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intb - 10 Introduction the former globalization represents...

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Unformatted text preview: 10 Introduction the former, globalization represents a decisive configuration of social, economic, political, and cultural changes which consequently has trans- formed key institutions and practices of the modern world (Scholte, 2000a). Although there is immense variation among these scholars with some emphasizing economic variables while others stress cultural ones, and no agreement exists on either the date at which this transformation occurred or its impact on state policies, these writers have reached the conclusion that the term globalization captures the key features of the contemporary age. On the other hand, a disparate group of analysts insist that the political, cultural, social and economic changes described by globalization theorists either do not amount to new developments in the international system, or are merely aspects of quantitative rather than qualitative change (Hirst and Thompson, 1996). This book is not about globalization although it is possible to interpret the historical developments portrayed here in that light. The book enters the globalization debate through a number of its concerns. One of the central issues of contention in the controversy over globalization is that of historical evidence. In delineating the scope, nature, depth and breadth of change in the global economy this book contributes to this debate. Moreover, in so far as globalization is a process of historical change rather than a specific condi- tion, the evidence here contributes to an assessment of this process. Secondly, in charting the evolution of the modern state the book confronts a central issue in the globalization debate. We reveal the historical develop- ment of the modern state, and consequently challenge arguments that present cssentialized portraits of the state. In this book we reserve the term ‘global political economy’ to describe the environment from the last quarter of the 20th century until today. Prior to this we speak of the world economy or international political economy. We use the short form ‘IPE’ to indicate the field of study surrounding the inter- action of economic and political phenomena acrbss state borders. The term ‘international political economy’ is also used when referring to inter-state developments. Chapter I We; Understanding the Global Political Economy During 1996 and into 1997 a small number of investors and currency traders began to have doubts about whether Thailand’s economy would be able to continue its record of remarkable growth. Fearing a reduction in economic prosperity and profit, some of these investors began to withdraw their money and investments. The outflow of money forced the Thai central bank to devalue its currency, the Baht. This began a process which was later called the 1997 Asian financial crisis. By the time the crisis had run its course several Asian countries experienced economic depression, the government of Indonesia was overthrown, countries previously labelled economic miracles (for example, South Korea) were forced to seek loans from the International Monetary Fund (IMF) and the viability of the international financial system was called into question. Although the 1997 Asian financial crisis was clearly a significant devel- opment in the global political economy it was not immediately apparent what caused the events, what were its most significant aspects or what lessons might be drawn from the crisis to prevent a similar event from occur- ring. Indeed, a number of different stories can be told about the crisis (see Table 1.1). One story, which we‘ll call the liberal story, would locate the causes of the crisis primarily in the financial policies followed by Asian states (McLeod and Garnaut, 1998). This view suggests that resources were directed to inefficient uses because of corrupt business practices and political influence over financial institutions. The term ‘crony capitalism’ was devel- oped to capture this inappropriate model of political economy. The lesson to be drawn from the crisis is that financial markets will eventually punish economic activity which violates or ignores liberal economic principles. The solution is for developing countries to have more transparent financial prac- tices and follow a more liberal economic model. A second story would stress the significance of state power in creating and exploiting the crisis (Weiss, 1999). In this view the problem arose because developing countries liberalized their economies prematurely and allowed large amounts of money to flow into and out of their countries too quickly. This undermined the East Asian model of political economy and caused a crisis. This approach would stress how the US used the Asian crisis as an opportunity to force some states to restructure along lines that benefited 11 00000 0_ mm: “0 000050.030 0f. .0: 003000 0103 05 00500000: 0000; 00 00000 E 00:00.0 00 00:50: 0 0410000 00... 