Steger, Globalization,
Steger, Globalization, chap. 3
Chap 3 China in the global economy Today’s lecture: Economic dimensions of globalization — Reading: Steger, Globalization, chap. 3 “The economic
dimension of globalization.” Feb. 20 Tues. lecture: China’s workforce — Reading: Jenny Chan, Ngai Pun, and Mark Selden,
“The politics of global production: Apple, Foxconn and China’s new working class.” japanfocus.org (2013)
Feb. 22 Thurs. lecture: China’s energy policy — Reading: John Mathews and Hao Tan, “China’s
continuing renewable energy revolution: global implications.” japanfocus.org (2013)
Wed. Feb 28 Recitation Chap. 3 response paper due Tues. Feb. 27 @ 10:00PM
Steger’s Globalization, so far: Chap. 1 Globalization: a contested concept —Presents a theory of globalization Chap.2 Globalization in history: is globalization a new phenomenon? —Presents a history or chronology of
globalization
Steger’s Globalization, ahead: Today: Chap. 3 Economic dimension of globalization —Presents a theory of the global economy In two weeks: Chap. 4 Political dimension of globalization —Presents a theory of political globalization
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Steger: Economic Globalization
Dramatic changes have occurred in finance, economic production, and movement of commodities, due in part to new technologies related to the Internet.
Economic Globalization
Gigantic flows of capital mediated by digital technology have increased trade in goods and services, linking national and regional economies
Globalization is multi-dimensional
Interconnections in the global economy are set in motion by political decisions —The global economy is based on an
interaction with politics and many other dimensions of globalization
21st c. Global economy The contemporary global economy is best described as a neoliberal economic system working in competition with regulation of trade and flows of capital motivated by national, regional, or justice concerns — Nexus: Neoliberal deregulation <->
Keynesian regulation
Globalization is at the nexus of dichotomies
Global International
“West”
Local National “Rest”
The global economy is also a nexus
Neoliberal Deregulation
Keynesian & Other
Regulation
Major building blocks of 21st c. global economic order: 1. Huge transnational corporations (TNCs) or
multinationals 2. Powerful international economic institutions 3. Large regional trading networks
— APEC Asian Pacific Economic Cooperation — EU European Union — [TPP TransPacific Partnership]
FYI: Multinationals vs. TNCs We tend to read the following terms and think they refer to any company doing business in another country. Each term is distinct and has a specific meaning which define the scope and degree of interaction with their operations outside of their “home” country.
1. International companies are importers and exporters, they have no investment outside of their home country.
2. Multinational companies have investment in other countries, but do not have coordinated product offerings in each country. More focused on adapting their products and service to each individual local market.
3. Global companies have invested and are present in many countries. They market their products through the use of the same coordinated image/brand in all markets. Generally one corporate office that is responsible for global strategy. Emphasis on volume, cost management and efficiency.
4. Transnational companies are much more complex organizations. They have invested in foreign operations, have a central corporate facility but give decision-making, R&D and marketing powers to each individual foreign market.
https://leeiwan.wordpress.com/2007/06/18/difference-between-a-global-transnational- international-and-multinational-company/
Origins of the contemporary global economic order
Bretton Woods, New Hampshire, July 1-22, 1944
Neoliberal vs. Keynesian Economics —Neoliberalism is based on idea of British
philosophers Adam Smith (1723-90) and David Ricardo (1772-1823) that unregulated markets are most efficient, because of the principle of supply and demand
—Keynesianism is based on idea of British economist John Maynard Keynes (1883- 1946) that a healthy economy requires regulation
Neoliberalism —Advocates elimination of all barriers to trade
and capital flows between nations — Includes idea of British sociologist Herbert
Spencer (1820-1903) that free market economies naturally survive because they are the fittest —Economic Darwinism
Bretton Woods: gold standard Pegged national currencies to fixed gold value of US dollar, creating a stable money exchange system
Bretton Woods system (1945-75), Established basis for ‘golden age of controlled capitalism’ —Nations paid for education, healthcare, and
infrastructure with tax revenue —Workers in global North joined the ‘middle
class’ due to rising wages
Why did Bretton Woods collapse?
Steger: “In the early 1970s, the Bretton Woods
system collapsed when President Richard
Nixon abandoned the gold-based fixed rate
system in response to profound political
changes in the world that were undermining
the economic competitiveness of US-based
industries.” (p. 40)
Reason: Japan’s rising economy
U.S. Industries unable to compete: — Steel — Ship building — Watches — TVs — Automobile — Textiles
1971: Nixon abandoned gold standard
—Currency exchange rates have floated freely ever since.
Free-floating interest rates
—Up to 1970s: USD-Yen fixed exchange rate $1.00=¥368
—Current: USD-Yen floating exchange rate $1.00=¥107
Discussion 1. Have you or your family ever been affected
by fluctuations in exchange rates between one currency and another? — If so, were you affected positively or
negatively? 2. Do you think it would be better to go back
to having a fixed exchange rate pegged to the gold standard? —Why or why not?
Fort Knox, Kentucky
Gold reserves: 147.3 million oz.
Fed Reserve Bank: “just in case”
1971: Nixon abandoned gold standard Result was global economic instability
— High inflation, high interest rates — Low economic growth — High unemployment — High public sector deficits — High energy costs
1971: Nixon abandoned gold standard
