The Globalisation of Trade, Production, and Finance

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Economic  Globalization:  The  Globalization  of  Trade,  Production,  Division  of  Labour,  and  Finance  

 Lecture  Notes  by  Gerry  Strange,  October  2014  

 This   lecture   introduces   the   politics   and   economics   –   or   political   economy   –   of  globalization.     While   globalization   is   a   difficult   idea   to   define   precisely,   it   is   very  widely  used  both  in  the  social  sciences  and  in  everyday  life.    Many  economists  have  no  difficulty  in  thinking  in  terms  of  globalization  because,  for  them,  it  refers  first  and  foremost  to  market  processes,  with  which  they  are  centrally  concerned,  and  markets  have   long   been   regarded   as   a   universal   or   global   factor   in   the  way   human   beings  interact.     Political   scientists   often   find   the   idea   more   troublesome.     Politics   is  concerned  with  power,   including  power  over  market  processes  and  outcomes.      As  such   it   is   concerned  with  how  markets  can  be  controlled,   regulated  or  overridden,  including   through   centralized   decision   making   and   the   power   of   the   state.    Advocates  of  state  power  like  to  think  in  terms  of  national  sovereignty,  the  idea  that  states  can  act  as  they  choose,  exercising  sovereignty  or  autonomy  at  least  within  the  borders  that  define  a  given  state.      The  idea  of  globalization  is  unsettling  for  such  a  way   of   thinking   because   it   challenges   its   key   assumptions   such   as   ‘borders’   and  ‘sovereign  power’  within  them.      Economic   globalization   can   be   understood   in   general   terms   as   the   increased  liberalization  and  openness  of  the  IPE.    It  is  primarily  about  the  overcoming  and  also  more   explicit   removal   of   political   barriers,   associated   with   nation   states,   to   the  movement   of   goods,   services,   finance,   productive   investment   and   people   across  national  borders.        Globalization  is  also  about  the  acceptance  of  common  rules  and  obligations  between  states  designed   to  protect  and  ensure  such   free  movement.    Making   the   IPE  more  open   and   global   creates   greater   connections   and   brings   peoples   from   different  states   and   cultures   together   in   important   ways.     This   creates   both   shared   and  specific  opportunities  and  problems  for  states  and  non-­‐state  economic  actors.        The  desire  to   liberalise   important  dimensions  of   the   IPE  has  a   long  history  and  has  come   from  many  market   agents,   including   firms   and   consumers,   as   well   as  many  states   and   governments,   acting   individually   and/or   cooperatively   through  international   agreements   and   institutions.     Economic   globalization   impacts  differently   on   different   types   of   market   agent   (e.g.   differently   on   firms   and  employees)  as  well  as  differently  on  the  same  type  of  agents  (e.g.  firms  and  workers  in  different  countries).    But  a  key  general  aspect  of  economic  globalization  is  that  it  affects   and   changes   the   relationship   between  market   agents   and   nation   states   as  well  as  between  states  themselves.    In  doing  so,  globalization  impacts  on  the  relative  power   of   market   and   state   agents.       Since   it   involves   a   reconfiguration   of   power  relations,  economic  globalization   is   therefore   implicitly  as  well  as  explicitly  a  set  of  

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political  processes,  supported  by  some  and  opposed  by  others.    As  a  set  of  processes  globalisation  brings  opportunities  and  dangers  and  is  contested.    Economic   globalization   has   a   number   of   key   dimensions.     These   include   the  globalization  of   trade,   production,   and   finance,   and   the   globalization  of   the   global  division   of   labour   (see   O’Brien   and  Williams   2010:   chapters   6,7,8,   9).     These   are  considered   directly   below.       The   lecture   concludes   by   considering   how   political  economists  from  different  perspectives  have  evaluated  globalisation.        Globalized  Trade    Globalization   of   trade   refers   to   the   major   liberalization   and   expansion   of   trade  between  states  that  has  occurred  over  the  past  forty  years.        While  IPE  scholars  argue  about  what  has  caused  international  trade  to  expand  most  agree  that  the  removal  of  political  barriers  to  trade  (i.e.  protectionist  barriers  such  as  tariffs,  quotas,   legal   restrictions   to   trade,  etc)  has  been  an   important   factor.    With  the  removal  of  these  barriers,  trade  in  general  has  become  freer  and  has  expanded  significantly.    As  a  result,  states  have  become,  de  facto,  less   independent  and  more  interdependent   in   the  economic  domain.    This   reinforces   the  globalisation  of   trade  by  making  it  difficult  and  costly  for  individual  states  to  resist  or  reverse.    Removal   of   trade   barriers   has   been   evident   in   the   growing   number   of   political  agreements   between   states   to   create   free   trade   promoting   institutions.     These  include  the  GATT  (1947),  and  the  WTO  (1995).    They  also  include  a  variety  of  regional  institutions     (regionalism),   such   as   the   EU,   NAFTA,   Mercosur,   and   ASEAN,   which  include   free   trade   agreements   (FTA’s)   between   their   members   and   third   parties  (individual  states  and  other  regions).    Regional  trade  agreements  (RTA’s)  have  grown  markedly  since  the  mid  1990s.    There  are  currently  over  230  RTA’s   registered  with  the  WTO  which   include   FTA’s   as   part   of   broader   forms   of   economic   and   political  cooperation  within  regional  groupings.    Within  the  regional  context,  FTA’s  often,  but  not   always,   form   an   initial   part   of   a   move   towards   deeper   forms   of   economic  liberalization   such   as   customs   union   (CU’s)   that   prohibit   member   states   from  imposing   tariff   barriers   on   fellow   members,   while   collectivizing   the   authority   to  impose  trade  barriers  on  third  parties.        The   WTO,   an   international   and   intergovernmental   organization,   seeks   to  institutionalize/normalize   free   trade  among   its  members   (currently  157   states  plus  the   EU)   by   establishing   and   enforcing   agreed   trade   and   trade   related   liberalizing  rules   among   its   members.   (Since   the   WTO   is   principally   an   intergovernmental   as  opposed  to  supranational  organization,  it  lacks  ultimate  authority  over  its  members  in   the  sense   that,   formally  speaking,  members  can  unilaterally  choose  to   leave  the  organization).    The  core  rules  are  multilateral  while  others  are  plurilateral  in  the  first  instance.     The  WTO   also   uses   the   principle   of   ‘special   and   differential   treatment’  (S&D)   as   first   established   under   the   GATT   in   1965,   to   provide   some   differential  treatment   under   the   rules   for   developing   countries.       In   general,   these   special  provisions   are   designed   both   to   encourage   developing   countries   to   participate   in  

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international  free  trade  agreements  while  acknowledging  that  specific  development  needs   and   development   disadvantages   might   otherwise   act   as   barriers   to   full  participation   in   free   and   competitive   international   trade.       In   principle   the  enforcement   of   some   WTO   rules   on   some   of   its   members   may   be   temporarily  suspended   in   circumstances   of   national   emergency   to   protect   vital   industries.    Likewise  free  trade  rules  which  demonstrably  interfere  with  national  security  can,  in  principle,  be  overridden  by  a  member  state,  although  this  may  be  subject  to  a  trade  dispute  and  therefore  the  WTO’s  binding  trades  dispute  settlement  procedures.        Some   of   the  WTO’s  most   important   rules   incorporate   the  GATT   and   are   aimed   at  tariff   liberalization   through   adherence   among   its   members   to   the  Most   Favoured  Nation   (MFN)   principle.     This   principle   has   its   historical   roots   in   earlier   moves   to  liberalise   trade   between   countries   notably,   the   Cobden-­‐Chevalier   Treaty   (1860)  between  Britain  and  France  (which  sought  the  reciprocal  removal  of  tariffs  between  the   two   countries)   and   the   US   Reciprocal   Trade   Agreements   Act   (1934)   which  overturned   the   protectionist   Smoot-­‐Hawley   Act   (1930)   by   giving   the   US   President  the  power  to  lower  (or  raise)  tariffs  by  up  to  50%  on  exiting  levels  through  bilateral  negotiation   (Winham   2011:   141-­‐2).     Such   negotiations   were   based   on   the   MFN  principle  of  non-­‐discrimination,  which  is  now  incorporated  into  WTO  rules.    A  WTO  country   that   seeks   to   impose   (or   lower)   a   tariff   on   the   goods   of   another   WTO  country   has   to   act   within  WTO   agreed   tariff   restrictions   and   limits   and   apply   the  same  tariff  to  all  other  WTO  member  states,  excepting  the  case  of  a  regional  trade  agreement.        More  generally,   the  WTO   is   committed  by   its  articles   to  extending   the  principle  of  free  trade  and  to  the  lowering  of  trade  and  other  protectionist  barriers  to  economic  competition   between   its   members.     Since   its   founding   in   1995,   most   states   have  signed   up   to   WTO   membership   and   in   this   sense   are   committed   to   freeing   up  international   trade.     Likewise,   states   that   have   joined   regional   forms   of   economic  cooperation  or   integration   typically  must   commit   to   free   trade  within   the   regional  grouping.    The   liberalization  of   trade  globally  between   states  builds  on  established   free   trade  practices  within  states.      But  while  the  freeing  up  of   international  trade  has  been  a  general   trend,   it   has   not   advanced   evenly   across   international   economic   sectors.      Most   liberalization   has   occurred   in   the   civilian   manufacturing   sectors   of   the  economy.     In   1947   average   tariffs   on   industrial   sector   manufactured   goods   was  approximately   40%.     Average   tariffs   on   manufactured   goods   have   since   fallen   to  lower  than  4%  (Winham  2011:  (155).    On  the  other  hand,  international  trade  in  the  agricultural  sector  remains  heavily  regulated  by  tariffs  and  other  restrictions  as  did  the  textile  sector  before  the  abolition  of  the  GATT’s  Multi-­‐Fibre  Arrangement  (MFA)  in  2005.    An  initiative  aimed  partly  at  liberalizing  the  agricultural  sector  was  launched  by  the  WTO  at  its  2001  and  2003  Ministerial  meetings  at  Doha  and  Cancun.    But  the  so-­‐called   Doha   round   was   indefinitely   stalled   in   2006   because   of   disagreements  between  developed  and  developing  countries  on  agriculture  and  other  issues.        

