International political economy definition

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Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org Chapter 1 Demystifying the Complex World of International Political Economy Introduction There are many books on international political economy, or IPE for short. Not surprisingly, each contains its own assumptions and views about the key concepts, issues, and concerns of IPE. Sometimes the authors of these various books hold the same assumptions and share the same, or at least very similar, views about how the world works. Sometimes they don’t. In fact, as we will see in a few of the chapters that follow, the perspectives of the people who write and think about IPE are often dramatically, if not fundamentally, different. You may already have an inkling that mainstream economists and radical economists (e.g., Marxists) do not agree on many central issues and concepts. But even among those who Figure 1.1. On the left is Friedrich Hayek and on the right, John Maynard Keynes. The debate between these two influential economists is still unresolved. seem to share basic ideas, there can be Image sources: The photo of Keynes is in the public domain, sharp disagreements. Within the broad and is free to use for publication purposes. The photo of F. school of neoclassical economics, for Hayek is licensed under the Creative Commons-Share Alike 3.0 unported license, and was released by the Mises Institute. The mash-up of the two photos was done by the Saylor URL: http://www.saylor.org/courses/books author. Attributed to: Timothy C Lim, Ph.D. saylor.org example, there is an intense and still-unresolved debate between those who believe that markets must be left alone and those who believe that government intervention in markets is sometimes necessary. This debate is encapsulated in the ideas of, and debates between, two famous economists—John Maynard Keynes and Friedrich Hayek. Keynes, who died in 1946, is best known for his ideas about the importance of “pump priming,” which refers to deficit spending by governments in times of recession or depression. The goal is to increase demand and create a virtuous circle: higher demand means more need for workers, more workers keeps demand strong, and strong demand keeps the economy going. Keynes’s ideas, it is important to note, are far from dead: the global recession that began around 2008 spurred the United States government to engage in stimulus spending—a type of pump priming—and other policies (including maintaining historically low interest rates and quantitative easing). These are all Keynesian policy prescriptions. Hayek, by contrast, expressed profound confidence in the ability of markets to take care of themselves, and saw only a very limited role for governments at the national level, one based on ensuring a relatively stable supply of money. Hayek is most famous for his classic book, The Road to Serfdom, first published in 1944. In The Road to Serfdom—which has become one of the bibles of libertarianism, along with Ayn Rand’s Atlas Shrugged (1957)—Hayek argued strongly that government control of economic planning inevitably leads to the loss of individual freedom. While his ideas were marginalized in the 1940s and 1950s, they found a much more receptive audience beginning in the 1970s; since then, Hayek’s writings have developed a very strong and even fervent following, especially among policymakers in the United States and Great Britain. Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org Significantly, the debate between followers of Keynes and followers of Hayek has been going on since the late 1930s. Think about this for a moment: in seventy-odd years, mainstream economists have yet to reach consensus on a fairly basic issue (i.e., Does stimulus spending work or doesn’t it?). Indeed, in an important respect, the disagreement today is even stronger than in the past, when there were long periods in which one or the other view held sway. While neoclassical economists continue to debate a range of issues, it is important to emphasize from the outset that neoclassical economics is not the same as international political economy. As I will discuss in detail below, IPE is a distinct field of inquiry. There is, to be sure, some overlap between the two fields—neoclassical economics and IPE—but there are also areas of very strong divergence. One of the most salient differences is embedded in the terminology itself. International political economy considers politics and economics to be inextricably intertwined, while neoclassical economics asserts that economics and politics are—and should be—two essentially separate areas or processes. We will consider this issue in much more detail below. For now, it is also important to emphasize that, as a field of study, IPE is much more strongly connected to the discipline of political science than it is to economics. The reason for this is clear: IPE is an outgrowth of international relations, or IR for short. IR, a major subfield within political science, has traditionally focused on the struggle for power between and among states. Although a diverse and heterogeneous field in its own right, IR has long been dominated by a particular theoretical perspective known as realism. Realism, in turn, has long held a heavy bias toward “high politics,” which refers to all matters considered vital to the survival of the state. In practical terms, this entails a near exclusive focus on