The Political Economy of Globalization

The Political Economy of Globalization

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: MERCANTILIST ECONOMICS Garston, Neil: BUREAUCRACY: THREE PARADIGMS Friedman, James W.: PROBLEMS OF COORDINATION IN ECONOMIC ACTIVITY 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 ECOONOMIC 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

The Political Economy of Globalization Edited by Satya Dev Gupta St. Thomas University, Fredericton, New Brunswick Canada ~. " Kluwer Academic Publishers Boston I Dordrecht I London

Distributors for North America: Kluwer Academic Publishers 101 Philip Drive Assinippi Park Norwell, Massachusetts 02061 USA Distributors for all other countries: Kluwer Academic Publishers Group Distribution Centre Post Office Box 322 3300 AH Dordrecht, THE NETHERLANDS Library of Congress Cataloging-in-PubUcation Data A C.I.P. Catalogue record for this book is available from the Library of Congress. Copyright c 1997 by Kluwer Academic Publishers All 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, phot<k:opying, recording, or otherwise, without the prior written permission of the publisher, Kluwer Academic Publishers, 101 Philip Drive, Assinippi Park, Norwell, Massachusetts 02061. Printed on acid-free paper

To Hansa and Santosh

Contents Preface 1. The Political Economy of Globalization: An Introduction Francis Adams ana Satya Dev Gupta Economic and Political Integration Uneven Development Policy Reform and Popular Organization A Brief Review of the Chapters Concluding Remarks xi 1 2 3 5 6 11 I. 2. 3. 4. GLOBALIZA TION AND NA TlONAL SOVEREIGNTY Globalization: The Game, the Players and the Rules Deepak Nayyar A Historical Parallel: The Late Nineteenth and Twentieth Centuries The Game: Similarities and Differences Unequal Partners and Asymmetrical Rules Uneven Development References Globalization: The Epochal Imperatives and Developmental Tendencies Cyrus Bina Globalization: A Prelude to an Integrated World Order Theories of Global Orientation Nation-States and the Modem International Relations Conclusion References The Limits of Globalization: An Assessment of the Extent and Consequences of the Mobility of Productive Capital Tim Koechlin The Mainstream Case for Openness A Critical Assessment of the Case for Free Trade Globalization of Investment? Conclusion References 13 14 19 25 29 37 41 43 44 50 53 53 59 61 64 67 72 77

II. INDUSTRIAUZED NA TlONS OF THE NORTH 5. The "Globalization" of Trade: What's Changed and Why? Beth V. Yarbrough and Robert M. Yarbrough 81 Globalization Indicators 82 Sources of Globalization 91 Summary 94 References 96 6. Limits of Convergence and Globalization Brigiue Unger 99 The Convergence Debate 101 The 'Clogged Channels' of Economic and Policy Convergence 110 Conclusion 122 References 123 7. 8. III. Does Trade with the South Disadvantage Unskilled Workers in the North? S. Mansoob Murshed 129 Background and Motivation 129 The Model 135 Variations in Parameters 139 Summary and Policy Implications 144 References 145 The Influence of International Trade on Union Firm Hiring and Worker Union Choice Dwight W. Adamson and Mark D. Partridge 147 International Trade and Labor Market Earnings 148 International Trade and Union Membership 156 Empirical Methodology and Results 163 Conclusion 171 References 174 DEVELOPING NA TlONS OF THE SOUTH 9. Uruguay Round Reforms and the Developing World Francis Adams 177 Uruguay Round Reforms 178 Developing Countries 181 Domestic Equity 187 Conclusion: Transnational Capital 188 References 191

10. Structural Adjustment and Civil Society in Contemporary Africa Sandra J. MacLean and Timothy M. Shaw 193 Africa's Political Economy/Culture in the 1990s 194 Civil Society in the Contemporary Continent 197 Challenges for African Development in the Next Century 201 Conclusion: What Prospects for Sustainable Democracy in the Twenty-first Century? 205 References 206 11. Women Workers in the Global Factory: Impact of Gender Power Asymmetries Saud Choudhry 215 Feminist Research on Women's Involvement in Export Manufacturing 217 Occupational Segregation, Compensating Differentials and Discrimination by Gender 221 Sex-based Wage Differential 223 Dissimilarity Indexes of Occupational Differentiation 227 Conclusion 232 Appendix 233 References 234 IV. PROMOTING GROWTH WITH EQUITY 12. Technological Change and International Economic Institutions Sylvia Ostry 237 Globalization and Deeper Integration in the 1980s 238 The New Policy Template of Deeper Integration 246 Technological Change and the Post Uruguay Policy Agenda 248 Policy Options in the WTO 250 Policy Options in the OECD 256 International Cooperation in Basic Research: A Global Public Good 262 Conclusions 264 References 266 13. Debt Management and Structural Adjustment: Neglected Issues Kunibert Raffer 269 The Real Beginnings of the Debt Crisis 270 llliquidity and Poverty - Two Fundamental Errors 272 Doubts on Debt Statistics and Their Use 274 The Evolution of the Multilateral Debt Burden 277