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The  liberalization  of  international  trade  has  also  been  uneven  because  some  sectors  have   yet   to   be   fully   incorporated   into   the   jurisdiction   of   free   trade-­‐promoting  bodies.    For  example,  the  oil  trade  (and  energy  sector  more  generally),  critical  to  the  IPE,   is  not  currently  fully  subject  to  WTO  rules  and  tends  to  be  controlled  by  other  international   agreements   and   forms   of   cooperation   such   as   those   between   oil  producers,   notably   the   Organization   of   Petroleum   Exporting   Countries   (OPEC)  formed   in   1960.       The   exclusion   of   energy   from   international   trade   liberalizing  agreements  partly  reflects  the  fact  that  historically  many  of  the  world’s  major  energy  producers  have  not  been  members  of  the  WTO.    This  has  changed  since  Saudi  Arabia  (the   world’s   leading   oil   producer)   joined   the  WTO   in   2005,   while   Russia,   another  major  oil  producer,  became  a  full  member  of  the  WTO  in  late  2012.      These  examples  illustrate  how  trade   liberalization,   starting  with   the   formation  of   the  GATT   in  1947  and   boosted   by   the   creation   of   the   WTO   in   1995,   and   subsequently   the  mushrooming  of   RTA’s   and   inter-­‐RTA’s   remains   an   on-­‐going   process   of   agreement  and  negotiation  between  states.     It   is  by  no  means  a   finished   (or   irreversible)   fact.    Like   other   aspects   of   globalization,   trade   liberalization   is   a   dominant   but   much  contested  process  in  the  IPE.    The  advance  of  trade  liberalization  over  the  past  three  decades  has  come  under  pressure  since  the  onset  of  the  global  financial  crisis  (GFC)  in  2007.    Beyond  tariff  reduction  and  liberalization  the  WTO  promotes  free  trade  by  means  of  a   variety  of   separate  agreements   around  other   state   imposed  barriers   to   free  and  competitive   trade.     For   example   international   trade   in   financial   services   has   been  liberalized   through   the   General   Agreement   on   Trade   in   Services   (GATS).    Transnational  investment  has  been  subject  to  liberalization  through  the  WTO’s  Trade  Related   Investment  Measures   rules   (TRIMS).     TRIMS  are  designed   to   remove  what  may   be   restrictions   on   foreign   investment,   such   as   local   content   agreements.    Government   procurement   is   also   subject   to   competitive   rules,   meaning   that  governments  cannot  discriminate  against  foreign  firms  in  tenders  for  the  provision  of  government   provided   goods   and   services.     The  WTO   has   also   sought   to   liberalise  foreign   investment   through   the   development   of   a   Multilateral   Agreement   on  Investment   (MAI).     This   aims   to   give   foreign   companies   full   freedom   to   make  investments   in   any  WTO   country   without   discrimatory   restrictions   favouring   local  firms  or  peoples.    Trade  Related  Intellectual  Property  Rights  (TRIPS)  are  also  subject  to  WTO  rules.    These  provide  agreed  rules  relating  to  the  property  rights  of  patent  holders.     Finally,   the   WTO   has   sought   to   develop   rules   restricting   state   practices  designed   to   secure   international   trading   advantages   for   their   own   firms,   such   as  price  subsidies  for  exporters,  or  other  forms  of  ‘market  dumping’.    If  a  WTO  member  believes   that   its   own   companies   are   subject   to   ‘unfair   competition’   from   another  WTO  member,  it  can  apply  ‘counteracting  measures’  subject  to  binding  trade  dispute  resolution  by  the  WTO.    Finally,  while  the  globalization  of  trade  has  been  facilitated  by  broad  multilateral  free  trade   promoting   political   agreements   and   institutions,   like   the   WTO,   there   is  controversy  regarding  whether  some  associated  (but  formally   independent)  trends,  especially   the   trend   towards   regionalism,   may   encourage   or   restrict   trade  liberalization   or   perhaps   do   both   simultaneously.     A   key   area   of   controversy   is  

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regionalism.    Regional  agreements  in  the  1990s  tended  to  be  seen  as  consistent  with  global  trade  liberalization  because  they  tended  to  be  committed  to  both  promoting  free   trade   internally   and   externally   by   removing   internal   and   external   political  barriers  to  trade  (so  called  ‘open  regionalism’).      Yet  the  more  recent  development  of  some   regional   projects,   such   as   various   regionalisms   in   Latin   America,   have   had  strongly   ‘developmentalist’   and   concomitantly,   protectionist   dimensions.     For  example,   the   Mercosur   grouping   in   South   America,   resisted   attempts   under   US  leadership  to  extend  the  NAFTA  to  the  wider  Americas.    The  US-­‐led  Free  Trade  Area  of   the  Americas   (FTAA)  project   stalled   in   2005  because  of   unified  opposition   from  more   protectionist   and   development   orientated   interests   around   Mercosur.    Likewise  Mercosur  has  proved  a   ‘stumbling  bloc’   in  relation  to  the  EU’s  attempt  to  negotiate   FTA’s   with   important   Latin   trade   partners,   notably   Brazil.     Brazil,   for   its  part,  can  be  seen  as  torn  between  its   interests   in  freer  trade  with  partners  such  as  the  EU  and  wider   ‘developmental’   and  political   ties  with  other   regional   and  global  partners,  such  as  other  Mercosur  states  as  well  as  China.      Wider  political  concerns  facing   developing   countries   in   particular  may   limit   their   interest   in   some   forms   of  international   free   trade   agreements,   especially   those   perceived   to   be   unduly  dominated  by  powerful  developed  states  and  their  market  agents  within  the  IPE.    Globalized  Production    Globalized  production  has  expanded  rapidly  over  the  past  forty  years.    It  is  especially  associated  with  the  globalized  investment  and  production  activities  of  transnational  corporations   (TNCs).     A   TNC   is   a   firm   or   company   operating   with   and   owning  productive  assets  in  two  or  more  countries.    There  is  some  differentiation  in  the  IPE  literature   around   the  nomencaltura  used   to  describe   a   TNC.     Some  authors  prefer  the   term   multinational   corporations   (MNC’s)   while   others   prefer   the   term   global  corporations.    These  different  definitions  have  emerged  historically  and  often  simply  reflect   the   primary   analytical   concern   of   the   author   particularly   in   describing  ownership  patterns.    For  example  the  term  multinational  has  been  used  to  indicate  that  a  given  company  is  owned  by  agents  from  a  number  of  different  countries.    The  term  transnational,  by  contrast,  usually  refers  to  the  fact  that  the  company  operates  production   across   political   borders.     In   fact   TNC’s   display   different   country  ownership   patterns   while   MNC’s   are   also   companies   organizing   and   owning  production   assets   transnantionally.       Nevertheless   ownership   patterns   remain  sufficiently  concentrated  such  that  it  makes  sense  to  speak  of  TNC’s  with  strong  legal  and   ownership   ties   to   a   specific   country   or   region   of   origin,   for   example,   US,  German,   European   or   Japanese   TNC’s.     This   is   important   because   it   will   have   a  significant   influence   on  where   the   flows   of   income   from   FDI  will   go   and   therefore  how  FDI  impacts  on  different  states  providing  and  hosting  it.    TNC’s  have   grown   in  both   size   and  number.     In   terms  of   size,  many  of   the   largest  TNC’s   are   now   bigger   than   nation   states   in   terms   of   their   command   over  wealth.    Some  of  the  largest  TNC’s  (in  terms  of  value)  have  their  core  business  interests  in  car  production   and   related   industries   and   in   the   resources   and   energy   industries,  especially   oil.     Other   core   industries   for   the   largest   TNC’s   are   electronics,  communications,   IT  and   related   services,   and  chemicals.     Finance   is   another  major  