military-strategic issues. Economic concerns, therefore, are relegated to the domain of “low politics” and, as the term Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org implies, are considered relatively unimportant. For many scholars, however, both the dismissal of economic concerns as unimportant and the implicit separation of politics from economics is unwarranted: in a nutshell, this is what led to the emergence of international political economy as a distinct field of study (beginning in the 1970s). What Is Globalization (and Why Is It Important)? Interestingly, in moving away from IR, IPE scholars continued to use the word international to describe the field. Yet, as most of us recognize, the world is increasingly characterized by the phenomenon referred to as globalization. There are, unfortunately, not only many ways to define the term globalization, but there is also no general consensus on how it should be defined. We cannot resolve the debate here; for now, then, suffice it to say that globalization is a complex and multidimensional (economic, political, social, technological, and cultural) process that involves a compression of time and space (Harvey 1989). The time-space compression, most simply, is a situation in which geographic distance has become less and less an obstacle to communication and information flows, to production, and to the movement of goods, people, ideas, and capital around the world. Time-space compression is represented in many developments, but nowhere is it more evident than in the Internet and other forms of information technology. Today ordinary citizens can instantaneously communicate with thousands, even millions of people across the globe at the press of a button via Twitter (or the Chinese version, Weibo), Facebook, or Pinterest; the cost of this communication, moreover, is practically nil for the individual user. Somewhat slower, but still significant, are video-sharing sites such as YouTube, which are used by regular people, influential organizations, governments, and powerful corporations Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org alike. In 2012, for example, the group Invisible Children posted a video called Kony 2012, which appealed for Joseph Kony’s capture and arrest for his role in the commission of crimes against humanity and war crimes against civilian populations in Uganda. The video has generated almost 100 million hits (as of June 2013). Globalization, as the foregoing discussion suggests, also means increasing interconnectedness, through which the actions and activities of states, societies, organizations, and peoples in one place can have significant reverberations in many other places, virtually anywhere on the planet. Such descriptions of globalization have become trite, but nonetheless, the implications of globalization remain immense, especially for the field of international political economy. Indeed, as we have already seen, in the era of globalization, the label international may well have become anachronistic. The term era, it should be noted, is generally defined as “a long and distinct period of history with a 1 particular feature or characteristic.” The era of globalization, therefore, necessarily implies that what exists today is meaningfully different from the past. This does not mean that globalization is an entirely novel phenomenon. It is not. But as one scholar put it, “globalization did not figure continually, comprehensively, intensely, and with rapidly increasing frequency in the lives of a large proportion of humanity until around the 1960s” (Scholte 2001, p. 17). A key implication of globalization is in the de-linking of specific processes, relations, and activities from specific territories. Territorial and political space—as in a country such as the United States, Brazil, or China—still matters a great deal, but globalization is challenging the still-prevailing idea of a single territorial state as the exclusive site for organizing political, economic, and social relations. This means, in turn, Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org that the state is losing its unrivaled status. We will return to this issue below (in the section “Putting the Global in International Political Economy”), so for now it is enough to say that globalization has expanded the influence and power of a range of nonstate or transnational entities. Corporations, of course, are among the most important of these entities, but so too are nongovernmental organizations (NGOs), regulatory agencies, associations, social movements, and the like—many of which “treat the whole planet as their actual or potential clients” (Scholte 2001, p. 16). Why Do Scholars Disagree? Earlier I discussed the disagreements that exist among economists, between various disciplines and fields of study—such as neoclassical economics and IPE, or IPE and IR— and among scholars and analysts more generally. Left unaddressed, however, is the question of why such disagreements exist in the first place. That is, why don’t scholars and others who think about economics, politics, or international political economy agree on how things work? Why can’t they even seem to agree on what factors or processes are most important in the world (political) economy? There are many answers, but perhaps the most fundamental reason has to do with the subject itself: as with all social sciences, IPE ultimately studies the behavior and actions of human beings, which means that, unlike