Unit 1: Historical and Contemporary
Overview of Globalization
Part
4: After the Fall of the Wall
It’s easy to say that
the last fifteen years have been especially turbulent ones
for the world economy. But it doesn’t really mean
much. Liberalization—globalization—really means
turbulence, because it means speed. For better or worse,
the liberal theory of markets—that markets efficiently
and instantaneously adjust to changing conditions—implies
that those who live their lives in the market must be ready
to change quickly also. This idea (to be discussed at much
length as the course continues) comes across brilliantly
in a recent TV advertisement for IBM. The ad shows a bunch
of kids walking through what looks like a museum of natural
history with their teacher, looking at the skeletons of
dinosaurs and other extinct creatures. They come across
a young, contemporary-looking businessman in a suit, frozen
behind glass. The children ask their teacher, “What
is it?” The teacher says that it’s a businessman
who couldn’t adapt to changing conditions. Obviously,
for IBM, the conditions they are talking about are those
in the notoriously fast-paced IT industry. But the general
lesson is clear: adapt or you’re history, a dinosaur.
Among the momentous changes in the past 15 years has been
the collapse of the former Soviet Union in 1989, the world
counterpoint to US economic, military, and political power
since the late 1940s. The USSR finally collapsed under the
weight of its own mismanagement and backwardness, succumbing
after being drawn into a “second,” intensified
Cold War in the 1980s. The collapse gave added ideological
force to the global neo-liberal thrust begun in the ’70s,
as it looked like prima facie evidence that socialism—or
even “managed” capitalism a la Keynes—simply
wouldn’t work. Capitalism was the only game left in
town, and neo-liberals—the hard core advocates of
free markets for everything—took themselves as capital’s
representatives.
The newfound interest in markets has increased the visibility
of its successes—and failures. Latin American economies
that once adhered to ISI principles adopted more open stances
to international markets and investment. But, as the experiences
of Chile and Argentina have shown, the periods during which
such policies succeed are rather liberally mixed with periods
of financial, political, and economic crisis. Latin America’s
“lost decade” (the 1980s) was not followed by
one in which it clearly found its way. For that, they are
still waiting.
Another of the hallmarks of the last fifteen or so years
of economic liberalization has been the continued ascent
of financial capital—an ascent which began in 1970s.
The liberalization of capital markets has meant increased
flows of money across borders. As a result, foreign exchange
markets trade an entire year’s worth of world GDP
many times over in one day. The downside of this freedom
to move money across borders has been seen in the rapid
development panics and crises. Indeed, the nineties seemed
to lurch from financial crisis to financial crisis, from
Mexico to Southeast Asia to Russia and Brazil to the US
hedge fund Long Term Capital Management. Each of these crises
had its own set of special causes but none could have happened
without liberalized capital markets.
Although Southeast Asia recovered from the financial crisis
of 1997–98, the series of financial catastrophes in
the ’90s, along with the continued struggle of countries
that have followed the neo-liberal program to achieve stable,
lasting growth, has cast globalization in an unfavorable
light. In November of 1999, at the World Trade Organization
meetings in Seattle, a movement—against globalization—was
more or less born. The movement highlighted these failures
as endemic to market liberalization itself, and has since
drawn together an otherwise unlikely mix of environmentalists,
labor activists, anarchists and assorted (mostly) leftists
into its orbit. The movement has changed the debate about
globalization. At the World Economic Forum in Davos, Switzerland—a
meeting for the who’s who of the international business,
economics, and policy—the agenda has increasingly
concerned itself with remedies to market failure since the
protests in Seattle.
It’s tempting to blame globalization for the upsurge
in terrorist activity directed against the secular West.
In a certain way, it’s true that the spread of Western
commercial values and culture have made clashes such as
this possible.
It’s also true that market liberalization by itself
doesn’t explain much, since terrorism is born of a
mix of particular, mostly local political circumstances
and the pragmatic concerns of terrorist organizations in
general. The advent of large-scale conflict between the
secular, commercial West and radical Islam cannot be explained
by globalization, but it can’t be explained without
it either.
For a detailed account of the geopolitical changes that
have shaped the global economy over the last century, watch
the PBS “Commanding Heights” VHS/DVD (see required
course materials) or visit the PBS website “The Commanding
Heights Storyline,” which provides a complete netcast
of the program. (Each of the three two-hour episodes is
subdivided into chapters listed in the chapter menu which
can be downloaded to a media player of
your choice. Links shown below.)
WEBSITE: Visit the PBS website or watch
the Commanding Heights VHS/DVD:
Commanding Heights Storyline
http://www.pbs.org/wgbh/commandingheights/lo/story/index.html