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industry   for  TNC’s.    Some   ‘conglomerate’  TNC’s   (for  example,  Proctor  and  Gamble)  have   core   interests   across   a   variety   of   goods   and   services   sectors   (O’Brien   and  Williams  2010:  189).    Other  large  TNCs  operate  primarily  in  the  retailing  sector  (e.g.    Wal   Mart,   Tesco,   and   Carrefour).     These   companies   may   not   engage   directly   in  production  but  source  globally  for  the  goods  they  sell.        Of   the   biggest   50   economic   entities   (principally   nation   states   and   corporations)   in  2009   seven  were   TNC’s.      However,   of   the   100  biggest   economic   entities   44  were  TNC’s  (Keys  and  Malnight  2010).    To  put  this  in  perspective,  Wal-­‐Mart,  currently  the  biggest  retailing  TNC  according  to  the  Fortune  Magazine  ‘Top  500’  listing,  had  annual  sales  revenues  of  US$421  billion   in  2011.    This  approximates  to  over  a  third  of   the  total   GDP   of   Sub-­‐Saharan   Africa   and   is   also   roughly   half   Australian   GDP   (US$992  billion   in   2009).     In   2009   Wal-­‐Mart   reportedly   earned   revenues   exceeding   the  respective  GDP’s  of  174  countries.    However,  Wal-­‐Mart   is   just  one  of  a  number  of  very  large  TNC’s  commanding  huge  revenues  (and  profits).    The  top  ten  companies  in  the  Fortune  Magazine   ‘Top  500’   listing  all  have  annual   sales   revenues  of  over  US$  200   billion.     Taken   together,   the   world’s   largest   44   companies   in   2009   generated  revenues  of  US$6.4   trillion,   equivalent   to  over  11%  global  GDP  and  higher   in   total  than  the  combined  GDP  of  all  but  the  worlds  largest  40  nations  (Keys  and  Malnight  2010).    Partly  reflecting  the  size  and  importance  of  the  US  economy  (the  world’s  biggest  by  GDP),   the   majority   of   the   largest   TNC’s   are   American   owned   and   based   (133   in  Fortune  Magazine  ‘Top  500’).      However,  this  concentration  has  significantly  declined  in  recent  years  (for  example,  in  2005  the  US  accounted  for  176  of  the  ‘Top  500’).  The  EU,   the   largest   single   integrated  economic   space   in   the   IPE,   is  home   to  148  of   the  ‘Top   500’   TNC’s,   including   two   co-­‐owned   by   Britain   and   the   Netherlands,   and  Belgium  and  the  Netherlands.  Japan  is  home  to  68  of  the  ‘Top  500’,  while  Australia  homes  eight  and  China  homes  61  (up  from  16  in  2005).            While   size   is   an   important   factor   in   understanding   the   importance  of   TNC’s   in   the  IPE,  it   is  not  everything.    Apple,  the  most  ‘popular’  global  corporation,  according  to  Fortune  Magazine,   commands   relatively   modest   sales   revenues   by   comparison   to  the   ‘giant   giants’   (around   $65   billion,   giving   it   a   Top   500   ranking   of   101   in   2011).      However,   the   company   recorded  profits  of  $14  billion   in  2011  close   to  Wal-­‐Mart’s  $16  billion  and  Royal  Dutch  Shell’s  (2nd  in  list)  $20  billion.    Moving  further  down  the  list,  Rio  Tinto   (140th)   recorded  profits  of  $14.3  billion   in  2011  and  Microsoft   (listed  120th)   $18.7   billion.     More   generally,   size   does   not   capture   the   full   dynamics   or  importance   of   the   growth   of   TNC’s.     Many   thousands   of   small   to   medium   size  companies,  especially  from  the  OECD,  now  undertake  and  seek  to  take  advantage  of  ownership  and  production  abroad  as  well  as  in  their  countries  of  origin.        The   United   Nations   Conference   for   Trade   and   Development   (UNCTAD)   estimates  that  there  are  now  some  82,000  ‘parent’  TNC’s  operating  globally  with  an  additional  800,000   affiliates   (UNCTAD  2012a).       These   companies   now  dominate  world   trade  and   production.     Approximately   70%   of   global   trade   is   accounted   for   by   TNC’s   of  which   50%   is   trade   internal   to   the   company.     Parent   TNC’s   account   directly   for  

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around   25%   of   global   production   (in   terms   of   value   added)   while   another   50%   is  undertaken  by  affiliates  or  firms  to  which  production  is  outsourced  by  the  a  parent  TNC.    These  types  of  connections  between  a  parent  TNC  and  other  firms  indicate  the  existence   of   complex   global   production   networks   dominated   by   TNC’s,   which   cut  across  the  international  division  of  labour  in  production.    One  of  the  main  indicators  of  globalized  production  by  TNC’s  is  the  massive  growth  of   foreign  direct   investment   (FDI)  over   the  past   three  decades.     FDI   is   the  process  whereby  a  TNC  acquires  productive  assets  abroad,   through  merger  and  acquisition  (M&A)   or   through   new   ‘greenfield’   investments   abroad.       These   two   forms   of   FDI  have   distinct   historical   and   spatial   dimensions.     M&A   has   its   roots   in   the   early  development  of  the  capitalist  firm  in  national  contexts.      For  example,  US  firms  grew  from   being   regional   entities   to   national   corporations   from   the   late   19th   century  through   competitively   driven  merger   and   acquisition.     Over   more   recent   decades  large  nationally  focused  firms  have  merged  with  or  acquired  foreign  firms  to  become  TNC’s.      M&A  has  been  the  predominant  form  taken  by  FDI  in  the  developed  world  of  OECD  countries  (Thun  2011:  347-­‐8).            On  the  other  hand,  most  of  the  FDI  flowing  into  the  developing  world  from  the  OECD  –  which  accounts  for  a  majority  of  FDI   inflows  to  the  developing  world  –  has  taken  the  form  of  greenfield  investment  (i.e.  the  establishment  of  new  production  facilities  and  capacity).      Note,  also,  that  foreign  direct  investment  is  distinct  from  indirect  or  ‘portfolio’   foreign   investment.     This   latter   refers   essentially   to   credit   or   borrowed  funds   raised  by  a   company   from   foreign   investors   in   return   for   interest,  where  no  acquisition   or   ownership   transfer   over   assets   is   involved.     Alternatively   portfolio  investment  might   involve   intermediary  financial   institutions,  such  as  pension  funds,  buying   non-­‐controlling   stakes   in   a   company   as   part   of   a   client’s   savings   or  superannuation   fund.     Before   World   War   One,   portfolio   investment   (which   also  happens   nationally)   was   the   most   important   form   of   foreign   investment   and   it  remains   an   important   source   of   financing   for   TNC’s   and   other   companies.     It   is  increasingly  important  for  governments  as  well  as  firms  and  ordinary  citizens  seeking  loans   for   investment   or   consumption   spending   purposes.     However,   it   is   distinct  from  FDI  (O’Brien  and  Williams  2010:  186-­‐7).        Between  1982  and  2008  the  total  value  of  annual  inward  FDI  flows  (in  2008  prices)  increased  from  $59  billion  to  $1,697  billion  (or  nearly  $1.7  trillion)  (Thun  2011:  347).      After  2008  this  dropped  as  a  consequence  of  the  global  financial  crisis  (GFC)  and  the  global  recession.    However,  FDI  has  since  recovered  and  in  2011  was  up  16%  on  2010  levels  bringing  total  inward  FDI  back  towards  2008  levels.    It  is  expected  to  continue  growing  over  the  next  three  years  as  the  world  economy  recovers  from  the  GFC  and  TNC’s  make  productive  use  of  accumulated  cash  reserves,  which  currently  remain  at  historically  high  levels  (UNCTAD  2012a).        The   sources  of   FDI   remain   concentrated   in   the  developed  economies  of   the  OECD  with  US,  European  and  Japanese  TNC’s  contributing  the  bulk  of  inward  FDI  globally.    In   the   past   the   highest   proportion   of   FDI   has   also   been   hosted   by   developed  countries  (59%  of  total  inward  FDI  in  2005,  for  example).    Of  this,  over  50%  has  been  

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hosted  by  a  handful  of  the  largest  developed  economies  (the  US,  Germany,  France,  UK   and   Japan,   also   the   key   sources   of   FDI).     But   there   has   been   a   growing   trend  towards   inward   FDI   flows   from   the   developed   to   the   developing  world,   especially  towards   the   leading  BRICS  economies,  namely,  China,   India  and  Brazil.     Taken  as  a  whole,   the   broad   developing   world   now   accounts   for   approximately   53%   of   total  inward  FDI.    Moreover,  a  number  of  developing  countries  have  acquired  significant  capability  in  the  provision  of  inward  FDI  hosted  by  both  the  developed  and  especially  the  developing  world.    Chinese  TNC’s,  for  example,  have  been  actively  making  large  productive   investments   under   agreements  with   states   in   Latin   America   Africa   and  the   Middle   East,   in   part   to   secure   and   stabilize   future   resource   supply   for   its  burgeoning   manufacturing   industries   and   product   markets   at   home   and   abroad.    Overall  developing  countries  now  contribute  approximately  23%  to  the  total  value  of  inward  FDI  flows  (UNCTAD  2012a).    Through  FDI,  the  growth  of  TNC’s  can  be  seen  to  have  impacted  on  global  production  and   control   over   the   global   division   of   labour   in   a   number   of   distinct   ways.     An  important   feature   of   globalized   production   is   its   hierarchical   division   between  distinct   groups   of   nations   within   a   ‘global   value   chain’.     Until   relatively   recently  developed   countries   have   been   able   to   dominate   the   global   division   of   labour   by  specializing   in   the   production   of   goods   at   the   high   value   added   end   of   the   value  chain,  especially  manufacturing  and  more  recently  product  design  and  technological  innovation,   often   protected   by   patents.     Developing   countries   with   lower   or   less  efficient   capability   in   manufacturing   have   specialized   in   primaries   production  (resources,  foodstuffs,  etc)  and  product  assembly  which  generates  less  value  but  in  which   they   have   a   comparative   advantage   or   competitive   advantage   relative   to  developed  countries  because  of  relatively  cheap  labour.        TNC’s  operate  across   this  division  and   lock   it   in  by  using  FDI   to  acquire  ownership  and  control  over  all  stages  in  the  production  process,  a  corporate  strategy  known  as  ‘vertical   integration’.     This  may   impact   on   the   relative   income   flows   between   the  developed   and   the  developing  world  by   further   locking   in   an  unequal   structure  of  international   specialization   and   comparative   advantage   between   countries   and   by  giving  TNC’s  leverage  over  the  cost  of  acquiring  primary  inputs.        On  the  other  hand,  TNC’s  may  use  FDI  as  part  of  a  market  access,  cost  cutting  and  profit   maximizing   strategy   organized   around   ‘horizontal’   integration.     This   occurs  when   a   TNC   replicates   a   given   production   stage   (for   example   the   manufacturing  process)  in  different  states  around  the  world.        This  may  be  done  in  order  to  avoid  transport  costs  or  avoid  protectionist  trade  barriers  limiting  access  to  local  markets  (e.g.   Toyota   in   the   US   and   Europe).     But   it  may   also   enable   a   company   to   insure  against   cost   changes   in   particular   states   and   to   exploit   localised   competitive  advantages  through  ‘social  dumping’  (e.g.   in  the  1990s  Volkswagen  took  advantage  of  the  Single  European  Market  by  opening  up  replicated  car  manufacturing  plants  in  different  parts  of  the  EU,  enabling  it  to  lower  labour  and  associated  costs).        A  number  of  possible  underlying  causes  for  the  growth  of  globalized  production  and  FDI  can  be  identified.    These  focus  primarily  on  the  competitive  pressures  faced  by  

