GLOBALIZATION

17.195/17.196

Reading Questions:

 

 

Notes for October 2 readings: Norman Angell, The Great Illusion and Paul Hirst and Grahame Thompson, Globalization in Question, Chps. 1 & 2

Angell

  1. Angell starts by challenging the view "that national power means national wealth, national advantage; that expanding territory means increased opportunity for industry; that the strong nation can guarantee opportunities for its citizens that the weak nation cannot."(p.12) What are the arguments that Angell levels against this claim? Are you convinced? Why or why not?

 

  1. Why has conquest become unprofitable in his view? Was it ever profitable? What has changed? What are the costs involved in seizing and holding onto another country? Can you think of examples that might support or refute his argument?

 

  1. How do economic and financial interdependence preserve peace according to Angell? What do you think of his argument?

 

  1. In which critical respects [i.e., critical for the argument he is making] was the economic and political world that Angell analyzed the same as ours? In which significant respects have the international economy or power relations among nations changed?

 

Hirst & Thompson: 

  1. Hirst and Thompson distinguish between internationalization and globalization. What are the differences? What do these distinctions matter?

 

  1. What are the some of the economic indicators that can be used to "measure" globalization? Do you find some more useful/relevant/informative than others and if so, why?

 

  1. Based on your reading of Hirst & Thompson, what would you identify as the three or four key developments in the past two decades that have led to increasing globalization? Have these developments occurred spontaneously or been a product of government policies?

 

Notes for October 16 readings: Ruggie, International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Order and Bhagwati, Protectionism

Ruggie:

  1. Ruggie refers to the post-World War II international economic order as a "compromise" based on "embedded liberalism." What is "embedded liberalism"? How does it differ from traditional liberalism? Does "embedded liberalism" remain the ordering principle of the international economic system today?

 

  1. What evidence does Ruggie cite to support his idea of an "embedded liberalism compromise"? Do you find it persuasive? Why or why not?

 

  1. What role did the United States play in organizing the international economy according to Ruggie? What particular aspects of the international economic order does he attribute to the involvement of the United States? What role do you see the US now playing in the international economy? In your view, has it changed significantly and if so, how?

 

Bhagwati: 

  1. According to Bhagwati, the liberalization of trade is related to economic growth. Does Bhagwati demonstrate clearly how trade promotes growth? Do you think (free) trade helps promote growth? Why or why not? Can you think of examples to support your position?

 

  1. How does Bhagwati explain the movement toward trade liberalization after World War II? Which factors in his explanation do you think were the most important and why?

 

  1. Writing in the late 1980s, Bhagwati observed a rise in protectionism. What was his explanation for the rise in protectionism? Why was he optimistic about the future?

 

  1. Since the publication of his book, the United States has pursued significant multilateral efforts to promote free trade. These include the completion of the Uruguay Round of the GATT and the North American Free Trade Agreement (NAFTA) and the establishment of the World Trade Organization. Bhagwati's optimism therefore seems to have been justified. Based on your knowledge of these developments, did the factors cited by Bhagwati as grounds for optimism play a role in these events? Are there other factors that account for the move toward greater trade liberalization?

 

  1. It was recently reported that last year the United States ran its worst trade deficit in its history ($168 billion for 1998). The deficit appears to have been caused by a substantial decrease in US exports. However, the US also enjoyed strong economic growth last year. Are you optimistic about the future of US-led efforts to promote free trade and if so, why? Or do you expect a resurgence in protectionism in the US and if so, why?

 

Notes for October 23 readings on capital flows: Susan Strange, Casino Capitalism; The Economist, Fear of Finance; and Jeffry Frieden, Invested Interests: The Politics of National Economic Policies in a World of Global Finance

 

Susan Strange, Casino Capitalism: 

  1. Compare and contrast Strange's view of the interests of banks, investment firms, and other financial actors with Frieden's analysis of the preferences of international investors. In her view, have firms benefited or suffered as a result of increasing volatility in international financial markets? Do you subscribe to Frieden's or Strange's analysis of the interests/preferences of the financial community? Do you think its interests have changed as a result of the Asian financial crisis and subsequent crises in Russia and Brazil? Why or why not?

