Cover Page

Contents

Figures

Tables

Preface

List of Abbreviations

Acknowledgments

1 Introduction: The Contours of Globalization

The basic argument

Challenges and responses

Alternative globalizations

General governance possibilities

Criticisms and responses

Models of the international economy

The chapters in outline

2 Globalization and the History of the International Economy

MNCs, TNCs and international business

Trade and international integration

Migration and the international labour market

The relative openness and interdependence of the international system

Early discriminatory trade blocs

International monetary and exchange rate regimes

Openness and integration: what is at stake?

Developments in international financial market activity up to the late 1990s

The rise of short-term lending

The overall picture: history, the current situation and the immediate future

Conclusion

3 Multinational Companies and the Internationalization of Business Activity

FDI and MNCs in the early 2000s

Character of trade and FDI

Triad power and influence

Measures of internationalization from national accounts data

Alternative company-based measures

Business strategy and the future of national systems

The extent of ICT-driven activity in the economy

Offshoring

Consequences of ‘globalization’ for company strategy

Conclusion

4 Globalization and International Competitiveness

International competitiveness and globalization

From ‘embedded liberalism’ to ‘neo-liberalism’

North–South divergences and differences

Investment and trade

Migration

Technology and innovation

Measures and trends in international economic competitiveness

Standard-setting and benchmarking

The competitiveness of countries and the competitiveness of companies

Borders and globalization

Some final considerations

5 Emerging Markets and the Advanced Economies

Introduction

Innovation and catch-up in the history of industrial capitalism

Resurgent Asia?

China: results and prospects

Global inequality and poverty

Emerging markets as a competitive challenge for the advanced economies?

Conclusions

6 Supranational Regionalization or Globalization?

Introduction

Supranational regionalization: what is it?

The real economy

The financial economy

The empirics of international trade and investment

Pressures and reactions

Conclusions

7 General Governance Issues

Introduction

The multilateral institutions

Regional trade and investment blocs: the European Union and NAFTA

Governing the world economy: the role of the major political actors

The challenge of the Euro?

Conclusions

8 Globalization, Governance and the Nation-State

Introduction

The rise of ‘national sovereignty’

The political rhetoric of ‘globalization’

The changing capacities of the nation-state

Governance and the world economy

The ‘new’ sovereignty

Nation-states and the rule of law

Conclusions: cooperation or conflict?

Notes

References

Index

To Paul Quinten Hirst: 20 May 1946–16 June 2003

Title Page

Figures

1.1 Three types of international economic mechanism
2.1 The development of overall globalization, 1970–2004
2.2 Overall international financial integration, 1970–2004
2.3 Global voluntary migrations, 1815–1914
2.4 Global voluntary migrations, 1945–1980
2.5 International capital flows among the G7 economies, 1870–1995
2.6 Financial derivatives: notional amount outstanding on organized exchanges
3.1 World merchandise exports compared to world GDP, 1984–2000
3.2 FDI inflows, global and by groups of economies, 1980–2004
3.3 Inward FDI as a percentage of GDP, 1995–2003
3.4 FDI flows between the Triad countries, 1994
3.5 Average revenue distribution of European and US companies, 1997 and 2005
3.6 Offshoring in selected OECD countries, 1995 and 2000
5.1 Lorenz curves for incomes of world citizens, 1820 and 1992
5.2 Components of global inequality, 1970–2000
6.1 The growing importance of regional trade agreements
6.2 Networks of trade, 1980 and 2001
6.3 Correlation of stock returns across Asia and the rest of the world
6.4a The share of US equities in world and foreign portfolios
6.4b The share of foreign equities in world and US portfolios
6.5 The relative importance of country, industry and diversification effects in global stock return
6.6 Global capital flows, 1999 and 2004
6.7 The extent of ‘global’ deposit dollarization

