The Effect of Globalization

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Special Working Paper Series

Globalization and Politics
Suzanne Berger
MIT IPC Globalization Working Paper 00-005

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Annual Reviews

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Annu. Rev. Polit. Sci. 2000. 3:43–62
Copyright c 2000 by Annual Reviews. All rights reserved

GLOBALIZATION AND POLITICS
Suzanne Berger
Department of Political Science, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139; e-mail: szberger@mit.edu

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Key Words internationalization, neoliberalism, trade opening, social dumping, states and markets
s Abstract This chapter reviews the issues at stake in current public and scholarly debates over the impact of changes in the international economy on domestic politics and society. Over the past two decades, there have been dramatic increases in the flow of portfolio capital, foreign direct investment, and foreign exchange trading across borders at the same time as barriers to trade in goods and services have come down. These changes raise many new questions about the effects of trade and capital mobility on the autonomy of nation-states and the relative power in society of various groups. The first signs of realignments within and between political parties of both the left and the right over issues of national independence and trade openness suggest a rich new terrain for political inquiry.

INTRODUCTION

The rise of public and scholarly interest in globalization and politics is a new phenomenon. Over the past decade, the liberalization of trade, finance, and investment across the world has opened vast new territories to dynamic economic actors. The rise of incomes in developing countries has created large new consumer markets. Producing across national boundaries has shifted research, development, and manufacturing activities involving higher and higher degrees of skill and value into other societies. At the same time, economic institutions are also changing. Corporations that were once vertically integrated are shrinking their boundaries and focusing on core specializations. New partnerships, commodity chains, alliances, and mergers link producers, suppliers, and customers. How do we understand the impact of these complex transformations on our societies as risks, rewards, and security are redistributed in a global economy? How do we understand the impact of these changes on politics?

Before World War I, it was only the rare observer of the international economy who wondered about the effects on domestic politics of soaring levels of cross-border capital movements, migration, foreign direct investment, and the new transportation and communication technologies that accelerated movement of 1094-2939/00/0623-0043$14.00

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BERGER

information and goods among countries. But the idea that globalization undermines the autonomy and leverage of the nation-state appears in writings from this earlier period of internationalization. Angell (1913:54–55), reflecting on this theme on the eve of the war, had already identified the very same factors that today are imagined to be the motors of globalization.

This vital interdependence ... cutting athwart frontiers is largely the work of the last forty years. ...[It is] the result of daily use of those contrivances of civilization which date from yesterday—the rapid post, the instantaneous dissemination of financial and commercial information by means of telegraphy, and generally the incredible increase in the rapidity of communication which has put the half-dozen chief capitals of Christendom in closer contact financially, and has rendered them more dependent the one upon the other than were the chief cities of Great Britain less than a hundred years ago.

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From this financial interdependence, Angell deduced the irrationality, indeed the unlikelihood, of war, for he thought it had become too costly to the fabric of international economic exchange...
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