The Multinational Enterprise in Global Production and Trade Networks - Individual Essay
— The Political Economy of International Business
Week 5: Democracy, authoritarianism and geopolitics
BUSM 4694_2120 Lecturer: Jaime Wong 18 February, 2020
‹#›
RMIT Classification: Trusted
To create Em dash above headline:
Same size and weight as the headline and set using a soft return.
PC: Em dash (—): Alt+Ctrl+ - (minus)
Mac: Em dash (—): Shift+Alt/Option+hyphen
1
Last week
Globalisation and inequality
Shrinking western middle class
Growing wealth in emerging countries
Changing politics in the western world
Rise or populism(s)
Decline of centre-left parties
‹#›
RMIT Classification: Trusted
Lecture outline
Thinking about the “global order”
Theories about the future:
“End of history”
“Clash of civilizations”
Return of states and nationalism
“Clash of capitalisms”
What impact on IB?
‹#›
RMIT Classification: Trusted
Global order
Geo-politics
Conflict
Alliances
Global economic governance
Monetary policy
Interstate loans
Trade
‹#›
RMIT Classification: Trusted
19th century globalisation
Rapid growth in global economic integration c1815-1914
Underpinned by:
Gold Standard
(Relative) peace in Europe
Imperialism
Limited democratic suffrage
‹#›
RMIT Classification: Trusted
Collapse of globalisation
Conflict: WWI
Democratisation
Expanded suffrage
1930s: Depression, “beggar thy neighbour” trade policies
Rise of nationalism, Fascism, WWII
‹#›
RMIT Classification: Trusted
Post war order
New “superpowers”: United States and the Soviet Union
Geopolitical tensions mitigated by:
UN, Mutually Assured Destruction
Western hemisphere Bretton Woods financial institutions:
IMF
World Bank
GATT
‹#›
RMIT Classification: Trusted
Post Cold War order
United States the sole “superpower”
Geopolitical tensions mitigated by lack of rival to US
Western hemisphere Bretton Woods financial institutions become global
Rapid trade integration under WTO
‹#›
RMIT Classification: Trusted
Post Cold War: the end of history?
Francis Fukuyama:
“What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of postwar history, but the end of history as such: that is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government.” (1989, p.1)
Decline of ideology
Advent of liberal-democracy & capitalism
State
Democracy
Institutions
‹#›
RMIT Classification: Trusted
The end of history: evidence
Conversion of communist world to market economies
Russia, Eastern Bloc, China, Vietnam, etc.
“New World Order”: one superpower
Democratisation:
“Third Wave” of southern Europe, Latin America, Africa, Asia
“Arab spring” movement 2011-
‹#›
RMIT Classification: Trusted
The end of history: criticism
Ideology has not disappeared
Democratization in decline:
End of the “transition paradigm” (Carothers)
Democracy itself not politically stable
Awkward relationship with globalisation
‹#›
RMIT Classification: Trusted
Clash of civilizations?
Culture as a new geo-political fault line
“the fundamental source of conflict in this new world will not be primarily ideological or primarily economic. The great divisions among humankind and the dominating source of conflict will be cultural. Nation states will remain the most powerful actors in world affairs, but the principal conflicts of global politics will occur between nations and groups of different civilizations.” (1993, p.3)
Decline of ideology & states.
‹#›
RMIT Classification: Trusted
Clash of civilizations?
‹#›
RMIT Classification: Trusted
Clash of civilizations: evidence
Regional integration:
EU, AU, ASEAN, etc.
Post cold war “civilizational” conflicts:
Former Yugoslavia, India-Pakistan, Chechnya, Sudan
West and Islam
9/11, “War on terror”, wars in Iraq and Afghanistan
‹#›
RMIT Classification: Trusted
Clash of civilizations: criticism
Simplistic view of culture
Said, Bhabha
Most conflict in the world within civilizations, not between them
Middle east, Eastern Europe, South China Sea, Latin American “pink tide” politics
Europe weakening political solidarity
Cross-cultural alliance still common in geo-politics
US/Saudi, Russia/Syria, China/Venezuela, etc.
‹#›
RMIT Classification: Trusted
Return of authoritarian nationalism?
Returning to a 19th-early 20th century model of international relations characterised by:
States (not culture or ideology)
Nationalism (rather than globalism)
Authoritarianism (rather than liberal democracy)
Underpinned by:
Economic rise of emerging powers
Democratic backsliding in fragile democracies
Turn to nationalist (isolationism) populism in the west
‹#›
RMIT Classification: Trusted
Return of authoritarian nationalism: evidence
States turning to authoritarian “strongmen”
(Considered western populists last week)
Turkey: Erdogan
Brazil: Bolsonaro
China: Xi
Philippines: Duterte
Russia: Putin
India: Modi
‹#›
RMIT Classification: Trusted
The Clash of capitalisms
Milanovic: Liberal capitalism vs political capitalism
| Liberal capitalism (US, EU, India) | Political Capitalism (China, Vietnam, Russia) |
| State serves interest of economic elite Rule of law above the executive, independent judiciary State as embedded is society via democratic process | State run by technocratic bureaucracy Rule of law arbitrary, beneath the executive State as autonomous from society |
‹#›
RMIT Classification: Trusted
Is this the decline of the post war order?
Geopolitics
Global financial governance
Trade
‹#›
RMIT Classification: Trusted
Decline of post-war order? Changing geo-politics
Weakening of UN regulation of conflict
Increase assertiveness of emerging powers
South China Sea
Middle East
Eastern Europe
Global competition for resources
‹#›
RMIT Classification: Trusted
Decline of post-war order? Changing global economic governance
Post-war order: International Monetary Fund (IMF), World Bank
Consider political power behind these institutions
Fragmenting of global financial governance
Declining dominance of the IMF, World Bank
Increasing prominence of New Development Bank (BRICS Bank), Asian Infrastructure and Investment Bank (AIIB)
‹#›
RMIT Classification: Trusted
Decline of post-war order? Trade fragmentation
Decline of GATT/WTO consensus model in the Doha round
Even “enforcer” powers of WTO threatened
Rise of regional deals: NAFTA, EU, EEU, etc.
Rivalry in super-regional Asia-pacific trade
(US) Trans Pacific Partnership (TPP/CPTPP)
(China) Regional Comprehensive Economic Partnership (RCEP), Belt and Road Initiative (BRI)
‹#›
RMIT Classification: Trusted
Belt and Road, RCEP, TPP
TPP
BRI
RCEP
‹#›
RMIT Classification: Trusted
What impact on MNEs/IB?
One argument:
More integration is the outcome regardless, companies will be more global
US and other western MNEs will benefit from any form of integration
“Who is us” doesn’t really matter
Another argument:
Increased geopolitical competition, fractured economic governance will alter the nature of IB
“Who is us” starts to matter
‹#›
RMIT Classification: Trusted
Next week
Global value chains, global production networks.
Is “the firm” the object of analysis in IB today?
‹#›
RMIT Classification: Trusted