GROWING A GLOBAL ECONOMY: 1945-2019 This chapter examines the transformation of the ineerna ee ee eee 2915-59 ee stots ‘The Post-Cold War international relations were marked by@LLWar divi- [amet Meee ONC nee eee ea eet eee re eee” ors cenit ¢ the end of the Cold War-These inciude QUMRAReeN competing capitalisms and state transformation, che inf mation revolution and developments in intermational-organization and globalgovernane eee eke cases maCYEmS Reema Ties acolo eee Cent Ree eC MS No Zealand and later Japan. The S8€6ndWorld comprised the commumisestates of Eastern Europe ere Oe ee ee ea Dae Reg eters eet ee aces ee ect eee development. Some countries such as China might fall into ewo camps - the Second and Third Nese ymine the relationship within and among these three worlds The Cold War Era: 1945-89 ese Meare collte ko Following the Second World War, the © and its li created a newsinternational system Renee or ok keer est aerate oe Tessons from the 1930s and 40s (sec Box 5.1), the US provided a DPreteen eirce ern Yen ene ee nce cate ce eee eo eee ee Sec aM MES eee! OT enter ceca Anes ttempt at creatirEVOLUTION unos the ea and ovis woUld ee fo De sccomodsted in some 3. The power of the and o be koro one Prem rerace ptteal forces could nly be Dunted If some oF te cancers of they stituents were taken into account, The answerto this Ps Keynesian state, redistributed incomerto the broad population. ire moreerobuslssecurityearrangements thy 4, These economic arrangements would rea aT id existed under the L States would 1 rep. ht at an cary Oe prevent lager waa alae dat. The pastor period SOW the emergency Soe res of aitnpolinees sch 26 IID and rconce on nuclereapeny, prevent wars between the superpowers. he above fourpoints could only ‘be.implemented if the US played.a the battle within the US and it assumed a role as a major international power and leader ofthe Western bloc. Indeed, the period from the mid-20th until the rid-21st century may well be remembered as the American century. Cold War confrontation “The wartime alliance between the WestFHAlliés and the Soviet Union was already under strain as Germany and Japan were in the process of being defeated. Indeed, it had always been a tem», poraryalliance subject to rivalry and tension (Thorne, 1978). After the wat, Burope was divided, benween the two camps and a lukewarm alliance turned into a Cold Wat. The Soviet Union placed fFiendly regimes in power in Eastern Europe and the US led Western states in the creation of economic and military alliances against the Soviet Union “The US pledged both economic and military resources to confront the Soviet Union. [nthe economic realm, US funds helped with the reconstruction of Western Europe and Japan. In mils ‘ary affairs, the US'stationed troops in-foreign countries and agreed to the creation in 1949 of a ‘Western military alliance - the North Atlantic Treaty Organization At the heart of NATO was the threat that the US would use nuclear weapons to deter Soviet aggression in Europe. Canada and the US stationed troops in Europe so that any Soviet invasion would force a united defence. Once the Saviet Union also developed nuclear weapons, the threat of mutually assured destruction ffoze confrontation in Europe and made the prospect of direct: confit between the USSR and the US daunting (Freedman, 1985), France and ‘maintained the ability to intervene around the world and also developed nuclear weapons. One ofthe effects ofa relatively stable US-USSR. confrontation was that conflict between the Sedan a. out in other pats of the-world: When the US supplied arms to Isr a panies Iran (before the revolution of 1979), the USSR supplied Syria, Iraq and Egypt. Paces Meera to the Vietnamese in their struggle against the US, and the racist government of ec ne Buerrilts against the Soviet Union, The US supported the Angolan Cena Areca ite, which was engaged in fighting Culban-backed fre: Imovements,The US and the $ US backed right-wing governments against left-wing insurge®t anda ofndependenes ean ig same invelved ina series of national revloos Thema ee 8 acerbating local conflicts (Halliday, 1983) ‘Asian states iaumten for Us Ose of this global competition varied across countries. Sumie ES rent able to use US investment and the eon nd aid: For example, Japan, South Korea and Taiwan we" However i the security umbrella t 99), vole at ote counts, Cold War ry ihe se escalating violenc in 1¢ flames of | contributin ea War confice one ne Southern Africa, Central America and Indochina bot US and th ¢ in terms of hu = le USSR. They seved as pro wuman casualties and stunted Shana seroma In additiora f the 18ft and rift weresable-termainiGliN POWER to the detriment of their hag, ue to sponsorship of one othe other ofthe superpowers hese proxy war andthe Pfs let death, destruction, devastation an famine fr milion of poor peopl, vinng the semblance of peace word in Wester cout sme westem economic system ‘The US wsed ts unpatileled evonome and military dominance to cOnstrct’a set of institutions The ineernationaltracle-and payments'system, constructed as the earl War drew eo a cose, was,in theory, negotiated by the principal participants che US Secor dod the UK. However, in reality, it was jower and thus reflected US inter aad Me the economic natonaim ofthe 1950, chi ejected batralism. Is key ars eae sr GIIBIERin. The new order was based on HBEBI eSonomie principles but Hot the that had characterized the 19th-century a al economic order. In the wake ofthe political mobilization ofthe working class and ser cinces ofthe Great Depression, policy makers attempted balance social welfare con- aa careree commitment to market principles. This multilateralism rested on domestic political aaa thet were interventionist: There was no automatic adjustment as in the gold standard sonore tade unrestricted The goal was to create a system that had liberal attributes, bus did aoe ermine domestic stability Ruggie (1982) termed this order based on Keynesian princi- Fisone of embedded liberals. Embedded liberalism was committed ta epoany but che Liberalism was enipesed by domestic stateliatervention to support socal BU yoseosuch as fall employment, Wiotern sates patiipated in a number of economic institutions designed to free economic exchange, Thzee ineeenational organizations were created to oversce the liberal international tronomic order. While ostensibly committed to universal membership, the INI, the International (fare of the World BanikGioup) and the GATT restricted membership t0 countries committed to following free-market principles in heir ‘domestic economic management. The IMF and the World Bank were designed in 1944 to sup~ portastable monctary system and fand postwar reconstruction. Additional funding to aid reeon- was provided by the US in the form of the Marshall Plan (1948). The attempt to create