Tables

2.1 Accumulated stock of FDI by country of origin, 1914–1978
2.2 Volume of exports, 1913–1984
2.3 Gross migration rates, 1870–1910
2.4 Net migration, 1870–1998
2.5 Ratio of merchandise trade to GDP at current prices
2.6 FDI in Latin America, Asia and Africa, 1900–1990
2.7 East Asian trade as a share of total trade for different countries
2.8 History of monetary and exchange-rate regimes
2.9 Official holdings of foreign exchange by currencies
2.10 Savings and investment correlations, 1900–1995
2.11 Cross-border transactions in bonds and equities
2.12 Institutional investors’ holdings of foreign securities, 1980–1993
2.13 Distribution of outstanding listed corporate equity among different categories of shareholders in selected OECD countries
2.14 Foreign assets and liabilities as a percentage of assets of commercial banks for selected countries, 1960–1996
2.15 Borrowing on international capital markets, 1976–1997
2.16 Growth in markets for selected derivative instruments, 1986–2006
2.17 USA, Japan and the EU: relative economic size and relative use of currencies
2.18 The international role of the main Triad currencies
3.1 Inward FDI stock as a percentage of GDP, 1980–2005
3.2 Share of inward FDI flows in gross domestic fixed capital formation, 1985–2005
3.3 Share of exports of foreign affiliates of MNCs as a percentage of host country’s total exports, selected countries, 1995 and 2000
3.4 Intra-regional sales of the world’s largest 500 MNCs, by country
3.5 Percentage of manufacturing subsidiaries and affiliates located in home country/region, 1987 and 1990
3.6 MNCs’ sales to home country/region as a percentage of total sales, 1987, 1990 and 1993
3.7 MNCs’ assets in home country/region as a percentage of total, 1987, 1990 and 1993
3.8 Estimates of global internet/ICT business, 2001
3.9 Multinational corporate structures and strategies of three countries
4.1 World trading relations: direction of trade, 1998
4.2 The ‘Kaldor paradox’ re-examined, twelve industrialized countries, 1978–1994
5.1 GDP in six large economies
5.2 Trade in goods and services for six large economies
5.3 Growth rates in the emerging South and the bottom billion
5.4 Distribution of world GDP by region, 1820–2001
5.5 Growth of per capita GDP
5.6 Trajectories of transition
5.7 State socialist, market capitalist and Chinese systems compared
5.8 Theil indices, 1820 and 1992
5.9 Components of global inequality, 1820 and 1992
6.1 Share of interregional merchandise export flows in each region as a percentage of total merchandise exports, 2004
6.2 Correlations of real variable fluctuations between the USA and other economies, 1972–2000
6.3 Relationship of market region and borrower domicile
6.4 Home bias: portfolio allocations of lenders in each region
6.5 The internationalization of the world’s stock exchanges, 2000–2005
6.6 World bond market portfolio, end 2001
6.7 Average cross-border portfolio holdings of long-term debt as percentages of destination countries’ total outstanding debt securities, 2001–2003
6.8 The effect of distance on economic interactions
6.9 Deposit dollarization over time, 1999–2004
6.10 Non-industrialized countries’ dollar deposit liabilities as a percentage of GDP, 1995 and 2000
7.1 GDP per capita, growth projections
7.2 Country policy commitments to address global imbalances

Preface

When Paul Hirst and I embarked upon the first edition of Globalization in Question in the mid-1990s we had firmly in our sights the then emerging debate about the ‘end of the national state’. Globalization, it was suggested, had fatally undermined the possibility of sensibly deploying the category of the nation-state, since national frontiers were no longer a reality that made sense. Unconstrained market forces and transnational political movements were imposing their own logic on the global system, sweeping away the constraints of national politics and creating a new political and economic order beyond the control of traditional nation-state-centred actors.

As the third edition is published thirteen years later, it is perhaps surprising that this fundamental issue still remains at the heart of the debate over globalization. Paul Hirst and I were designated ‘sceptics’ in this debate: we wanted to reassert the possibility of continued domestically based regulatory initiatives that could have an impact, and the possibilities of managing the international order that placed the nation-state at the centre of such a multilateral governance system. At its heart, this argument still forms the central one of this new edition, though newly nuanced and updated to take account of events that have often shaken the world since. And this restatement of the argument has been aided by my new writing colleague Simon Bromley, who now becomes the third co-author with this edition. When Paul Hirst died suddenly in June 2003, he and I were then actively planning a third edition. His death interrupted that project and it was put on hold for several years. Needless to say, I was delighted when my work colleague Simon Bromley agreed to become a co-author as the thought of finally generating the third edition re-emerged in early 2007. In our conversations Paul had always been a great champion of Simon: he recognized his sharp intellect and incisive analytical skills. Broadly speaking Simon has concentrated on redrafting the more ‘political’ chapters dealing with the state capacities and governance issues, while I have concentrated on the historical and more ‘economic’ ones. This more or less mirrored the original division of labour between Paul and myself.

But we both take collective responsibility for the final product. All chapters have been closely scrutinized for necessary changes and consistency. Most of them have been extensively revised or entirely rewritten, though some more so than others. Chapter 1 lays out the broad thesis of the book and characterizes various senses of globalization that have appeared in the debate. In addition, we have responded to the criticism that our characterization of strong globalization represents a ‘straw man’ and we have redrafted the contents section. Chapter 2 has been extensively updated and extended. Chapter 3 has been widely pruned, but what remains is more or less as before, though updated. Chapter 4 has been completely revamped and updated. Chapter 5 has been effectively rewritten as a new chapter, while chapter 6 is a completely new addition. Chapter 7 is also a substantially new chapter and chapter 8 has been extensively rewritten to take account of current debates. At the end of chapter 1 the substantive concerns of these chapters are outlined in more detail.

