EH 4: neoliberal globalization Flashcards
World system theory
-Wallerstein
-core idea from development theory: industrialization spreads across the globe, but takes a long time
-modernization process: every country follows the steps of the first movers, goes through the same steps
vs. idea, that a global economy emerges ->
countries that industrialize late have worse terms than first movers
-> world system theory picks this idea up
-> world system is built upon division of labour between countries
-> gives core advantage, they can set prices
periphery: mostly cheap labour and exports, but also industrialized countries, that do not have the same terms -> they cannot dictate their prices
semi-periphery: are industrialized, have their own industries, can exploit countries for raw materials, but are still in a subordinate position towards the core countries
dependency theory
-ermerged in latin America in 60s, 70s
-> reacting to the region’s persistent economic “backwardness”
-looks at countries what types of capitalism emerge in countries that do industrialize but under the conditions of a full fledged world market and multinational companies
-analyze Latin America capitalism from the point of view of the interplay between internal and external structures
-dependency theory often points to the “deformed” character of Latin American economies due to strucutral inqeualities & hierarchies in the world economy
-mechanisms that keep late developers in a situation where they are dependent
multinational companies
when building up own industries, usually start with light industry (textile), then maybe into heavier industry, but countries are still missing technology and machinery -> invite multinational companies to produce locally
-> result: very different social relations
-> not a national bourgoisie, but one that is aligned with the interests of foreign capital
globalization
process of creating networks of connections among actors at multicontinental distances, mediated through a variety of flows including people, information and ideas, capital and goods
foundation for sustained transnational ties through neoliberalism
process that erodes national boundaries, integrates national economies, cultures, technologies and governance
global integration of production occurs through trade, foreign direct investment, portfolio investment and the orchestration of global value chains (intra-firm trade, or trade within value chains)
foreign direct investment
substantial, lasting investment made by a company or government into a foreign company (vs short term portfolio investment, buing stocks to diversify assets)
FDI investors typically take controlling positions in domestic forms or joint ventures and are actively involved in their management
motives for FDI might be market access (important in eastern europe), acquiring a source of input material, incresing efficiency (decrasing costs) or controlling competitors
global value chain
global economy is increasingly structured around global value chains that account for a rising share of international trade, global GDP and employment
value chain describes the full range of activities that firms and workers perform to bring a product from its conception to end use and beyond
governance (i.e. contrl and coordination) of the value chain regulates power relations and inequalities within the chain
how much value is added where and how much do they get out of it?
how is it coordinated? coordination has repercussion on distribution of added value
profits mainly added by research and development, design, marketing etc; seemingly independent firms controlled by lead firms; production is most-exploitable
e.g. for food: Inputs -> Production -> Packaging and Storage -> Processing -> Distribution & Marketing
different kinds: for example: captive value chains: suppliers are dependent on lead firm, products can not be easily sold to different firms -> not in a position to negotiate
-> depends on how important lead firm is, what assets the supplier has etc
Czech Republic
dependent manufacturing
- “dependent core”, dependent on investments, but exported products are similar to core -> export strucutres are now as “complex” as western countries
re-industrialized under the dominance of FDI
-> exports have been grown massively
Latvia
dependent and more peripheral integration
Latvias industry collapsed in the 90s (industry seen as sovjet legacy -> very politicised), Exports remained flat until the 2000
less FDI, but Latvias export are often part of GVC
specializes in lower-end ICT and transport services etc
Ukraine
peripheral integration
volume of Ukraines export is comparatively low, mostly in agriculture and metals
Ukraines exports are typically not part of GVC (not under controll of GVC; Ukraines companies export)
Russia
“petro state” -> special commodity: booms and bust cycles, highly volatile
in countries that industrialized citizens and companies pay taxes -> social contract -> countries need to offer something in exchange for taxes -> more accountable
petro state doesnt really need to raise taxes, can rely on ressource earning -> less existing bond between citizens and state
not very complex economic strucutre, that faces booms and busts
globalization eastern europe
rapid globalization in Eastern Europe after 1990 -> hyperglobalization in some countries
explanatory factors:
legacies
1. socialist industrialization
2. import-led development and debt
simultaneity of breakdown of socialism and the rise of global neoliberalism
large scale privatization
socialist industrialization as a legacy
socialist indsutrialization left behind
-some valuable enterprises
-a lot of uncompetiitive industries
-a skilled, experienced and comparatively cheap labor force
-> way for foreign investors to come in, build them up -> attractive region
(mainly Visegrad, Romania to some part, baltic countries apart)
import led development
strong ocrrelation between socialist “protoglobalization” and the inflow of FDI in the 1990s
legacy of debt: wheres Poland negotiated a debt relief, Hungary did not. Privatizing to foreigners provided income to service its debt and aimed at fosterin exports
simultaneity of breakdown of socialism and the rise of global neoliberalism
countries couldnt protect their own industries even if they wanted to, because of the rise of neoliberalism -> invite FDI as much as possible, will help to modernize, service debt etc
Washington Consensuns: summarizes the policy consensus that ermeged after the Latin American debt crisis of 1980s in the IMF; World Bank and US Government
neoliberal policy consensus, which aims at limiting the role of the state, fostering private property and competetiveness
politics of the washington consensus made gradual reforms very difficult and exposed East European industires to strong competitive pressure
Large scale privatization
rapid liberalization, marketization and privatization as the hallmarks of East European economic transformations
in most oft post-soviet space: insider privatization: people from inside the bureaucracy during socialism largely appropriated property -> oligarchy -> not conclusive to FDI
in most of ECE multinational companies invested heavily in industries & services
-> tried to restructure economy so endogenous private firms, later FDI model
