Global Capitalism

"This book is also historical and takes a much closer look at the last two centuries of economic globalisation. What’s very useful about it is that it underscores that economic globalisation is not inevitable: Frieden spends a lot of time looking at the collapse of globalisation in the interwar period in the 20th century. The book is also very good at underscoring the domestic political prerequisites of globalisation. The lesson is very much with us. Right now we are going through a period when globalisation is being questioned, for the same kinds of reasons that it came under attack and was overwhelmed during the interwar period. The fundamental question is about the compatibility between a system of politics that is still organised around nation states and a global economy where national economies are intertwined and markets have gone global. “Of the following three things—national self-determination, political democracy and hyper-globalisation—we can have at most two, and that we need to make an explicit choice as to which two we want. Many of our troubles stem from the fact we seem to be pushing for all three things simultaneously.” I think these two things – the domestic nature of politics and the global nature of markets – are fundamentally in tension. It was the mismanagement of this tension that led to the collapse of the gold standard in the earlier era of globalisation – an episode the Frieden book describes so well – and the future of our current round of globalisation will depend on exactly our skill in managing the same tension now. Very much so. There is political tension between the groups who are largely the beneficiaries of economic globalisation – either because they’re internationally mobile like firms or because they have the kinds of skills that allow them to prosper in the global economy – and those who are not so lucky. Get the weekly Five Books newsletter Those who are not so lucky are, in many countries, still a large majority of people and they want their democratically elected governments to be much more responsive to their needs, at a time when governments just say: ‘Globalisation made me do it! I can’t do anything else!’ It’s this tension that we need to be grappling with. Yes. I think one good thing is that pretty much everybody understands that there really is no alternative to market-based systems. But that still leaves huge room for argument about the type of market system. If you look at the national economies of different countries, they have very different kinds of market-based systems. The US economy is very different from the Swedish economy, which in turn is very different from the French economy, which in turn is very different from the Japanese one. And all of them are very different from the kind of market economy China is. So there are many, many different ways of constructing a market economy. What is the role of the state? What is the role of the welfare state? What is the role of regulation? How much redistribution should there be? What should the tax system look like? What should the consumer safety regulations look like? How organised should labour markets be? These are all questions that different societies have to resolve for themselves. But global markets are fundamentally hostile to heterogeneity on these questions, so what economic globalisation tends to do is push for uniformity, to push for similarity in standards and regulations. It is not entirely clear that this is desirable – either politically or economically. And it’s certainly not inevitable in any way – because it’s up to governments and policy-makers to decide to what extent they want to go down that route."