2 Announcements Office Hours limited: Topic: Theories of globalization TodayMay 29Contact me about appointments…Topic: Theories of globalizationPlus, continuing discussion of governance…
3 Review: What is a Theory? Definition #1: A specific claim or argument that leads to empirical predictionsExample: Economic law of “supply and demand”Definition #2: General imageries about how the world worksExample: Marxist theory: not just a single predictionThis broader kind of “theory” is useful because it generates a rich description of the worldOffers directives to guide researchAnd produces many specific claims to be testedBut, it isn’t easy to prove “right” or “wrong”.
4 Theories of Globalization Some major views on the international system:1. Modernization theory2. World Systems TheoryAnd “dependency theory”, a common variant3. “World Polity Theory”Also called “neo-institutional theory”4. Realism5. Various responses to Realism“Complex Interdependence”, others…
5 World-System Theory (WST) Background: Modernization theoryAn evolutionary theory predicting how societies developSee Chirot and Hall article on WST…Argument: All societies naturally pass through certain stages of developmentAll societies start out as “traditional” hunter-gatherersThen, they develop agriculture; towns & cities growEventually, they become “modern” industrial societiesMovement from one stage to the next is driven by things like population growth & new technologiesSociety becomes more complex; greater division of labor.
6 World-System Theory (WST) Modernization theory was based on analyses of European societiesIt was assumed that non-European societies would have the same experienceOr modernize faster with aid & technology from the WestProblem: Non-western countries weren’t modernizing as predictedExample: Argentina was as rich as many European countries in 1890… but hardly improved by 1960Example: Many former colonies in Africa were stagnant, or becoming more impoverished over time.
7 World-System Theory (WST) World-System theory tried to explain the failure of many countries to developScholars: Andre Gunder Frank; Immanuel WallersteinClaim: Underdeveloped/peripheral countries are not just like Europe, but at an earlier stage of developmentThey have a very different history: colonizationAnd, they must compete with highly developed countriesEurope was undeveloped and became developedOther countries were undeveloped, and now trapped in a state of “underdevelopment”.
8 World-System Theory (WST) Argument: Europe was able to prosper by exploiting resources from other placesThe great success of Europe and the failures in the non-West weren’t just a coincidence…Europe became wealthy by maintaining economic & military dominance over other nationsExploited nations will never “modernize” as long as they are oppressed by Western nationsExample: Latin America traded a lot with Europe… and remained underdevelopedWhereas Japan avoided contact with Europe; did better…
9 World-System Theory (WST) World-System Theory: We need to study the entire global economy as a world systemWe can’t understand the fate of a single country, without understanding how it fits into the overall systemCountries aren’t poor because of their own specific history or internal characteristicsRather, they are poor because of their position relative to others in the global capitalist system.
10 World-System Theory (WST) Key concepts:Core: the rich, developed countriesAlso: west; metropolitan countries; developed worldPeriphery: poor, dependent nationsAlso: underdeveloped countries; satellites; dependenciesSemi-periphery: semi-industrialized countriesDependency: The vulnerable state of being exploited by core countriesThey depend on the core for trade, investment, loans, technology, etc. (related term: underdevelopment).
11 World-System Theory (WST) Classical economic theory (Ricardo) predicts that specialization & trade is beneficial for allCountries that can produce high-tech goods most efficiently should concentrate on thatCountries that can produce bananas or coffee efficiently should concentrate on thatSpecialization leads to a “win/win” situation… everyone is more efficient; countries become more wealthyWorld-System theorists criticize this view…
12 World-System Theory (WST) Criticism #1: Specialization in low-tech production (e.g., bananas) may produce profits in the short term…But, there is a cost: countries fail to develop industry and sophisticated technology that could lead to greater profits in the futureArgument: In the long run, countries would be better off developing high-tech industry, rather than just producing coffee…
13 World-System Theory (WST) Criticism #2: trade is asymmetricalRich countries don’t need coffee/bananas badlyAnd, they can buy them from many sourcesBut, poor countries critically depend on trade to get technology, machinery to develop their economiesThus: Poor countries are dependent on rich onesThey need manufactured goods… and are forced to pay high pricesAnd, they must sell their raw materials and agricultural products very cheaply.
14 World-System Theory (WST) Economists argue that foreign investment is good for peripheral countriesWorld system theorists criticize this, too:1. “Core” capitalist countries tend to extract profits from the peripheryThis outweighs benefits of foreign investment2. Foreign investment doesn’t really help a society industrializeForeigners build plantations and mines to extract resourcesThey build roads & ports to extract; not to benefit the countryIn sum: They don’t build useful industrial infrastructure.
15 World-System Theory (WST) More key concepts:Trade concentration: When a peripheral country trades with just a few core countries (or only one)Investment concentration: When investment comes from just a few core countries (or one)High concentration may make peripheral countries vulnerableIf the core country decides to halt trade or investment, economic disaster would followPeripheral countries must please core trading partnersThey lose political autonomy to do what is best for its people.
16 World-System Theory (WST) Scholars such as A. G. Frank found evidence in studies of Latin AmericaKey observation: Latin American economies and trade was unusual:They mainly produced “cash crops” and raw materialsTrade was almost entirely with the U.S.High “Trade Concentration”Foreign investment resulted in foreign-owned plantations, not expanded industry & “development”.