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modern  corporations  and  the  benefits,   in  terms  of  accessing  and  securing  markets,  reducing   production   costs,   avoiding   punitive   regulations   and   taxes   and   increasing  profits,   companies   can  enjoy  by  globalizing  production.    New  communications  and  production  technologies  have  also  played  an  important  role.    But  FDI  has  also  been  facilitated  by  important  changes  in  the  governance  and  politics  of  the  IPE  as  well  as  important  political  and  economic  differentiations  between  nation  states  within   the  IPE.     Newly   gained   accesses   to   different   types   of   political   system   within   the   IPE  provide  profit-­‐seeking  firms  with  new  opportunities.    A  major  factor  facilitating  the  growth  of  TNC’s  and  FDI,  as  with  the  globalization  of  trade,   has   been   key   transformations   in   the   politics   of   economic   governance   that  have  occurred  in  recent  decades,  especially  since  the  late  1970s.    These  include  the  active  liberalization  of  the  rules  and  regulations  governing  international   investment  flows,   both   at   the   national   and   international   levels   as   well   as   the   growing   trend  towards  political   and  economic   regionalism,   including   cooperative  efforts  between  states  to  increase  regional  economic  integration.            At   the   national   level,   many   states   from   the   late   1970s   started   to   systematically  liberalise   their   national   economies   to   the   advantage   of   their   investors   and   TNC’s.    For   example,   in   1979   the   UK   government   abolished   quantitative   constraints   on  inward   and   outward   flows   of   financial   and   productive   capital   that   had   been  associated  with  exchange  controls   imposed  by  previous  British  governments   in   the  post-­‐World  War   Two   period.     In   addition   the   UK   government   liberalized   industry  internally,   reducing   taxes  on  company  activity   to  encourage  private  enterprise  and  its   growth   and   wealth   producing   capability,   and   removing   subsidies   and   trading  protections  to  domestic  firms  to  encourage  competitive  restructuring  and  economic  efficiency.    Protected  state  industries  such  as  coal,  steel  and  cars,  and  public  utilities,  such   as     gas,   electricity   water,   public   transport   and   telecommunications,   were   all  privatized  by  the  Conservative  administrations  of  Margret  Thatcher  and  John  Major  (1979-­‐1997).       As   a   consequence,   the   UK   economy   (sometimes   dubbed   UK   PLC)  became   increasingly   dominated   by   British   and   foreign   TNC   ownership   and  production  and  British  TNC’s   themselves  became  a  major   source  of   (outward)   FDI.    The  market  favouring  liberalization  policies  of  the  Thatcher  and  Reagan  governments  started   a   global   trend   towards  market   favouring   neoliberal   state   policies   (Gamble  2001).        In  terms  of  multilateral  governance,  a  number  of  initiatives  have  sought  (with  mixed  impacts)   to   further   free   up   and   consolidate   cross   border   investment   activity   by  seeking  the  liberalization  of  differential  national  rules  regulating  FDI  flows.    In  1998  the  OECD  proposed   a  Multilateral   Agreement   on   Investment   (MAI)   allowing   TNC’s  greater   freedom   to   invest   abroad   as   well   as   greater   autonomy   over   the   terms   of  investment.    The  proposal  was  shelved  following  widespread  protests  by  civil  society  groups,  which  led  France  to  withdraw  its  support,  thus  preventing  a  necessary  OECD  consensus.      A  further  attempt  to  introduce  the  proposed  MAI  was  made  at  the  WTO  Ministerial   in   Seattle   in   1999  but   again   this  was  defeated   as   a   result   of   successful  protests   by   civil   society   groups   who   argued   that   investment   liberalization   would  damage  the  interests  of  relatively  marginalized  and  nationally  embedded  developing  

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world   producer   groups   (especially   independent   subsistence   farmers)   as   well   as  putting  pressure  on  global  wages  and  national  labour  market  regulations  designed  to  protect  workers.    Nevertheless,  as  noted  earlier,  the  liberalization  of  FDI  remains  an  important   objective   of   the   WTO   and   liberalizing   and   other   FDI-­‐   encouraging  measures   have   been   incorporated   into   key  WTO   agreements.     These   include   the  Agreement   on   Trade-­‐Related   Investment   Measures   (TRIMS)   (giving   TNC’s   much  greater   autonomy   over   the   forms   taken   by   FDI),   the   Agreement   of   Trade   Related  Intellectual   Property   (TRIPS)   (protecting   TNC-­‐controlled   patents)   and   the  Government  Procurement  Agreement  (GPA)  (giving  TNC’s  competitive  access  to  the  provision  of  government  goods  and  services  while  restricting  national  governments’  ability  to  procure  goods  and  services  from  ‘favoured’  (typically  national)  producers.        In   terms  of   regionalism,  the  EU’s  single  market  project,  which   led  to  the  signing  of  the  Single  European  Act  (SEA)  in  1985  and  the  creation  of  a  single  European  Market  (SEM)  within   the  EU  aimed   to  achieve  a   fully  open  economic   space   combining   the  national   economies   of   all   the   EU’s   member   states   into   a   single,   market-­‐driven  economy.    This  built  on  the  abolition  of  internal  tariff  barriers  (the  Common  Market)  to  ensure  the  free  movement  of  goods,  people  and  capital  (financial  and  productive)  across  the  EU’s   internal  national  political  borders.    One  of  the  key  aims  of  the  SEM  was   to   open   up   the  whole   EU  market   and   economy   to   the   nationally   owned   and  based   firms   of   the   EU’s   individual  member   states.     This  was   designed   to   facilitate  competitive   industrial  restructuring,   leading  to  the  emergence  of   large  EU  TNC’s  or  ‘European   champions’,   capable   of   taking   advantage   of   economies   of   scale   and   of  competing  in  the  global  market  against  rival  TNC’s  from  the  US  and  Japan.    The  SEM  particularly  facilitated  merger  and  acquisition  (M&A)  between  European  companies  as  a  form  of  FDI  aimed  at  competitive  restructuring.    This  consolidated  the  size  and  competitiveness  of   the  EU’s   existing   TNC’s   and  was   a  major   cause  of   TNC  and  FDI  growth  overall.      The   consolidation   of   EU   economic   integration   through   the   SEM’s   liberalizing  measures  also  enabled  non-­‐EU  TNC’s   to  extend   their  production  activities   into   the  EU   through   EU-­‐focused   FDI.       Such   FDI   ensured   that   non-­‐EU   TNC’s   could   remain  competitive   relative   to   their   EU   rivals   by   avoiding   tariffs   applied   by   the   EU   on  external   trading   partners.     It   also   enabled   non-­‐EU   TNC’s   to   avoid   competitive  disadvantages   associated  with   the   costs   of   transporting   goods   for   foreign   trade   (a  more   general   reason  why   companies   trading   their   goods   internationally   choose   to  produce   globally).   More   recently,   the   EU’s   embrace   of   ‘open   regionalism’   has  provided   foreign  TNC’s  with   further   investment  opportunities   in   the  EU,   especially  through  merger  and  takeover.        Beyond   the   EU   political   agreements   between   states   to   achieve   regional   economic  integration  has  become  a  significant  feature  of  the  contemporary  IPE.    As  in  Europe  this   is   likely   to   create   conditions   favourable   to   the   further   growth  of   FDI.      A   final  governance  factor   leading  to  FDI  has  been  the  emergence  of  an  increasing  number  of   bilateral   and   regional   free   trade   agreements   (FTA’s),   which   include   investment  liberalization   agreement   rules   as   a   core   component   of   a  wider   ‘trade’   agreement.    For   example,   following   the   stalled   negotiations   around   the  WTO’s   Doha   Round   as  