An International Chapter 9 Insolvency References 280 283 14. NAFTA and Labor: A Global Strategy for the Global Economy Esmail Hossein-zadeh What is NAFTA All About? Flawed Arguments Against NAFTA Checking Capitalism's Logic Prospects for International Labor Solidarity References 287 288 289 294 304 309 15. Globalization and Development: Facing the Challenges 315 Brigitte Levy The New Global Economic Environment 317 Trade, Development and Global Economic Management 321 Sustainable Development: Turning a Concept Into Reality 327 Conclusion 332 References 332 Index 337 Contributors 341

Preface Globalization is transforming the world at an accelerated pace. Integration of the world continues, widening and intensifying international linkages in economic, political and social relations. Liberalization of trade and fmance, lubricated by revolutionary changes in information 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. Although both developed and developing countries are actively participating in this saga of globalization, nearly ninety countries, as the United Nations' Human Development Report, 1996 indicates, 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. Further, a majority of the countries benefitting from this globalization drive have seen a rise in inequality and poverty. This failure of market driven globalization to reward the benefits equitably led the United Nations to proclaim 1996 as the International Year for the Eradication of Poverty (IYEP) and the decade of 1997-2006 as the international decade for the eradication of poverty, and to promote "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 this "global village". Their research work is contained in a set of three volumes. One volume, entitled Globalization, Growth and Sustainability, focuses on the implications of both regional and global trade liberalization on growth, equity, sustainability and the environment. Another volume, entitled Dynamics of Globalization and Development, examines the impact of liberalization in the fields of aid, finance, capital, technology and management policies both at the micro and macro levels. This volume focuses on the issues arising from a political economy perspective on globalization. Contributors to this volume have addressed such issues as erosion of national sovereignty, strained relations between capital and labor, gender equity, increasing tensions between North and South, and changes in the roles of international institutions, labor organizations, nation-states and nongovernmental organizations. Although authors disagree over details, they all

recognize an urgent need for refmements in the dominant capitalist paradigm, and a need for strong leadership to implement the changes in a way that would enable all people to achieve their full potential, both as individuals and as members of the global family. 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, development studies, political science, international relations and international business. A project of this nature, obviously, can not be carried out without substantial help from others. Nearly two years ago, Sandy Darity Jr. invited me to edit one volume on a current topic for the Recent Economic Thought Series. However, the response on the subject matter of this project was so overwhelming that I could not accommodate nearly thirty proposals. I therefore first thank all the scholars who expressed an interest in contributing to the project and apologize to those who, in spite of their excellent proposals, could not be included. Second, I owe a special sense of gratitude to Nanda Choudhry who provided help for this volume in the initial stages of the project and to Francis Adams who helped me in a number of ways in the fmal stages of the project, including co-authoring the introductory chapter for this volume. Third, I am thankful to the anonymous reviewers whose comments, though invisible, are well reflected in the chapters of this book. Fourth, I wish to thank St. Thomas University for research grants and a number of colleagues including Stan Atherton, Roger Barnsley, Ian Fraser, Tom Good, John Jennings, Santosh Kabadi, Joan McFarland, Richard Myers and Andrew Secord for their help and encouragement. Preparing manuscripts in a camera-ready format, as I learned from this experience, can become a tedious and an extremely time consuming job for an academic. lowe special thanks to a number of assistants who helped me in this venture. Fifth, I wish to thank Sandy Darity Jr. and Warren Samuels, co-editors of the Recent Economic Thought Series and Zachry Rolnick and his staff at Kluwer for providing this opportunity and, in particular, for their help, encouragement and understanding in publishing three oversized volumes on the subject. Finally, lowe a special sense of appreciation to my wife Sarita and children Hansa and Santosh who were often deprived of usual family and social discourse for nearly two years. They also deserve special thanks for their labor oflove on a number of tasks associated with this project. DevGupta December 1996