UC Berkeley - HIST 186 - 2012 Spring - Sargent - International and Global History Since 1945 - Lecture 18 - Globalizing the Market - 01h 22m 59s

Lecture Overview: Globalization in the 1970s

[0:00]

Okay, today we're going to be talking about globalization in the 1970s. We'll be covering some historical terrain which we've already traversed. But we'll be doing so with a view to a quite different set of historical themes. The big problem that I'm going to be concerned with today is the emergence of what I would characterize as a distinctive new era of globalization in the 1970s.

[00:24]

You know insofar as I'm going to be dealing with technical topics please you know do feel free to raise your hands and ask if you have questions or would like any clarification. I'm going to try to make this as nontechnical as possible but if you know we end up dealing with technical terms that are perplexing then let me know and I will pause to elucidate them.

The Meaning of the Term Globalization

[00:44]

But I'd like to start with a term that is one of the most confounding terms that we're going to encounter today, and this of course is the term globalization itself.

[00:53]

What is globalization? Is it just a phenomenon of the past you know two or three decades or does globalization have a longer history than that? Perhaps a much longer history.

[01:05]

This is a contentious issue. You know historians and political scientists and economists will disagree as to what globalization is and when it begins. It's not my purpose today to try to reconcile those competing definitions. That would be too difficult a task, but rather I should just try to lay out for you how I understand the term globalization. I think my sense of what globalization is probably in line with what most historians who've thought about globalization as a problem would understand that term to mean.

[01:37]

And this is globalization as a long historical process of social and economic integration. Globalization is the long term sort of integration of societies, nation-states in the modern era, across space. It obviously has a technological aspect. Technology underpins the shrinkage of time and space that is a crucial aspect of globalization's advance.

[02:05]

Over time globalization which involves the long term sort of expansion in the scale of social processes from a very local scale to a you know regional even global scale can produce what we might characterize as a increasing interdependence of societies.

[02:23]

Interdependence is a term that is distinct from globalization but interdependence can be a state of affairs that globalization produces. As you know the scale of social processes expands as societies become meshed in ever thickening relationships of trade, financial transactions, social and cultural exchange, and so on then these societies can become more interdependent.

[02:48]

And that is to say that developments in one society can have a determining impact on developments elsewhere. Interdependence involves a sort of meshing in the fates of social units.

[03:01]

Of course when we talk about the modern era nation-states are the principle social units that we're talking about when we discuss globalization at the international scale.

[03:11]

It's important when we talk about the history of globalization, even if it is a history that goes back a long way, to acknowledge that the term itself is of relatively recent coinage. It's not until the 1980s, really into the 1990s, that globalization becomes a subject of common discussion in the English language.

[03:32]

What I've have for you here on the slide show is a Google Ngram↗. Do most of you know what the Google Ngram is?

[03:40]

Okay, the Google Ngram is a really cool tool. What it does is it allows you to plot on a time series chart the sort of frequency with which particular words are used in the entire canon of published English language books. As you know Google has been scanning you know sort of the corpus of English language literature held by major university libraries over a period of about ten years now.

[04:07]

Most of this text has been digitized. And this allows us to see how the usage of particular terms has evolved over time. And this you know is a really good sort of tool for analyzing the evolution of discourse. How does the sort of frequency with which particular used words -- words are used evolve over time?

[04:27]

And if you look at globalization you can see that globalization is really not used at all in the English language until the 1990s. This is 1990 on the chart. And the frequency with which the word globalization is used increases very dramatically from the early 1990s. So globalization is a term of very recent coinage.

[04:50]

Interdependence, which is indicated in the blue line, goes back a lot longer in terms of the sort of frequency with which social scientists and historians and journalists you know really have used the term. Of course interdependence can mean a whole lot of things outside of the context of international relations.

[05:10]

Interdependence when it appears in print can mean you know any number of things. It can be used in any number of contexts. The word globalization has a particular meaning that has to do with international relations.

[05:22]

So that's a you know quick footnote on the language. I don't know want to belabor that point but just remember that globalization is a relatively new term even if we use it to describe developments that go a long way back.