the International Trade Organization filed, but GATTT served as a framework for gradually lib crazing trade These three institutions were created to overcome the persistent economic prob- lems that had arisen inthe 1930s. An important development in the postwar global political economy has been the creation of ‘eyional economic institutions. The most elaborate of these regional organizations arose and puted in Waser Eoope, Sheltering behind the security umbrella of the US and NATO, gfe atts trough he Tea of Rome in 1957 cwared {55 comnon markt, ai with econome nteration-This was the continuation of Bee flor cooperation inated bythe Beropean Goal and Steel Community in 1951.The Cag int de Bupa Uo (EU) an in he proces brought European tte ich wn lal usion The unprecedented lve of economic cooperation lating to monetaty se ae tana ino cee Harmonization of ean and secrity policies, but Siete is emerged asialsto US dominance ina numberof aa sgt By the nuclear umbrels and supported by sympathetic economic institutions, the = urope, Japan and other allies followed policies of economic growth in the postwar ‘ment The -_ ne sappored indy and mainined i employ- = 2 series of technical innovations failitafed a golden era of eco- rain Us nines fromthe: 1950s until the early 1970s.This system then came under Pending on the Vietnam War and rising ol prices caused inflation and recession. aEVOLUTION a Beginning in the 19708, developed states increasingly moved from providing Welly Ge below). The US andthe Ut a for reforms to the trade, financial and monetary regimes, which were des : plhy to matketforees and reduce the ability of the sate to intervene in the ecoggny Re" reforms undermined the balance of embedded liberalism, pushing the economies. rmoreneoliberal-diteetion, These neoliberal ideas were captured well by the tm "Wan? Consensus’. This consenstis in liberal economic policy was applied domestically and ak 10 expo to developing countries through international organizations and transnational policy nes tuned to gig ee ‘The Communist political economy In contrast to the Westetn system where individuals and-corporations-owned property adie allocations.of resources. were largely determined by the supply-and demand of the marker communist system eliminated private property and “of hiestate. The communist system began in Russia following the 1917 revolution, With Russ, defeat of the Nazis in Eastern and Central Europe, the soviet form of communism extended countries such as Ukraine, Poland, Romania and East Germany. Social revolutions led by com. ‘munist parties in cooperation with peasant movements brought central planning to counties » diverse as China, Cuba, Vietnam, North Korea, Ethiopia and Angola. Communist states were 180 authoritarian, one-party states where other forms of political expression were suppressed by the Communist Party. Communist states achieved a number of notable successes, but these were offen accompanicd by a horrendous human cost and eventual failure. Following the [Russian Revolution, the Sovie ‘Union was able-to-industrialize its primarily rural economy. By the mid-1960s its technolgs had advanced to such an extent that it posed a serious military threat to Western Europe and m3 engaged in a space-race with the US. The Soviet Union also made considerable ewway ia women’s equality, literacy and healthcare for its population. However, the collecivizaton of agriculture in the Soviet Union was accomplished through a combination of force and san tion at the ¢dst of many-millions of lives. In economic terms, the Soviet Union enjoyed som ‘success in intensive growth, but fll short in creating growth in other areas. It was able sho ‘Progress in areas of the economy that required people or'resotirees in the production pros Dut less successful in areas that required an increasing application oftnkanlosnandinaeray While the Soviet Union was able to produce heavy industry and basic goods, it was ub develop consumer goods on a par with Western states. Unable to produce consumer : ‘sired by many of is population and increasingly falling behind in the arms race with Wes Sates, the Soviet growth model had reached its limit by the early 1980s, A series cof largely RO ‘Serine Swept the communists from power in Eastern Europe in 1989. The 19955" Fence pean states, Russia and the former republics of the Soviet Union struggle © = of Heh dovecuing apitalist-economies and ‘liberal"democratic’ states’ with varying des a ies of ‘Sedge ‘_ommunist model enjoyed less success than ite Russian counterpattA sf oe ion, which turned on many ofits own citize™™ fhe Chinese leadership bad © lows ‘Western investment of its economy into capitalist forms, with large it a atop poli bin Sduction of private property: Unlike the Soviet Unio ‘censorship, one-party rule and wien 24 Continued an authoritarian form of state, Wil ifpy the early 1990s, Russis and-Ching the two largest communis states, HRE-abaMOMd the jteommunism. Russia evolved into a fully-eapitalisestte fuelled by wealth from ‘the institutional form of a demOeAieye-but strains of authoritarianism in its s, with sea culture Ks cranstion to capt was marred-by-the wise of wealthy oligarehs whe ered heats of the former sate during tte when the sul of aw vas no rly eta se China, remendous wealth was generated in some ares of he county iting milion Ine poverty However, the challenges of soil stability at dine of rapid economic eansorns oervand under an authoritarian state were intense. ‘the Southern political economy inion and the US struggled for advantage in the Cold War, another historic pro- eos taking place. This was the decolonization process and emergence of the Third World as polities! and economic actor.The states of the Third World ‘ment that, co this day, has ‘Asthe Soviet Us Decolonization ‘The postwar period saw an cussed in Chapters 3 and 4) crumble continuing to rule foreign countries, campaigns to force the colonialists to relinquish “Fhe nature and pace of decolonization varied considerably. For example, France tended to be more committed than Britain to using-force to maintain its empire (Chamberlain, 1985, pp 35-72). France waged long, bloody and ultimately futile wars in Viemam and Algeria (see Box 5.2) In Vietnam, nationalists defeated the French at the Battle of Dien Bien Phu in 1954 ‘The Algerians secured their independence in 1962 after years of fighting.’The Frenchigetteat in sub-Saharan Affiea proceeded more peacefully as states were granted independence but kept close economic and. political. ties with France. The US played a complex role inthe process of “Gecolonization, ft granted the Philippines independence in 1946 and abandon their empires. During the Suez Crisis of 1956, it opposed the British/French/Israeli iwasion of Egypt. However, as the Cold War intensified, the US itself became involved in old