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John Leslie April 17, 2000 Major changes have transformed the world's economies over the last three decades and everyone knows it. We have become accustomed to describing these changes, in their totality, as "globalization." Unfortunately, "globalization," as a term, contains a great deal of ambiguity, leaving us uncomfortable about what exactly it is meant to communicate. At times, it seems to mean all things to all people. Commentators representing opposing perspectives are likely to invoke "globalization" in support of differing explanations of the same events. By accepting "globalization" as a description of real developments and by tolerating its ambiguities, however, we create enormous incentives for individuals and groups to fill the term with particular values and meanings that conform to their interests. The existence of competing interests attached to different definitions of "globalization" means we must handle this term differently than those whose definitions are less contested. Rather than assuming a single term captures the infinite complexity of worldwide economic changes-or that we can agree on the cause and meaning of those changes-I suggest we consider the term, "globalization," itself as a political instrument, that is wielded by human actors with concrete purposes. We accept that, in taking this anthropological approach, "globalization" may take on different definitions when wielded by different actors. The purpose of assuming this perspective is to identify the values, interests, and notions of cause and effect underlying different usage of the term, "globalization." At least three, mutually exclusive "images" of "globalization" appear in media discussions of economic changes in North America and Europe. Each "image" captures a part of these changes that are taking place, but not the entirety of developments. Accordingly, they emphasizes certain developments, while neglecting others. One image may be more applicable to events in one country or region than it is elsewhere or globally. Finally, each image asserts a certain relationship between economic and politics. These three images of "globalization" are labeled for the purposes of this essay: 1) "the exogenous shock," 2) "the triumph of American capitalism," and 3) "the intertwining of national economic trajectories." The following essay analyzes each of these "images" in terms of how it directs our focus toward particular economic developments and a particular understanding of those changes. "Exogenous Shock" One common perspective portrays "globalization" as the settling of single, "impersonal," global "market" over the economies of the world. Commentators who promote this image focus not only on the rapid increase in cross-border economic transactions over the past two decades, but also on the seeming inability of governments to control this development. Commentators propounding the "exogenous shock" image greet these changes with the utopian optimism of 18th Century liberals. Ironically, the proponents of this image are found in the economically most developed part of the world, while the image of the "exogenous shock" is most applicable to the situation in the developing world. Purveyors of the "exogenous shock" image proclaim the force of human nature, unleashed by the Scottish Enlightenment, is melding humanity into a single global marketplace. Taking their cue from Adam Smith, these commentators attribute contemporary developments to the irrepressible "propensity in human nature…to truck, barter, and exchange one thing for another." Smith also provides them with the motivation for this singular human propensity: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." Material self-interest, increasing returns to the specialization of labor, and scale economies are driving individuals and firms to expand markets beyond the boundaries of national societies. All who stand in the way of this development, including national governments, must succumb to this drive for efficiency. "Globalization" is but the realization of the liberal utopia. Liberal utopia, of course, holds no place for politics. National borders and political power can only interfere with the precise and efficient functioning of "the market." The melding of humanity into a single global market, however, signifies the triumph of "reason" [read: short-term, material rationality] over religion, nationality, ideology, and politics in general. With no need to protect reason and rationality from infidels, so it is argued, the raison d'être of government ceases to exist. It is not surprising that the most vociferous advocates of the "exogenous shock" image of "globalization" reside in the world's most prosperous societies. Precisely those who own large amounts of private wealth have the greatest interest in seeing that they, and no one else--like government--control traffic in material resources. Commentators representing the interests of concentrated private wealth, therefore, are amenable to a perspective that defines government out of existence-at least until such a situation becomes likely and threatens existing property rights. Commentaries that portray "globalization" as an "exogenous shock" often demonstrate their authors' inability to maintain the distinction between analyzing "globalization" and advocating certain policy positions with regard to the world's changing economies. Consider, for example, the logical contradiction that arises when analysis and advocacy are combined in statements such as the following: "Since government intervention is inefficient and, therefore, doomed, any policy other than market liberalization and deregulation must have perverse consequences." Media discussions of the "exogenous shock" variety are replete with such logical contradictions. Although proponents of the "exogenous shock" image reside in the world's wealthiest societies, their analyses are most applicable in developing countries. It is economies these countries that have been most vulnerable to the "impersonal" gyrations of international financial markets. No dark conspiracy orchestrated the 1997 Asian financial crisis. Rather the rational decisions of faceless investment managers within an institutional framework permitting short-term capital, so-called "hot money," to flow quickly into and out of "emerging markets" produced a decidedly "impersonal" and unintentional, market outcome. For the time being, at least, the impersonal, abstract, global (financial) market appears to be a reality capable of producing nasty "exogenous shocks" in several developing countries. "The Triumph of American Capitalism" This image of "globalization" differs strongly from the preceding one by recognizing explicitly the role of politics and conflict in contemporary economic changes. The image of the "triumph of American capitalism" is also quite malleable and can be made to accommodate widely varying political convictions. While commentators working within this perspective recognize common links between political causes and economic effects, they disagree on what values political power should promote. Consequently, these commentators invoke the image of the "triumph of American capitalism" to support radically different policy positions. In the label, "triumph of American capitalism," this image links a particular type of economic organization to the political power of the United States Government. "Globalization" represents the extension of the peculiar organization of American markets outwards, to encompass the world's economies, as a consequence of political decisions made in conformity with a "Washington consensus" to "liberalize" trade and "deregulate" markets. Either in the lead of transnational firms or as their instrument, the American government-assisted by the WTO, IMF, and World Bank-forces the "harmonization" of other nation's economic policies with its own. The role of the U.S. Government is to make the world safe for transnational finance and capitalism, American style. How one feels about this exercise of American power depends on one's geographical as well as ideological location. There are those who greet this development with unqualified approval. The numbers of such supporters has grown number both inside and outside American borders with the relative strength of the U.S. economy. This perspective is closely related to the one underlying the "exogenous shock" image. Its progenitors view the broadest possible extension of "free" markets as the best means to promote material welfare and human freedom. Unlike supporters of the "exogenous shock" image, however, they do not see this development as automatic or inevitable. Rather, only the "rational" direction of American power can overcome parochial interests in "inefficient" policies around the world. From their perspective, American power can and should be used to force the retrograde organization of foreign economies to "slim down" and "tone up." It should be used to expose the rest of the world to mechanisms that have sustained American economic supremacy in the face of all challengers. One finds this perspective most often among political commentators on the right in the United States and among liberals in Europe. Commentators on the political left view the combination of American power and capitalism differently. Analysts on both the European and American Left view this alliance not as a means to promote welfare and freedom, but rather to promote their opposites. In the United States, labor and environmental organizations united to oppose the sacrifice of labor rights and environmental standards to the interests of international capital in the North American Free Trade Agreement in 1994. These two groups met again recently to voice similar concerns vis-à-vis the World Trade Organization in Seattle and the International Monetary Fund and World Bank in Washington. In Europe, defenders of welfare states on both the left and traditional (religious) right see "Americanization" of the world's economies threatening to ignite a global "race to the bottom." Mobile international capital will force governments to dismantle environmental protections and welfare programs as well as compel unions to accept stagnating. All of this will be necessary, so the argument goes, to protect employment. Economics has not trumped politics, but the interests of capital have gained the political upper hand, using state power to promote its values. Attempts to portray globalization as the "triumph of American capitalism" has revived postwar debates about Keynesian economics in all political quarters. The liberal Right, and the organized Left in Europe and the United States all promote an internationalized version of Okun's Law. As long as an international government does not contain the global market, national governments can promote goals other than economic efficiency only by isolating their economies from the superior international division of labor. Political choice remains possible. It is only the national compromises between labor and capital that led to postwar growth and full employment that "globalization" makes unsustainable. The policy constraints envisioned by the "triumph of American capitalism" image of globalization are probably greater in developing countries than in the U.S. or Europe. The international division of labor offers fewer comparative advantages to those societies where technological innovation, capital, and stability are scarce. Developing countries