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6 Lecture International Economic System: Globalization and Its Implications I. What is globalization? Globalization: a process (or set of process) that embodies a transformation in the spatial organization of social relations and transactions, generating transcontinental or interregional flows and networks of activity, interaction, and power. "Picture yourself as a poor African farmer, scraping a living on a hectare or two. While you may not have heard of globalization, you are affected by it: you sell cotton, which will be woven into a shirt by a worker in Mauritius in a style designed by an Italian, to be worn by some well off Parisian." (Stiglitz) Question: Are globalization and internationalization the same? (check Abdelal and Segal) Internationalization: exchanges across borders (more prosaic) Globalization: involving also the transformation ideological process of breaking down barrriers Forms of Globalization 1. Economic globalization (i.e. marketization): the free worldwide flow of capital, goods, and labor market: A place where goods are offered for sale; the joining of buyers and sellers, producers and consumers and savers and investors (e.g., bazaar). Washington Consensus1 as the Apostle's Creed of globalization: (Washington Consensus): the orthodox, free-market economic policies promoted by the iMF and the World Bank which assumes that markets are efficient, states are unnecessary; that the poor and the rich have no contradicting interests, that things turn out for the best when left alone; Background: -- The decline of command economies and welfare state2 (term used since WWII to refer to the acceptance by democratic governments of the responsibility for the economic and social well-being of all their people) -- Laissez faire: a minimalist, "hands-off" approach, an economic doctrine that opposes governmental regulation of or interference in commerce beyond the minimum necessary for a free-enterprise system to operate according to its own economic laws. --Adam Smith3 and the invisible hand thesis: 1 2 The Orthodox, free-market economic policies promoted by the IMF and the World Bank. A term used since WWII to refer to the acceptance by democratic governments of the responsibility for the economic and social well-being of all their people. It is embodied in programs aimed primarily at the alleviation of the hardships by caused unemployment, disability, and old age and the securing for all, regardless of income, of adequate medical care and other essential services. 3 Adam Smith, the 18th-century Scottish philosopher, is considered the intellectual ancestor of modern economics. 1 Individuals acting in their own self-interest can guide society toward common goals; "It is not from benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest...[Man is] led by an invisible hand to promote an end which was no part his intention..." (Wealth of Nations) Question: Is globalization just an economic trend? 2. Cultural Globalization: the flow of cultural goods; the spread of Americanization. 3. Political globalization: the dominance of the U.S. and its political institutions II. What makes it different today? 1. History: a "centuries-old dynamic," or "a trendy word for an old process." "We have known for at least ten years that globalization is the dominant phenomenon of this century" (Ignacio Ramonet) 2. But this era is different: New markets foreign exchange and capital markets linked globally, operating 24 hours a day, with dealings at a distance in real time New tools Internet links, cellular phones, media networks New actors WTO with authority over national governments, MNCs, NGOs and other groups that transcend national boundaries New rules multilateral agreements on trade, services and intellectual property, backed by strong enforcement mechanisms and more binding for national governments, reducing the scope for national policy. III. Is it irreversible? Compare globalization in its last great era with globalization today: similarities (see Ferguson 2005) and differences (see Abdelal and Segal 2007). Yes: Underlying tendency is for globalization to prevail over localization. "the more pervasive globalizing tendencies become, the less resistant localizing reactions will be to further globalization." (James Rosenau) The previous era of globalization (1870-1914) had once seemed as unstoppable as the current one but ended disastrously; so too, could this one What does Niall Ferguson say about this in "Sinking Globalization"? Five factores that precipitated the collapse of globalization in 1914 Rouge terrorists Imperial over-streach Great power rivalry 2

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