[05:34]

In fact just to give you a second footnote on this point the first usage of the term globalization in the English language in print comes in the mid-1980s. It's used in an article in the Harvard Business Review.

Globalization Over the Course of Time

[05:48]

But if we think about globalization not just as a phenomenon of recent years but rather as a very long term historical process we can date its origins much, much earlier. If globalization involves simply the expansion in the scale of social and economic processes from the local level to the world scale then globalization could be seen to have begun...as early as the earliest human civilizations.

[06:18]

After all processes of sort of interregional trade are familiar to historians of the ancient world. You know one of the accomplishments that the Roman Empire achieves for example is to create a sort of integrated trading arena within the Mediterranean. Roman imperial power will make possible the linkage of North Africa to Europe via you know permanent trade routes. At least trade routes that endure as long as the empire does.

[06:45]

So globalization could be said to have a very old history. It has a history that dates back perhaps as far as the Silk Road↗ -- at least so far as trade is concerned. If we expand our definition of globalization to include the movement of peoples as well as goods then we might think of the recurrent movements of people from the Eurasian Steppe↗ into Western Europe and the Middle East as sort of demographic aspects of globalization's long history.

[07:12]

If we think about the diffusion of ideas and ideologies as part of globalization's history then there may be cause to consider the rise of Christianity from about two thousand years ago or the rise of Islam a little more recently than that as globalizing developments.

[07:24]

As developments that produce a sort of convergence in belief systems across vast expanses of space. So globalization has a potentially very long history; it has a host of sort of ancient precursors depending of course on how we define it.

[07:44]

In the modern era globalization accelerates and expands in scope. 1492 is a really important year in the history of globalization. Because we talk about globalizing processes before 1492 we're really talking about developments within the Eurasian world. 1492 is a crucial date because with Columbus's discovery of the New World Eurasia and the America's effect, in effect, become sort of integrated.

[08:13]

At least the moment of departure for a process of global reintegration occurs with the passage of the Columbine threshold. You can think for example about the reintegration of disease across the hemispheres as an example of that with the you know sort of transmission of smallpox to the Americas from Eurasia -- Americans -- which is to say -- indigenous Americans -- become sort of the subjects of an integrated global...environment for disease, and its transmission.

[08:50]

So the Columbine threshold is important because it brings the Old World and the New together. It creates the possibility for the first time of an integrated global sort of arena on the world scale.

[09:04]

Empire in the modern era is a crucial force that pushes forward the advance of globalization. Colonial empires build linkages between continents and between regions. The European trading companies: the British East India Company↗, the Hudson Bay Company↗, the Dutch VOC, the Dutch East India Company↗, these are all you know sort of crucial builders of globalization. Empires build ships, they build railroads, they build the infrastructure that pulls the world together into a more convergent future.

[09:36]

Of course industrial technology is a crucial underpinning of this imperial era of globalization. As the you know sort of sailing ship is replaced in the 19th century by the steamship the pace of integration can quicken, the pace of global transportation increases, accelerates.

[09:55]

From approximately the 1860s forwards processes of globalization will produce conditions of accelerating and increasing interdependence among nation-states. Especially amongst the nation-states of the North Atlantic world. Globalization in the last decades of the 19th century is most pronounced within the North Atlantic world.

[10:17]

North America is the principle destination in the late 19th century for British foreign investment overseas. North America is the primary destination for European migrants. Migrants from Europe go elsewhere. They go to Latin America, they go to Australia, they go to New Zealand, but North America is the primary destination.

[10:36]

And within the North American world thickening ties of capital mobility, of international trade, and of...demographic movement, the movement of peoples produce something resembling a sort of convergence of economic fortunes. And we can chart this by looking at the convergence of factor prices within the North Atlantic world.

[11:00]

In 1860 you know wage differentials between North America and Western Europe are very great. North Americans typically earn much, much higher wages then do North, then do West Europeans in 1860.

[11:13]

By 1900 those differentials have begun to close somewhat. And the reason that they close of course is that Europeans migrate in you know millions and millions annually from Western Europe to North America. And this has an effect of tightening labor markets in North America and loosening labor markets in Western Europe such that the wage differentials you know sort of tend to diminish over time.