colonial struggles, sich as preventing the reunification of Vietnam. ‘There are a number of competing explanations for the onset of decolonization. The Second’ ‘ was a major factor (Abernethy, 2000, pp. 345-60). For the second time in 30 years, ‘uropean states inflicted damage on cach other's productive and military capacities. France, “Beira iui and the Netherlands emerged ina greatly weakened condition, much less able to hold on [pittttory by force. At the same ime, Japanese success early in the war against che US and iPeans in Asia revealed the’ vulnerability of their empires. The war itself had the effect of as the European empires (dis -d. In some cases, European states recognized the difficulty of while in other cases local populations had to wage violent control, 3s Tee neces The effect inthe ee nna the colonizer and the colonized were starkly ilustrated by Frantz Fanon es As Wing nthe shadow of Ageia brutal sug or ndependene rom France, Bn 198. p. 94 arged in The etched ofthe Earth that the use of violence against the Dotan gay 1 eee the colorized from years of hunliation and oppression What Fanon did abandon Hs that once independence was won it was ote cfcul for independence leaders Use of violence in ruling their new countries.104 _EVOLUTION t ae ee colonies. Similar to the European ‘mobilizing and wipt0ting millions of people in the col ie mang # he Fi ond Wan these people were not willing to return t0 the prewar status gue, the First ie aie : and the increasing economic drain that colonies posed fo" European states (D3 ks Win, 1945 pp. 17-24). Within countries such as India, Vietnam and Indonesia, ons 0 change the calelus of empire Through a variety of meqe ‘mobilized local populations to chang .ct of empire was no longer y te European colonizers that the proje: WET Sstainabley, deanna Gandia campaign of iomolenb reestancelhighlighied the pore ung, Cenability of South Ava, In the eases of Vietnam, Indonesia and Algeria, wars of independens Teun ber of new states cam. c impact of decolonization-was dramatic. A large num into bei aa z uch as the UN General Assembly. In some va “shifting the balance in international institutions st asthe United Nations Conference on Trade and Development vce a. “neve organizations such as i ated to serve the interest of developing countries. In the 1970s, developing countries Pushed. for a change in the rules governing the global economy, which was called the “Beonomic Onder. Many of the new states, akhough formally independent, were high dependent on their former metopoles for economic ties. Inthe security field, many ofthe nevi independent states tried to ster a tind way in the Cold War between the USSR and the US Th, initiative was called the ‘Non-Aligned Movement’ and was Ted by India, Indonesia, Ghana ani ‘Yugoslavia in the 1960s and 70s, Finally, decolonization pushed the question of development onto the international agent, where it continues to be a significant issue. Development success and failures The issue of development and growth will be examined in Chapter 11, but a brief overview required here. Some states have experienced suiécess in their attempts to develop their economies ) in the postwar peric was able to rebuild its economy after US ‘occupation, while the four Asian tigers of South Korea, Taiwan, Hong Kon if and Singapore achieved incredible progr it thane < Bomnivraseuentionevels and dances in particulaneconomie sects the rie some US analysts feared that US 1984). Some Asian leaders also began to Superior to the US and began to advance or! (Gilpin, 1987;Keohane, believe that they had developed a political economy the notion of a distinct and better set of Asian vl (Zakaria, 1994). Both of these trends were’ diminished bY ‘renewed US-grow:h in the 19905/and the Asian financial ‘crisis of 1997. we crories: many of the world’s most-populous states such 1970s, disastrous eases, such as ‘until the reform process embarked on in 2865, such assubege fe PING. destroyed agriculeeal and industrial productivity. In ot Moo nts Were trapped into producing products that del ad £0 on). Insecurity within and between states led hed deepen ervilla movements, In many inseances and forced states into a series of ie!The Post-Cold War Era: 1990-2019 trends have been increasingly visible a the GoldWaF'era fadesnto history: Th {Ths ion of a competition between ‘dasa cbse asl its ees eper The seed is the pervasive impact ofthe information evluton Thesis potlopments in the field of international organization ‘Competing capitalisms and state transformation simultaneous with the worldwide competition between communist and capitalist forms of poltal economy, rivalry and competition beeween differing models of capitalism were occur Ping among Western states. Depending on the analyst, the systems were categorized in different tuys Some saw a competition between different financial systems, such as the Anglo-American vnodel of stock markets versus Continental European models, which relied more heavily on tanks to raise money for firms, versus an Asian (mainly Japanese and Korean) model of close government/industry/finance ties. Others perceived the significant difference in the various forms of capitalisms as being the manner in which they provided welfare to their citizens, The US model provided a minimal welfare state, the Continental Europeans had an extensive govern rent welfare state, while Japan provided extensive welfare (such as lifetime employment) for those lucky enough to be working for key corporations (Esping-Andersen, 1990) ‘The Western competition between capitalisms did not provide a winner. Each model had suengths and weaknesses, periods of success and times of economic turbulence. The European system provided broad-based welfare for is citizens, but struggled with relatively high levels of unemployment. The US system generally had lower levels of unemployment, but a disturbingly high number of its citizens lacked access to basic welfare such a5 affordable healthcare. The Japanese economy enjoyed great success in the 1980s, sparking fears in the US of an economic rival, However, in the 1990s, it was the US economy that led a wave of technological innovation and the Japanese economy entered a decade of economic stagnation. From 2008 to 2012, the US and European economies suffered severe financial crises. While the US showed signs of a reviving, ‘economy in 2015, Europe remained in austerity and economic stagnation. [At the close of the first decade of the 2ist century, the competition between capitalisms had become more global and diverse. The welfare capitalism of Western Europe and the Anglo-Saxon. liberal models were joined by a host of competitors with a variety of models. The BRICS countries (Brazil, Russia, India, China and South Aftica) emerged as areas of increased economic activity and pola infuenes. Fist among