Dynamics of Globalization and Development

Transcription

1 Dynamics of Globalization and Development

2 RECENT ECONOMIC THOUGHT SERIES Editors: Warren J. Samuels Michigan State University East Lansing, Michigan, USA William Darity, Jr. University of North Carolina Chapel Hill, North Carolina, USA Other books in the series: Magnusson, Lars: EVOLUTIONARY AND NEO-SCHUMPETERIAN APPROACHES TO ECONOMICS Reisman, D.: ECONOMIC THOUGHT AND POLITICAL THEORY Burley, P. and Foster, J.: ECONOMICS AND THERMODYNAMICS: NEW PERSPECTIVES ON ECONOMIC ANALYSIS Brennan, H.G. and Waterman, A.C.: ECONOMICS AND RELIGION: ARE THEY DISTINCT? Klein, Philip A.: THE ROLE OF ECONOMIC THEORY Semmler, Willi.: BUSINESS CYCLES: THEORY AND EMPIRICS Little, Daniel: ON THE RELIABILITY OF ECONOMIC MODELS: ESSAYS IN THE PHILOSOPHY OF ECONOMICS Weimer, David L.: INSTITUTIONAL DESIGN Davis, John B.: THE STATE OF THE INTERPRETATION OF KEYNES Wells, Paul: POST-KEYNESIAN ECONOMIC THEORY Hoover, Kevin D.: MACROECONOMETRICS: DEVELOPMENTS, TENSIONS AND PROSPECTS Kendrick, John W.: THE NEW SYSTEMS OF NATURAL ACCOUNTS Groenewegen, John: TRANSACTION COST ECONOMICS AND BEYOND King, J.E.: AN ALTERNATIVE MACROECONOMIC THEORY Schofield, Norman: COLLECTIVE DECISION-MAKING: SOCIAL CHOICE AND POLITICAL ECONOMY Menchik, Paul L.: HOUSEHOLD AND FAMILY ECONOMICS Gupta, Kanhaya L.: EXPERIENCES WITH FINANCIAL LIBERALIZATION Cohen, Avi J., Hagemann, Harald, and Smithin, John: MONEY FINANCIAL INSTITUTIONS AND MACROECONOMICS Mason, P.L. and Williams, R.M.: RACE, MARKETS, AND SOCIAL OUTCOMES Gupta, Satya Dev: THE POLITICAL ECONOMY OF GLOBALIZATION Fisher, R.C.: INTERGOVERNMENTAL FISCAL RELATIONS Mariussen, A. and Wheelock, J.: HOUSEHOLDS, WORK AND ECONOMIC CHANGE: A COMPARATIVE INSTITUTIONAL PERSPECTIVE Gupta, Satya Dev: GLOBALIZATION, GROWTH AND SUSTAINABILITY

3 Dynamics of Globalization and Development Edited by Satya Dev Gupta St. Thomas University Fredericton, New Brunswick Canada with Nanda K. Choudhry University of Toronto Toronto, Ontario Canada SPRINGER SCIENCE+BUSINESS MEDIA, LLC

4 Library of Congress Cataloging-in-Publication Data Dynamics of globalization and development / edited by Satya Dev Gupta with Nanda K. Choudhry. p. cm. -- (Recent economic thought series) lncludes bibliographical references and index. ISBN ISBN (ebook) DOI / Economic development. 2. Economic policy. 3. International economic relations. 4. Competition, International. I. Gupta, Satya Dev. II. Choudhry, Nanda K. III. Series. HD74.D dc CIP Copyright 1997 Springer Science+Business Media New York Originally published by Kluwer Academic Publishers in 1997 Softcover reprint of the hardcover 1 st edition 1997 AlI rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical, photo-copying, recording, or otherwise, without the prior written permis sion of the publisher, Springer Science+Business Media, LLC. Printed an acid{ree paper

