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SIS 401 Summer 2005 Wolfram Latsch. International Political Economy. Presentation 5. Why Globalization Works I. What Liberal Globalization Means. “movement in the direction on greater integration” Greater “integration of economic activities, via markets”

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International political economy l.jpg

SIS 401 Summer 2005Wolfram Latsch

International Political Economy

Presentation 5.

Why Globalization Works I.


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What Liberal Globalization Means

  • “movement in the direction on greater integration”

  • Greater “integration of economic activities, via markets”

  • Lowering of “natural and man-made barriers to international economic exchange”

  • “Greater reliance on market forces”


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Markets, Democracy and Peace

  • Property and freedom(political and economic liberties or rights, political and economic control rights/property rights)

  • The beneficent state

    • Regulatory competition (contestability)

    • Constitutionality, accountability

      (credibility, constraint)

    • Moral reform (commercial culture and guardian culture)


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Markets, Democracy and Peace

  • International relations

    • Comparative advantage and absolute advantage

    • Positive-sum interactions and zero-sum interactions

    • “Openness”: goods, services, technology, ideas

    • Collectivism and liberalism


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The “Magic” of the Market

  • Rise of the market economy

    • Property (incl. IPRs)

    • Corporations

    • Innovation

    • Financial intermediation


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Physician, Heal Thyself

  • Death of central planning

  • Who’s the boss? Market or planner?

  • Production or consumption?


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The Changing Role of the State

  • Why has the scope of the state changed?

    • Public goods

    • Merit goods

    • Regulation and competition policies

    • Redistribution and risk management

  • Why has the size of the state changed?


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Physician, Heal Thyself

  • Market failure

  • Government failure

    • Capture, “special interests”

    • The government as a special interest


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The Liberal Global Economy

  • The first and second “golden ages of globalization”

    • 1870-1914 (UK and offshoots)

    • Since 1950(Western Europe, Japan, then non-Japan East Asia)

    • Criterion: convergence of prices and synchronized business cycles


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The Liberal Global Economy

  • Trade in Goods and Commodities

    • Large volume increase in trade

    • Increase in productivity of goods-producing sectors, fall in relative prices of goods

    • Increase in importance of services

    • Rise in intra-industry trade and intra-firm trade (MNCs)


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The Liberal Global Economy

  • Capital mobility

    • UK a major capital exporter in the 19th C.

    • Offshoots are major recipients of capital in 19th C.

    • US a major capital importer now

    • LDCs receive smaller proportion of investments today


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The Liberal Global Economy

  • Labor mobility

    • Migration a major factor in the 19th C. (c. 19-100 million from 1815-1914)

    • Migration negligible today, mostly intra-LDC refugees

    • Migration today: skilled labor aggregated in DCs

    • “Factor price equalization” phenomenon


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The Liberal Global Economy

  • The 1914-45 interlude: why?

    • Citizenship, public goods and nationalism

    • Business cycles and economic integration

    • Protectionist politics

    • Rise of collectivist ideologies

    • Warfare and inter-war instability


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The Liberal Global Economy

  • After 1945

    • Keynesianism, fine-tuning, full employment

    • Fixed exchange rates, limited capital mobility

    • Int’l economic institutions (IMF, WB, GATT/WTO)

    • Oil crisis, stagflation, reform


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The Liberal Global Economy

  • After 1945

    • LDCs: planning and statism

      vs. outward-orientation

    • Resurgence of economic liberalism

    • Liberalization in India and China: convergence?


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