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well  as  the  failure  of  its  own  attempt  to  extend  and  deepen  the  North  American  Free  Trade  Agreement   (NAFTA)  around   the  multilateral   FTAA   (Free  Trade  Agreement  of  the  Americas)  project,  the  US  is  currently  in  the  process  of  leading  the  consolidation  of   a   number   of   existing   FTA’s   to   which   it   is   a   partner   around   the   Trans   Pacific  Partnership   Agreement   (TPPA).     Along   with   Australia,   the   TPPA   brings   together  countries  from  Pacific  Asia,  North  America  and  the  Latin  American  Pacific  seaboard.    This  is  a  deep  (WTO  ‘plus’)  free  trade  agreement  since,  unlike  many  FTAs,  it  includes  strongly   liberalizing   measures   specifically   designed   to   facilitate   FDI   among   its  signatories  while  protecting   intellectual  property  rights.    While  these  measures  are  regarded  as  controversial  by  many  within  as  well  as  outside  the  agreement  (because  it   tends   to   favour   specifically  US  FDI)  many  weaker  nation  states  who  are  party   to  the   agreement   negotiations   face   pressure   to   sign   up   so   as   to   secure   or   maintain  relatively   privileged   access   to   the   US  market,   one   of   the   primary   destinations   for  their   exports   of   commodities,   processed   and   semi   processed   foods   and   low   end  manufactured  products.        From  International  to  Globalized  Division  of  Labour    A    core  dimension  of  economic  globalization  is  the  global  division  of  labour.    This  has  undergone  considerable  change  over  the  past  four  decades.    Up  until  the  late  1970s  the  global  division  of  labour  was  largely   international.    This  was  in  the  sense  that  it  was   characterized   by   a   dominant   pattern   of   specialization   that   locked   in   a  hierarchical   structure   of   comparative   advantage   between   distinct   groups   of  countries,  especially  between  the  developed  and  developing  world.      This  division  of  labour   corresponded   to   a   fairly   clear   and   integrated   global   production   and   value  chain.     The   developed   world   tended   to   specialize   in   the   production   and   trade   of  goods  at  the  high  value-­‐added  end  of  the  production  chain,  dominating  most  aspects  and   sectors  of  manufacturing  production.    Developing   countries,  by   contrast,  have  focused   on   the   production   of   non-­‐manufactured   input   goods,   notably   primaries  (resources)  and  food  stuffs,  as  well  as  low  end  manufactured  goods  such  as  textiles,  at   the   low   value   added   end   of   the   production   chain,   where   they   have   enjoyed  comparative  advantage  through  low  wages.        This   form   of   the  global  division  of   labour   continues   to  be   important  and  has  been  further  facilitated  by  the  liberalization  of  trade  and  investment  that  has  encouraged  specialization   based   on   comparative   advantage   and   has   created   economic  interdependency   between   specializing   countries.     However,   it   has   also   tended   to  create   highly   unequal   income   flows   between   the   developed   and   the   developing  world.    As  noted  earlier,  many  critics  of  global  free  trade  see  this  global  division  of  labour  as  a  major  source  of  the  sustained  income  inequalities  between  the  states  of  the   global   north   and   south,   which   continue   to   persist   (see   dependency   theory   as  discussed  in  earlier   lectures).    This  can  be  a  major  source  of  economic  instability   in  the  developing  world  and  may  lead  to  international  conflict  between  the  developed  and  the  developing  world  because  unequal  interdependence  has  been  a  major  cause  of   structural   (long-­‐term)   trade   deficits   and   debt   (and   debt   dependency)   for  developing  states.      States  that  suffer  debt  as  a  consequence  of   international  trade  may  seek   instead  to  protect   their  economies  while  developing   their  own   industrial  

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capabilities  as  a  substitute  for   import  dependence  and  reliance  on   limited  earnings  to   be   gained   from   low   value   exports.    On   the  other   hand  developed   state   trading  partners  may  prefer   such   states   to   remain  open  and   specialized   so   as   to  maintain  export  markets  and  ensure  the  supply  of  cheap  inputs  for  manufacturing.        TNC’s  from  the  developed  states  can  take  advantage  of  this  already  unequal  division  of   labour   by   using   their   financial   power   and   established   links   to   manufacturing  producers  and  markets   in   the  developed  world  to  dominate  trade,   investment  and  production   in  the  primary   industries  of  the  developing  world  states  faced  with  few  viable  development   alternatives.       This   process   can  displace   local   producers   (firms  and  workers)   in   the   developing  world   and   reduce   land  use   and   resource   rents   for  developing   states   (often   a   major   source   of   revenue   for   these   states).     Thus,   by  facilitating   TNC   growth   and   freeing   up   their   activities,   globalization   can   reinforce  developing  world   dependence   on   developed  world   states   and   their   global  market  based  agents.        However,   the   conceptualization   of   the   global   division   of   labour   in   terms   of   an  unequal   and   hierarchically   organized   value   chain   bringing   together   the   developed  and   developing  world   as   sites   for   geographically   distinct   forms   of   specialization   in  interdependent   production   processes,   does   not   capture   all   or   even   the   most  important   dimensions   of   contemporary   globalized   production.     A   new,  more   truly  globalized,   layer  has  been  added  to  the  global  division  of   labour  in  recent  decades.    Indeed  an  important  effect  of  the  liberalization  of  trade,  finance  and  investment  has  been   the   breaking   down   of   a   rigid   hierarchy   of   specialization   between   developed  and   developing   countries,   based   on   comparative   advantage,   in   favour   of   FDI-­‐facilitated   reorganizations  of  production  based  on   ‘competitive   advantage’.    Under  competitive  advantage  direct  costs  and  profitability  advantages,   rather  than  access  to   specialized   sectors   of   an   integrated   production   process,   becomes   a   key  determinant  of  where  FDI  is  located  and  the  forms  it  takes.        An  early  indication  of  this  new  dynamic  was  the  rise  from  the  1970s  of  the  so-­‐called  ‘tiger’  economies  of  South  East  Asia,  notably  Hong  Kong,  South  Korea,  Singapore  and  Taiwan.     Along   with   Japan   two   decades   earlier,   these   ‘newly   industrialized  economies’   (NIC’s)   became   a   major   new   source   of   globally   competitive  manufacturing  production  and  trade  this  time  based  firmly  in  the  developing  world.      The  process  was  driven  less  by  FDI  than  by  the  ‘developmentalist’  strategies  of  their  respective   states   (which   included   the   use   of   protectionist   and   export   promoting  instruments).     Nevertheless,   the   rise   of   the   NIC’s   presaged   a   more   general,   FDI-­‐driven,   shift   of  many   types   of  manufacturing   production   to   the   developing  world,  thereby   transforming   the   global   division   of   labour   that   had   characterized   and  structured   the   relationship   between   the   developed   and   the   developing   world   for  most   of   the   20th   century.     In  more   recent   decades   the   process   has   expanded   and  deepened   to   incorporate  a   large  number  of  developing  economies   throughout   the  world  as  global  manufacturing  powers.    Notably,  this  includes  Brazil,  India,  China  and  to  a  lesser  degree  South  Africa,  members  of  the  so-­‐called  BRICS,  all  characterized  by  their   newly   developed   global   manufacturing   capabilities   (Russia,   the   other   BRICS  

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economy,   is   excluded   because   its   status   as   one   of   the   largest   global   economies   is  based  principally  on  resource  capabilities).          To  take  one  (very  important)  example,  since  it  began  a  state-­‐led  process  of  economic  liberalization  in  1979  China  has  emerged  from  a  largely  non-­‐trading  economy,  based  on   agriculture,   to   be   the   world’s   leading   manufacturing   economy   and   largest  manufacturing  exporter  to  the  rest  of  the  world  (China  displaced  Germany  in  2010  to  become   the   leading  global  exporter  of  manufactured  goods   in   terms  of  value,  and  displaced   Japan   in   2011   to   become   the  world’s   second   largest   economy   over   all).    Much  of  this  capability  has  been  developed  on  the  basis  of  inward  FDI  (from  the  US,  EU  and  Asia),  for  which  China  is  the  worlds  leading  destination,  and  involves  intricate  integrated   manufacturing   networks   connecting   China   economically   (through   sub-­‐contracting   and   outsourcing   of   production   on   the   basis   of   components   trade)   to  other  manufacturing   states   in   South   East   Asia,   including   Japan   and   the   tigers   (see  Thun  2011:  361-­‐2).            What   is   clear,   then,   is   that   it   is   no   longer  empirically  accurate   to   characterize   the  global   division   of   labour   uniquely,   in   terms   of   a   division   separating   developed  countries   specializing   in   manufacturing   from   developing   countries   specializing   in  primaries   and   foodstuffs.    While   it   is   true   that  many   developing   states   (especially  Sub-­‐Saharan   African   states)   do   continue   to   specialize   in   primaries   and   foodstuffs,  and   have   very   limited   manufacturing   capacity,   this   is   no   longer   true   for   the  developing   world   as   a   whole,   where   manufacturing   production   has   expanded  exponentially,   sometimes   alongside   primaries   and   food,   but   sometimes   displacing  them.     Moreover,   while   this   expansion   in   developing   country   manufacturing  capability   has   occurred   largely   under   conditions   favourable   to   overall   growth   in  global   industrial   output,   it   has   also   been   associated   with   the   displacement   and  decline   of  many   of   the   older  manufacturing   bases   in   the   developed   world   where  ‘deindustrialization’  has  been  a  significant  trend  globally.    This  is  an  example  of  how  the  new,  more  globalized,  division  of  labour  has  created  new  opportunities  for  states  but  also  new  sources  of  tension  and  economic  conflict  between  them.    Globalized  Finance    There   are   two   key   dimensions   to   the   global   financial   system.     These   are   the  international   monetary   and   currency   regime,   and   the   broader   financial   system  associated   with   direct   financial   capital   flows   and   the   wider   provision   of   credit   to  finance   investment   and   spending   both   by   states   and   private  market   agents   (firms  and   individuals)   across   political   borders.     In   short,   there   is   both   an   international  monetary  system  and  a  more  global  finance  and  credit  system.    Fixed  and  Floating  Exchange  Rate  Regimes    The  international  monetary  system  determines  the  way  different  national  currencies  relate   to   each   other.     This   focuses   on   the   exchange   rate,   the   value   of   a   currency  relative   to   other   currencies.     Very   broadly,   there   are   two   possible   exchange   rate  regimes.    Under  floating  exchange  rates  market  forces  determine  the  relative  value  