the physical world of the natural sciences, the social world is populated by subjects with the capacity to think, learn, and make willful choices. To understand the difference, just imagine if atoms, planets, and chemicals had minds and wills of their own. Certainly, the task of physicists, astronomers, and chemists would be far more difficult than it is already. But it is not only individual consciousness that separates the social from the natural sciences. The Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org social world is also composed of historically contingent structures, institutions, and systems of belief (i.e., cultures). The term historically contingent means that major elements of our social world are the product of specific and sometimes unique processes and circumstances that make, say, the United States meaningfully different from Japan, or Japan different from France, and so on. In every country, too, there are often dramatic differences—including differences in national identity and culture—between different time periods, such as Japan in 1850 compared to Japan in 2013. To fully understand or explain the social world, then, it is not enough that we find the “universal key” to individual behavior (which some social scientists claim to have done with the concept of rationality); we must also try to understand how the broader social, economic, and cultural contexts in which individuals live alter, shape, and constrain—in both subtle and dramatic ways—the behavior of people and the types of societies, polities, and economies they produce. Given this, a grand totalizing theory (a single theory that explains everything) is exceedingly hard to imagine. The Social World as an Open System From a different perspective, we can say that the social world is, by nature, an open system, which basically means that the subjects or objects (e.g., forces or factors) we want to study cannot be isolated from other subjects or objects in the environment. In many of the natural sciences, by contrast, objects of study can be isolated, albeit not always completely. The whole point of many experiments in the natural sciences, in fact, is to create closed or quasi-closed systems so that regular sequences of events can be observed under carefully controlled conditions (Sayer 1992). It is this ability to create closed systems that has led to the precision and predictive success of certain sciences like physics and astronomy. On the Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org other hand, there are some natural sciences—e.g., meteorology, geology, and the environmental sciences more generally—that do not have the ability to directly experiment with closed systems, although they can sometimes borrow from closed-system sciences to establish rough predictions and explanations (ibid.). It is the relative lack of precision and predictive power in these more open-system natural Figure 1.2. The science on climate change is sciences that has led to some intense complicated because the planet is an open system, which means that scientists are unable to isolate or control for a wide range of potentially relevant and even fundamental disagreements, variables. which may or may not be amenable to Permission to copy, distribute, and modify this image is granted under the GNU Documentation resolution in the long run. One of the License, Version 1.2. most prominent examples of this is the continuing debate over global warming. After decades of intense research, for example, there is near-universal scientific consensus on theories related to the greenhouse effects of global warming, yet because the global environment is inherently open, there continues to be room for debate. In general, the difficulties posed by open systems in the environmental sciences pale in comparison to those in the social sciences, where subjects also have the added capacity for learning and self-change; this means that the subjects of study are, in principle, never exactly the same from one time period to the next (or even from one minute to the next). Thus, it should be even less surprising that sharp theoretical disagreements in IPE not only Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org exist, but also show no sign of ever disappearing. The basic reason, to repeat, is clear: the inherent openness of social systems means that there will always be strict limits on what we can know (although there are many stalwart social scientists—including, no doubt, several of your past or current professors—who never have accepted this, and probably never will). Given these limitations, the goal of this book is not to provide a definitive, much less objective exposition on international political economy. I especially do not want to tell you the “proper” or “correct” way to think. Rather, I want to provide you with knowledge that will enable you to develop your own ideas and frameworks of analysis. In this regard, I have two other related goals. First, I wish to get you to think more clearly and explicitly about your own (theoretical) assumptions, values, and beliefs. This is a critical step, since many students often do not understand the basis and/or implications of their own beliefs about the world. It is this lack of self-understanding that leads to inconsistent, sloppy, and sometimes contradictory thinking. Second, I want to introduce you to a variety of ways of understanding, explaining, and interpreting the world political economy. In the