[11:40]

Through this era of late 19th century globalization the classical gold standard provides a sort of basic infrastructure as we've discussed for maintaining price stability amongst national currencies. This you know framework is something which makes possible and facilitates the advent of sort of integrative globalizing economic processes. The monetary, the gold standard, for example, reassures investors that the sort of value of investments is not likely to change over time as a consequence of currency price fluctuations.

[12:17]

So the classical gold standard provides a certain sort of institutional stability within which late 19th century globalization can proceed.

[12:27]

In the 20th century however really interesting things happen. Globalization does not continue to accelerate. On the contrary globalization is reversed. The First World War is a big exogenous shock.

[12:40]

It -- doesn't have much to do with globalization in terms of its origins, the origins of the First World War have to do with the alliance system and Germany's bid for European mastery, but the First World War is nonetheless a sort of catastrophic moment of disrupture for the globalizing world economy.

[12:55]

During the First World War the European belligerent powers throw up you know trade barriers, they throw up capital controls↗, they take their currencies off the gold standard. And they do all of these things in order to be able to manage their own economies so as to produce the maximal amount possible of war materiel.

[13:12]

But the effect for the world economy is...a moment of deglobalization. The world economy ceases to integrate. Of course globalizing processes continue during the war and to some extent change direction. New opportunities for example for Latin American food producers arrive as a consequence of Europe's...catastrophic war, but the basic pattern is one of disruption in the second decade of the twentieth century as a consequence of the First World War.

[13:46]

During the 1920s globalization is to some extent restored. This is something that you know we've discussed. There's a restoration of the classical gold standard. Trade begins to pick up from the mid-1920s onwards. But this will be a very fleeting resurgence. The Great Depression really puts an end to a class -- the era of classical globalization. And makes deglobalization permanent.

[14:10]

In the early 1930s countries throw up very substantial barriers to international trade. The Smoot–Hawley Tariff↗ in the United States is one example of that but it has parallels elsewhere.

[14:21]

International trade grinds to a halt. Governments take their countries off the gold standard and manipulate sort of national currencies with little regard to the international consequences thereof.

[14:33]

Whether the gold -- world economy can ever be put back together again does not appear entirely obvious at the end of the 1930s. The world has substantially deglobalized. Nation-states have turned in upon themselves. They've become economically more autonomous than ever before.

[14:50]

It's in this context, as we've discussed, that the Bretton Woods system↗ tries to orchestrate a qualified reglobalization of the world economy. It was certainly the objective of British and American policy planners at Bretton Woods to establish a framework in which international trade could resume.

[15:10]

It's one of the reasons that the policy planners who create the Bretton Woods system are so anxious to restore a modicum of international currency stability. Because currency stability is widely believed to be a prerequisite for international trade.

[15:23]

But the Bretton Woods reestablishment of globalization is sharply qualified by a commitment to maintain the macroeconomic autonomy of nation-states. And this is where Keynes's influence on the postwar settlement is pronounced.

[15:40]

Keynes argues of course that in order for governments to manage their own economies so as to sustain full employment governments need to be able to work the levers of economic policy -- those levers being fiscal policy and monetary policy. An effective manipulation of fiscal and monetary policy depends upon a certain degree of separation between the national economy and the world economy.

[16:01]

If your domestic economy is entirely open to international movements of capital for example then it's very, very difficult to regulate a national monetary policy. Because the monetary policy determines the supply of money in the economy and if your borders are open to you know foreign funds washing in and out of your economy then you really can't control your monetary policy on your own terms.

[16:25]

You may have some influence over the sort of direction in which international funds flow whether they flow into or out of your economy but your sort of magnitude of control will be much less in an open market economy than it is in a closed market economy.

[16:41]

And Bretton Woods tries to strike a compromise between sort of reglobalization on the one hand and national economic autonomy on the other. And this is really crucial. It's sort of the basis of the postwar economic settlement -- a settlement which tries to combine aspects of market economics with aspects of planned economics in the capitalist West.