17 World-System Theory (WST) Interpretation of Latin American situation:Global capitalism forced countries into a state of under-development1. They can’t to compete with industries from high-tech economiesThey do not develop high-profit industries: cars, etc.2. Instead, they trade commodities (coffee)They must compete with other poor countries for sales… so they don’t make much profitSo, they remain underdeveloped…
18 Investment Concentration CountryConcentration (%)PartnerHonduras97.7U.S.Swaziland96.6BritainNiger95.7FranceChile91.3Saudi Arabia90.4Tanzania48.1Iraq37.5Brazil35.6Source: Kentor and Boswell 2003
19 World-System Theory (WST) Research literature on WST… Examines:Do countries with more trade, investment, and concentration fare worse in terms of:Economic growthPovertyHealth and environmental well beingDemocracyResults: Mixed… More on this later.
20 World-System Theory (WST) Issue: Why don’t all the peripheral countries band together and overthrow the core?Example: In 1970s, Oil-producing countries created “OPEC”, and restricted the flow of oil to the coreResult: High gas prices; OPEC countries got richThough eventually the West made friends with Saudi Arabia and others… who lowered prices.Why doesn’t this happen all the time?
21 World-System Theory (WST) Wallerstein’s explanation:for stability of the world system1. Military dominance of the WestEx: US overthrew any Latin American governments that tried to oppose the US2. Ideological commitment to the systemPeople believe capitalism is “fair”, justSimilar to Marx: false consciousness3. The existence of the semi-peripheryMost important, according to WallersteinSemi-periphery is doing OK, so they support the corePrevents everyone from ganging up on the core…
22 World-System Theory (WST) Question: How does WST differ from other analysis of economic globalization?Both agree that economics = importantBut, economists often view the world economy positively (or neutrally)Ex: Ricardo thought trade was overall beneficialEx: Many economists think globalization reduces poverty compared to a world without tradeWST argues that globalization perpetuates inequality.
23 World-System Theory (WST) In contrast, WST argues that the global economic system is inherently unfairEconomic power of core countries and MNCs is so great that the periphery will always be exploitedThe idea that governments and international institutions can make the system “fair” is an illusionGovernments and international institutions (e.g., the WTO) will always reflect interests of capitalistsTherefore, WST scholars are pessimistic about the role of global governance in solving social problems…Consequently, the system must be substantially reorganized… or overthrown.
24 World-System Theory (WST) What should peripheral nations do?According to WST scholars?1. Peripheral countries must avoid exploitive economic relations with the coreBeware of trade and foreign investment, which can lead to exploitation and foreign control2. Try to nurture domestic industriesDon’t sell coffee and rely on core for high-techTry to develop advanced industries locallyConcept: “Import substitution” – developing local industries to avoid importing products.
25 World-System Theory (WST) What should peripheral nations do?According to WST scholars?3. Band together with other poor nations to fight against the power of the Core…Trade with each otherPerhaps create cartels to bargain with the CoreAnd some argue: start a global anti-capitalist revolution.
26 World-System Theory (WST) How does WST view international organizations?Answer: They do not affect the fundamental economic positions of core and peripheryClaim: Most IGOs and INGOs are created by core countries, and will never fundamentally undermine the dominance of the coreIGOs and INGOs tend to perpetuate core dominanceExample: WTO has not given big concessions to peripheryThe only thing that could help would be organizations representing the peripheral countries against the core!
27 World-System Theory (WST) Question: Is world-system theory “right”?WST makes many claims. There is no simple answer1. Analysis of Latin America is generally thought to be compelling2. Rapid industrialization of South Korea, Taiwan, etc = major exceptions to WST3. Evidence on foreign/trade investment = mixed, but often contradict WSTSome studies find effects consistent with WST, but many do not.
28 World-System Theory (WST) Criticisms of WST:1. Research findings are mixed at bestThe specific WST predictions about sources of global inequality/poverty have often been wrongIt is true that there is horrible poverty in the world…But: Are people worse off than if there was no global economy? That is less clear.
29 World-System Theory (WST) 2. WST doesn’t make clear predictionsAfter the fact, almost any action can be interpreted as “serving the interests of global capitalists”Example: The Montreal Protocol on CFC emissionsFirst, the core didn’t sign it… WST scholars said: “See, the core is using its power to avoid the treaty!”Later, when the core signed it, WST scholars said: “See, the core has ensnared the peripheral countries in a treaty that will keep them in poverty”A theory that can fit any evidence is not so useful.
30 World-System Theory (WST) 3. Reverse causalityWST argues: Countries that are dependent on the core of the world capitalist system will be trapped into a state of underdevelopmentBUT, maybe it works the other way aroundPoverty produced “dependent” relations in the first placePoor countries can’t produce high-tech goods, so they trade commodities (e.g., bananas)But, this doesn’t necessarily mean that trading bananas made those countries poorer or “trapped” them into poverty.
31 World-System Theory (WST) My advice: WST is a useful theory that has some predictive powerBUT: don’t become a conspiracy theoristDon’t assume that the entire global economy is conspiring to “keep the little guy down”The real answer, as always, is that the world is complex…Some aspects of the global economy have been beneficial, others notDon’t judge without evidence.