may have little to offer other than cheap labor and valuable natural resources. It seems more than unjust, however, that political debates in the developed world may dictate how even these resources are integrated into world markets. "The intertwining of national economic trajectories" The image of globalization as an "intertwining of national economic trajectories" has emerged in media and policy debates from academic political economy. The popularization of these ideas began only with the end of the cold war. The juxtaposition of "state socialism" and "market capitalism" as competing models of social organization collapsed along with the Soviet Empire, revealing real differences between the "capitalist" economies of the world. To many observers these variations were not a matter of the quantity of government intervention in markets, but qualitative differences in market organization market outcomes. Different capitalist countries did not employ "more state" and "less market," but constructed markets differently along many axes to generate different economic and political outcomes. These observations led to a re-examination not of the efficacy of postwar Keynesian policy prescriptions, but to a re-evaluation of the very assumptions about the behavior of individuals on which classical and neo-classical economics rest. At the most basic level the "national economic trajectories" image reconsiders the meaning of the word "rational." Classical and neo-classical economists assume individuals have a clear and unchanging understanding of their interests. Subsequently, individuals-and the economists who build models of their behavior-know their preferences and how they will behave in given circumstances. These same economists also assume individuals have a good deal of reliable information about all the options the world presents them. Given a clear understanding of their interests and options, individuals choose "rationally" the course of action that best serves their purposes. Contemporary political economists regard the interests of individuals, and the information available to them, much differently. Information is neither ubiquitous nor cheap. Individuals expend time and resources acquiring it. They often pass up courses of action they might prefer because they cannot or do not know of their existence. Consequently, individuals are not only revise and update interests and preferences as they recognize new possibilities, but also seek mechanisms to eliminate certain outcomes in exchanges, like theft or fraud. The economic implications of this perspective are that individuals, groups, and societies create laws, organizations, and customs, to which they give their consent in order to overcome uncertainties that might prevent them from realizing mutually advantageous exchanges. Although political economists debate how and when such rules and organizations form, as well as how long they last, they agree to call them "institutions." From the perspective of contemporary political economists, markets are inseparable from the institutions in which they are embedded. Institutions in the form of laws, producer, employer, and professional organizations, unions, universities, firms, customs, norms, etc. permeate societies, framing all economic transactions. More interestingly, these institutions, in order to be economically useful, must be relatively durable. Institutions that change easily hardly reduce uncertainties that transactions will have the outcome that individuals expect. It is because individuals trust institutions to prevent the worst from happening when they exchange things of value that markets function. On this theoretical foundation contemporary political economists construct a very different image of "globalization." If institutions are durable, then they must have been constructed in the past. Before the advent of this "global" era, the world was divided into national states that bounded national economies. Indeed the creation of market economies and industrialization took place, largely, within the confines of national boundaries. As these processes took place not only at different times but also in very different ways in different countries, it stands to reason that the institutions permeating their societies also look very different. "Globalization," therefore, is a process by which governments remove the policies that insulate peculiarly organized economies from each other to link national markets. This process, of course, exposes underlying institutional differences and may lead to "friction" between them. This image of "intertwining of national economic trajectories" presents globalization neither as inevitable nor as necessitating a choice between economic efficiency and other policy goals. Governments choose to remove the barriers that insulate their economies and societies. The countries of the European Union engage in an unceasing series of negotiations not only about how they will trade, but also how to govern health, legal, labor, and environmental issues as well as the movement of people and ideas. The U.S., Canada, and Mexico made similar but less far-reaching choices in NAFTA. The various negotiating rounds of the General Agreement on Tariffs and Trade [GATT] and the WTO also contributed to exposing differences in the organization of capitalist economies. Power differentials between national governments undeniably play a role in such negotiations, but 2000 is not 1945. The United States government is unable to dictate the organization of world markets now as it did at The Bretton Woods Conference in 1944. From this perspective of "globalization" the growth of the European and Japanese economies vis-à-vis the United States, and the relative success of European and Japanese