All in all, we think this represents a substantial update of the argument and introduces extensive new empirical material that backs up that argument. The book has always been centrally concerned with providing evidence for its arguments, not just assertions of them, and this approach has been adopted again. Too often wild claims are made about the processes and effects of globalization without these being grounded in adequate empirical justification. Of course, empirical evidence is never neutral and always requires judgement and interpretation, but as a minimum careful generation and scrutiny of evidence is absolutely vital.

This edition was being prepared during a time of some important changes and events in the international system. We are perhaps seeing several developments that are straining against the conception of a stable and truly globalized system. There has been a growth of populist left movements in Latin America that threaten a withdrawal from the full extent of globalization’s programmatic embrace. In addition, Russia has begun to reassert its independence from ‘global forces’ as it takes advantage of high energy prices and increased demand. The idea that China and India are going to bow down and roll over before the full rigours of the global, liberal marketplace is hardly credible. And the USA is taking an increasingly unilateral line on many aspects of global relationship and governance. As far as trade policy is concerned, the apparent collapse of the Doha Round of negotiations puts in doubt the centrality of the WTO and further trade liberalization as an end in itself (rather than as a means to an end).

All this has developed over the past few years alongside a serious disruption of the international financial system with the 2007 ‘credit crunch’. This saw essentially national regulatory systems reasserting their traditional roles as guardians of the ‘lender-of-last-resort’ function to shore up their domestic economies. The credit crunch may also have begun the erosion of exotic financial engineering developments associated with hedge funds, private equity and ‘structured investment vehicles’. All of these were argued to have emerged from the liberalized and ‘global’ financial markets of the 1990s and early 2000s. In their place is developing the next problem for the international financial system: sovereign wealth funds. But these also speak to a potential new phase of investment intentions based upon national interest and state control.

None of this should lead us to expect any sudden undoing of the international system, however. But these developments may delay any further genuine globalization. The ‘global system’ – such that it is – has always been at heart an international one. That, anyway, is the argument of this book. Nevertheless, and given this, the underlying sentiment the book expresses is summed up in a slogan that it would do well for all to heed as far as the international system is concerned: ‘always expect the unexpected’. Never think that what has gone on in the past, or what seem to be well-entrenched trends and directions of the present, will necessarily extend into the future. This is a basic sceptical and pragmatic lesson which, it is hoped, will be reinforced with the publication of this third edition.

Grahame F. Thompson
September 2008

Abbreviations

AB Appellate Body (of the WTO)
APEC Asia-Pacific Economic Cooperation
ASEAN Association of South-East Asian Nations
B2B business to business
B2C business to consumers
BIS Bank for International Settlements
BWS Bretton Woods system
CIS Commonwealth of Independent States
DM Deutschmark
EEC European Economic Community
EMS European Monetary System
EMU European Monetary Union
EU European Union
FDI foreign direct investment
FTA free trade agreement
FTAA Free Trade Area of the Americas
GATT General Agreement of Tariffs and Trade
GCC global commodity chain
GDP gross domestic product
GPC global production chain
GVC global value chain
HDD hard disk drive
ICT information and communication technology
ILE interlinked economy
ILO International Labour Organization
IMF International Monetary Fund
IOSCO International Organization of Securities Commissions
LDC less developed country
M&A merger and acquisition
MDC more developed country
MENA Middle East and North Africa
MNC multinational corporation
NAFTA North American Free Trade Agreement
NATO North Atlantic Treaty Organization
NGO non-governmental organization
NIC newly industrializing country
NIE newly industrializing economy
OECD Organization for Economic Cooperation and Development
OTC over-the-counter
R&D research and development
RULC relative unit labour cost
S&A subsidiary and affiliate
SWF sovereign wealth fund
TFP total factor productivity
TNC transnational corporation
UNCTAD United Nations Conference on Trade and Development
WSA World Systems Analysis
WTO World Trade Organization

Acknowledgments

The publisher would like to acknowledge permission to reproduce the following copyright material:

Page 29, ‘Journal of Economic Literature’, Maddison 1987, table A-21, p. 694; 31 & 32, An Atlas of International Migration by Aaron Segal, (London: Hans Zell Publishers, 1993, pp. 21 & 23). Reproduced with the permission of Hans Zell Publishers, on behalf of the estate of Aaron Segal. Copyright © The estate of Aaron Segal; 33, A.M. Taylor and J.G. Williamson, ‘Convergence in the age of mass migration’, European Review of Economic History Volume 1(01): pp27–63, (1997), Cambridge University Press; 33, The World Economy: A Millennial Perspective, A. Maddison, 2001. OECD, Paris; 51, BIS 1996–7, table V.1, p. 79, www.bis.org; 51, table 10, p 33, An assessment of financial reform in OECD countries, Edey and Hviding, OECD Economics Department, Working Paper 154, 1995, OECD, Paris; 52, table 1, [Title], [Page], [Book Title], [Author], 1998, OECD, Paris; 53, IMF, International Financial Statistics Yearbook, 186 and 1997; 55, Financial Market Trends (OECD), no. 55 (June 1993); no. 58 (June 1994); no. 69 (Feb. 1988), p. 49; 56, Financial Market Trends (OECD), no. 55 (June 1993), table 3, p. 26; BIS 1998, table VIII.5, p. 155; 57, European Union 1997a, chart 18, p. 15; 72, UNCTAD World Investment Report 2005, UNCTAD. Geneva and New York, Figure I.1, p. 3; 73, OECD Economic Globalization Indicators, OECD 2005, Figure A.8.1, p. 30; 80, Alan M. Rugman, The Regional Multinationals, MNEs and ‘Global’ Strategic Management, 2005, Cambridge University Press, Cambridge; 87, Nikolaos Karagiannis & Michael Witter eds., The Caribbean Economies in an Era of Free Trade, 2004, Ashgate; 92, OECD Employment Outlook 2007, Figure 3.3, p. 112; 96, Louis W. Pauly and Simon Reich, ‘National Structures and Multinational Corporate Behavior: Enduring Differences in the Age of Globalization’, International Organization, 51:1 (Winter 1997) © 1997 by the IO Foundation and the Massachusetts Institute of Technology; 117, J. Fagerberg, ‘Technology and Competitiveness’, Oxford Review of Economic Policy, Autumn 1996, page 41, by permission of Oxford University Press; 132, Winters and Yusuf, 2006, table 1.1, World Bank and World Development Report 2006, World Bank; 132, Winters and Yusuf, 2006, table 1.3, World Bank; 148, Based on data from Bourguignon, F. and Morrisson, C., ‘Inequality Among World citizens: 1820–1992’, in The American Economic Review, vol.92, no.4, September 2002, pp.727–744; 150, Salai-Martin, X., The Disturbing ‘Rise’ of global Income Inequality, New York: Columbia university Press, Fig 12; 162, Derived from Princeton Institute for International and Regional Studies (2006) Data and Selected Images from the GKG Project: Princeton, NJ; 164, WTO International Trade Statistics 2005, derived from table III.3, p. 40; 164, adapted from Heathcote and Perri (2002), table 6, p. 7; 168, Cai, F. & Warnock, F.E. (2004), International Diversification at Home and Abroad, International Finance Discussion Papers 2004–793, Figures 1 & 2; 169, Derived from: Sassen (2006) table 5.4, p. 258; World Federation of Exchanges Annual Report 2006, table 1.3, p. 68; table 1.5, p. 71; table 2.2, p. 89; table 2.1, p. 88 and table 2.5, p. 92; 172, Eichengreen, B. & Luengnaruemilchai, P. (2006), ‘Bond markets as conduits of capital flows: How does Asia compare?’, table 2, p. 27, IMF Working Paper wp/09/238, IMF, Washington; 185 & 186, Adapted from Levy Yeyati, ‘Liquidity Insurance in a Financially Dollarized Economy’, NEBR Working Paper 12345, June 2006, p. 31 and p. 25, table 1; 186, calculated from Levy Yeyati (2006), table 2, p. 73.

1

Introduction: The Contours of Globalization

All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the productions of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependency of nations.

(K. Marx and F. Engels, The Communist Manifesto, 1850, repr. in Marx and Engels Selected Works, London: Lawrence & Wishart, 1968, p. 39.)

The inhabitant of London could order by telephone, sipping his morning coffee in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises in any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality.

(J. M. Keynes, The Economic Consequences of the Peace. London: Macmillan, 1919, pp. 6–7)

The basic argument

Globalization has become a fashionable concept in the social sciences, a core dictum in the prescriptions of management gurus, and a catch-phrase for journalists and politicians of every stripe. It is widely asserted that we live in an era in which the greater part of social life is determined by global processes, in which national cultures, national economies, national borders and national territories are dissolving. Central to this perception is the notion of a rapid and recent process of economic globalization. A truly global economy is claimed to have emerged or to be in the process of emerging, in which distinct national economies and, therefore, domestic strategies of national economic management are increasingly irrelevant. The world economy has globalized in its basic dynamics, it is dominated by uncontrollable market forces, and it has as its principal economic actors and major agents of change truly transnational corporations that owe allegiance to no nation-state and locate wherever on the globe market advantage dictates.