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of   currencies.    A   currency’s   international   value   (the  exchange   rate)   tends   to  go  up  when  international  demand  for  that  currency  is  high  or  rising.    This  may  be  because  the  demand  for  the  goods  and  services  produced  by  a  country   is  high.    Likewise,   if  the  international  demand  for  a  currency  falls,  the  exchange  rate  will  tend  to  fall.        Under  fixed  exchange  rates,  by  contrast,  states  cooperate  to  ensure  that  the  relative  value   of   their   currencies   remain   fixed.     This   requires   states   to   take   appropriate  actions   to   defend   a   currency’s   fixed   value   when   faced   with   demand   and   supply  forces   that   would   otherwise   cause   the   international   value   of   the   currency   to   rise  above   or   fall   below   the   agreed   fixed   rate.     For   example,   a   country   with   a   trade  surplus   may   have   to   take   action   to   expand   its   demand   for   imports,   thereby  increasing  the  demand  for  other  currencies  relative  to  its  own.    Likewise,  if  a  country  has  a  trade  deficit,  the  exchange  rate  of  its  currency  will  tend  to  fall,  so  action  must  be  taken  to  limit  imports  and  expand  exports.        Whether   the  monetary   regime   is  one  of   fixed  or   floating  exchange   rates   therefore  has   important   implications   for   the   degree   of   autonomy,   independence,   or  sovereignty,  a   state  can  exercise   in   relation   to  domestic  economic  policies.    Under  fixed   rates,   in   particular,   states   automatically   face   a   ‘balance   of   payments  constraint’.    This  means  that  they  must   take  action  to  actively  maintain  the  agreed  ‘fixed’   exchange   rate   of   the   currency,   regardless   of   how   this   action   impacts   on  domestic  policy  objectives.      This  is  one  reason  why  the  classical  gold  standard  of  the  19th   and   early   20th   century   –   a   model   example   of   a   fixed   international   currency  regime   –   created   difficult   problems   for   many   nation   states,   especially   those   with  trade  deficits.    On   the  one  had,   they   agreed   to   the   international   rules   of   the   gold  standard,   which   facilitated   world   trade   and   output   growth,   and   so   in   principle  benefited  all   countries   taken  as  an  aggregate.    On   the  other  had,  abiding   to   these  rules  meant  that  states  with  deficits  faced  constraints  on  what  national  policies  they  could  pursue.    For  example,  full  employment  and  national  wage  and  income  growth  might  have   to  be  sacrificed   in  order   to  maintain   the  national  currency’s   fixed  rate.    Yet  states  faced  mounting  pressure  from  national  constituencies  and  interests  not  to  sacrifice   such   policies.       A   conflict   emerged   for   many   states   between   their  international  and  national  commitments.    Many  states  chose  to  give  priority  to  their  immediate   national   commitments   and   interests.     The   eventual   result   was   the  collapse  of  the  gold  standard.    Since   the   end   of   the   Second   World   War,   exchange   rate   regimes   have   changed  between  these  extremes,  moving  from  a  fixed  to  a  floating  system.    Bretton  Woods  established,   by   international   agreement,   a   heavily  managed   fixed   exchange   rate  system  based  on  gold  and  the  US  dollar.    The  dollar  was  given  a  fixed  value  against  gold  ($35  per  ounce)  while  other  national  currencies  within  the  system  were  given  fixed  values  against  the  dollar   (although  one-­‐off  realignments  of  a  currency’s  value  against  the  dollar  was  allowed  under  certain  conditions  and  subject  to  agreement  –  an  example  of  how  the  fixed  system  was  managed).    The  fixed  exchange  rate  system  of  the  dollar-­‐gold  standard  was  designed  primarily  to  stabilize  and  encourage  competitive  international  trade,  after  it  had  collapsed  during  

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the   inter-­‐war  period,   thereby  expanding  global  markets,  demand  and  output.     The  fixed  dollar   functioned  as   the  principal   currency   for   conducting   international   trade  (medium  of  exchange)  and  also  as  a   stable   reserve  currency   (store  of   value)   to  be  used   by   governments   for   holding   wealth   earned   from   international   trade   and   for  settling   trade  deficits.    Crucially,   fixed  exchange   rates  also  prevented  governments  facing  balance  of  payments  deficits  from  using  currency  devaluation  (exchange  rate  depreciation)  as  an  international  competitive  adjustment  mechanism.    The  thinking  was   that   a   country   that   allows   its   currency   to   devalue   to   gain   an   international  competitive  advantage  was  likely  to  excite  protest  and  counter  measures  from  other  states  (so-­‐called  beggar-­‐thy-­‐neighbour  policies).    This  would  tend  to  lead  to  a  spiral  of   protectionism   and   trade   conflict.     In   turn,   protectionism   limits   the   growth   of  international   trade  and   therefore  output  and  growth  as  export  markets  are   closed  off  to  companies  trading  internationally.    In   fact   the   dollar-­‐gold   fixed   exchange   rate   system  was   far   from   insensitive   to   the  pressures   faced   by   deficit   countries.     The   Bretton   Woods   agreement   therefore  combined  fixed  exchange  rates  with  various  measures  designed  to  extend  credit  to  countries  faced  with  balance  of  payments  difficulties.    Deficit  countries  could  borrow  from  the  IMF,  for  example,  enabling  them  to  meet  international  payment  obligations  without   sacrificing   domestic   objectives   of   output   expansion   and   full   employment.        This  was   an   important   departure   from   the   classical   gold   standard.     Countries  with  severe   long   term   balance   of   payments   problems   could   borrow   longer   term  investment   funds   from   the   World   Bank   to   improve   their   industrial   capacity   and  competitiveness.    The  US  also  provided  investment  grants  or  low  interest  rate  loans  to   many   countries   to   help   them   build   capacity   and   reduce   import   dependency.    Finally   the   Bretton  Woods   agreement   allowed   for   countries   to   undertake   one-­‐off  currency  devaluations  to  improve  competitiveness,  while  also  delaying  convertibility  to   the   dollar,   providing   weaker   countries   with   domestic   monetary   leverage   while  retaining  their  longer  term  commitment  to  the  fixed  exchange  rate  system.      These  mechanisms  made  the  dollar-­‐gold  exchange  standard  a   far  more   flexible  system  of  fixed   exchange   rates   than   the   gold   standard   had   been   during   the   early   interwar  period,  before  its  ultimate  collapse  in  1931-­‐3.        The  Move  Towards  Floating  Exchange  Rates    A   floating   exchange   rate   regime   emerged   initially   by   default   (rather   than  international  agreement)  between  1971-­‐73.    In  1971  the  US  government  unilaterally  announced  that  the  dollar  was  no  longer  pegged  to  gold  at  a  fixed  rate.    At  the  same  time,   the   US   announced   that   the   dollar   would   be   devalued   by   10%   against   all  currencies  within  the  fixed  system.    The  fixed  exchange  rate  system  was  abandoned  altogether  in  1973  after  which  a  de-­‐facto  system  of  floating  exchange  rates  emerged  in   the   absence   of   any   agreement   to   formally   align   currency   values.     In   turn   the  floating  system  was  formalized  in  1978  under  an  amendment  to  the  IMF’s  Articles  of  Agreement  (Helleiner  2011:  235).    Floating  Exchange  Rates  and  the  Globalisation  of  Finance  Capital    

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The   shift   towards   floating   exchange   rates   has   gone   hand   in   hand   with   the  liberalization  of  capital  exchange  controls.    This  includes  the  liberalization  of  private  financial   capital   flows,   such   as   credit,   across   borders   and   also   the   liberalization   of  currency  exchange   controls.     Exchange  markets   in  national   currencies,   such  as   the  Euro-­‐currency   market,   emerged   strongly   in   the   mid   to   late   1970s   when   the   US  government  began  to  relax  capital  and  currency  exchange  controls.    Britain  likewise  abolished   exchange   controls   in   1979   and   the   European  Union   abolished   exchange  controls   in   the   EU   in   the   1980s   in   the   run   up   to   the   completion   of   the   Single  European  Market  (SEM).        An   important   effect   of   the   liberalization   of   currency   markets   was   to   increase  speculative   flows   of   capital   –   often   called   ‘hot   money’   -­‐   in   and   out   of   national  currencies.     Generally,   finance   capital   is   attracted   by   relatively   high   interest   rates  and   stable   currency   values.     Where   currencies   are   freely   traded,   speculation   can  mount   against   a   currency   if   a   state   has   a   balance   of   payments   deficit   or   is  deliberately  pursuing  expansionary  policies   that   tend  to   increase   imports     (and  the  trade  deficit)  and   lower   interest  rates.     If  a  state  wants  or  needs  to  attract   finance  capital   it   faces   pressure   to   keep   the   international   value   of   the   national   currency  stable.    This  tends  to  mean  adjusting  interest  rates  up.    But  this  may  mean  sacrificing  the  use  of  monetary  policy  instruments,  such  as  the  interest  rate,  to  achieve  internal  objectives,  particularly  growth  and  full  employment.      Thus,  while  in  principle  flexible  exchange   rates  provide   states  with   greater   autonomy  with   respect   to   the  national  economy   (enabling  a   state   to  allow  a  currency’s  value   to  depreciate  and   therefore  boost   the   international   competitiveness   of   its   exporters),   this   autonomy   is   heavily  circumscribed  under  conditions  where   finance  capital   is  globally  mobile  and  where  national  currencies  can  be  freely  exchanged  by  investors  and  speculators.    In  addition,   states  with  weak  currencies  will   find   it  difficult  and  more  expensive   to  borrow  from  international  money  markets,  placing  constraints  on  national  spending  programmes  as   it  becomes  difficult   for   the   state   to   sell  bonds   issued   in  a  weak  or  depreciating  currency.    One  of  the  most  evident  indicators  of  this  growing  constraint  on   the   state   imposed   by   global   money   markets   is   the   existence   of   credit   rating  agencies  (such  as  Moody’s  and  Standard  and  Poor’s)  that  rate  the  sovereign  bonds  of  different   states   according   to   the   perceived   risk   for   the   investor   of   default   or  devaluation.     States   with   relatively   low   debt   and   borrowing   ratios   and   stable  currencies  are  judged  credit  worthy  and  get  top  (‘triple  A)  ratings.    Those  states  with  existing  debt  and  high  borrowing  needs,  poor  economic  performance  and  unstable  currencies   receive   lower   rating,   with   bond   ratings   falling   to   ‘junk’   status   in   more  extreme   cases.     Thus,   despite   flexible   exchange   rates,   the   globalisation   of   finance  capital   through   the   liberalization   of   international   financial   markets,   including  currency  exchange  markets,  place  considerable  constraints  on  state  autonomy  in  the  economic  domain  and  in  relation  to  the  national  economic  policies  it  can  pursue.      ‘Approaches’  Orientated  Evaluations  of  the  Meaning  and  Impacts  of  Globalization    