5 To Gangadevi

6 CONTENTS Preface XI 1. Dynamics of Globalization and Development: An Introduction 1 Satya Dev Gupta and Nanda K. Choudhry Globalization at the Crossroads? 4 Financial Liberalization 6 Multinational Enterprises, Investment and Technology 8 Micro Foundations 10 Conclusion 12 References 13 I. FINANCIAL LlBERALIZA TION 2. Foreign Aid and Growth: A Simulation Model 15 Kanhaya Gupta and Robert Lensink A Non-technical Explanation of the Model 16 The Coefficients and the Simulation Strategy 18 The Simulation Results 20 The Alternative Simulations 25 Conclusions 32 Appendix: The Model 34 References Liberalization and Growth-oriented Structural Adjustment Programs: A Financial Programming Approach for India 41 M J Manohar Rao and Balwant Singh Analytical Framework For Macroeconomic Management 43 Financial Programming 52 Conclusions 61 References The Monetary Dynamics of Economic Integration 65 Paul Deprez and Johan Deprez A Keynesian Theoretical Foundation 66 A Keynesian Interpretation of the Monetary Dynamics of Integration 68 Monetary Integration and Economic Growth 73 The Policy Requirements for Effective Economic Integration 76 References 79

7 Vlll II. MULTINA TlONAL ENTERPRISES, INVESTMENT AND TECHNOLOGY 5. EU, ASEAN and North American Integration: Lessons from Their Degrees of Integration 81 Maria Sophia Aguirre Blocs and Their Degrees of Integration 83 Econometric Analysis 95 Conclusions 107 References Speculation-led Development in the Third World 111 Ilene Grabel Theoretical Foundations of Speculation-led Development 114 Speculation-led Development 118 Consequences of Speculation-led Economic Development 126 Implications for Financial Liberalization Theory and Policy 127 References Globalization and Development: Lessons from the Peripheral Countries of the European Union 135 Eleni Paliginis Conditions for Convergence in the EU Periphery 136 Economic Structures: Core and Periphery 138 The Single European Market 142 Policies for the Development of the European Periphery 143 Conclusion 149 References Globalization's Implications for Indonesia: Trade Policy, Multinationals, and Competition 153 William E. James and Eric D. Ramstetter Recent Economic Trends and the Policy Debate 155 Changing Trade Structures and Comparative Advantage 158 Foreign Multinational Firms and Competition in Manufacturing 165 Conclusions 177 Appendix 179 References Technical Diffusion and Confusion 187 Michael Bradfield Back to the Basics 188 Reality Check 199 Alternatives 201 References 204

8 10. The Role of Intellectual Property Rights in Economic Growth 209 David M Gould and William C. Gruben Intellectual Property Rights Protection 211 Intellectual Property Rights and Economic Growth Theory 213 Intellectual Property and Economic Growth 215 Intellectual Property Rights and Economic Growth: The Results 217 Intellectual Property in Open and Closed Trade Regimes 222 Conclusion 231 Data Source Appendix 232 References 237 III. MICRO FOUNDATIONS ix 11. A New Approach to Global Trade Imbalances Ravi Batra The Absorption Approach An Alternative Approach A Critique of the Current Thinking A New Interpretation of U.S. BOP History Developing Economies Conclusion References Structural Microeconomics of Productive Efficiency and Strategic Alliances 261 Robin Rowley and Renuka Jain Inertial Forces and Prior Commitment to Competition 262 Theoretical Omissions and Realistic Inadequacies 263 Structural Design, Technological Progress and Information 265 Microeconomic Foundations of Globalization 266 International Collaboration, Standards and Alliances 268 Dynamic and Integrated Global Processes 269 Reconstruction, Communication and Managerial Limits 270 Recasting Some Earlier Theories of the Large Firms 271 Concluding Remarks: Globalization and Micro-Macro Synthesis 273 References Markets, Globalization and Structural Change 281 Masudul Alam Choudhury and Abdul Fatah Che Hamat Questions on the Methodology of Oligopolistic Decision Making 282 The Contractarian Nature of Oligopolistic Decision Making 284 Alternative Concept of Market Contract 285 Social Contractarianism of Markets: Hayek and Buchanan 286

9 x A Model of the Market as a System of Social Contract 290 Oligopolistic Behavior in the Light of Knowledge Induced Markets 293 Islamic Relevance of Malaysian Development Initiatives 300 Political Economy of Markets in the Globalization Process 301 Some Empirical Inferences on Markets and Globalization 304 Conclusion 307 References A New International Economic Priority: Policy Responsibilities among Multilateral and Regional Institutions H Edward English The Unique Example of the EEC Shifting Priorities Since the 1960s A Common Theoretical Context-Market Failure and "Subsidiarity" 316 Competition Policy Issues 319 International Investment and Technology Issues 320 Environment and International Transactions 322 Policy Priorities and Programs Linking Competition, Investment and Environment Issues to Multilateral and Regional Institutions 324 Appendix 327 References 331 Index 333 Contributors 341

