, enabling later episodes of globalisation. From the 1850s onward the first global markets were established, such as the London Metal Exchange and others. At the end of the 1800s the first international brand name packaged goods like Coca-Cola appeared, which was marketed in North America and big parts of Europe only twenty years after its introduction.[8] However, it is to note that these first signs of globalisation were mostly outside the experience of all but a small circle of people, largely located in Europe and North America.
International trade expanded rapidly between the middle of the 19th century and the beginning of the First World War in 1914. On the eve of the Great War the international economy was in fact in many ways more open than at any time since, including financial flows; the very high figure of international trade as a share of world GDP in that period was only reached again in the 1980s![9] Even in 1995 countries such as Japan, the Netherlands and the UK were less open economically than in 1913.[10]
The two devastating World Wars that took place in the first half of the 20th century grinded the – still embryonic – process of economic globalisation to a halt, as the belligerents pursued policies of autarchy. Only in the decades after the Second World War this trend gained momentum again. The first harbinger for an anew movement towards international openness and economic integration was the Atlantic Charter, proclaimed in 1941 by US president Roosevelt and the British Prime Minister Churchill, which called for a world more open to trade, e.g. by the demand for the freedom of the seas.[11]
II. Changes in the global political economy since the end of WWII
After the Second World War the victorious allies under the auspices of the United States and Great Britain set out to create a framework for a liberal economic order for the Western world by the establishing of the Bretton Woods institutions – the International Monetary Fund (IMF) and the World Bank – and the General Agreement on Tariffs and Trade (GATT). The essential element of the Bretton Woods system was that the US dollar was backed by gold at a certain rate and all the currencies of the participating countries were pegged to the dollar at fixed exchange rates. This should facilitate international financial stability, which was seen as a prerequisite for growth of the devastated national economies, as well as for the expansion of international trade. Capital controls should provide protection from speculative financial flows; in short, the responsibilty to organise and regulate global finance was clearly exercised by the public realm and not by the private one.[12]
The first episode towards increased liberalisation of the international financial markets appeared with the emergence of the so-called ‘Eurodollar market’ in London in the late 1950s; this first ‘offshore’ market however was not a ‘spontaneous’ development as often claimed, but was created and developed by market actors and the Bank of England in a non-regulatory vacuum in the City of London.[13]
The 1960s witnessed important technological innovations such as the first airliner with a jet engine (the Boeing 707) and the launch of the first telecommunications satellite, which both lead to a diminished importance of geographical distances. However, more important was the beginning rise of the Multinational Corporation (MNC), which was facilitated by the appearance of the ‘Euromarkets’ in London. Possible explanations for this new phenomenon range from the product-cycle theory by Vernon, which claims that companies are likely to internationalise, because the monopoly rent experienced at the launch of a new product in the home market is gradually being undercut by competitors, which in turn leads the company to search for new markets where is little or no competition, to the eclectic theory by Dunning, which lays more emphasis on possible locational and organisational advantages to be gained from internationalisation – such as cheaper labour or raw materials.[14]
The dominant mode of production in that time was Fordism. Fordism was characterised by mass production of standardised consumer goods (e.g. cars) mostly built with the help of the assembly line. Mass production of nearly identical goods generated economies of scale. A compromise between capital and labour enabled quasi full-employment and relatively high wages. In the 1970s first signs of crisis of Fordism emerged with the oil-price shocks and generally falling economic growth rates in the Western countries. One of the main characteristics of this crisis were falling rates of profit, as shown by Robert Brenner, which until the present times have lead companies to seek to lower their costs by using cheaper labour and to find new markets abroad.[15] Fordism turned slowly into ‘Post-Fordism’, which was characterised by a more flexible production, innovation, economies of scope and more rapidly changing patterns of consumption by the citizens, which increasingly defined themselves as consumers only – the culture-ideology of consumerism appeared.[16] The class compromise between capital and labour that had characterised Fordism slowly broke down and the ‘(...) process of globalisation has allowed it [capital] to break free of nation-state constraints.’[17]
The fall of Bretton Woods in 1971 marked the first step in the liberation of embryonic transnational capital from the tight regulation by the states that had characterised the period since the Second World War. President Nixon cut the link between gold and the dollar mainly because the value of dollars held outside the United States of America exceeded the value of gold stocks held by the American central bank. As it was theoretically possible for foreign governments to call for a conversion of their dollars into gold, a collapse of the system was easy to envision – a structural flaw of the system that was already predicted in the 1950s.[18] Another reason was that the United States increasingly recognised that their interests were better suited by a more liberal and unregulated international financial system, because if market actors were given the freedom to invest globally, their investment choices would secure the dollar’s central international role and attract foreign funds to the US.[19]
The trend towards deregulation and liberalisation of financial markets – started in the US in the 70s and then pursued in tandem by the Reagan Administration in the US and the government of Margaret Thatcher in the UK during the 1980s – lead to free-floating exchange rates and the abolishment of capital controls in many countries. This resulted in the loss of control by the governments over their respective national currencies, ‘(...) that power passed to currency traders, portfolio investors and transnational bankers – precisely the representatives of transnational financial capital.’[20] The far going reforms of Reagan and Thatcher were a manifestation of the rise of neo-liberalism, propagated by e.g. Milton Friedman and Friedrich Hayek. Neo-liberalism called for far-reaching deregulation, fiscal conservatism and monetarism. Its most prominent idea was that of a self-regulating market – in the style of the ‘invisible hand’ depicted by Adam Smith three centuries earlier – which effectively leads to a retreat of the state and a benefit to capital.[21]
[...]