process, however, I also want to help you make much better sense of the conflicting perspectives and approaches in the field of IPE. Defining International Political Economy: The First Step So far we have seen the term international political economy numerous times, but we have not yet Figure 1.3. In the traditional view, the relationship between the discussed its meaning. Before we get state and the market is seen as adversarial, like two boxers fighting. However, this is not the only way—nor is it necessarily the best way—to conceptualize the relationship Saylor URL: http://www.saylor.org/courses/books between the state and the market. Attributed to: Timothy C Lim, Ph.D. Source: Library of Congress, New York World-Telegram & Sun saylor.org Collection. http://www.loc.gov/pictures/resource/cph.3c14335/ “No copyright restriction known” to the nitty-gritty, though, a few words of warning are in order. First, there is no universal agreement on how IPE should be defined—although this is definitely changing. This means the discussion that follows will not be as simple or straightforward as you might expect (or want). At the same time, a careful reading of this section will provide you with a better foundation for understanding and interpreting the concepts, issues, and problems that are examined throughout the remainder of this book. Second, it is also important to emphasize, at the outset, a key point: definitions are important. A big reason for this is that they tell us what to include in our analysis and what to leave out. Put in slightly different terms, definitions within a given area of inquiry tell us what is considered legitimate—what matters, or what is relevant—within that field, as well as how it is supposed to be studied. We can certainly see this in the more common definitions of international political economy. Consider this somewhat dated definition from a once-popular textbook, which tells us that international political economy “is the study of the tension between the market, where individuals engage in self-interested activities, and the state, where those same individuals undertake collective action . . .” (emphasis added; Balaam and Veseth 1996, p. 6). This seemingly innocuous definition is based on several important, but unstated assumptions. First, it suggests that there are only two significant subjects of international political economy: (a) markets, which are composed of self-interested individuals (and the firms that they operate), and (b) states, which are the primary political institutions of the modern international system. Further, it suggests that a clear-cut distinction exists between economic or market-based activities and political or state-centered ones. Second, this definition tells us that the most important aspect of the relationship between markets and states is based on tension, which is “a strained state or condition resulting from forces acting in opposition to Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org 2 each other.” In other words, the definition presupposes that markets and states relate to one another in fundamentally adversarial ways. On the surface, there is nothing terribly objectionable about this definition of international political economy. Markets and states are obviously important, and it seems apparent that a strong degree of antagonism can exist between them. However, in looking below the surface, problems begin to arise. The exclusive focus on states and markets, in particular, is exceedingly narrow. In the definition, for example, states represent the political world, but if political society is defined solely in terms of the state, then whole categories of other actors, issues, and activities are essentially eliminated from view, or at least relegated to the outer margins of the field. According to the foregoing definition, in other words, we don’t even get to ask the question, “Who are the most important actors in world politics?” Yet this would seem to be a crucial question. What if states are not as all-powerful as the definition suggests? What if there are other powerful actors out there in the world? What would this mean to our understanding of how the world works? In addition, defining state-market relations as “tense,” or adversarial, rules out other possible aspects of that relationship. Can the state-market relationship, for instance, be reciprocal or mutually constitutive? (Mutually constitutive means, most simply, that two entities cannot exist apart from one another, or that each part Figure 1.4. Marx’s theory is often misunderstood, but it exists on account of and for the other part.) Again, using the arguably still has much to tell us about the world foregoing definition, we cannot even ask these types of questions. Yet economy. The class- analytical basis of Marxist analysis is particularly such questions—and the answers to them—are vital to the study of important. Chapter 2 will discuss his theory in more international political economy. depth. Source: Unknown. This image is in the public domain because Saylor URL: http://www.saylor.org/courses/books its copyright has expired. Attributed to: Timothy C Lim, Ph.D. saylor.org Let us take a closer look at the issue of the assumed “tension” or antagonism between the state and the market. A number of scholars have convincingly argued that states and markets are inextricably bound together. Karl Polanyi, to cite one scholar whose work we will focus on later in this chapter, provided a