versions of capitalism vis-à-vis their American counterpart, indicate governments retain considerable choice about the direction of economic policy. No simple dichotomy distinguishes between "efficient," "unregulated" markets and "inefficient," "regulated" markets. All markets are embedded in peculiar institutions and these institutions provide comparative advantages and disadvantages for particular types of economic activities. In fact, institutions are likely to constrain the choices of policy-makers as much or more than the international mobility of capital. Policy-makers are compelled constantly to identify and promote new activities for which the institutions of their societies provide a comparative advantage in world markets. In the rich countries of the industrialized world the accumulation of human and material capital, innovative capacity, and stability are likely to make such opportunities numerous. The image of globalization as the "intertwining of national economic trajectories," however, also seems more suitable to some regions of the world than to others. In the two centuries since industrialization began in Western Europe and the United States and in the century-and-half since it began it Japan these societies have enjoyed levels of wealth capable of sustaining not only growing consumption, but also long term social investments in education, the arts, and political stability. These accumulated resources provide these societies substantial and expanding advantages in terms of innovation and production for world markets. These assets would seem to ensure the survival of their societies and cultures as discernible "trajectories" in a "globalized" world. In a world increasingly intertwined by commercial exchange, however, it is less clear that societies and cultures with fewer opportunities to "add value" will survive. A final observation about the capacity of this image of "intertwining trajectories of national economies" to explain the tenor of current discussions of globalization is in order. An air of breathless confusion distinguishes contemporary discussions of "globalization" from debates about "internationalization" in the 1960's and "international interdependence" in the 1970's. These past disruptions in the international system have stemmed from easily identifiable sources, such as American firms' overwhelming productivity in the postwar era or the Nixon Administration's unilateral abrogation of the Bretton Woods monetary system in 1971. Discussions of "globalization" are characterized by a pre-occupation with rapid, indeterminate, flux and change. Proponents of the "intertwining trajectories" image explain this focus on rapid change and uncertainty as a consequence of the fact that innovation and change come now, more than in the past, from multiple geographic regions. The contemporary world no longer has a single, discernible center of economic gravity like London at the end of the 19th Century or New York in the 1960s. Conclusion A single term, "globalization," cannot possibly capture the complexity of transformations in the worlds' economies. It would be naïve to assume, therefore, that all who use this term share a common understanding of its meaning. "Globalization" is not an empty term. It has power because we accept that it is connected to changes we feel but cannot easily explain. This situation breeds fierce debate about "globalization" and its meaning. The triumph of one explanation of globalization over others recommends or excludes certain policy choices. Consequently, individuals and groups have huge stakes in ensuring that definitions of "globalization" conforming to their interests are the ones that inform government action. Because the meaning of "globalization" is contested in this way, we must be careful to treat the term not as one that unites those who use it in understanding, but as a political instrument wielded in defense of particular interests. This essay attempts to transcend unreflective invocation of "globalization" to understand the meanings people give it in defense of different interests. It distinguishes three "images" of globalization common in media debates in Europe and the United States according to the values and interest they promote as well as the relationship between politics and economics they assert. The point of this exercise is to demonstrate the continued relevance of a truism in this global age. People do not choose policies according to what they believe is the best explanation of events. Rather, they choose the explanations of events that best suits their policy preferences. Besides this trite observation, this essay offers but one other conclusion. The term "globalization" implies a unification and homogenization of the world. There is a sense that technological change and increasing commercial interdependence have superceded political and geographical boundaries. Examination of each of the "images" presented above, however, demonstrates exactly the opposite. The changes sweeping across the globe are not melding humanity into a global village of mutual interests. Rather people in different places are experiencing these transformations very differently. Geography continues to be very much in evidence. In this sense, the advent of the global era has changed things very little. Contemporary economic transformations have produced vastly different experiences for those in places where resources and choices are concentrated and for those where they are not. So far, the voices of the world's poor have been conspicuously absent in discussions of "globalization." If we listen closely the message of Pat Buchanan, Jörg Haider, and Prime Minister Mahathir of Malaysia s that we should not expect this situation to continue indefinitely. |