these competitors was China, which possessed an extensive mane Pace, sector and considerable capital from its export surpluses. [t combined an authoritarian gomese sate with strict internal lbour discipline and a mercantiist approach t9 economic policy eae rilsion of foreign investment and active intervention in financial and production systems. Gat Sieve tremendous economic growth, but struggled to diperse gains among a large and eat Population. India pursued a different model. It maintained a democratic government with os in information technology (T) and serves bbut faced a substantial challenge in certs rg subsistence agricultural sector and developing is infrastructure. renewed and oe ttgcatc Russian sate imbued with immense wealth fiom natural resourees casa shadow Engtig pb Tews -dependent Europe. However, collapse io oil prices in 2014 showed the Tea Rusia rsoune-dependent development model. In Latin America, Brazil, buoyed by homer dest and agricultural sectors and ed by governments committed to addesing is 2i15 pais of eeouomicineguaity offered an alternative model to he Wester hemispher: By sib lopment model was also challenged by slow growth. In South Africa, initial optimistic inegudiges geen batted state would lead an African renaissance wilted inthe face of stubborn mnemployment worsened by premature economic liberalization.MOUTON the competition between forms of capitalism, we aso see 3 change, ae crows modes: The function sid nature of sates at che bores ; century are different from those ofthe mide ofthe 204 ey Inthe 1950e sie Wwere characterized by Keynesian economies or Fordism (the system of yy. hh nt rable ‘within their borders. Inthe Second World, Soviet command cua. ne shall resources to fed indusealzation and competition with the West. In mac gr ‘World, ‘developmental states’ intervened in the economy to protect infant industri and be, the proces of industralization. By 2000, most of the centrally planned states had mit Teaving the field to versions of the welfare and developmental states and the competing = tu the 9 ing From welfare to competition in the North In advanced industrialized countries, considerable concern has been expressed that the maa the state as changed from providing welfare o its citizens to preparing both citizens ania. Porations for international competition. The idea of a ‘competition state" capture this day, Cerny (2000) suggests thatthe transformation of the state’ role includes several major poy changes. One change is that rather than supporting particular industries or sectors, states ae mop likely to ensure that national economies provide a competitive environment. This involves inns, tives at the macto- and microeconomic levels. At the macro level, states put a priority on low inf tion to attract investment. At the micro level, steps ae taken to increase organizations competion and flesbilty‘This mighe include deregulating or privatizing industries or changing labour lis tion to permit more flexible (and less secure) employment practices. Finally, governments incres- ingly shift from maximizing general welfare, through policies such as fall employment and univers] social programmes, to targeting programmes designed to increase citizens’ employability, such i training, or reducing welfare benefits to encourage work at lower wage levels The concept of a competition state is a useful tool to think about policy innovation ia Western states. However, a wide range of models continues to exist from the relatively welie- ‘oriented Scandinavian states to the increasingly competition-oriented US and UK. Liberal and authoritarian competition in the South Bites outside the developed world have not been immune from the pressures of the global mi kesplice.Two developments dating back to the late 1970s and early 1980s have increased e? Chis competition in developing states. One was the unilateral decision by the government of China that it would begin opening up to Western states by seeking trade and foreign dire rior ni EDD-Although this was a slow process in the beginning, China grew to become te ae eerie of FDI in the 1990s, ‘This diverted investment from other developing countries vie noi the growth of exports that competed with the products of other developing countries. For example, Chins, P e inthe US merken Chins India and Indonesia might all be trying to sell the same product The second developmen mat re evelopment was the debt crisis, which forced many states to abandon inward ig development strategies in pees des en re search of finding a niche in the global market. wee rear gatning towards liberal economic policies as ‘the tiuit!authoritarian rule of Augusto Pinochet. However, the 199 stor a fo Pn He crete 190s aso sw a number of Southern sates eS ey ee and Mexico) and continue the pursuit of a policy While many Southern states have liberalized, renewed interest in the wake of fin . developed states suffered the conse financial sectors, whereas states th the notion of he development sate a Seuevisren states between 2008 and 2012. Western luences of excessive liberalization and deregulation of their at kept the financial sector subservier 2 : Gach a Chita) emerged relatively well Chin eemendows sca in dewoping ees while maintaining government control over ects of F many aspects of economic and political life suggest that the developmental state is sila viable model Developing countries Sates mee : range of models, embracing liberalism to varying degrees and in a multitude of ways. The rise of offshore Another striking development in the state system was the growth of offthore regulation. The term ‘ofithore" refers to areas of the global economy where states create territorial or juridical enclaves characterized by a reduction in regulation (Palan, 1998, p. 626). One of the most significant developments in the offshore world has been the growth of tax havens (see Box 5.3). ‘Tax havens are usually located in small states, such as the Cayman Islands. They allow companies and banks to move large sums of money through paper companies to avoid taxation and regula tion. Some estimate that half the world’s money resides in or passes through tax havens (Palan, 2002, p. 151). Similar offshore developments can be seen in other economic sectors. Different forms of regulation have been applied to specific territories within states to foster investment and eco- nomic growth. For example, China has created special economic zones to attract FDI, Many developing and developed states have created export processing zones (EPZs) or tax-free zones. In developed states, hese EPZs are likely to be in depressed areas desperate for economic growth such as inner cities, What all these areas share is that a different type of economic regulation is, applied within them from that in the rest of the economy. In some cases, the EPZs may give