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note638 - The Global Economy and World Politics Professor...

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Unformatted text preview: The Global Economy and World Politics Professor Edward Weisband Part III: Entrepreneurial Firm Lecture 22: Introduction to Globalization and the Efficiencies of the Transnational Entrepreneurial Firm International Public Goods from the US Hegemon The international public goods provided according to US hegemonic leadership Revolved around rules to ensure predictability and normative expectations institutionalized by means of international governmental organizations (IGOs) The International Monetary Fund These IGOs included the Bretton Woods Institutions Created a pool of resources based on national quotas and lending in credit tranches to central banks to assist in balance of payment The International Bank for Reconstruction and Development/ The World Bank Created a pool of financial resources available to devastated or developing economies to facilitate infrastructural growth and competitiveness The General Agreement on Tariffs and Trade (GATT)/WTO Created a forum to pursue multilateral trade negotiations and to ensure openness in international markets International Monetary Fund US hegemonic leadership helped to establish a fixed exchange rate system in which the dollar was pegged to gold International financial intermediation was not the promise of the US Central Bank or "the Fed" (unlike the Bank of England or the Old Lady of Threadneedle Street) The institution responsible for assisting central banks to maintain balance of payments equilibrium was the IMF The IMF continues to function today How does it operate? The key to the IMF process revolves around `quotas, SDRs, facilities, credit tranches, and conditionality See link: http://en.wikipedia.org/wiki/International_Monetary_Fund IMF Governing Structure Voting power is based on GDP and the amount assessed according to national "quota", which converts into SDRs, and thus voting rights The Demise of US Hegemonic Leadership The Bretton Woods system of financial intermediation did not include a mechanism that would permit the dollar to become devalued relative to the Deutschemark and the Yen The US hegemon had paid the cost of its own demise The result was the Nixon Shocks on August 15, 1971 The dollar was taken "off the peg" and would "float" against gold and other national currencies Automatic convertibility of the dollar to gold was closed This closed the "gold window" by eliminating the dollar peg to gold Thus the US hegemonic role came to an end with the demise of the fixed rate system A new era of financial intermediation and pluralism would begin Countering Risk and The Fundamental Importance of Multilateral Coordination With the end of US hegemony based on a fixed exchange rate system We entered an era of economic pluralism That required a new level of political and institutional coordination To avoid the kinds of economic nationalism That accelerated the dynamics of the Great Depression and Beggar Thy Neighbor policies How then does this era of global economic governance function in the absence of a single hegemonic state? This question becomes central to an interpretation of the contemporary era In which coordination of global economic activity Is a consequence of the combined policies and actions Of groups of states or national economies This reinforces the importance of multilateral forms of coordination Hegemony Without A Hegemon We live today in an era of hegemony without a hegemon This refers to a system of economic coordination Based on the economic predominance of several major national economies (the G8/G20: the United States, Great Britain, France, Germany, Italy, Japan, Russia, and Canada) and their collective political willingness To coordinate their policies relative to financial intermediation in ways that permit political stability and the openness of international markets And to use a "dirty float" to allow the basket of currencies and gold to float but only within certain limitations ("bands and snakes") First Cut We live in a world often defined in terms of globalization Introduction to Globalization and Transnational Forms of Production Globalization represents the third "ization" process examined in terms of economic governance within international political economy Globalization means many things to many people It differs from liberalization and regionalization in three major ways: It represents economic activity at the level of transnational scapes and thus `cuts across' national borders and national markets It represents a form of production organized by a globalized entrepreneurial firm or the TBE (transnational business enterprise) that is "the firm of many firms" Globalization is organized in the form of a transnational division of labor in which specialization takes the form of networks and networking Networks as a Theory of Efficiency Networks represent a theory of efficiency: WHY? The answer is that many small firms provide value for the TBE requiring a new kind of economic governance or coordination These are often referred to as value chains organized by major producers or major purchasers The history of the firm that we will now review culminates in the contemporary period of globalization in which specialization and interdependence have become transnational and coordinated by TBEs or `firms of many firms' As before, the question of risk arises: how do TBEs that organize transnational value chains prevent or impede risk? The answer is through outsourcing or subcontracting Globalization is thus a dynamic that has led to the transnational network structure of value chains operating across national economies in the efficiency standards ...
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