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If  it  can  now  perhaps  be  agreed  that  economic  globalization,  in  the  form  of  a  trend  towards   greater   openness   in   respect   to   trade,   investment   and   financial   flows,   has  occurred  over  the  last  forty  years  and  continues  to  evolve  (although  not  necessarily  evenly  across  the  world  or  in  an  uninterrupted  process),  the  impact  of  globalization,  in  relation  to  the  relative  power  of  states  and  market  agents,  and  its  more  general  impact   on   peoples’   lives,   is   much   contested   by   IPE   scholars   (Hay   2011:   335).     To  some   extent   contestation   around   the   idea,   meaning   and   impacts   of   globalization  reflects  the  different  perspectives   IPE  scholars  and  others  bring  to  understanding  it.    Liberal,  Marxist  and  state-­‐centric/mercantilist  perspectives  are  all  evident  in  the  IPE  debates   about   globalization,   although   even  within   particular   perspectives   there   is  considerable   disagreement   about   globalization’s   meaning   and   impact.     These  differing   perspectives   provide   different   bases   for   evaluating   the   impact   of  globalization  on  the  state.    This  will  be  considered  in  more  detail  in  the  next  lecture.    For  now,  the  broad  parameters  of  the  debate  can  be  considered.    Benign  Globalizationists    Many   commentators,   especially   those   committed   to   the   notion   that   market  openness   brings   general   benefits   (e.g.   Friedman   2005;   Ohmae   1990),   have  enthusiastically   welcomed   globalization.       Freer   markets   and   greater   human   and  capital  mobility  has,  they  argue,  increased  world  trade,  output  and  income,  while  the  consequential  growth  in  global  interdependency  has  enhanced  cooperation  between  individuals  and  countries  and   reduced   the  possibility  of   conflict.    Globalization,   for  Friedman   (for   example),   not   only   enhances   economic   welfare   (as   measured   by  output)  but  also  comes  with  a  peace  dividend.    Trading  nations  are  less  likely  to  go  to  war  with  each  other  because  interdependency  created  by  globalization  increases  the  costs   and   risks   associated  with  war  and   serves   to  embed   relations  of   cooperation.    Some   liberal   enthusiasts   have   anticipated   the   emergence   of   a   ‘borderless   world’  where  peoples’   lives  are  no   longer  divided  by  national   identities  and  rivalries,  built  around   the   nation   state   and   its   power   (Ohmae   1990).     Globalization,   such  enthusiasts   argue,   diminishes   state   power,   but   this   is   to   be   welcomed   because   it  increases   output   and   innovation   and   enhances   individual   freedom   and  interdependency.     In   any   case,   globalization,   the   enthusiasts   contend,   has  restructured  more  than  weakened  states.    Globalization  has  witnessed  the  spread  if  not   complete   triumph   of   liberal   democratic   forms   of   the   state   (Fukuyama   1989).    Such   states   are   able   to   adjust  market   outcomes   through   redistributive   institutions  and  policies  and  through  macroeconomic  management  without  unduly  impairing  the  operation   of   competitive  market   processes   on  which   expanding   output   ultimately  depends.    Radical  Globalists    Radical  globalists  include  eclectic  critical  scholars,  such  as  Susan  Strange  and  Robert  Cox,   as  well   as  many  neo-­‐Marxist   IPE   scholars,   such  as  David  Harvey,  Hugo  Radice  and   Stephen   Gill.   The   radicals   share   with   the   benign   globalists   a   belief   that  globalisation,   in   the   form  of   the   freeing  up  and   spreading  of  market   relations,  has  been   a   growing   trend   over   the   past   forty   years.     More   and  more   countries   have  

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become  integrated   into  a  global  free  market  for  goods  and  capital.    Radicals  differ,  however,  in  emphasizing  the  power  relations  and  political  processes  that  lie  behind  globalisation.    The  radicals  are  critical  of  the  benign  approach  because  of  the  way  it  exaggerates   and   overemphasizes   the   benign   and   positive   effects   of   globalisation  while   ignoring   the   unequal   power   relations   the   process   of   globalisation   embodies  and   the   economic   polarizations   and   conflicts,   both   between   states   and   classes,   it  gives  rise  to.    Globalization,   the  radical  globalists  claim,  has  reduced  state  power  but  primarily   in  ways   that  enhance   the   freedom  and  power  of  profit-­‐seeking,  private   transnational  companies  -­‐  capital.    This  has  led  to  a  distinctly  capitalist  form  of  globalization  that  has   served   to   radically   increase   class-­‐based   inequalities   and   exploitation   iniquities  that  democratic   state  power   and   communist   states  had  earlier   in   the  20th   century  done  much  to  overcome  both  in  the  developed  and  developing  world.    By  ruling  out  ‘progressive’  social  democratic  and  developmental  forms  of  state,  globalization  has  brought   capitalism,   injustice   and   inequality   back   in.       The   freedoms   enhanced   by  globalization   have   been   ones   that   have   empowered   capital   rather   than   ordinary  people.    The  borderless  world  has  become  a  reality  for  TNC’s,  who  are  now  free  to  trade  and  make  commercial   investments  globally.    But  such  freedom  of  movement  has   not   generally   been   extended   to   ordinary   people,   who,   by   and   large   remain,  ‘locked   in’   by   political   borders   as   well   as   restrictions   on   migration   and   migrant’s  rights   or   by   a   simple   lack   of   the   economic   power   necessary   for  mobility.     As   such  ordinary  people  are  vulnerable  to  heightened  forms  of  exploitation  that  comes  with  globalization.    For   radical   globalist,   economic   globalization   is,   at   best,   a   profoundly   contradictory  process   in   terms   of   economic   outcomes.     The   new   freedoms   enjoyed   by   TNC’s  means   that   they   can   freely   invest   in   developing   countries.     This   is   good   news   for  them   (the   TNC’s),   because   they   are   able   to  make   high   profits   by   exploiting   cheap  labour  available   in  many  developing  countries.    Consumers   in  the  developed  world  also  benefit  because  they  are  now  able  to  consume  a  vast  array  of  products,  which  sell   for  much   cheaper   prices   than   before   production   and   trade   had   become   truly  globalized.     But   developed   countries   also   suffer   because   TNC’s   shift   production   to  the   new   developing   world,   which   leads   to   job   losses,   unemployment   and   a  significant  loss  of  income  and  economic  security  for  workers  in  the  developed  world.    The   world   may   be   becoming   ‘flat’   as   Friedman   claims.     But   for   ordinary   people,  radical  critics  argue,  this  is  experienced  as  a  leveling  down  of  incomes  and  conditions  of  employment.      Radical   globalists   also   argue   that   globalization   has   led   to   a   leveling   down   of   core  aspects  of  state  provided  welfare  and  worker  protection.    This   is  because  the  basic  economic  capabilities  of   the   liberal  democratic  state,  particularly   its  powers  to  tax,  borrow,   and   spend,   have   been   greatly   weakened   by   the   changing   power  relationships  embodied  in  economic  globalization.            Globalization  Skeptics    

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Many  political  economists  have  been  highly  critical  of   the  concept  of  globalization.    Some,   like   Hirst   and   Thompson   (1996)   argue   that   it   has   been   exaggerated   as   an  empirical   phenomenon   of   the   late   20th   century.     The   19th   century   also   saw   the  spread  of   trade   and   interdependency  on   a   global   scale,   so   globalization   is   nothing  new.    Nor   is  globalization  an   ‘inevitable’,  or  a   linear  process.    As  skeptics  point  out  global  interdependency  largely  collapsed  into  regional  autarky  and  war  in  the  years  between  the  world  wars  and  has  only  recently  ‘recovered’  to  its  19th  century  levels.    Given   these   empirical   criticisms,   others   skeptics   have   argued   that   the   ‘new’  globalization   is   primarily   a   discourse-­‐based   myth,   rediscovered   to   legitimize  contemporary  pro-­‐market  ideological  projects  such  as  neoliberalism  after  decades  in  which   states   had   displaced   markets   as   the   regulator   of   the   production   and  distribution  of  goods  and  services  (Hay  and  Watson  1999).        The  starting  point  of  skeptical  analysis   is  the  assumed  primacy  of  politics  and  state  power   above   the   market   and   associated   institutions   and   actors.     From   this   view,  states   have   power   and   therefore   autonomy   over   how   they   act   and  what   they   do  (sovereignty)  including  power  over  economic  resources  and  how  they  are  used.    The  key  question,  for  skeptics,  is  how  states  use  their  economic  power  and  why.    The  use  of   power   for   specific   purposes   often   reflects   ideological   commitments   rather   than  economic  necessity.    To  summarize:    

-­‐ Despite   ‘globalization’   states   in   general   remain   powerful   and   some   very  powerful  

-­‐ The  significance  of  the  rise  of  TNC’s  is  exaggerated.    The  idea  that  capital  can  pick   and   choose  where   to   locate   –   its   geographic  mobility   –   and   therefore  dictate   terms   to   government   conflicts  with   the   fact   that   TNC’s   remain   very  largely   nationally   and   regionally   ‘embedded’,   most   of   their   investments  taking  place  in  their  own  country  or  its  immediate  neighbours  

-­‐ Markets   remain   strongly   regulated   by   the   state.     While   globalization   may  have  freed  markets  and  market  agents,   ‘regionalism’,  such  as  in  the  EU,  has  constrained   the  operation  of  market   agents.     For   example,   the  EU   imposes  regulations  such  as  the  Common  External  Tariff  on  non-­‐EU  states,  while  the  EU   also   imposes   European   standards   on   TNC’s,   which   may   force   them   to  accept  European  traditions  of  labour  representation  at  work.    

For   some   skeptics,   the   real   importance   of   globalization   is   as   part   of   a   broader  neoliberal   ideology.     Constructivist   and   neo-­‐Gramscian   IPE   scholars   argue   that   the  discourse   of   globalization   has   been   used   as   a   means   by   which   governments   and  elites   have   legitimized   a   move   away   from   social   democratic   policies   towards  neoliberal   ones,   especially   in   relation   to   employment   and   welfare.     For   example,  according   to   Hay   and   Watson,   New   Labour   in   Britain   evoked   ‘globalization’   to  legitimize   a   move   away   from   ‘Keynesian   welfarism’   towards   neoliberalism   in   the  guise  of  the  ‘third  way’.    Such  shifts  indicate,  however,  that  the  idea  of  globalization  is  important  because  its  acceptance  as  a  mantra  among  policy  making  elites  leads  to  the  institutionalization  of  material  changes  which  may  be  difficult  to  reverse.    

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Nevertheless,   most   globalization   skeptics   remain   committed   to   the   idea   that   the  nation   state   remains   the   key   actor   and   holder   of   power   in   the   global   political  economy.     Even   where   states   choose   to   commit   to   regionalist   projects   they  nevertheless  tend  to  guard  their  political  sovereignty   in  key  policy  domains.    Many  globalization   skeptics   are   also   committed   to   social   democratic   and   developmental  forms   of   the   state.     As   such,   they   believe   in   the   continued   efficacy   of   national  political  economy,  including  forms  of  protectionism.    For  example,  they  often  argue  that   states   should   disengage   from   aspects   of   regional   integration   that   ‘threaten’  national   sovereignty,   such   as   cross-­‐national   monetary   unions.     Some   argue   that  developing   countries,   in   particular,   should   disengage   from   global   governance  institutions   such   as   the   WTO   and   the   IMF   and   pursue   independent   strategies   of  development  (Bello  2009)  that  prioritize  the  needs  and  give  voice  to  the  demands  of  local  people  rather  than  TNC’s.    Global  Transformationists    A   third   approach   to   globalization   –   the   trasnformationist   approach   –   has   been  developed  by  political   economists  who   seek   to   emphasize   the   importance  of   both  changing   economic   structures   and   institutions   and   the   continuing   importance   of  political  agency  (Perraton  et  al.  1997;  Held  2000).    Like  hyperglobalists  (both  liberal  and   radical),   transformationists   argue   that   globalization   has   transformed   the  institutional   context   in   which   political   power   is   exercised.       In   particular   they  acknowledge  that  many  changes  have  empowered  markets  and  market  agents.    But  governments  have  both  contributed  and  responded  to  globalization.    Just  as  market  agents  have   sought   to  gain  power  by   ‘going  global’,   so  governments  have  become  increasingly  transnational  –  both  regional  and  global  -­‐  when  seeking  to  influence  the  political   economy   through   exercising   state   power.     This   has   often   meant   moving  towards  the  pooling  of  sovereignty  in  many  areas  of  economic  policy  and  of  seeking  to   exercise   political   leverage   at   the   level   of   transnational   economic   international  agreements.    Such  agreements  may  impose  rules  that  all  states  have  to  abide  by,  but  leverage   can   be   exercised   in   order   to   determine   the   nature   of   such   rules   and  agreements.     Transnational   governance   doesn’t   exist   in   a   political   vacuum,  transformationists  argue.    For   transformationists,   the   key   point   of   dispute   is   less   about   globalization  as   such  but  more  about  how  its  outcomes  can  be  influenced  and  changed.    Globalization  has  the  potential  to  transform  peoples’  lives  positively  as  liberals  emphasize.    But  it  must  be  effectively  and  more  democratically  governed  and  its  logics  more  evenly  pursued  if  the  negative  outcomes  emphasized  by  radical  hyper-­‐globalists  are  to  be  mitigated  or   eliminated.     The   key   point   for   transformationists   is   that   globalization   can   and  must  be  governed  and  that  states  must  collectively  play  a  crucial  role  in  that  process.        For   transformationists   globalization   is   thus   an   open-­‐ended   and   evolving   process  whose  outcomes  are  indeterminate.    Leaving  globalization  in  the  hands  of  powerful  market   actors   and   powerful   pro-­‐market   states   will   not   produce   just   or   equitable  outcomes   for   all.     Equally,   skeptics   exaggerate   the   capacity   of   the   nation   state   to  guarantee  such  outcomes  at  the  national  level  by  actively  resisting  global  markets.  

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 Transformationists   tend   to   acknowledge   that   globalization,   through   empowering  market   agents,   has   forced   policy   change   on   government.     For   example,   following  hyperglobalists,   they   recognized   that   virtually   all   states   have   become   competition  states,  seeking  to  actively  attract  TNC  foreign  direct  investment.  But  they  reject  the  radical  claim  that  this  has  forced  states  to  accept  neoliberalism,  whereby  the  balance  of   power   shifts   decisively   in   favour   of   capital   and   against   workers   and   ordinary  people.         Welfare   capitalism   remains   possible   if   it   can   be   combined   with  international   competitiveness   (rather   than   requiring   protectionism)   through  pursuing  appropriate  policies.        For   example,   in   Europe,   Britain   but   also   Sweden   Germany   and   France,   are   all  competition  states,  integrated  into  the  global  economy.    But  whereas  in  Britain  this  has  involved  a  decisive  shift  towards  neoliberalism,  in  Germany,  France  and  Sweden  the   state’s   commitment   to  welfare   and   strong   labour   protection   remains   decisive.    Whereas   Britain’s   competitiveness   has   depended   on   deregulating   labour   markets  and  cheapening   labour,   in  Germany  competitiveness  has  been  maintained   through  state   commitments   to   labour   productivity   and   to   financing   innovative   forms   of  investment.    Likewise,  many  German  companies  have  been  successful  by  developing  highly  specialized  and  high  quality  products,   rather   than  focusing  on   low  costs  and  prices.   The   competition   state   (a   consequence   of   globalization)   is   therefore  compatible  with  radically  different  ‘models’  of  capitalism,  and  ‘modes  of  regulation’  some  more   just  and  equitable   than  others  depending  on   the  way   the  nation   state  integrates  with  and  regulates  the  market.    In  terms  of  the  developing  world,  transformationists  acknowledge  that  globalization  places   constraints   on   state   developmental   strategies,   forcing   states   to   open   up   to  markets,  foreign  capital  and  TNC’s  and  forcing  developing  states  to  join  pro-­‐market  organizations   like   the  WTO  and  the   IMF.    China   is  an   important  example  of   such  a  developing   country   that,   under   globalization,   has   abandoned   its   closed,   state  planned,   economy.     But   in   accepting   globalization,   China   has   not   simply   accepted  neoliberal  policies,  which  favour  TNC’s  and  the  exploitation  of  cheap   labour  (which  China   has   in   abundance).         Rather,   in   line   with   trasnformationist   thinking,   the  Chinese   state   has   increasingly   used   its   power   to   actively   influence   the   nature   of  globalization   and   global   governance,   so   that   it   becomes   compatible   with   its   own  long-­‐term  development  objectives.        Thus,  China  has  become  a  major  player  within  the  WTO  and  the  IMF  where  it  has  sought  to  promote  greater  voice  for  developing  countries.     By   influencing   global   governance   through   its   leadership   of   developing  countries  within  the  G20  and  through  its  constructive  membership  of  the  WTO  and  IMF,  China  has  begun  to  shift  the  balance  of  power  within  globalization  away  from  neoliberalism   and   the   ‘Washington   Consensus’   towards   a   more   consensual   and  equitable  form  of  capitalist  globalization.    For  transformationists,  this  is  indicative  of  broader   possibilities   for   a   more   positive   globalization,   one   in   which   states  collectively   commit   to   the   global   regulation   and   management   of   the   market  economy,   just   as   they   once   sought   to   defend   welfare   and   development   at   the  national  level.    

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