This image is so powerful that it has mesmerized analysts and captured political imaginations. But is it the case? This book is written with a mixture of scepticism about global economic and political processes and optimism about the possibilities of control of the international economy and about the continued viability of national political strategies. One key effect of the concept of globalization has been to paralyse radical reforming national strategies, to see them as unfeasible in the face of the judgement and sanction of global markets. If, however, we face economic changes that are more complex and more equivocal than the extreme globalists argue, then the possibility remains of political strategy and action for national and international control of market economies in order to promote social goals.

We began this investigation, originally in the early 1990s, with an attitude of moderate scepticism. It was clear that much had changed since the 1960s, but we were cautious about the more extreme claims of the most enthusiastic globalization theorists. In particular it was obvious that radical expansionary and redistributive strategies of national economic management were no longer possible in the face of a variety of domestic and international constraints. However, the closer we looked, the shallower and more unfounded became the claims of the more radical advocates of economic globalization. In particular we began to be disturbed by three facts. First, the absence of a commonly accepted model of the new global economy and how it differs from previous states of the international economy. Second, in the absence of a clear model against which to measure trends, the tendency casually to cite examples of the internationalization of sectors and processes as if they were evidence of the growth of an economy dominated by autonomous global market forces. Third, the lack of historical depth and the tendency to portray current changes as unique, without precedent and firmly set to persist long into the future.

To anticipate, as we proceeded, our scepticism deepened until we became convinced that globalization, as conceived by the more extreme globalizers, is largely unfounded. Thus we argue that:

1 the present highly internationalized economy is not unprecedented: it is one of a number of distinct conjunctures or states of the international economy that have existed since an economy based on modern industrial technology began to be generalized from the 1860s. In some respects, the current international economy has only recently become as open and integrated as the regime that prevailed from 1870 to 1914.
2 genuinely transnational companies appear to be relatively rare. Most companies are based nationally and trade regionally or multinationally on the strength of a major national location of assets, production and sales, and there seems to be no major tendency towards the growth of truly global companies.
3 capital mobility has only recently begun shifting investment and employment from the advanced to the developing countries, and here it is just a very few of the emerging economies that are benefiting. Foreign direct investment (FDI) is still highly concentrated among the advanced industrial economies, and the Third World remains marginal in both investment and trade, a small minority of newly industrializing countries apart. As we show below, however, the emergence of India and particularly China represents a disruption to this imagery, though as yet it has not significantly shifted the centre of gravity from the already advanced countries.
4 as some of the extreme advocates of globalization recognize, the world economy is far from being genuinely ‘global’. Rather trade, investment and financial flows are concentrated in the Triad of Europe, Japan/East Asia and North America, and this dominance seems set to continue. In fact, the growth of supranational regionalization is a trend that is possibly stronger than that of globalization as normally understood.
5 these major economic powers, centred on the G8 with China and India, thus have the capacity, especially if they coordinate policy, to exert powerful governance pressures over financial markets and other economic tendencies. Global markets are thus by no means beyond regulation and control, even though the current scope and objectives of economic governance are limited by the divergent interests of the great powers and the economic doctrines prevalent among their elites.

These and other more detailed points challenging the globalization thesis will be developed in later chapters. We should emphasize that this book challenges the strong version of the thesis of economic globalization, because we believe that, without the notion of a truly globalized economy, many of the other consequences adduced in the domains of culture and politics would either cease to be sustainable or become less threatening. Hence most of the discussion here is centred on the international economy and the evidence for and against the process of globalization. However, the book is written to emphasize the possibilities of national and international governance, and as it proceeds issues of the future of the nation-state and the role of international agencies, regimes and structures of governance are given increasing prominence. But in addition, given one of the intriguing (but also infuriating) aspects of the globalization debate is that the term ‘globalization’ seems to have an almost infinite capacity to inflate – so that more and more aspects of the modern condition are increasingly drawn under its conceptual umbrella – we have taken the opportunity in this introduction to expand our discussion a little beyond the book’s central focus on economic globalization and governance. Globalization is now a term with such a wide embrace that it seems incumbent upon us at least to comment on some of these matters. This we do below, but mainly only in so far as it serves to clarify what this particular book is not about.

Challenges and responses

The third edition of this book is very much a product of the previous two editions. While its basic thesis remains substantially the same – that is, there is an exaggeration of both the extent and the significance of ‘globalization’ – things have moved on from the previous two editions. In this edition we have tried to capture many of these developments without undermining the basic thesis, to which, as will become clear below, we still hold. Of course, if this volume were being entirely written afresh in early 2008 we would no doubt recast it somewhat differently, and in the rest of this introduction we allude to these recastings. But it seriously concerns us that the strong ‘globalization’ thesis is now largely and uncritically accepted as the mainstream, whether it be by the public authorities or our academic colleagues. Thus it seems worthwhile – to us at least – to re-emphasize and reinforce the original thesis in the light of the more or less total acquiescence to a strong globalization imagery by all shades of opinion.