companies tax holidays for a number of years in return for investment. In others, the main attrac tion may be the prohibition of the activites of independent trade unions in the EPZs. The rise of a new political jurisdiction provides some business actors with greater economic flexibility to increase profits by reducing the costs of complying with regulations. Some states have benefited ffom offshore activity because it has alowed them to attract investment to their territory: However, other states have lost investment and the ability to tax or regulate in the pub- lie interest. Rees 3 A.2012 estimate of the amount of wealth hidden by rich individuals in offshore accounts placed the figure at between $21 trilion and $32 tilion (Tax Justice Network, 2012). The lower figure is a large ae the GDP af the US and Japan combined. About hal the total amount is ovned by just 92.000 people. Since most of this wealth is not taxed by governments, an estimated $190-280 tilion in tan revenue is lost, This is more than Western countries give in aid to the developing Worl (H. Stewart, 2012), The drain of wealth by rich individuals out oftheir countries is particulerly serious for states where a small number of people own most of the nation’s wealth. Countries where afew indiveuals or famiies control vat ol wealth or where dictators plunder the nation’s wealth are Particularly damaged, However, even rich countries are harmed as they struggle to raise tax revenue without adequate contributions from their wealthiest citizens.a . 8 BOUTON o : BSN sone anna new The information revolution 4, we examined the advent of the Industrial Revolution and how COT Ri ee Th be Gecades OE e'20CN ane Grit GEGSUENOE te Dtec"e pec ea 1¢ based on information rath; med hnological revolution, this ti (offer, 1980). The first wave was the agricultural revolution and the second Revolution. We are too close to the beginning of the information revolution ro final form and implications, but some initial points can be developed, Technological f Most readers ofthis text willbe familiar with the information revolution because iis heap, an everyday part oftheir lives. Many university students may not be able to imagines yop without lapcops, smartphones and the internet. Yer chese communication and information wp nologies only began their diffasion in the 1970s with the invention of the microprocesor (or puter chip). In 1977, the fist highly successful mass-produced personal computer was intody-e by Apple and user-friendly software was soon marketed by Microsoft Since the mid-1970s, the application of information and knowledge to innovation and po. Guction has accelerated technological change. Computers have become smaller, more power and more mobile.The internet has greatly increased the number of people exchanging informs. tion, products and entertainment, Digital technology has allowed for improved communication through voice (phones) and visual devices (the internet, streaming). In the 21st century, the po. liferation of artifical intelligence has accelerated automation, while digital platforms have fic, tated the creation of new kinds of economic interaction, such as the gig economy: These will ke explored in more detail in Chapter 13, Economic ‘The economic impacts of the information political economy. IT has certainly facilitat financial transactions such as foreign exch: revolution are still working their way through the gob ted the globalization of economic activity. For example. The information revolution offers the computers are applied to the production the advent of new form and track genes holds o has led t0 the creatio Prospect of increasing productivity as information and Process. New economic sectors are being created ith ns of consumer electronics, medicine and agriculture, The ability © 1? ' the possibilty of new medical cures for diseases, Genetic maniplio® "of genetically modified crops, which ate more productive and m0 west However, the advent ofthese technologies has also brought 20 mobile phones all developing cons Counties to leapfrog development sage‘GROWING A GLOBAL ECONOMY: 1945-2019 ble 5.1. Decline in valu Table 5.1 Decline in value of selected high-tech stocks, 2000-03 10 March 2000 $178.06 Tae ee ee $1601 4 Solutions ees $920 $904.90" aa Note: "Canadian dol. Source: Data from Bloom (2003) ty or safe to rural populations, some countries in Aftica are still struggling to provide cle p with Grinking water. The danger is that rather than allowing disadvantaged groups © catch uy developed countries, the gaps grow wider. “The enthusiasm for the information revolution created a bubble in the stock market in the late 1990s Investors poured money into a wide range of T firms, inflating the sock market and creat vn paper fortunes for some entrepreneuts. Like all bubbles (ink of the tulip bubble from Chapter 3), this one burs, leaving a wreckage of sour investors an ‘broken companies (Table 5.1). The technological revolution continues, but with 4 more realistic appraisal of the difficulty of spreading innovation through the economy and the posible negative consequences of rapid change ing insta Social Manuel Castells (1996) has suggested that th profound effects on social life. He argues tha ins hemelves through networks rather than i reeid direct links with each other rather than working throu thority For example, people concerned about the en TNT tal group rather than work through 8 political party, Companies may opt sarees than a workforce divided into rigid roles and tasks. Universities might 1 Iearning tather than gather students in a classroon “The advent of the internet and email has certainly provided the form networks around the world in order to advance their views ab ny ‘Caseen anocarions i the felds ofthe eon and women’ issues, Campaigners, development advocates and labour groups, Reese and mobilize suppor. Given he influence fgovernments and corporations have moved r0 ‘exercise control over its ¢ aovpaviduals threaten their interests Gee Box 5:4 ¢ advent of the information revolution is having ‘mew forms of communication allow people tO ‘erarchies. In the network society, people ‘ah institutions that have layers of ne may form a small environmen= for flexible work teams turn to distance tools for groups of people t0 out how society should be as well as peace have used the new technology fo share of the internet, it is not surprising that ‘ontent when civic groups Meus fe internet to publish US dinlomatic ing at civilians in Iraq. Some have st, which contributed to the Arab vanistan. The distribution of this mmentators, including calls for teresting and damaging action to continue hosting WikiLeaks Box Ba In-2010, the non-profit transpare! ‘cables and video footage showing credited this information with spar Spring of 2011 and increasing ‘opposition to the US war in Afghe Freee eared