convincing argument that the emergence and subsequent development of a “market society” was made possible by the enormous and continuous intervention of the state. Similarly, Charles Tilly’s now-classic study, Coercion, Capital, and European States, AD 990–1990, showed that the development of the modern state in countries such as Britain and France paved the way for capitalist development. At a more basic level, another prominent scholar, Albert O. Hirschman (1977), convincingly argued that the “invention of capitalism depended on the creation of a new type of political actor—an individual liberal subject who was the product of a liberal state” (Blyth 2009). In vivid contrast to the state-centered definition of international political economy is the Marxist view, which, generally speaking, focuses on the social relations of production. From a Marxist perspective, the key aspect of political economy (note that Marxism does not distinguish between IPE and political economy more generally) is the inescapable conflict between opposing class interests—that is, between the owners of the means of production (i.e., modern capitalists) and wage laborers (i.e., workers). The questions and answers that result from a definition that focuses on the tension between states and markets versus one that focuses on opposing class interests are, needless to say, likely to be quite different. Yet, as with the more conventional or mainstream definition, Marxists also tell us on whom we should focus all, or the bulk of, our attention—i.e., social classes—and how we should conceptualize the relationship between the key actors: as conflict-ridden. There is no middle ground here, either. This definition, then, can be just as problematic as the first if Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org we assume that the world is more complex than the definition indicates, which I think it is. Let us just consider one problem. In the Marxist definition, no mention is made of the state. The reason for this, at least to Marxists, is clear: (classical) Marxists considered the state to be an appendage, or tool, of the dominant class. That is, the state existed to serve the interests of capitalists. Period. It is difficult, however, to sustain this argument, since we can, with relative ease, find evidence that states can and do act against the interests of dominant economic actors—not always, but more than just occasionally. Recognition of this fact, by the way, has compelled contemporary Marxists to offer up the notion of relative autonomy, which acknowledges that states are, indeed, actors with their own interests, but that they are “relatively autonomous” because they can never be totally independent of dominant class interests. As I suggested above, things are changing. David Balaam (one of the authors cited in the first definition), for example, later amended his conceptualization of IPE by adding societies into the mix. Specifically, he (and a different co-author) wrote, “as a subject area or field of inquiry … international political economy involves tensions amongst a variety of state, market, and societal actors and institutions” (emphasis in the original; Balaam and Dillman 2011, p. 7). This amended definition clearly expands the range of relevant actors (and could easily include social classes); it also explicitly introduces another type of actor— namely, institutions. We will learn more about institutions later; for now, suffice it to say that many scholars, and perhaps most, agree on broadening the domain of IPE (although the amended definition still insists on restricting IPE to the “tensions amongst” these actors). More generally, then, we are seeing a shift to an inclusive definition of IPE. This has had significant implications. Most importantly, it has allowed hitherto excluded or ignored Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org actors, activities, and issues to finally be fully incorporated into the mainstream. Over the years, for example, we have seen more emphasis on a range of societal or nonstate actors: corporations, labor unions, social movements, criminal organizations, nongovernmental organizations (NGOs), religious institutions, epistemic communities, and so on. We have also seen an expansion of issue areas. Twenty years ago, most IPE textbooks would focus on a limited number of topics, especially international trade and monetary relations, international finance, and international debt and development. Today, such issues as the global environment, cross-border migration, social movements (including indigenous peoples’ movements), poverty and hunger, nationalism, gender, and race/ethnicity are considered appropriate topics of study in international political economy. Putting the Global in International Political Economy In the introduction to this chapter, I briefly discussed a significant limitation of IPE, a limitation that stems from the use of the term international. Strictly speaking, international applies only to relations between and among sovereign states. The term also implies a clear distinction between the national and the international—between what goes on inside states and what goes on outside states. With just a little reflection, though, it is clear that a great deal of, and likely most, economic activity that occurs in the world today is conducted—and sometimes controlled—by nonstate actors in ways that transcend national boundaries. Most of us know, for example, that large