Lecture 8
                                           26 April 2006

                                Economic dimension of globalisation

                                             Economic G

*      Economic G refers to intensification and stretching of economic interrelations across the
globe.

*      Global economic order is composed of transnational corporations, regional trading systems and
powerful economic institutions

                                       Global economic order

*      Present-day economic G can be traced back to the gradual emergence of a new international
economic order put together at an economic conference:

*      The Bretton Woods Conference of 1944

*      Leading role of the USA and GB; major economic powers of the global North committed to expand
international trade, establish binding rules on international economic activities, and create a more
stable money exchange system.

*      `Golden age of controlled capitalism' for almost three decades but

*      by the early 1970s the Bretton Woods system collapsed

                                   Consequences of Bretton Woods

*      It set the institutional foundations for the establishment of 3 new international economic
organisations:

*      IMF was created to administer international monetary system

*      International Bank for Reconstruction and Development (`a the World Bank) was designed to
provide loans for Europe's post-war reconstruction. During the 1950s, its purpose expanded and it
began funding different industrial projects in developing countries.

*      GATT was established in 1947 as a global trade organisation (in 1995 its successor became the
WTO).

                                       Rise of neoliberalism

*      Roots in classical liberal ideas of Adam Smith and David Ricardo who viewed the market as a
self-regulating mechanism, seeking equilibrium between supply and demand (the invisible hand of the
market). Against constraints on free competition, for elimination of all barriers to trade and
capital flows.

*      Neoliberals have revived classical liberal arguments against proactive state intervention to
guide or restrict operations of the market. They argue that the state lacks the capacity to control
G.

*      Therefore, large scale retreat of official regulation is needed; abolition of state-imposed
limitations on movements of money, goods, services, capital; removal of state control on prices,
wages, foreign exchange rates...

                                       Rise of neoliberalism

*      By the 1980s Margaret Thatcher in GB and Ronald Reagan in the USA led the neoliberal
revolution against Keynesianism, linking G to `liberation' of economies

*      The new neoliberal economic order was further legitimised by the collapse of the communist
system in CEE

*      Since then, 3 significant developments have been related to economic G: internationalisation
of trade and finance; increasing power of TNCs; enhanced role of international economic institutions
(e.g. IMF, WTO, World Bank)

                            1. Internationalisation of trade and finance

*      Many people associate G with free trade

*      Free trade is a controversial issue

*      Elimination or reduction of existing trade barriers is supposed to increase global wealth,
enhance consumer choices, secure peace in IR, spread new technologies around the world...

*      It is less clear whether profits that result from free trade are distributed fairly within
and among states; the gap between the rich and the poor countries is growing

                                2. Transnational corporations (TNCs)

*      More than 50,000 TNCs (IBM, Sony, Nike, Mitsubishi, General Motors, Walmart, Siemens...)

*      Many TNCs have larger sales revenues than entire economies of most countries!

*      The world economy is beyond control of states: the 200 largest TNCs account for over half of
the world's industrial output

*      Geographical concentration: headquarters in North America, Europe, Japan, South Korea



                      3. Enhanced role of international economic institutions

*      Most commonly mentioned are the IMF, the WTO and the World Bank

*      They enjoy the privileged position of making and enforcing the rules of global economy
(sustained by significant difference in power between the global North and South)

*      From the beginning the USA has been the dominant power

*      In return for supplying loans to developing countries, the IMF and the World Bank demand
`structural adjustment programmes', often referred to as the `Washington Consensus'

                                       Readings for Lecture 9

*       From Lechner & Boli The Globalization Reader:

*       "A Global Ethic as a Foundation for Global Society" Hans Küng

*       "The Emergence and Transformation of the International Women's Movement" Nitza Berkovitch +
"Beijing Declaration" UN 4^th World Conference on Women

*       "World Culture in the World Polity: A Century of INGO" John Boli & George W. Thomas

*       "From One Earth to One World" World Commission on Environment and Development

*       "Greenpeace and Political Globalism"  Paul Wapner

*       "Globalization and Sustainabilty" Wolfgang Sachs

*       + all excerpts from Part X are also suitable