00: 03 0.00: 020 :— 68: 00000: EB 00:3 “0:008 00 00:0 00:03 0103 0:0 0:80 -0000: 00 09.00000 00 E 500.0 00: 00 .200:— 0090 000 0.0000 002:. 0000.5 00:0:GE 00 00:00m00 00.00 000000.. .305 00 0000000 03000000: .2000: 0_ 0000.603 00;. 03:2. 000000 00030 000000.000 0003000 003 we 0000200.: 05 00:00:.— 00 00 .5300» 0_E00000 0350 00 000_ 0.003 E0000 50000000 mo 00.: :53 020000 00 030 00 00 00—: 0.003 >05 615008 00m 0000:0000 E 00000000E 000 03000 0E0m 00000.50 *0 50:5» 0 00“ E05 00: 000 00000.0 00 500:; 0 00: E $01030 0005 000 03000000 .000200 130% 050 E 00000< .wcfitouf 00:93 E 0m0w00 000 00 x000 : 026 03:21 0:.— 00 300.0 003:0: 000000 b0>m .0000.“ 0030.500 00“. 0000000 00:50.: 00 00:00 00.0 00 000: 0a 000 >000 ”0000.00 wEEo00: 000 0000000 00 000—5 00 000 00000 00.0 00 0.0.03 05 000% 2000:0000 00020 00 000: 00 000 00—0 «003000 003.802: 000:.— 0:0 00 00000000 .0000 0.50 00 0153300.. 30:0 000 00:00:00.": 0000000 000 >050 “00000.50 ‘0 50:3 0 00“ 000: 000 00:02:. 00096 00000::0 0003000 0:0 00000 0020020200 0002:0000 00:3 000 0000000E_ 0000.. 000 00000 00.53 0EE00000 E0: 00 03.80.: 00.050 0000.5: .0000.“ 0300300000 813 00 0: 03000 00 000 0:03 0:0 00 00:00 00—90 00 00000 :— 4300.0 03 00000::E E 00303 000 00300000 0.:0 >001 £0.33 0.. ~33 0:0 :5 .00.: 00 000. 3:00.. 00 000000.200 00 £9.05 0.8 00; 0 00.0mEuowE h.0 0000a 0.3 000mm— .0x0030Ead x0000020x0 h.0 3000000000E 0 £76 ”0: CU qufinm 09000000 Eugen 302005005 :0 00300000000 0050000000 0.000 000 00 00000000 0% 30:05 000000 0003 :00: 0;... 0000030 03000—0030 @0008 :02? 0030.8 00:00 0.0 000 A200 t0n0m 000 605.00% 9.030% 09:25 00005 000—0000 us: 00:20 000E800; 00:0 “0 0—003 000 0000000 0.0 wE000_0000 3 023 0:0 00E0 0000 .050 00: 0—0: 05 >5: 80:50 000030 0—: 00 :00 000000 0.; 5000000 000 0500 00000000005 E 0200000000 000 005000 00““ 0.000003 000 00:00:00 .2200 x04 05 “‘0 00020000000 030000000 00;. 00 900008 E szofi we 0.00:00 0005 ‘0 30_>00>0 00 0030.5 0? .FEHEuxEEXumE 0:0 £00293: .0030m 0030500200200: 00000000 I 00200090000 00 0Ew_0uuam 900000000 0000 0003000 05000 0 h.0 000 0:0 00 000000000040 0000.0 0_ m... 5000000 38500 _000m000._00:_ 0:040 mac—Est 000—305 000 0009—0 00..— 005 Ban—00 0% 00:00.50 03 0000000 0:0 “.0 :00 005 0:0 0— 0—000 05 E 00000000000 00 EB 0000 an: 00 0000000000 50. 0:0 .00 3030020 00 .005 000000 05 0003000 000030 0.22. 0000002070 90009000 swsohfi 0000000005 000 0000:. -00_0>00 00:20 000:. .00005 0an 00000020 .3050 E 000E000 0a 000 E05 05d,» 2+.— u—uF—u andH—mp—OEO—v mmmmhu _wmu:d:u Cumm< “0:qu O—QF—fiuno *0th fizz—x . my Etczcum 30.53% 302.0 .50 Mfihaagfifizs .05.! : 0.3m r .1 L.‘ .0245"- .. .04. . ..-<.-¢u»:g.ras&'u . “42.0.0: ..... 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HGQECHO>D m: . 0.0005. 0 00‘ 00020000 000 . . 0 0 “0.00.0.5 0002.:— m3 0.0 0.00 0.0 00 0000» 00.03 20000.3 P800 0 .M ”H000 . 0000.000. 1000.000 .005 9.000% 00 0000000 >000 000.: 0:0 0. . . . . . 0 0.05 00000000 0000 wEE—Eus: 0:000 0.00.80 00 on“ 0000 00.80 “uh—0H0 0.6.5 . . . 50%;: 50:0: 00 00 E000 0 . . 0. 0 E00 0:800— 05. :33 . . 0E 00. wEEmE00== 0.0 000000 00 0:00:00 00 000 m3: 0:. 00 00>00_0E 00mm05< 00000.3 00 030E000 00080 033.. $00.0 0:0 wEEQ 00000:.”— 00/ < I .9:0=00m 30.050L 0330 n— 14 Global Political Economy constructed around a debate between three contending schools of thought, paradigms or approaches. Some commentators refer to contending para- digms, others to different schools of thought and yet others to competing approaches but it does not really matter for our purposes whether they are seen as paradigms, schools of thought or approaches. The central point is that three main contending perspectives have been used to explain develop- ments in the global political economy. Although analysts distinguish between these three approaches there is a wide variety of thought within each approach and much work in [PE draws on more than one of them. In addition, there are a number of approaches outside these three, such as envi- ronmentalism, feminism, and post-structuralism which contribute to the study of IPE. These will be introduced later in the text. Before addressing the current state of theory, however, we will next introduce the key propositions of the three perspectives and highlight the major differences between them. The economic nationalist perspective One school of thought brings together analysts who focus on the role of the state and the importance of power in shaping outcomes in the international political