corporations engage in all sorts of economic transactions and activities that cut across borders: from buying, selling, and trading products and services, to building and investing in global chains of production (whereby a single product is designed, manufactured, assembled, distributed, and marketed in various locations Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org throughout the world), to forging strategic alliances with other corporations based in a range of different countries. We even have a special name for these types of firms: transnational corporations, or TNCs for short. The ability of TNCs to quickly and (relatively) cheaply move operations and assets—physical, financial, technological, et cetera—across borders is a fairly recent phenomenon. To be sure, for a very long Table 1.1. Revenue of World’s Largest Corporations (by Sales) Compared to GDP of Selected Countries, time corporations have had operations in 2011 (in U.S. Billions) multiple territories, but establishing and Country GDP Corporation Sales maintaining a presence across the globe Austria 419.2 Wal-Mart Stores 421.8 UAE 360.1 Shell (Netherlands) 369.1 was a slow, arduous, and expensive Thailand 345.6 ExxonMobil (U.S.) 341.6 undertaking. As technological, financial, Greece 303.1 BP (UK) 297.1 and political barriers have begun to fall Chile 248.4 Sinopec-China 284.8 away—as the world, according to a popular Ireland 217.7 PetroChina 222.3 Philippines 213.1 Toyota (Japan) 202.8 saying, has become “smaller” (this refers to Algeria 190.7 Chevron (U.S.) 189.6 the notion of time-space compression, Romania 189.8 Total (France) 188.1 which I discussed earlier)—the costs Kuwait 176.7 ConocoPhillips (U.S.) 175.6 associated with operating on a transnational Sources: Statistics for corporations comes from Forbes.com (“World’s Biggest Public Companies 2011”), available at basis have decreased rapidly. Today, http://www.forbes.com/lists/2012/18/global2000_2011.html; data for GDP comes from the International Monetary Fund, “Report for Selected Countries and Subjects,” in the World according to UNCTAD (United Nations Economic Outlook Database, April 2012, available at http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/inde Conference on Trade and Development), there are over 82,000 TNCs with as many as 810,000 foreign affiliates (UNCTAD 2009, p. 222). Consider just one well-known example: Toyota Motor Corporation. Toyota has operations and facilities in 27 countries and regions, and its products are sold in 160 Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org countries. Toyota’s revenues, moreover, totaled almost 203 billion in 2011, which was more than the GDP of 150 countries. Indeed, as a group, corporations—not states—directly control most of the world’s productive, financial, and technological resources. The combined sales of the top ten corporations in the world in 2011 were 2.69 trillion, which is larger than the GDP of all but four countries (the United States, China, Japan, and Germany). While a comparison of corporate revenue to GDP is admittedly simplistic, it nonetheless gives a general sense of the economic size of corporations relative to most states. Where, when, and how TNCs decide to invest, manufacture, and/or distribute their products is therefore of considerable importance to the world political economy. The rise of the transnational corporation, in sum, means that we can no longer just talk about states (actually, this has been true for quite some time). This does not mean, however, that corporations have surpassed states as the primary sources of power in the global economy. They have not. Yet, it does mean, to repeat, that we can no longer analyze the international political economy as if only states have power. Figure 1.5. An Example of Regulatory Arbitrage Indeed, many scholars argue that TNCs are now able to directly challenge states’ authority to regulate their activity. Consider this simple, but oft-cited example: by threatening to limit or close down their operations in a given location, corporations can compel governments to modify local regulations or standards for health, safety, wage levels, and/or the environment—a In an era of globalized production, states have more difficulty regulating and taxing TNCs, since corporations can phenomenon dubbed regulatory arbitrage. In easily relocate some or all of their operations to countries with minimal regulations and taxes. Mobility and their productive capabilities give TNCs significant power in the Saylor URL: http://www.saylor.org/courses/books world economy. Attributed to: Timothy C Lim, Ph.D. Source: Created by author. saylor.org essence, TNCs are telling states, including the most powerful ones: “If you want our business, then you have to play by our rules.” Another example can be found in the area of corporate tax arbitrage—an issue that became particularly salient in 2013, when Apple Computer was criticized for “offshore profit shifting” in order to cut dramatically the taxes it pays in the United States. Again, this is not to say that TNCs have necessarily become the equals of the largest and most powerful states; instead, it means that the relationship between states and large corporations is not as clear-cut or unilateral as it once appeared to be. In fact, even the most powerful state in the world—the United States—is not immune from corporate power. In the area of international trade, for instance, it is well understood that U.S. policy is influenced, and even Figure 1.6. Charles E. Wilson: “What’s good for GM …” sometimes dictated, by the interests of corporations. A noteworthy example of this was the decision, by the Bush administration in 2002, to impose tariffs on imported (foreign) steel. Many observers have argued that it was pressure from the U.S. steel industry that drove the The actual quote by Wilson (left), former CEO of General Motors, came in response to a question at administration’s policy decision, rather a Senate committee hearing on his nomination to become secretary of defense. He was asked if he than the interests of the country as a whole. could make a decision as secretary of defense that would go against the interests of GM. Wilson said This may seem an obvious point, but it is a that he could, but added, “I cannot conceive of one, because for years I thought that what was very important one to keep in mind: if state good for our country was good for General Motors, and vice versa” (quoted in Hyde 2008). action is even partially determined by This work is in the public domain in the United States because it is a work prepared by an officer or employee of the United States government as part of that person’s nonstate actors, this tells us again that we official duties under the terms of Title 17, Chapter 1, Section 105 of the U.S. Code. Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org cannot focus exclusively on what states themselves do. (As we will see, too, such policy decisions are complicated: Bush’s actions may have pleased steel-producing companies, but they hurt steel-consuming companies, as well as consumers.) Globalization: A Reprise The increasingly important role that TNCs (and other transnational actors) are playing in the world today can be attributed, in large part, to globalization. Again, globalization is one of those terms about which there is no broad-based consensus. While some see it as an over-hyped myth, others argue that it has already brought about fundamental changes to the world. I am more sympathetic to the latter view. That is, I believe that globalization is a critical phenomenon that must be accounted for in any examination of international political economy. To repeat, globalization is a complex, multidimensional, and ongoing process. The most salient aspects of globalization—that is, those aspects most people think about when they hear the term globalization—are economic. Economic globalization is more than the simple extension of economic activities across borders, which has been going on for centuries. Instead, it refers to the functional integration of economic activities across borders (Dicken 1998). Imagine a network with connections crisscrossing the globe; each point (or node) has a different, sometimes very specialized function, whether in manufacturing, finance, transport, marketing, sales, or something else. Each point of activity relies on other nodes to do their part in creating or sustaining a larger whole. This is, in very simple terms, functional integration. One important implication of this condition is a de-nationalization of corporations. For the most part, we still tend to think of corporations as essentially American, German, Chinese, Mexican, and so on. Yet, when Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org corporate operations are part of a globalized network, nationality matters less and less—or, perhaps more accurately, it matters in different ways. In the past, to paraphrase a famous quote by the former head of GM, what was good for General Motors (or any other U.S. company) was good for the country. In the era of globalization, this is not necessarily the case. What is good for GM might be good for the United States, but it also might be good for Russia, China, the European Union, Brazil, India, and a slew of other countries where GM invests and sells its products. At the same time, the de-nationalization of TNCs does not mean that political borders have, or will necessarily, become irrelevant. Political space still matters At the most basic level, we know this because of a point we already covered— namely, that states and markets are mutually constitutive. Doremus et al. put it this way: “Without stable political foundations, markets collapse” (1998, p. 3). Globalization, I must emphasize, is not only about deepening economic integration and interconnectedness. Another key aspect of globalization is occurring in the realm of ideology, values, and beliefs. This means, in part, that people throughout the world are beginning to communicate—albeit as a product, to a significant extent, of advances in information technology (IT)—in terms of a common discourse centering around human and political rights (especially democracy), social, economic, and environmental justice, and global governance. Just how meaningful this “globalization of ideas” might be is still open to debate, but we can see evidence of its impact with increasing frequency: from the peasant rebellion in Chiapas, Mexico, to the Arab Spring, from the protests against sweatshop labor in the garment districts of New York, Honduras, Haiti, and Los Angeles to the Occupy Wall Street (OWS) movement in the United States and Europe. What is significant about—and common to—all these cases is that, to varying extents, each is based on an appeal to a set of Saylor URL: http://www.saylor.org/courses/books Attributed to: Timothy C Lim, Ph.D. saylor.org

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