10 PREFACE Globalization is transfonning the world at an accelerating pace, expanding and intensifying international linkages in economic, political and social relations. Liberalization of trade and fmance, lubricated by revolutionary changes in infonnation technology, has resulted in significant economic growth at the global level. On the other hand, the process of globalization is changing the nature of production relations, threatening the traditional roles of the nation-state, and carrying with it far-reaching implications for sustainable growth, development and the environment. As the United Nations' Human Development Report, 1996 indicates, although both developed and developing countries are actively participating in this saga of globalization, nearly ninety countries are worse off economically than they were ten years ago, leading to "global polarization" between haves and have nots. The report further indicates that the gap between the per capita incomes of the industrialized world and the developing countries, far from narrowing, has more than tripled during the last thirty years. A majority of the countries benefiting from globalization have seen a rise in inequality and poverty. This failure of marketdriven globalization to distribute its benefits equitably led the United Nations to proclaim 1996 as the International Year for the Eradication of Poverty, and the decade of as the international decade for the eradication of poverty and the promotion of "people-centered sustainable development". It is against this backdrop that nearly seventy leading scholars world wide have come together to explore and analyze a variety of challenges facing the "global village". Their research is contained in a set of three volumes. One volume, entitled Globalization, Growth and Sustainability, examines the implications of regional and global trade liberalization and complementary macroeconomic policy refonns for growth, equity, and sustainability. Several contributors to this volume point to a set of proactive policies needed to remedy intra-national, international, and intergenerational inequities aggravated by the rapid globalization of the world economy Another volume, The Political Economy o/globalization focuses on globalization issues arising from a political economy perspective, including issues such as the erosion of national sovereignty, increasing tensions between the North and the South and between capital and labor, and possible roles for international institutions in ameliorating undesirable outcomes. Contributors to this anthology debate the role of structural adjustment programs and policies, the implications of fmancialliberalization for growth and

11 xii stability, the effects of foreign direct investment and the associated behavior of multinationals in tenns of intellectual property rights, the diffusion of technology, growth and development. Many contributors offer innovative insights into the complexities of the process in tenns of its micro foundations, and propose efficiency-based multinational policy frameworks. A general thrust of most of the studies in this volume is that the market-driven process of globalization alone will not lead to stable and equitable economic growth. Consequently, several contributors recommend a set of proactive policies to promote greater stability in the system and a more equitable distribution of the benefits of globalization. This anthology will provide valuable insights and important background analysis for scholars working in the field of globalization as well as senior undergraduate and graduate students in a variety of curricula, including economics, fmance, development studies, and international studies. A project of this nature, obviously, can not be carried out without substantial help from others. Nearly two years ago, William Darity Jr. and Warren Samuels, co-editors of the Recent Economic Thought Series invited me to edit one volume for the Series; I appreciate very much their advice and encouragement as the original concept expanded to a three volume undertaking. My first debt, of course, is to all the scholars who contributed to the project, and I apologize to those who, in spite of their excellent proposals, could not be included. lowe a special gratitude to Nanda Choudhry who has collaborated with me in developing this project and in co-authoring the introductory chapter. I am also thankful to the large number of reviewers whose comments, though invisible, are well reflected in the chapters of this book. In addition, I wish to acknowledge the research grants provided by St. Thomas University, and the encouragement and support of my colleagues including Stan Atherton, Roger Barnsley, Ian Fraser, Tom Good, Jeannette Gaudet, Gary Hughes, John Jennings, Mary Ann Johnson, Santosh Kabadi, Alan Mason, Joan McFarland, Robert Mullaly, Richard Myers, Daniel O'Brien, Andrew Secord and Jim Williams, and the technical assistance of those who have helped me in preparing the camera-ready manuscripts. Zachary Rolnik, Christopher Collins, Yana Lambert and other staff at Kluwer deserve special thanks for their help and understanding in publishing the full three volume set. Finally, I wish to express my deep sense of appreciation to my wife, Sarita, and our children, Hansa and Santosh, who not only went through the usual disruption of family life that such projects entail, but also contributed their labor of love on a number of tasks associated with this volume. Dev Gupta April IS, 1997