ferceericsm trom some US Pelee and co Foca net jalan Assanee, the ikea (Oud More int I peveral ipa TICS In December 2O1C-Anes A refused ek mney group Wikileaks used th Us helicopter gunships shoot ving unrest in the Middle Ea fecreon 109EVOLUTION Le isa, Mastercard, Western ons such as PayPal, Visa, i re sal transactions. including donations that fy, dts survival because of cof WikiLeaks threaten ; everational funding. Many of the corporations s, while financial org on its servers, Bank of America refused to proc organization's activities (Naughton, from its App Store. The financial boycott ated to WikiLeaks’ activism 4 nial of service might be rel se Miltary : ‘The information age is alo thought to be creating a revolution in warfare (Cohen, 1996) 7h. cer its surveillance and attack capabilities. The US military is bere, Saar aqme cold ages and stk them fom a ditce The une might be compared to European use of cannon ot repeating rifles against locals in the 1%). century wars of empire. US success in the Gulf War of 1990-1 and the Iraq War of 2003-11, 3 well as Afghanistan in 2001-2, indicates that a combination of new technologies and new tact hhas made US military power much more effective. It is not invulnerable, but the US certainly his an edge over any possible contender. International organizations and governance Astriking feature ofthe global politcal economy has been the rise in international organizations in the second half ofthe 20¢h century. The number of international organizations has grown and 20 has their importance in organizing the global economy. In this section, we briefly examine tines ses of organizations ~ the UN, international economic organizations and corporate and civic associations. The UNGROWING A GLOBAL ECONOMY: 1945-2019 International economic organizations ‘The multilateral framework created after the Second World War has proved remarkably resilient. in the half-century-plus since it was constructed. Because a number of chapters in Part 3 explore the role of these organizations in the context of trade, finance and development, we will only provide a brief review of the continued relevance of the multilateral framework at this point. ‘Three themes have dominated the postwar multilateral framework - adaptation, challenge and expansion. International economic institutions have taken on increased significance in world “ofits, especially since the 1980s. These institutions influence behaviour by providing advice on ‘economic policy and demanding policy change in return for fiiancing or setling economic becween actors. In the wake of the debt crisis in the 1980s, the IMF and the World Bank took on enlarged roles in the global economy. The relevance of the IMF was underscored: during the global finan- cial crisis (2008-9) where, despite some reservations concerning the adequacy of its lending capacity and strength of its surveillance mechanisms, it was given a central role to play in ‘coordinating responses to the crisis. The financial assistance and policy advice of the Bretton ‘Woods institutions have been critical in dealing with states in financial crisis. In return for assis tance, the institutions have demanded that states adopt adjustment policies by liberalizing their ‘economies and opening up to trade and foreign investment, In the trade area, the World Trade. Organization (WTO) was created in 1995. The WTO is a significant change from its predecessor (the GATT) because it provides the trade regime with a -nt formal internation: ‘opens up new-areas of economic activity (such as services) to liberalization and provides a strong. dispute settlement mechanism. This last feature ‘means that states are much more likely to be bound by trade rules after the creation of the WTO, ‘than before. Even strong states that lose a trade case are likely to obey because they see a rules based system as being in their long-term interest. Despite the long drawn out Doha Round of trade negotiations, governments appear unwilling to contemplate the collapse of the WTO. The WTO has incorporated China into the world tade regime and continues to function despite the rise of nationalist politics in many states. ‘How do we explain the longevity.of these institutions? For most of this period, these organizations have enjoyed the support of the leading states within the global economy. Successive US administrations, EU countries and Japan may at times push specific agendas that weaken one or other of these regimes, but they have consistently provided support for a renewed and reinvigorated multilateralism, In other words, the postwar consensus concerning, the necessity for an open, multilateral economic system has not been eroded despite shifts in economic policy and power. Itis notable that the rising BRICS countries have tended to call for, The postwar tnukilateral framework will have to adapt to a changed power structure but the precise form of the new multilateralism is not apparent at.the present time. The increased influence of these institutions has sparked a debate concerning their relevance and legitimacy, with many civil soci- ‘ety groups claiming that they are too powerful. ‘The IME the World Bank and the WTO are the most visible international economic institu- tions, but there are many others. The G7 (Group of Bight) brings together the seven most to discuss economic management of the global economy. In ke of the global financial crisis, the G20 (Group of 20), which had traditionally focused on “financial issues such as financial stability, widened its scope to more general.economiic matters. It includes the G7 plus a number of prominent developing, countries. The B: “Tocated in Geneva, is the fortum for central bankers. The Organisation for Economic, (OECD) is an advisory organization that brings together the industrialized countries of the world. Alongside these organizations can be added numerous the wal a1ees i ties, such as the North Ameri ~ and economic integration treaties, i regional groupings an ket (MERCOSUR), the Fy, ha ‘Agreement (NAFTA), the Southern Common Mat ket (MI J, the Eure nomic Community of West I Economic Ce eration, the Economic aca "The multiplication of interstate organizations means 0) that states, corporations anc; national organizations. In some cases, the imp c tise ia aa separ urging a particular ecONOMY to spend ng! ca het cae, the impacts greater. For example, the IMF may demand th = sean te amount it spends in its budget, before giving desperately needed loans. Alterna, the WTO might rule that a domestic environmental regulation violates trade law and my) modified Corporate and civic associations Both the for-profit and not-for-profit sectors have also been busy expanding their internation contacts and forming international or transnational organizations. Boli and Thomas (1999, p, 4) estimate that almost 60 per cent of