[17:04]

This is the mixed economy. This is the economy which we've been talking about. We've talked about the mixed economy sort of within a comparative framework by looking at the experience of different West European economies and comparing them to the United States, but the Bretton Woods framework as I've explained is the international framework within which the mixed economy can flourish. And it's a framework that begins with a compromise between globalization and national policy autonomy.

[17:34]

The 1970s are a decade of crucial disjuncture for this postwar compromise. It's in the 1970s that this compromise between the mixed -- this compromise between sort of capitalism and planning, the so-called mixed economy begins to come apart.

[17:51]

And this process of, you know, deconstruction occurs both within nation-states as the mixed economy compromise breaks down, and at the international level as the Bretton Woods framework breaks down and is replaced by something you know sort of altogether new.

[18:10]

This you know passage from an era of planned capitalist economics to an era of relatively sort of free market economics that occurs during the 1970s is a critical disjuncture for the capitalist world.

[18:25]

And it you know can be traced both at the international scale and at the scale of particular national experience. But situated within a larger historical context this disjuncture looks like a really important moment in the larger history of globalization.

[18:41]

If the mid-20th century from the 1930s through to the 1960s was an era in which globalization was held at bay, held at bay by controls, held at bay by restrictions on the movement of capital and goods, then the 1970s are a period in which globalization accelerates once again. In which the world begins to reglobalize after a long mid-20th century phase in which globalization is held by you know the consensus of governments at bay.

Globalization in the 1970s

[19:13]

What are the basic dynamics of globalization in the 1970s? What was globalization in the 1970s? Well globalization in the 1970s is much the same as it had been in the late 19th century. It's a set of processes that tends over time to integrate societies and their economies. Globalization involves in the 1970s, as it had done in the late 19th century, a growing awareness of the basic interdependence of nation-states.

[19:42]

The dynamics of this globalization include the rise of international trade and financial flows. These economic vectors are crucial to the production of a more sort of globalized international economy.

[19:57]

But they're not the only signs that a new era of globalization might be taking shape. Economic vectors are very important to the production of economic interdependence. But there's much more to the globalizing shift of the 1970s than that. We might think about sort of the rise of global concerns. Human rights, an issue that we've talked about, is in some aspects a global issue.

[20:21]

Right, the proponents of international human rights proclaim that rights are not a subject for nation-states anymore, that rights are an issue for the international community, that your rights are the same whether you happen to live in Syria or in the United States.

[20:36]

And this is a globalizing shift. It's a globalizing shift in sort of legal discourse. It's a globalizing shift in the scope of rights claims. For most of the modern era the idea of rights had been utterly entwined with the nation-state.

[20:52]

It was nation-states that bestowed rights and defended them. Well, the Universal Declaration in 1948↗ signals a sort of move to the global scale but it's in the 1970s that a political, and even a social movement to affirm and uphold that shift in the scale of human rights from the nation-state to the world as a whole really occurs.

[21:12]

So human rights are a global concern that sort of hinge on the 1970s. But there are other global issues too. It's in the 1970s that global environmentalism really takes off as a political movement. Awareness of the basic unity of the planet's biosphere is one factor as we'll discuss that helps to inform a new age of environmental activism and consciousness.

[21:35]

There is in sum a glowing awareness that the world, in the, there is in sum in the 1970s a growing awareness, that the world constitutes an integrated whole, that the world is not just a patchwork of nation-states. each of which is basically independent and autonomous, that the world constitutes something like an integrated and cohesive system.

[21:57]

Now this awareness is more pronounced in some spheres of human activity than in others. It's easier to make a you know case for the cohesiveness of the planet's ecology perhaps than it is to make a case for the integration of the world economy, which is you know less tangible. But this basic awareness that the world is integrating, that its fate is you know somehow entwined, is a sort of critical marker of globalization's ascent during the 1970s. Consciousness is very important to the history of globalization.

The Earthrise Moment

[22:32]

Here no single moment is more you know evocative perhaps than you know what I would call the Earthrise Moment↗, the moment in December 1968 when Apollo 8 circumnavigates the moon, and takes a picture of the earth from space. And this is the picture that forms the backdrop to this slide.