[1] Cf. Ohmae, Kenichi: The Borderless World: Power and Strategy in the Interlinked Economy, London: Collins, 1990
[2] Cf. Hirst, Paul and Thompson, Grahame: Globalization in Question: the International Economy and the Possibilities of Governance, Cambridge: Polity Press, 1996
[3] This essay focuses mainly on the Western World, other highly developed parts of the world, e.g. China are largely omitted, due to their relative isolation to these trends for long periods of time. In fact Sub-Saharan Africa remained the ‘switched off’ region in the world for the bigger part of the time covered in this work. (Cf. Castells, Manuel: The Information Age : Economy, Society and Culture. Volume 3: End of millennium, Oxford: Blackwell, 1998, p.93)
[4] Cf. Hirst and Thompson: Globalization in Question, p.19
[5] Cf. Dunning, John: The Globalization of Business : The Challenge of the 1990s, London: Routledge, 1993, p.97
[6] Cf. Hoogvelt, Ankie: Globalisation and the Postcolonial World : The New Political Economy of Development, Basingstoke: Macmillan, 1997, p.68
[7] Cf. Meiksins Wood, Ellen: Empire of Capital, Verso, London 2003, p.87
[8] Cf. Scholte, Jan Aart: Globalization : A Critical Introduction, Basingstoke: Macmillan, 2000, p.67
[9] Cf. Hoogvelt: Globalisation and the Postcolonial World, p.69
[10] Cf. Hirst and Thompson: Globalization in Question, p.27
[11] Cf. The Atlantic Charter <http://usinfo.state.gov/usa/infousa/facts/democrac/53.htm> (last accessed 9.5.2004)
[12] Cf. Helleiner, Eric: Explaining the Globalization of Financial Markets: Bringing the States Back In, in Review of International Political Economy, 2:2, 1995, p.318
[13] Cf. Burn, Gary: The state, the City and the Euromarkets, in Review of International Political Economy 6:2, 1999, p.252
[14] Cf. Strange, Susan: Mad Money, Manchester: Manchester University Press,1998, p.11
[15] Cf. Brenner, Robert: The Boom and the Bubble : The US in the World Economy, London: Verso, 2002, p.7
[16] cf. Jessop, Bob: Towards a Schumpeterian Workfare State? Preliminary Remarks on Post-Fordist Political Economy, in Studies in Political Economy 40 (Spring 1993), p.18
[17] Robinson, William: Capitalist Globalisation and the Transnationalisation of the State, in: Rupert, Mark and Smith, Hazel (eds.): Historical Materialism and Globalization, London: Routledge, 2002, p.219
[18] Cf. Strange, Susan: ‘From Bretton Woods to the Casino Economy’, in: Corbridge, Stuart; Thrift, Nigel and Martin, Ron (eds.): ‘Money, Power and Space’, Oxford: Blackwell, 1994, p.56
[19] Cf. Gowan, Peter: ‘The Global Gamble: Washington’s Faustian Bid for World Dominance’, London 1998, p.74
[20] Robinson.: Capitalist Globalisation and the Transnationalisation of the State, p.222
[21] Cf. Robinson: Capitalist Globalisation and the Transnationalisation of the State, p.220
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