For an example of the attitudes of the public authorities one need look no further than the UK Treasury’s thinking on ‘globalization’. Gordon Brown (the chancellor when the reports alluded to in a moment were written but who subsequently became the prime minister), and the New Labour government more generally, has completely fallen under the spell of the full globalization story. Among a number of reports from the Treasury in the mid-2000s about globalization and the UK economy can be found one titled Long-Term Global Economic Challenges and Opportunities for the UK (HM Treasury 2004). This document buys completely into a conventional and uncritical globalization story, for the UK economy and the international economy beyond. It is a great shame that no one from the Treasury seems to have read any critical books and papers produced over the past five years or so that have challenged the full globalization thesis, though admittedly these are few and far between. If, however, they had done so, then the Treasury might have been much better informed of the options facing the UK economy in its relationship with the EU and, indeed, the rest of the world. Instead we have had other documents which just repeat the mantra, and this time directed at telling ‘Europe’ how it should reform to meet the same undifferentiated global challenges: Global Europe: Full Employment Europe (HM Treasury 2005a) and Responding to Global Economic Challenges: UK and China (HM Treasury 2005b).

Of course, the academic literature is another matter, but even here a largely acquiescent position is to be found. It is one thing to be sceptical about various uses of the concept of globalization, it is another to explain the widespread development and academic reception of the concept since the 1970s. But the literature on globalization is vast and varied. Although we have deliberately chosen not to rewrite this book so as to summarize and criticize this literature, in part because, given the scale and rate of publication on the topic, that would be a never-ending enterprise, it is perhaps incumbent upon the third edition to address this in part, and to respond to some of the more cogent critics. We begin with the positions and move on to the criticisms and our responses later.

Alternative globalizations

As pointed out above, it is not our intention to review all the positions in respect to globalization. The following discussion picks on the most notable and forceful of these. By and large these positions take globalization as an accomplished fact, though they all hedge about this in various ways and with various degrees of reservation. And, as will become clear, these alternative positions are not totally exclusive of one another: rather they overlap and merge into one another. We outline these positions here, beginning with those that are furthest from the immediate concerns of this book, gradually moving closer towards those that are nearest to our own perceptions and analytical stance on the globalization debate – which, it should be emphasized, is concerned mainly with its political economy and governance aspects.