 

  1. Strange is highly critical of US policy decisions and nondecisions, which she claims have contributed substantially to international financial instability. Are her criticisms valid? How would she evaluate US economic policy in the 1990s, especially in response to the recent international financial crises in Asia, Russia, and Latin America? Has it continued to exacerbate volatility or has the US exercised a stabilizing influence on international financial markets?

 

  1. Writing in 1986, Strange was pessimistic about the prospects of greater international policy coordination or the strengthening of international institutions as viable solutions to the problem of international financial volatility. In the aftermath of the Asian financial crisis and subsequent crises in Russia and Brazil, however, both of these approaches have received renewed attention. French President Jacques Chirac has recently called for the US, Europe, and Japan to coordinate their economic policies so as to stabilize exchange rates. Others have called for the IMF to play a larger role in the international economy (e.g., acting as an international lender of last resort) or for the creation of a new world central bank. Are these solutions more viable today than they were when Strange wrote Casino Capitalism or are the grounds for her pessimism still valid? Strange also argued that the key problem was for the US, as the dominant actor in the world economy, to recognize its interest in international financial stability. Has the US recognized this interest yet? Why or why not? If not, what would it take for the US to develop an interest in promoting greater stability and act on this interest?

 

The Economist, Fear of Finance 

  1. The Economist survey suggests that the expansion of international capital flows was largely inevitable. What forces/factors were responsible for the growth of these flows? Which factors do you think were especially important and why?

 

  1. How has the ability of governments to manage national economies been affected by increased capital mobility and the move to a system of floating exchange rates? What specific developments in international finance have influenced the conduct of monetary and fiscal policy? How have these developments affected the effectiveness of monetary and fiscal policy?

 

  1. According to the Economist survey (published in 1992), the danger of international financial instability has grown because of the expansion and increased mobility of international capital flows. Have its concerns about instability been substantiated by the Asian financial crisis and the more recent crises in Russia and Brazil? That is, do you think that these crises represent evidence of a fundamental problem with the international economic system or are they just isolated cases? If you think that international financial instability has become a serious problem, are you optimistic or pessimistic about the prospects for international cooperation to address the problem?

 

Jeffery Frieden, Invested Interests 

  1. Frieden the Mundell-Fleming approach, which argues that a country can have at most two of the following three conditions: a fixed exchange rate, monetary policy autonomy, and capital mobility. The United States has chosen to pursue monetary policy autonomy and capital mobility while allowing its exchange rate (the value of the dollar) to fluctuate. Based on Frieden's analytical framework, which economic groups/actors benefit from this policy choice? Which groups lose? What choice did Asian countries make prior to the financial crisis? Which actors gained/lost in these countries?

 

  1. Frieden argues that the political battle over international financial integration and the regulation of capital flows is between two camps: the financial sector, owners of financial assets, and multinational corporations vs. firms specific to particular industries and places. Which group do you think has greater political power in the United States? Does U.S. policy reflect the preferences of the more powerful group? Can you think of other countries where the balance of power between these two groups might differ? Do the policies of those countries toward international financial integration and capital mobility differ from those of the US?

 

  1. Consider Frieden's 2 x 2 matrix on p. 445, which categorizes various economic groups/actors according to their policy preferences with regard to monetary policy autonomy and exchange rate stability. Can you think of specific examples of each of the four types of economic actors/groups identified the matrix? Has he accurately derived the policy preferences of these actors/groups? How strong or weak do you think these preferences are and what factors might affect the intensity of a group/actor's policy preferences? Has the political behavior of these groups (if any) matched the preferences Frieden ascribes to them? For example, Frieden expects "multinational firms, international investors more generally, and internationally oriented producers of tradable goods" to support stabilization of exchange rates and international policy coordination. Is there evidence of such support among the financial community in the United States? What about in Europe?

 

 

Notes for October 30 readings: Graham, Global Corporations and National Governments; Hirst & Thompson, Globalization in Question, Chps. 3 & 4

Graham 

  1. What is a multinational company? What different definitions might there be? And why does it matter?

 

  1. Why do companies invest abroad? Is it good or bad for their home economies? What are the strongest arguments on both sides of this case?

 

  1. Graham argues that government regulation of foreign direct investment (FDI) (e.g. performance requirements, local-content restrictions, etc.) reduces global economic welfare. How does such regulation negatively affect world economic growth in his view? Do you think global economic welfare is or should be a priority for national governments?

 

  1. Graham proposes an international agreement on liberalization and harmonization of regulations on FDI. According to Graham, how does FDI affect national economic performance? How might the domestic politics of such an agreement play out in the advanced industrial countries, i.e. who wins and who loses if restrictions are removed on foreign direct investment in developed countries? What would Frieden claim? How about in developing countries? Are you optimistic or pessimistic about the prospects of reaching such an agreement?

 

Hirst & Thompson 

  1. What are Hirst & Thompson's concerns about foreign direct investment? Do they differ from Graham's and, if so, how? Which analysis of the problem -- Hirst & Thompson's or Graham's -- do you find to be more compelling and why?

 

  1. Hirst & Thompson also address the issue of a multilateral agreement on FDI. What kind of international arrangements do they consider most feasible? Are they optimistic or pessimistic about achieving such arrangements and what arguments do they offer to support their view? How does their view of international arrangements on foreign direct investment differ from the agreement proposed by Graham?

 

  1. In Chapter 4, Hirst & Thompson analyze the geographical dispersion of the business activities of multinational corporations. Are you surprised by their findings? How might you explain their results? Do their findings suggest that world economy is evolving in the direction of globalization or regionalization? Do you think these patterns have changed significantly since 1992-93 (the most recent data they present)? Why or why not?

 

Notes for November 6 readings: Hirst & Thompson, Globalization in Question, Chp. 5 and the World Bank, The East Asian Miracle

 

Hirst & Thompson 

  1. In Chapter 5, Hirst and Thompson evaluate the prospects for future growth of developing countries. Are you optimistic or pessimistic about their prospects? What key domestic political, economic, and social/demographic requirements do Hirst and Thompson identify for future growth? Do you agree with their analysis? Can you think of any other important domestic factors that were not identified by Hirst and Thompson? What constraints and opportunities are developing countries likely to face in a "globalized" world economy? What role will advanced industrial countries have to play for developing countries to enjoy strong economic growth in the future?

 

  1. Hirst and Thompson outline two basic development strategies: 1) a laissez-faire approach of openness to international trade and capital flows, advocated by the United States and other developed countries; 2) an interventionist strategy premised on government regulation of the interaction between the domestic and international economy, along the lines of Asian NICs (newly industrializing countries). Which approach do they support and what arguments do they make to back their position? What kinds of policies with regard to trade, capital flows, and FDI would Hirst and Thompson recommend to the governments of developing countries? Which development strategy do you favor and why? Which strategy do you think is more feasible and why?

 

  1. According to Hirst and Thompson, opponents of globalization tend to overstate the dangers associated with multinational corporations relocating their operations to developing countries with low wages. Moreover, they suggest that trends in production technology and practice raise the possibility that MNCs may actually begin to reconcentrate their activities in their home country. Are you persuaded by their analysis or do you think they understate the seriousness of the problem? Is the transfer of jobs to developing countries a major problem economically? Politically? How might the governments of advanced industrial countries deal with such problems?

 

World Bank Report 

  1. Why did some developing countries grow rapidly -- and others, not? What explanations does the World Bank report offer of the success of a few and the much slower progression of others? Which of factors that they identify as responsible for rapid growth in the Asian newly industrializing economies do you think can be successfully duplicated by other developing countries? Which are unlikely to be replicated elsewhere? What domestic factors and/or developments at the international level are likely to influence the extent to which the "East Asian miracle" can be reproduced in other parts of the world?

 

  1. What economic policies did East Asian governments pursue to encourage exports? According to the World Bank, how did a focus on exports foster economic growth and development in these countries? What similarities existed in the export promotion strategies of the HPAEs? How did approaches differ across countries? Are any of the policies employed by East Asian governments still feasible for other developing countries and, if so, which one(s)? Do you think export-led growth remains a viable development/growth strategy as a whole for developing countries?

 

  1. How did East Asian governments deal with labor? Business? Old elites? What political and/or economic benefits did such arrangements provide to governments, lab, business, and other groups? How did the relationships between these groups and governments cto growth? In the aftermath of the Asian financial crisis, these relationships have been reevaluated and they are now widely believed to have contributed to corruption and economic inefficiency. Do you think this reinterpretation of the arrangements between East Asian governments and domestic social groups is valid? Why or why not?

 

  1. Consider the evolution and nature of capital and labor markets in the East Asian NICs. To what extent did governments intervene in these markets? How did government policies affect the structure and operation of these markets? Did such policies have a positive or negative effect?

 

  1. The neoclassical explanation of the "East Asian miracle" emphasizes how the governments of Asian NICs got macroeconomic fundamentals "right," providing an economic environment of low inflation and competitive markets highly conducive to rapid economic growth. The World Bank report calls attention to how the governments of HPAEs properly managed fiscal, monetary, and exchange rate policies and effectively responded to economic crises. How do you explain the ability of the governments of the Asian NICs to get all of this right, successfully manage their economies, and promote such rapid growth?

  

Notes for November 13 readings: Gary Gereffi, Commodity Chains and Regional Divisions of Labor in East Asia, and P. Gourevitch, R.E. Bohn, and D. McKendrick, What is Global?: The Nationality of Production in the Hard Disk Drive Industry

 

Gereffi 

  1. Gereffi argues that both the neoclassical and state-centered explanations of the development of the Asian NICs are incomplete and that attention must be paid to the role of regional trade and investment networks, which he refers to as producer-driven and buyer-driven commodity chains (PDCCs and BDCCs). Do you think the concept of "networks" adds something useful? How does it differ from a market relationship? Or from relationships within a firm?

 

  1. What are PDCCs and BDCCs? How do the two types of commodity chains differ? What contribution have they made to economic development in the Asian NICs? Are you convinced of their significance? Why or why not? Do you think one type of commodity chain is more/less favorable for economic development and if so, which one and why?

 

  1. In his analysis of the apparel industry, Gereffi suggests that import quotas imposed by developed countries have had an important influence over industrial development and the organization of textile production in Asia. How have such quotas affected the competitiveness of Asian textile manufacturers? How have they influenced regional trade and investment patterns? Can you think of other industries in which import quotas have played a similar role? Based on Gereffi’s analysis, do you think that, on balance, the efforts of developed countries to protect domestic textile manufacturers from Asian competitors have been successful? Why or why not?

 

Gourevitch, Bohn, and McKendrick 

  1. Gourevitch et al suggest a number of different measures of the geographic distribution of industrial activity, such as the location of final assembly, employment, wages paid, and research and development. Which measures are most important from a development perspective? How about from a growth perspective? Which indicators do you think are the most significant and why?
  2. According to Gourevitch et al, firms in the hard disk drive industry have tended to establish fully-owned and operated subsidiaries overseas, i.e. to engage in foreign direct investment (FDI). The geographic distribution of their operations is summarized in Figure 4 (page 18). What kinds of activities are located in developed countries? What types of operations have been established in developing countries? Based on this distribution of activities, what kinds of policies do you think should be adopted by developing countries toward FDI? Should developing countries seek to liberalize their policies toward FDI or to regulate it?

Consider the four theories of firm location decisions -- factor prices, agglomeration, regulation, and networking -- outlined in the paper. Which theory or theories do you think provide the most explanatory power with regard to the hard disk drive industry? Does the relevance of these theories vary significantly across firms within the industry? Can you think of other industries to which one or more of these theories might apply

 

 

Notes for November 20 reading: Dani Rodrik, Has Globalization Gone Too Far? 

  1. Does globalization create more inequality? According to Rodrik the answer is positive. What are the exact mechanisms and changes in labor markets through which these negative consequences are generated? What are alternative explanations of the same outcomes?

 

  1. Are all workers equally affected or are some types of workers hurt more than others? Can you think of ways to test Rodrik's hypothesis?

 

  1. Some people argue that for trade to be "fair," labor and environmental standards need to converge, and they demand such harmonization as the precondition of trade opening. What is Rodrik's position? What are your own conclusions?

 

  1. Rodrik finds that increasing openness is associated with decreased government spending on social protection programs (referred to as "government consumption"). In his view, this is attributable to the declining ability of governments to tax capital as a result of capital's increased mobility in a globalized world economy. Are you convinced by his argument? Can you think of other (economic and/or noneconomic) explanations for the decline in social spending in advanced industrial countries that Rodrik finds?

 

  1. In his conclusion, Rodrik offers a number of policy recommendations to reconcile the tension between globalization and social protection. Do you agree with his recommendations? Why or why not? Which do you think are most feasible? Which do you consider least likely to be implemented?

 

  1. Consider Rodrik's argument and evidence in its entirety. Has globalization already gone too far? Do you think national and/or international efforts to further reduce barriers to trade and capital flows are likely to succeed? Why or why not?

 

 

Notes for November 27 readings on the Asian financial crisis 

  1. The readings on the Asian financial crisis offer several different, sometimes competing, explanations of why the crisis occurred. These include factors at the domestic and international level. In the end, which explanation(s) do you find most compelling and why? Which explanation(s) do you find least convincing?

 

  1. The most widely accepted argument, seen in the articles by Friedman and The Economist, is that weaknesses in the domestic institutions of Asian countries were primarily responsible for the crisis. In what ways were the internal structures of these countries supposedly flawed? Do you think these flaws played as large a role in causing the crisis as they suggest? Have the recent crises in Russia and Latin America provided evidence that supports or undercuts this argument?

 

  1. The IMF has been sharply criticized for its handling of the Asian financial crisis. What policies did the IMF pursue in response to the Asian financial crisis? What criticisms have been leveled at these policies? Are these criticisms valid? What could/should the IMF have done differently? Do you think the IMF has the capacity to deal effectively with international financial crises? If not, how might its role and/or capabilities be strengthened?

 

  1. In his paper, Wade offers one explanation for the IMF's approach to the Asian financial crisis. How does he explain the IMF's response to the crisis and do you find his explanation convincing? Why or why not? If you were unconvinced by his argument, how would you explain the IMF's approach?

 

  1. In the wake of the Asian financial crisis, some have suggested that capitalism is inherently unstable. Thurow, for example, writes that "[e]conomic collapses are an intrinsic part of capitalism." Do you think international economic crises are inevitable? Why or why not?

 

  1. Stiglitz and others propose a variety of measat both the domestic and international levels to either mitigate or prevent future crises. Which proposals if any, do you conmost promising? Which proposals do you think are most feasible? Which do you think are likely to encounter strong opposition?

 

Notes for December 4 readings: S. Berger and R. Dore, eds., National Diversity and Global Capitalism 

The readings for this week ask us to consider whether, how, and to what extent globalization of economic life – especially but not only international mobility and flows of goods and capital – constrains autonomy and impels convergence of national economic and other policies and practices. They also ask us to consider whether convergence or divergence is a good thing, whether the future holds greater or less convergence, and finally what can and should be done, if anything, to preserve national practices.

 

The Berger introduction provides an overview of the questions and controversies at stake here. And the rest of the readings provide particular answers, with reference to particular sets of theoretical concepts and cases.

 

  1. What are some important national differences in macroeconomic policy, microeconomic policy, and political and social practices in the past or present that might be more or less subject to convergent pressure?
  2. In past thinking, Berger points out, convergence arguments focused on the role of technology as leading previously different economic policies and practices to converge. Boyer, Berger, Wade, and Upham focus on a variety of possibilities by which global capitalism might entail different mechanisms for convergence – including not only pressure from mobile capital and goods making some practices harder to pursue -- but also more intentional action by governments and industrial actors to copy one another or to force one another to adopt policies to protect home practices. What are the mechanisms by which global capitalism might lead to convergence of national differences? And how do the politics of these various mechanisms differ?
  3. According to Wade and Boyer, how globalized and interdependent has the world become according to various criteria? And how much do they believe national capitalism, by various mechanisms, constrains national sovereignty and impels national convergence?
  4. Upham and Streeck provide particular case study accounts of experience with the politics of globalization and national convergence. What do the Structural Impediments Initiative between Japan and the United States and industrial reform practice in German auto production tell us about the mechanisms, politics, and extent of convergence in an era of global capitalism? What role did domestic political struggles play in combining with aspects of global capitalism to allow or fuel convergence in some respects and not others?
  5. Streeten’s chapter discusses how trade policy can, and plausibly should, be used to protect national diversity? What are some of the more and less persuasive justifications for using trade policy to protect national diversity? For example, what do you think of his claim that national welfare might need to be expanded beyond traditional trade theory to include the value of “the quiet life”?
  6. Dore’s conclusion provides a pessimistic reading of the constraining effects of global capitalism and a passionate plea for what needs to be done to preserve and deepen national difference and a humane capitalism. What are the kinds of policies and practices Dore believes make for more or less humane capitalism? What are the reasons he expects global capitalism to threaten these policies and practices? And what are the particular social and institutional changes he thinks might preserve more humane capitalism?

 

Notes for December 11 reading: Geoffrey Garrett, Global Markets and National Politics: Collision Course or Virtuous Circle? 

  1. Garrett is optimistic about the prospects for government activism in a globalized world economy. According to Garrett, what kinds of policies will governments still be able to pursue? What limits will governments have to observe? Do you share his optimism? Why or why not?

 

  1. Garrett claims that globalization has heightened feelings of economic insecurity throughout society. He also suggests that center-left political parties are more likely to be responsive to such sentiment than center-right parties. Based on these assertions, what predictions can we make about trends in domestic politics as the process of globalization continues? What implications, if any, might such trends have for international politics?

 

  1. What is Garrett's view of financial market integration? Does he seem to support or oppose capital account liberalization?

 

  1. The Mundell-Fleming approach argues that countries can have at most two of the following three conditions: a fixed exchange rate, capital mobility, and macroeconomic (monetary) policy autonomy. On pp. 802-803, Garrett suggests that governments should choose the latter two and allow their exchange rate to float. Do you agree with his policy prescription? Does it apply to all countries? Or would the choice of policies vary across countries and, if so, how?

 

  1. Garrett presents some data on the deepening of financial market integration that seem to support the conventional wisdom about globalization. How would you explain the trend toward greater financial market integration? What factors seem to be driving it? Technology? Ideology? Powerful international actors?

 

  1. Garrett's paper considers the politics of globalization at the national level. Now consider the international politics of globalization. Are international agreements to regulate the world economy still possible? For example, can governments still reach effective multilateral agreements on foreign exchange or capital flows? Or, does globalization impose political constraints at the international as well as the domestic level?