economy. These theories stress the importance of the interest of the nation or the state in understanding activity in international relations. This grouping is variously termed mercantilist, neomercantilist, Statist, state- based theory, power politics or economic nationalist. We use the term economic nationalism to refer to this perspecrive because at the centre of such analyses is the protection of the national unit. The underlying economic argumentation may alter, for example, but the objective of economic inter- course remains the same. The origin of this school of thought can be traced back to the emergence and expansion of the nation-state in Europe in the 15th century. Mercantilism was a doctrine of political economy that governed the actions of many states until the liberal revolution in Britain in the mid-19th century. Mercantilists believed that there was only a limited amount of wealth in the world and that each state must secure its interests by blocking the economic interests of other states. This is known as a zero-sum game. One state’s gain is another state‘s loss. From the 15th until the 19th Centuries EurOpean states strove to establish overseas empires that would be as self-sufficient as possible. Trade between neighbouring colonies of rival empires was discouraged. Two famous advocates of mercantilist theory were Alexander Hamilton (1791/1991) and Fredrick List (1885/1991). Alexander Hamilton was a founding father of the United States. Writing in the 17905 he urged Americans to protect their manufacturers from foreign competition so that they could industrialize and increase their power. Almost a hundred years later, Fredrick List argued that Germany should industrialize behind trade r l domestic and international domains. Economic polic bUIld a more powerful state. Understanding the Global Political Economy 15 a barriers so that it could catch up to the economic might of Great Britain He believed that only the economically strong advocated free-trade olici ‘ because others would lose out in the ensuing competition. P LS One central question for students of the contemporary global eeonom relates to the persistence of mercantilist thought. It could be assumed that ’1: economic perspective based upon unrivalled state power is of limited rele- vance In a world characterized by globalization. While this may be correct contemporary economic nationalist thought should not be dismissed as some atavtstic throwback to an earlier era. It reflects acknowledgement that states remain at the centre of power within the lob l political economy, and on the other, that there is an intimate conngctioan between power and wealth. Economic nationalist thinking whether it is termed neomercantilism or statism remains important in both analysis and practice in the contemporary global economy. For example states m1 proteCt strategic industries against foreign rivals or attempt to export m i Y than they import for long periods of time. Japan has been accused of bei mercantihst state because in comparison to other advanced industrial countries, its economy IS relatively closed. on the one hand, an ore mg a ized , . . . . . Rey actors. Economic nationalist or mercantihst theories view the state as the main actor in the global political economy. A major assumption of economic nationalists is the primacy of the political over other aspects of socral life. Statist writers begin from a focus on the group (the state or nation) rather than the individual. Economic nationalist thought begins from two malor assumptions. The first is that the inter-state system is anarchical and that it IS therefore the duty of each state to protect its own interests At the core of the various historical versions of economic nationalism is the belief that an economic community persists and acts for the good of all its members. The second assumption concerns the primacy 0 real life. As the state is the central instrument through whi their goals it follows that the state remains the pre-e fthe state in polit- ch people can fulfil minent actor in the y should be used to From this perspective the state is prior to the market and market relations are shaped by political power. Economic nationalist thought is both descri - tive and predictive. Descriptively economic nationalists maintain thapt production, consumption, exchange, and investment are all governed b political power. Markets are not ‘natural’; they can only exist within a social context. for mercantilisrs political needs and purposes are seen lar el as being achieved through the form of the state. It remains at the core ogsoiial life. But economic nationalists move beyond description and also provide pglicy advrce. 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