1) The first proposition on globalization is one that is furthest from our concerns. In fact, it is one that actually challenges it from what is termed a ‘post-colonial perspective’. Often based around avant-garde anthropological and post-structuralist intellectual tendencies, this position works with a number of complex concepts, stressing such aspects as different spatial levels in the global arena and their imbrications, which involve multiple connections, and relationships, flexibilities, flows, etc. (Ong and Collier 2004; Tsing 2005). These ‘assemblages’ are argued to be continually dissolving and evolving, producing new and surprising terrains of activity. In this case globalization is treated as an accomplished fact – the consequence of these multiple flows and connections – and one that now needs to be transcended. One of the most forceful of the terms within this perspective is ‘planetarity’. This is designed to describe a possible world ‘above’ the North–South divide, ‘beyond’ the colonial and the Other, ‘outside’ of the national and the global (Spivak 2003, chap. 3). The project associated with ‘planetarity’ involves the development of a certain kind of new analytical language and discourse to express this possible world that lies ‘beyond globalization’.
Although it is not directly aligned with the post-colonial discourses, there is a closely associated conception that perceives the global as a series of ‘camps’ – zones of indistinction and the suspension of the rule of law – that infect the rest of the social order (e.g. Agamben 1998, 2005). One rather pessimistic consequence of this conception is that such zones of indistinction embody the final expression of a degenerate modernity. It can lead to a rather hopeless and disarming response: the global is beyond control, management or regulation.
2) A second characterization is one that does not offer a critique of globalization as such but rather a critique of a particular political appropriation of it. In this case current globalization is expressed as the emergence of a new empire based upon the hegemony of the USA. The USA is considered the only truly global power, and it is using this status, aligned with neo-conservative ideology, to construct a world order in its own image. In doing so it has thrown off the mantle of proceeding through multilateral agreements and compromises with its partners. Instead it has adopted a new strategy of unilateral action, building under its leadership transient ‘coalitions of the willing’ that vary in composition depending upon the objective at hand. In the section immediately following this one we assess this claim in the context of the idea of imperialism, seen as a possible mode of contemporary global governance.
Somewhat aligned to this position, we would suggest, is one that sees the global arena as made up of a ‘clash of civilizations’ or as a ‘clash of fundamentalisms’ (e.g. Huntingdon 1996). The USA is seen as the central defender of Western civilization, thus it is in the forefront of constructing a coalition to reinforce its hegemonic leadership in this respect. But in this case the global is fatally fractured, something we allude to in the comments on the cosmopolitan position discussed below. But this is in no way meant to endorse this position. There may be clashes in the international arena, but for us these are not clashes between such large aggregations as civilizations or fundamentalisms. The problem is whether civilizations or fundamentalisms exist in any seriously homogeneous way such that there could be an organized clash between them. Rather, there would seem to be as many clashes within civilizations (whatever these may be) as between them, and fundamentalisms do not exist as unitary entities either, but are already always riven with rivalries, disputes and indeed armed clashes (as in the case of religious fundamentalist-driven insurgencies in many Middle East contexts). But fundamentalisms are not just religious based; there are also secular fundamentalisms such as extreme neo-liberal market fundamentalism and some animal rights activism (Thompson 2007).
3) A third position on globalization would stress the emergence of a new international cosmopolitanism in the wake of the complex interdependency and integration that characterizes what is seen as the break-up of the West-phalian international system. In this case, new political responses are required to address the deterritorialization of authority in the global system. Very much developed in the shadow of Kant’s pamphlet Perpetual Peace (Kant [1919] 1990) – which itself was a call to arms for a new world order – this position stresses the role of transnational civil society actors in the formation of global democratic accountability and political responsibility. The most incisive and insistent advocate of this position has been David Held and his co-authors (e.g. Held and McGrew 2002, chap. 9; Held 2004). It is particularly embodied in his call for a ‘new global covenant’ among the ‘democratic peoples’ of the globe designed to address the growing democratic deficit he sees as resulting from the leaking of power from sovereign states towards what is at present a highly problematic and unsatisfactorily ungoverned but coordinated international market order.
Again, there is a nuanced and elaborated defence to be made of this position, but we would stress that it is underpinned (at least implicitly) by an acceptance of the full globalization story, otherwise why is there a need for such a radical and new political order? But if – as we would argue is demonstrated by our analysis in the chapters below – there is no complete globalization of the international system, then the ‘global’ of globalization does not (yet?) exist in this form: there is no single ‘cosmos’ for cosmopolitanism to address. Against this we would argue that we are still caught in a ‘pluriverse’ rather than in a ‘universe’ (e.g. Latour 2004): there remains a set of heavily competing voices in the international system that do not necessarily address one another in a ‘common language’, and without such a universal language for all to lock into these voices will continue to a large extent to speak past one another (as in the case of fundamentalism briefly mentioned above). Thus we are not in a position to forge such an ambitious global covenant or a global cosmopolitanism. Rather we will have to continue to learn to live with – and within – a certain disorder (as outlined later in this introduction), where the best that can be hoped for is ad hoc and limited governance responses to emergent problems combined with fire-fighting ‘crises’ as they arise, and the installation of prudential regulation in their wake.
4) A fourth take on globalization is to see this as involving the development of networks of cross-cutting relationships in various domains that straddle national borders (Castells 2000). In part this conceives of the system in the light of issues about the role of ICTs in stimulating locational disengagement, and the move towards global standard-setting discussed below. Global standard-setting involves not only the traditional public bodies of international governance but also increasingly fully private or quasi-private actors that both claim and exercise a public power in this respect (Cutler et al. 1999; Cutler 2003). An added aspect to this development is the way ‘international governance’ is increasingly being rendered into various networked legal forms, something stressed (and celebrated) by Slaughter (2004), but also involving the progressive juridicalization and constitutionalization of the international sphere without a clear single sovereign presence or legitimating authority to sanction these (e.g. Gerber 1994; Jayasuriya 2001; Joerges et al. 2004).
