Abstract
There are two great, world-encompassing changes associated with the last quarter of the twentieth century: the rapid integration of the global economy and the unprecedented decline in the economic role of the state in most countries. The first of these, usually referred to as ‘globalization’, represents not a new direction but an acceleration of the long-term trajectory of the international system. The second, however, is new and different. For two hundred years the historic trend has been for greater public control over economic life, whether through state ownership, as the communist world, or state-directed regulation and redistribution, as in the mixed economies of Europe and North America. Developing countries had usually incorporated both of these features: large state-owned sectors embedded in a dirigiste system of controlled markets. Over time these restrictions on private capital became increasingly pronounced, and the universal expectation was that still greater regulation would be imposed in the future.1 Yet the final decades of the twentieth century have reversed the flow of history: now it appears that private capital is progressively freeing itself from control, and the guiding vision is the liberal Utopia of the classical economists.
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Notes
Andrew Shonfield, Modern Capitalism: The Changing Balance of Public and Private Power (London: Oxford University Press, 1965).
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According to the conventional theory, trade liberalization neither eliminates nor creates jobs except transitionally, since trade is assumed to be balanced in the long run. The efficiency gains for large economies (which have already captured most economies of scale) are generally estimated to be in the range of 1–3 per cent of GDP, on a one-time basis. Reasonable trade economists recognize the primary benefit stemming from trade is encouragement of competition, but this is nearly impossible to quantify. Paul Krugman, ‘The Uncomfortable Truth about NAFTA: It’s Foreign Policy, Stupid’, Foreign Affairs, 72/5 (1993): 13–20.
I would distinguish the broad claim that globalization is not a decisive characteristic of contemporary life from the more narrow one that globalization does not erode state capacity. It is possible for a state to be capacious and yet choose to deregulate capital, due to the impact of globalization on its domestic political economy, as I will argue shortly. For a defence of state capacity under globalization, see Linda Weiss, The Myth of the Powerless State (Ithaca, New York: Cornell University Press, 1988).
David M. Gordon, ‘The Global Economy: New Edifice or Crumbling Foundations?’ New Left Review, 168 (1988): 24–65.
This point is made in several of the essays included in Robert Boyer and Daniel Drache (eds), States against Markets: The Limits of Globalization (New York: Routledge, 1996).
For an earlier assessment of some of these claims, particularly as they relate to the well-being of workers in the US, see, Peter Dorman, Policies to Promote International Labor Rights: An Analytical Review. Report to the US Department of Labor, Bureau of International Labor Affairs (1995).
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For evidence and analysis, see Richard Nelson and Gavin Wright, ‘The Rise and Fall of American Technological Leadership’, Journal of Economic Literature, 30/4 (1992): 1931–64.
This is a controversial claim. For an alternative view, see, Christopher Freeman, ‘The “National System of Innovation” in Historical Perspective’, Cambridge Journal of Economics, 19/1 (1995): 5–24.
Richard Nelson, Merton Peck, and Edward Kalachek, Technology, Economic Growth, and Public Policy (Washington: Brookings Institution, 1967).
Christopher Freeman, Raymond Poignant and Ingvar Svennilson, Science, Economic Growth, and Government Policy (Paris: OECD, 1963).
The supremacy of Austrian over neoclassical reasoning may be partially due to internal developments within neoclassical economics — in particular, within the field of general equilibrium theory. Since the 1970s a variety of developments have occurred in this field which undermine faith in unregulated markets, including the arbitrary adjustment theorems of Sonnenschein, Mandel and Debreu and the multiple equilibrium models of theorists like Arthur. To the extent that neoclassical economics was well suited to play an ideological role prior to these developments, it is now a more fragile vehicle. For further discussion, see, Alan Kirman, ‘The Intrinsic Limits of Modern Economic Theory: The Emperor Has No Clothes’, Economic Journal, 99/395 (1989): 126–39,
and S. Abu Turab Rizvi, ‘The Microfoundations Project in General Equilibrium Theory’, Journal of Economics, 18/4 (1994): 357–77.
Barry Bluestone and Bennett Harrison, The Deindustrialization of America: Plant Closings, Community Abandonment, and the Dismantling of Basic Industry (New York: Basic Books, 1982).
Robert Wade, ‘Japan, the World Bank, and the Art of Paradigm Maintenance: the “East Asian Miracle” in Political Perspective’, New Left Review, 217 (1996): 3–37.
For documentation of this type of reasoning in the context of the New Deal debates in the US, see, Stanley Vittoz, New Deal Labor Policy and the American Industrial Economy (Chapel Hill: University of North Carolina Press, 1987).
I have tried to provide a fuller explanation as well as an alternative framework in Peter Dorrnan, ‘The Publicly Controlled Economy: Crisis and Renewal’, Legal Studies Forum, 21/1 (1997): 87–128.
The political reorientation I have in mind is implicit in the proposals of many in the ‘social movement’ left, such as Wainwright. I tried to provide an explicit statement of its core principles. Hilary Wainwright, Arguments for a New Left: Answering the Free Market Right (Oxford: Blackwell, 1994). Dorman, ‘Publicly Controlled Economy’.
David Held, Democracy and the Global Order: From the Modern State to Cosmopolitan Governance (Stanford, California: Stanford University Press, 1995).
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Dorman, P. (2000). Actually Existing Globalization. In: Aulakh, P.S., Schechter, M.G. (eds) Rethinking Globalization(s). International Political Economy Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-62425-6_3
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