April 10, 2012

Defining Globalization Economic globalization is a “set of

processes leading to the integration of economic activity in factor, intermediate, and final goods and services markets across geographical boundaries and the increased salience of cross-border value chains in international economic flows.”

Source: Introduction to Aseem Prakash and Jeffrey Hart,eds., Globalization and Governance (Routledge:1999)

Value ChainConcept invented by Michael PorterA value chain is more comprehensive than a

supply chain because it extends backward to R&D and innovation and forward to commercialization

Michael PorterHarvard Business School

The Role of ICTs in GlobalizationReduced time, cost, and effort to coordinate

activities across great distancesSimilar to the impact of the introduction of new

transportation and communications infrastructures in the past (telegraph, railroads, ocean shipping)

BUT also continuing relevance of international regimes (e.g. WTO, World Bank, IMF, global monetary system)

Estimated users at the end of 2011 = 2.2 billion

Broadband Penetration, June 2011

Other Ways of Thinking about GlobalizationDeterritorialization, e.g. of

diasporic communitiesMNCs

Cultural Convergenceleading toward a universal “sameness”

Globalization as a Myth or Fad

See, for example, Arjun Appadurai, Modernity at Large.

Appadurai’s Cultural LandscapesEthnoscapesMediascapesTechnoscapesFinanscapesIdeoscapes

“The suffix scape also allows us to point to the fluid, irregular shapes of these landscapes, shapes which characterize international capital as deeply as they do international clothing styles.”

Diasporic Communitiesany people or ethnic population forced or

induced to leave their traditional homelands, the dispersal of such people, and the ensuing developments in their culture

examples: Jews, Cubans, Chinese, Pakistanis, Indians, etc.

Examples of Globalized CultureCorporate logosWho Wants to be a MillionaireMTVWorld Music, e.g. Reggae or SkaAnime, Manga, Pokemon (J-pop)Disneyland, Disneyworld theme parksAction movies with little dialogue

Will Territorial Based Systems Become Obsolete?No (short answer)Territorial-based systems may become less

important relative to others but it is more likely that more complex relationships among governance systems at different levels of aggregation -- local, national, regional, etc. -- and nonterritorial governance systems will have to be established.

Coping Strategies: National Governments

Many coping strategies are still possible.

Downsizing the state is not always desirable (e.g. the case of the formerly centrally planned economies).

National governments are likely to play a role in reducing inequalities accentuated by globalization.

Theoretical approaches:Neoclassical (industrial policy is bad and

counterproductive)Regulatory State (regulation necessary for

markets to work properly, but industrial policy is still bad)

Developmental State (industrial policy is useful for catching up)

Competition State (industrial policy has to take globalization into account)

The Developmental State vs. the Regulatory State

DevelopmentalDevelopmental RegulatoryRegulatory

Type of Type of BureaucracyBureaucracy

Elite, InsulatedElite, Insulated Transparent, Transparent, AccountableAccountable

Support for New Support for New IndustriesIndustries

ExtensiveExtensive LimitedLimited

Use of State-Use of State-Controlled BanksControlled Banks

ExtensiveExtensive LimitedLimited

Stance w/regard Stance w/regard to Private Firmsto Private Firms

TutellaryTutellary RegulatoryRegulatory

Industrial PoliciesIncludes a wide variety of policy instruments

that are intended to advance the international competitiveness of “national champion” firms, such as:Investment subsidiesPublic R&D expendituresScience parks and free trade zonesExport incentives

The Impact of Globalization on National Economic StrategiesGreater volatility in global financial

markets requires changes in financial market regulations in all countries

To remain internationally competitive, firms have adopted global production strategies

Even regulatory states have to compete for inflows of foreign direct investment

Developmental states cannot succeed with pure national champion strategies

Examples of Coping StrategiesPromotion of inward FDIRaising the skills of the workers via

education and training programsScholarships and fellowships for collegeIncreased spending on research and

development (R&D)Regional development efforts

Example of GM in China2010 sales of 2.3 million vehicles in ChinaWorld-class production facilities (joint

venture with SAIC)Modified Buick as a chauffeur-driven luxury

carNot competing with low-end national

champions like Geely

Example of LG LCD ProductionJoint venture with PhilipsOnly major competitors globally

are Samsung and SharpProduction facilities use best

materials and tools from global suppliers (e.g. Corning and Canon)

Have to worry about China