Additionally, we would align this position loosely with one that is tied in with the global conceived in the image of a Luhmannesque-type system and subsystem (non-)integration (Albert et al. 2001; Albert and Hilkermeier 2004). For Niklas Luhmann – the spiritual father of this position – the social order is made up of a series of autonomous spheres of meaning, displaying different ‘logics of observation’. These may be economic, political or legal systems, organizational entities or even individuals, each of which orients itself according to its own distinctions, its own constructions of reality and its own observational codes. Here the global system is characterized by overlapping relatively enclosed systems which pose the problem of their macro-level coordination and governance. But the constitutive differentiation of society into (sub)systems means that they all operate according to their own distinctions, thereby continually reproducing new differences as they abut and collide with one another. The best that can be expected from this is loose couplings between different subsystems. This frustrates any attempt at overall coordination or governance by a competent authority. All that is possible is ‘self-governance’, driven by the enclosed inner logic of each (sub)system. One consequence is that new perturbations, differentiations, irritations, provocations and unexpected events continually arise in the world. This enables Gunther Teubner – a related and leading figure in this style of analysis – to align it with an understanding of the global as a radically differentiated ‘polycontextual’ space, where territories and national sovereignties are broken apart as contingent events produce a ‘global law without a state’: a transnational legal order for global markets that has developed outside of national and international law strictly speaking. In turn, this connects to the question of the surrogate juridicalization and constitutionalization of the international sphere as mentioned immediately above (Teubner 1997).
5) Another, and fifth, characterization of the global system places this in the longer historical tradition of Marxist and quasi-Marxist ‘World Systems Analysis’ (WSA) theories. Originally associated with the names of André Gunder Frank (Frank and Gills 1996), Immanuel Wallerstein (2004) and Giovanni Arrighi (Arrighi and Silver 1999), this position has advanced along several related trajectories, some of which no longer pay particular heed or explicit homage to their historical tradition. The first of these, and the one that continues to pay most respect to its intellectual lineage, is the ‘global cities’ approach (Sassen 2002; Knox and Taylor 1995; Taylor 2003). Here the global is seen as a continuation of a structured ‘centre–periphery’ set of exploitative relations involving the emergence of a network of global cities that becomes the new ‘centre’ of the international system. This network of cities in turn exploits the hinterlands of their locations, which become the new ‘semi-peripheries’. And in turn there is a periphery of non-global cities that are also structured into these relationships as the ultimate source of surpluses appropriated by their more powerful neighbours or cousins.
Another variation of this logic, though one that has now somewhat lost its connection to the original WSA approach, is ‘global value chain’ analysis (GVC). In fact there are a number of alternative formulations of this basic position that address the global economy, including ‘global commodity chain’ (GCC) and ‘global production chain’ (GPC) analysis. For those involved in this type of analysis these differences are highly relevant (Gibbon et al. 2008), but for our purposes they can all be treated similarly. Within this perspective, the global is conceived as a series of linked stages in various discrete chains of production and distribution. These chains involve production units, wholesalers, markets, shipping companies, retailers, consumers, etc., all of which serve to link several remote stages into a global production network. This particular position is concerned with how such chains are organized and governed (by producers or retailers in the main) and how this establishes who gets what in the chain of value distribution.
6) The sixth development discussed here would stress the emergence of supra-state regional economic and social configurations or blocs. Typical examples of these would be the EU, NAFTA, Mercosur or the proposed Andean trading bloc, ASEAN or the Asian Free Trade Area, etc. We define and discuss this position in more detail in chapter 6. It involves both de facto and de jure aspects, which do not necessarily advance at the same pace or in coordination with one another. Thus for our purposes supranational regionalism involves the development of geographically contiguous areas composed of the territories of those nation-states that have either combined in an integrative economic or monetary union or whose economies have evolved into a closely interdependent entity through normal market-based trade and investment integration.
7) The final position is perhaps the most conventional one. It stresses the continuation of multilateral interdependency and integration between essentially independent national economies or societies. This involves dealing with flows of resources across space and time. As will become clear later in the book, we partly endorse this position, but would emphasize the limits to the process, and perhaps the exhaustion of its possibilities under current conditions (chapter 6). Thus while our account is compatible with growing and deepening international connectedness in trade and investment – with an open world economy of interlinked trading nations – it is also sceptical of the continued pertinence of this imagery. So those who see extreme globalizers as one pole of the debate and people who deny globalization as the other, putting themselves conveniently in the sensible middle ground, are thus doing us and the issue a disservice. The issue for us is to ‘trouble’ both of these conceptions.
These last two positions represent the main ones in contention in current economic debates about globalization, and they raise important questions about their compatibility and governance. Broadly speaking, the point is whether the development of these trading and investment blocs is complementary to the ‘multilateralism’ of the global system (as embodied in the final position just described), or whether these two processes are in some sense in competition with one another (de Lombaerde 2007; Cooper et al. 2008). Such competition could manifest itself in the trade diversionary aspects of these blocs as opposed to the trade creation aspects, in terms of alternative and discriminatory regulatory initiatives, and in terms of their potential political rivalry. We reserve our own position on this dispute until after the analysis of chapter 6.

What, then, emerges from this description of various positions in the globalization debate, and from our emphasis on the latter two positions in particular? We would suggest that there are now four fairly separate (though connected) senses in which the term ‘economic globalization’ is commonly used in the academic globalization literature that connects to these positions: