Selling.Globalization.The.Myth.Of.The.Global.Economy.Ebook-Een.Pdf
Total Page:16
File Type:pdf, Size:1020Kb
Selling Globalization The Myth of the Global Economy Michael Veseth Lynne Rienner Publishers 1998 Table of Contents Preface 1. Global Visions 2. The End of Geography and the Last Nation-State 3. The Center of the Universe 4. Currency Crises 5. Turbulence and Chaos 6. The Political Economy of Globalization 7. Unsettled Foundations 8. Rethinking Globalization Bibliography * Michael Veseth is professor of economics and director of the Political Economy Program at the University of Puget Sound. His numerous books include Mountains of Debt; Introductory Economics; Public Finance; and most recently, Introduction to International Political Economy (coauthored with David Balaam). Preface This book began as a project to explore the application of chaos theory—the analysis of nonlinear dynamical processes—to international political economy, especially to the study of international financial movements. For a variety of reasons, I thought that international capital flows might be an especially interesting area to hunt for nonlinear dynamics. This hunch was correct. In fact, exchange rates and international capital flows display elements of both crisis and chaos, which are analyzed, illustrated, and discussed in the critical central chapters of this book. Once the case for chaos in international finance was established, the question I faced was, “so what?” One answer was globalization. Many people tell the story that global financial markets are the driving force behind the globalization of production, consumption, culture, politics, and more. The existence of crisis and chaos, however, makes truly global finance impossible, as a close study of the data indicates. This drew me into the globalization literature, which I found in need of a critical analysis. Much of what is written about globalization turns out to be nonsense and is accepted mostly because the story is appealing and because there are strong political and intellectual interests supporting it. Globalization, at least as it is conceived by some, is a myth. But like good myths, it is difficult to forget even after its illusive properties are revealed. The notion that globalization is a myth, at least on some level, and that international financial chaos necessarily limits globalization was a very radical idea when I first began talking about it to friends and colleagues. They thought I was nuts. As I began the final revisions of this book, however, the full impact of the financial collapse in Asia was beginning to be realized. And my ideas no longer seemed so outrageous. The globalization myth, however, lives on. It seems to have a life of its own—quite apart from the new information about the financial structures that simultaneously make global expansion possible and limit its growth. Why? In trying to explain the persistence of the globalization myth, I have found myself moving in two directions. One path leads to the concrete world of case study. Case studies of four “global” firms—Boeing, Microsoft, Nike, and the world’s largest pension fund management company, the Frank Russell Company—let me think creatively about what actual globalization is and what it means, which led me to the truth behind the myth. But I am also concerned about the interests that are served by the myth of globalization and those interests that are threatened by its debunking. These concerns led me to the political economy of global finance. Here I discuss which political interests are furthered by the threat of global business and what intellectual interests within the economics profession are threatened by the possibility that something so important as global financial markets might not behave according to the simple laws of supply and demand. I have intentionally tried to avoid an academic writing style in this book. I have tried to make the text interesting and the opinions clear and provocative. I have tried to prompt reaction and dialogue. I hope readers are not put off by my occasional brashness. I have spent a lot of time reading authors who try to “sell globalization,” and I guess a bit of their style has rubbed off on my work. Although the focus of Selling Globalizationhas shifted, its real core is still chaos theory. International political economy is complex and dynamic. It is tempting to oversimplify issues that are multidimensional and complex, but it is often wrong to do so. We need to be wary of what we “buy” when simplified visions of complex processes like globalization are presented to us. * * * I am an authority on debt, and I have run up more than the usual number of professional debts in writing this book. I am grateful to the University of Puget Sound, which has supported my work for many years, and to the Bologna Center of the Johns Hopkins University School of Advanced International Studies, where work on Chapters 5, 6, and 7 took place. David Balaam deserves special thanks for the help he provided me during the process of revising the manuscript. I am also grateful to an anonymous reviewer for a number of useful revision ideas. Finally, I would like to thank Leon Grunberg, Sunil Kukreja, David Sousa, Matt Warning, Ed Greenberg, Felix Martin, Jamie Ledford, Jon Westerman, Aadip Desai, and most of all, Sue Veseth. The errors and outrages that remain are all mine. I dedicate this book to Ernie Combs—teacher, colleague, and friend. 1. Global Visions Globalisation is a trend that has spawned many conventional wisdoms. The freedom of employers to locate factories wherever labour costs are cheapest is said to have reduced the power of labour. The ability of companies to choose countries with user- friendly tax and regulatory regimes is alleged to have undermined the power of the nation state. Income inequality in the developed world is often attributed to the globalisation of production. While there is an element of truth in each of these assertions, they are all potentially misleading. —Financial Times 1 This book is about the G-word: Globalization. Globalization is one of the most powerful and persuasive images of today’s world. The image of globalization—as promise or as threat—is invoked daily to justify actions and to rationalize policy. Managers are encouraged to “think global.” Investors sink their cash into “global” mutual funds. Politicians at every level in every country push to plug into the global web. Globalization is big and it is hot. But is globalization more than an image? What is the real nature of this process and what does it hold as promise or as threat? I believe that the “globe” is experiencing real and important change, but it is not globalization. Or at least the most important element is not the global element. In this book I argue that globalization is badly misunderstood. It is quantitatively and qualitatively different from the conventional wisdom. In particular, it is fundamentally different from the extreme visions of globalization—hyperglobalization—with which we are constantly bombarded in newspapers, on television, in popular books, and in scholarly journals. 2 In fact, I argue, the popular hyperglobalization images of seamless global markets and a borderless world are impossible from a practical point of view, whatever their theoretical or emotional appeal may be. Global financial markets have a built-in tendency toward chaos and crisis, and the instability worsens as the markets expand. Without a stable financial base, an integrated global economy is out of the question. Truly global firms are rare animals in this world of chaos and crisis. The emerging “global economy” that we hear so much about is really something else. If globalization as we commonly think of it does not exist, then how did we come to think of it this way? My answer is that hyperglobalization and its image of the seamless global economy are useful. Many people are able to further their own economic, political, and intellectual interests by painting in vivid, memorable colors a picture of hyperglobalization at work. Globalization is sold, and we buy it. But globalization is really a delivery system, not a final product. When we accept the image of hyperglobalization, we simultaneously accept, usually without question, a number of other images—political, economic, and intellectual. Globalization is the Marlboro Man of international political economy. People are attracted to the advertised image and buy the product associated with it. It makes them feel good and look cool, and they are soon addicted. Then one day they wake up with emphysema. This process is misleading and potentially dangerous. It is time that this globalization business was more closely scrutinized. This first chapter presents short case studies of how globalization is understood, misunderstood, and used to sell a variety of policies, programs, and ideas. I then outline the argument that I make in the main part of the book, so that you will know what you are getting into and will be better prepared to put specific analysis and particular case studies into a broader context. After I have convinced you that actual globalization is different from what the conventional wisdom suggests, I sketch my own image of globalization. But I save that for Chapter 8. Four Faces of Globalization Globalization has many faces. It is in fact a complex dynamic process. Because it is so complex, however, its true image is hard to grasp, and it is easy—too easy—to see what you want or have been conditioned to see. To a certain extent globalization is a mirror that shows us the face we are looking for, not the one that’s really there. Much of this book is devoted to a more detailed analysis of what globalization is versus how it is perceived and why. Let me show you four faces of globalization that made the news in the dog days of summer 1997 when I was writing the first draft of this chapter.