international nongovernmental organizations (NGOs) ate con. centrated in the economic or scientific fields. NGOs have been particularly active in internation development. Although most publicity is given to the advocacy role of many of these organizations a they lobby governments and international organizations, NGOs have become increasingy important in the implementation of development projects (Sklias, 1999). In the 1980s, Western governments increasingly used development NGOs as a channel for the provision of economic sid (Gordenker and Weiss, 1999, p. 25). Not-for-profit citizens’ organizations have also increased their international presence and have created transnational advocacy networks to lobby'TNCs, mulilx- eral economic institutions and the governments of nation-states (Keck and Sikkink, 1998). This activity has been enhanced by the revolution in communications, which enables activists to build networks at relatively low cost. The anti-globalization protests at meetings of the WTO, the Word Bank, the IMF and G7 summits provide evidence of non-state actors attempting to influence inte national economic policy-making. Thus, NGOs and citizen groups have become important actors in the normative and material structures of the global political economy. : In ea areas where states have not set up appropriate regulatory frameworks, industries hi formed their own associations and brought in rules or norms. For example, in the area of Sonia ae leading TNCs have established the ISO 14000 set of regulations (Coe. pee ee asociaions a the ioctl eon ‘Tuctures is becoming increasing ly visible. While industry associations have !o"5 played a pare at the domestic level in influencing national legislation fe appropriate level of nd the state, so national and transnational industry bods bis licy-making (Sell, 2000; Smythe, 2000). Conclusion The key frameworks of the global “ Pat 3.This conclusion promo etic economy in the 2ist century will be explor them with the his wides an overview of th - Po 'w oftheir evolution in the 20th century and com torical eras examined in Chapters 3 and 4, mpbekige Trade The postwar era savy under a series of n¢ an increase in the y lume an egotiating rounds of don et took plat er ee of trade. Trade liberalization Tarif were gradually reduced and 19 ©GROWING A GLOBAL ECONOMY: 1945-2019 1970s an effort was made to address non-tariff barriers to trade. In 199 creation of the eT marl in nese nk cesta serine tein se ond culture, as well as agrecing to submit their disputes to a binding dispute settlement mechanism. ‘Alongyide these multilateral trade initiatives, a series of regional agreements were created to facilitate the movement of goods and services among neighbouring countries. The most signifi- cantofthese were in Europe (the EU), North America (NAFTA), South America (MERCOSUR) and Southeast Asia (ASEAN). AAs trade agreements intruded more directly on national political economies, trade initiatives became the subject of extensive national and international debate, Concern was expressed about theit socioeconomic and environmental impacts. In the early 2000s, leftist social movernents wrgued that trade agreements undermined local environmental standards, supressed workers’ ‘wages and concentrated wealth among the rich. In 2016, backlash from the right resulted in Britain voting to leave the EU and the election of a protectionist president in the US. President ‘Trump called established trade rules into doubt by withdrawing from the'Trans-Pacific Partnership (@ trade agreement with twelve Asia-Pacific trading partners), negotiating NAFTA and putting tariffS on Chinese, Canadian and European products. Trade relations remain a topic of contro- versy and conflict. Production “The most visible development in the area of production has been the growth of transnational corporations. TNCs account for the majority ofthe global production structure and 50 per cent of world trade, In 1998, 53,000 TNCs with 450,000 foreign subsidiaries had total sales of $9.5 trillion. By 2015, the top 2,000°TNCs had combined revenues of $39 trillion. The largest TNCs hhave annual sales greater than the GDP of most countries. his results in the investment decisions ofTNCs having an enormous impact on the economic fortunes of particular states.The influence of these corporations has led to suggestions that the state is losing power to economic actors and that democny is threatened by their growing power. Since most large TNCs originate in and jinest in developed states the problem of development continues to plague many countries, “Another significant erend has been the increasing importance of East and Southeast Asia 35 2 site for intemational production. The development of the four tigers has been followed by the industriaisation of the coastal Chinese mainland. China’s government created special economic zones to hare foreign investment and build its export base. fit can maintain its political integrity ind manage the inequalities brought about by industrialization, China has the potential to become the leading international power. Indeed, an influential publication predicted that China would become the world’s leading economy by 2050 (HSBC, 2011), Finance “The financial field has witnessed a transition fiom the immediate postwar period, where markets were restricted and government actors played a large role, to today’ global system where capital is extremely mobile and private firms take the lend role. The international monetary system has moved from a system of fixed exchange rates to a system of fluctuating rites, Thus, we have 2 system of capital mobility and floating exchange rates, but the currencies are not ted to an accepted commodity such as gokdThe 1970s was the tansition decade from a system of national Keynesianisen ot embedded liberalism to a more open, neoliberal state and global economy. The openness of the global financial field is not unprecedented, but its particular form has not been Seen before, Information technologies allow for a much more rapid movement of funds across state boundaries, while the flow of news bas the financial markets reacting immediately to the latest current events. A financial crisis in one country can spill over into neighbouring countriesEVOLUTION and around the globe in a matter and had long-lasting effects in tern of days. The financial crisis of 2008 shook the giot nis of slower growth and austerity in many states, Labour yostwar years have seen a shift from an international to a more global division of world, but where work is not confined to particular states. In a global division of labour, that in the past might have been thought of as being confined to particular states nov very different types of states. Labour that we might associate with a developing count: {shes in a developed state and jobs thought to be the preserve of advanced industrialized «5 tries exist alongside labour-intensive jobs in developing states. For example, an. expining computer software industry has developed in India alongside the majority of the population tha; lives on subsistence agriculture. The distinctive feature of these jobs is that they are plage ings 2 transnational production process and are not confined to particular parts of the globe, although they may be more concentrated in some areas than others. The evolving global division of labour has seen the creation of a new global middle class with the development of China and India, s ‘well as the emergence of the global super-rich and increased inequality within states Gender ‘The gendered nature of the postwar global political economy has become clearer with increasing research into the subject, Economies of all states relied on women to provide free labour to cae for family members so that men could participate in the paid workforce. In addition, economic restructuring in response to financial crisis demands that women provide even more services states cut back on social provision. At the same time, the increasing globalization of the economy is bringing more women into the global workforce in particular roles ~ as domestics or nannies, entertainment or sex workers, or workers in labour-intensive factories in the developing world While some women pursue desirable carcer opportunities in the global economy, most struggle to make ends meet. Development Development has become a significant issue in the postwar era with the process of decoloniz tion, Akush a large number of countries gained their independence in the postwar period seule * development has been much more difficult. In this period we have witnessed unev®? ee pment within and among countries. The recent rise of Brazil, China and India may be the rae to susained SNE meaningful development continues to evade many people 0” Environment~ GROWING A GLOBAL E jOMy: 1985-2019 aiuastrous comsequences of rising tempe uareme weather events (hurricanes, ep species extinction and ocean acidification all nea rips have built their civilizations, Homers cn ea sil fuels to drive development and many ‘ consumption oF transitioning to clean ener greater instability to the global econ ures work their way through the clones), rising sea le ‘economic system. vels, melting ice caps, floods, drought, ndermine the material basis on which 'y developing countries continue to need fos- developed states seem incapable of curbing runaway *BY.At the very least, climate change is likely to bring Ideas int cae ee pasar en bat sen 2 prolonged sirugule over the superior method of onganiz ‘onomies. In Western states, Keynesian welfare policies dominated, Central planning in the Soviet model offered an alternative vision of society until the end of the Cold War in 1989.Although the capitalist system emerged triumphant in 1989, vigorous debates continue about what form of capitalism is appropriate for any particular economy. Usually, the liberal Anglo-American systems are contrasted against more welfare-oriented European arrange ‘ments or Asian corporatist practices, which integrate business, government and subordinate labour organizations. Another significant development in thinking has been the rise of the concept of ‘globalization’. Over the last quarter of the 20th century, the term ‘global’ was increasingly used to describe a range of activities in the cultural, economic and political realms. Globalization concerns the growth of supraterritorial relations between people (Scholte, 2000a).'These relations can be found in engagement with and response to mass media (for example, pressure for humanitarian intervention following a TV broadcast of a disaster), developed through economic structures (global production and finance) or aroused in response to shifting centres of authority. Security On the security front, most of the postwar era was dominated by the Cold War between the US and the USSR. This competition structured political and economic relations around the world, Conflicts between the superpowers were often channelled to developing countries, which resulted in losses and gains for those states. With the end of the Cold War in 1989, the security issues of terrorism, nuclear proliferation and conflict within states took on increased prominence. The US continued to build its military advantage by applying technological innovation to its armed forces. Increasingly, the developed world was characterized as a zone of peace (with the exception of occasional terrorist attacks), while much of the developing world faced the prospect. of interstate or civil war, For most of the world’s citizens, premature death was much more likely to come from poverty, disease or malnutrition than war. However, the threat of interstate eco- nomic and political rivalry did not disappear. A newly assertive Russia under the leadership of Viadimir Pain jostled with Europe and the US, while the economic rise of China added a new dimension to old geopolitical rivalries. Governance There are ewo governance developments that set this era apart from its predecessors. One ele~ ‘ment has been the proliferation of formal international organizations dedicated to coordinating Policy on a wide range of issues. Institutions such as the IMF the World Bank and the WTO exercise considerable influence over policy formation in the areas of finance, development and “ade, especially in weaker and poorer states. A second feature hus been the democratization of State inscutions. Greater public influence over decision makers (compared with previous eras) Complicate foreign economic and diplomatic polices. Economic arrangements such as NAFTALa F a for debate in many states. The ris e and the operation of the WTO, have become issues for a “ving popalism in Western states after 2016 demonstrated the degree to which in rrangements are rooted in the domestic politics of states. The automatic economic a, demanded in the gold standard eta is no longer possible. Having provided readers with a general introduction to theories and methods in Gp, t.and an overview of the historical emergence of a GPE in Patt 2, we now turn or oon. in Part 3 to a more detailed analysis of key GPE frameworks in the postwar era. Chapters 4. examine definitions, theories, major developments and Key issues in the areas of trade, prody. nance, bour, gender, development, environment, ideas, security and governanc: tion, DG Further Reading John Ruggie’s concept of embedded liberalism’ was elaborated in his 1982 article ‘International Regimes, Transactions and Change: Embedded Liberalism in the Postwar Economic Order, Internationa Organization, 36(2} 379-44. Thematic overviews of various aspects of postwar IPE can be found in John Revenhil’s edited collection Global Paitical Economy, Sth edn (2017).