[22:52]

Photograph of Planet Earth taken on December 24, 1968 by NASA astronaut William Anders during the Apollo 8 mission (downloaded from Wikimedia Commons).

[22:54]

The Earthrise image as this becomes known, the photograph is called Earthrise, is not the first image of the world to be taken from space. You know satellites in the 1960s take photographs and return them to earth. But what you get from going to the moon is not only soil samples you also get a unique vantage point on life on earth.

[23:13]

And this is what Earthrise presents -- a view of the earth as seen from another celestial body -- from the moon.

Video from NASA reenacting the taking of the Earthrise photograph (1m 38s excerpt)

And this image becomes very quickly one of the twentieth centuries most iconic images. Lyndon Johnson who's President of the United States at the time of the Apollo 8 expedition sends a copy to every head of state in the world.

[23:34]

The image adorns a postage stamp in 1969 -- the next year. And the image has profound political implications. What does the image signify? What does it reveal? What does it not reveal?

[23:48]

The image does not reveal political borders. When you look at the earth from space you don't see nation-states. You don't even see...you know, well, I guess you do see continents, but you don't see...(laughs) (laughter from the class), you don't, but you don't see, a, you don't see the difference between Europe and Asia. You can't really see that when you look at the world from space.

[24:10]

You see only...you know land and sea and clouds. You see...an integrated ecological unit. You don't see a world divided into sort of politics of nation-states. You don't see an ideological conflict between communism and capitalism. You don't see a Cold War.

[24:30]

All you see is an integrated biosphere floating in vast empty space. Of course I know space isn't really empty but this isn't a physics class...so...(laughter from the class).

[24:40]

And this political, you know, these political implications, are you know very powerful ones, and they help to animate in the 1970s a sense that the world is becoming a singular entity, perhaps that it is a singular entity and needs to be governed and led as such.

[25:00]

This image -- Earthrise -- becomes the sort of visual counterpart to a set of discursive claims that you know futurists and visionaries make for the unity of Planet Earth. And this is a theme which you know predates the taking of the photograph itself.

Futurists and Visionaries on the Unity of Planet Earth

[25:17]

During, in 1964, Marshall McLuhan↗, sort of media studies scholar, an iconic scholar in the intellectual history of the postwar world, calls the world a global village↗. It's a you know notion that is intended to capture a basic you know sort of interdependence in the affairs of the world.

[25:37]

McLuhan argues that the world is you know shrinking as a consequence of you know globalizing processes, the shrinkage of time and space as a consequence of technological innovation, and as a consequence the entire world is coming to resemble a village -- a village in which social life is integrated and interdependent.

[25:54]

Buckminster Fuller↗, an architect and futurist, describes the planet as Spaceship Earth↗ in 1967. This has a somewhat different set of implications. What Fuller is trying to communicate when he describes the world as Spaceship Earth is the idea that the world...exists kind of alone in space as a finite unit, as a unit with finite resources. Fuller argues that you know political leaders need to be much more aware than they are of the basic limits to the expansion of you know sort of material life on earth.

[26:29]

He says that the world is like a spaceship that is traveling through space and contains only limited supplies. How are those supplies to be conserved and marshaled over time? This is one of the you know sort of conservationist implications that McLuhan pulls -- sorry -- that Buckminster Fuller takes out of the idea that the Earth is a sort of solitary spaceship traveling through the universe.

[26:51]

Lester Brown↗, a Canadian ecologist and diplomat, publishes a book in 1972 titled World Without Borders. Brown is probably more of a pragmatist than either McLuhan or Fuller were but he is no less attentive to a sort of new category of public policy issues that affect the world as a whole.

[27:11]

Issues that transcend and transgress the borders of nation-states. Issues like you know sort of the global food supply, global population growth, global pollution and so on. I mean these are issues which are becoming increasingly urgent topics of concern in the 1970s.

[27:27]

And this photograph really captures how...an evolving consciousness of planetary interdependence might have sort of you know led contemporaries in the 1970s to conclude that global integration demanded new kinds of solutions.

[27:49]

So globalization in the 1970s is an intellectual and a perceptual phenomenon as well as an economic one. It's a very complex phenomenon that involves you know sort of processes of integration and accelerating interdependence.

Questions On Globalization

[28:03]

Why did this globalization occur? Was it a consequence of specific choices? Could we see political leaders perhaps as having chosen globalization? Did business leaders push them in this direction?

[28:19]

Or was globalization something that occurred more as a process of structural change beyond the capacity of sovereign power to orchestrate or promote? This is a very basic question and it's a question which remains very divisive amongst social scientists who study globalization.

[28:36]

To put it very crudely I would suggest that sort of liberals, people who, accept that the world as it is, you know, presently constituted is more or less the sort of optimal state in which it can be constituted see globalization as a natural or inevitable process, a process that is brought about by structural changes outside of the control of, you know, individual nations or you know sovereign powers.

[29:05]

Political radicals on the other hand are probably more inclined to see globalization as the achievement of specific policy choices. You know insofar as the...radical left is critical of globalization the proposition that globalization represents the accomplishment of specific policy choices is an appealing one because it carries with it the implication that different choices could produce a different ordering of global political and economic affairs.

[29:32]

So there is a sort of political aspect to this question of whether globalization is a choice or not. I don't want to get too caught up in the politics of it today but I wanted just to sort of draw your attention to that point as we consider this very fundamental question. You know to what extent is globalization chosen or to what extent is it produced by structural forces outside of the power of nations and political and economic leaders.

[29:57]

Is globalization synonymous with neoliberalism↗? Well, here's a loaded question. What is neoliberalism? Well, we could think of neoliberalism as a set of economic policies that emphasize market determination over determination by government -- as a sort of -- as the optimal means to produce economic outcomes.

[30:18]

Is globalization synonymous with neoliberalism? We'll come back to this question but it's a question that you should bear in mind as we proceed forwards.

[30:27]

Finally, what was the scope of globalization in the 1970s? Where did globalization occur? This is a point that is worth thinking about carefully. Insofar as we defined globalization as a process that involves rising interdependence, the acceleration and expansion of transnational movements of goods and ideas and money, it doesn't necessarily follow that globalization affects the entire planet at an even rate.

[30:58]

We should be open to the possibility that globalization was more pronounced among certain countries or within certain regions than it was among others. And my argument about the 1970s would be that globalization in the 1970s was really a phenomenon that occurred among the advanced industrial economies.

[31:18]

That it is to say within the OECD↗ world. The OECD is the Organization for Economic Cooperation and Development. It encompasses Western Europe, North America, Australia, New Zealand and Japan.

[31:30]

So when we talk about the OECD world we're really talking about sort of the advanced industrial West -- if you want to call it that. And globalization in the '70s was most pronounced among these countries. Later on from the 1980s and subsequently...the rest of the world will come to participate in globalization, but in this initial sort of break through phase it's most pronounced within the OECD universe.

Questions Overview: Global Dilemmas, Economic Interdependence, Transformation of Capitalism

[31:58]

Okay, well, we're going to try to do today then is...go through the history of this globalizing shift. And I'm going to basically...take you through three aspects of this you know sort of big development that we call globalization. I don't think this this can be a comprehensive history but hopefully I can give you a sense of some of the different aspects to globalization as it proceeds during the 1970s.

[32:26]

We have about 15 minutes for each theme so we'll try to keep this succinct. First, I want to talk about the emerging awareness in the 1970s of global issues -- that is to say policy dilemmas that affect the world as a whole.

[32:40]

This is a development that we might call the Shock of the Global. It's a title of a book that I had some involvement with: The Shock of the Global -- developments that pertain to the world as a whole -- global phenomena, global problems, global issues. How do they strike or shock the policy arena? The world of nation-states in the 1970s? That's our first question.

[33:01]

Second question has to do with the emergence and development of economic interdependence among the advanced capitalist countries, among the countries of the OECD world, how did it happen? What were its you know most important phenomena or symptoms?

[33:17]

Finally, we're going to talk about the transformation of capitalism in the 1970s. Or the transformation of capitalist economies from the mixed economy synthesis that still is very successful, or appears very successful, at the beginning of the 1970s to the more market oriented policy formulae that nation-states are beginning to embrace at the end of the 1970s.

[33:40]

How do we get from the sort of Keynesian world of the 1970s to the world in the 1980s in which sort of so-called neoliberal solutions, more market oriented solutions, are displacing the old Keynesian mixed economy consensus?

[33:56]

That's our third theme -- the transformation of capitalism. As we work through this I want you to you know reflect upon a number of big questions. How was the world changing? You know what are the big contours of global change during the 1970s? What are the consequences of global integration, of globalization even, for international relations? What does this mean for the basic configuration of international order? What does it mean for the configuration of the international economy?

[34:23]

And what are the consequences for individual nation-states? How different does globalization look if we view if from the perspective of a particular nation as opposed from looking at it at the world scale?

[34:35]

There are other urgent questions too. How did globalization spread beyond the OECD economies to encompass the developing world? A theme of the 1980s and 1990s. What have been globalization's consequences?

[34:49]

Has globalization made the world happier and more affluent or has it produced unequal, you know, sort of distributions of wealth and you know economic responsibilities? These are questions which will have to wait for our next lecture on globalization on I think April 22nd. It's going to be the lecture titled Contesting Globalization. Today we're going to focus on the sort of early phase of globalization's acceleration during the 1970s.

Global Dilemmas

[35:18]

Okay, global dilemmas. What are global problems? What was the Shock of the Global in the 1970s?

[35:26]

You know global problems, global dilemmas, could be construed very simply as the set of problems that escape the managerial regulatory capacities of individual nation-states. They are problems that affect the world as a whole. They might also be construed as problems that attract the attention of the world as a whole.

[35:47]

You know this is more contestable but there's an argument to be made that issues that unfold within a local or national context but which attract you know sort of global attention and perhaps demand a global response, a famine in sub-Saharan Africa for example, are global issues of a different kind.

[36:06]

But what kinds of issue are we talking about when we talk about issues that affect the world as a whole?

[36:12]

Are there issues that, you know, besides climate change or you know sort of global ecological catastrophe that would seem to you to be global issues of a sort that affect you know multiple nations or perhaps the entire world?

[36:26]

(student response)

[36:27]

Yeah, nuclear weapons is a really good one. The possibility of nuclear war is obviously a very global problem.

(student response)

[36:36]

Disease is also terrific, you know global public health, because disease respects no barriers of sovereignty, no distinctions between one nation-state and another. Disease that was you know prominent amongst the concerns with which you know sort of policymakers had to grapple, have had to grapple, as the world has become more integrated.

(student response)

[36:57]

Energy is also a terrific global issue insofar as the world's energy resources are distributed unequally across space, as is the world's demand for energy, the...process of bringing sort of energy resources to market is an implicitly global dilemma.

[37:18]

We might about other issues that don't necessarily affect the ecological fortune of the planet, but which lie beyond the capacities of sovereign nation-states as being global issues of sorts. You know the illegal drug trade is one good example of an issue that really lies outside of the competence of any nation-state to regulate and manage.

[37:36]

Terrorism is an issue that, you know, sort of lies outside of the capacity of singular nation-states. It requires cooperation amongst nations if it to be effectively engaged and redressed.

[37:48]

Why did these kinds of issues attract rising attention in the the 1970s? There are a variety of possible explanations. It could be because they were becoming more urgent. Perhaps the global environment attracted more attention in the 1970s because the rate of its degradation was accelerating.

[38:04]

But it's also possible that global issues attracted rising attention in 1970s because of the emerging global consciousness that the Earthrise photograph signified -- that people like Buckminster Fuller and Marshall McLuhan were working hard to cultivate.

[38:21]

So global consciousness can sort of feed engagement with global issues. It's also possible that the diminution of Cold War tensions during the 1970s played a role in creating space in the policy arena for global issues to stake their claim.

[38:38]

As the urgency of Cold War containment, for example, lessened in the United States, there was more and more time available for policymakers both in the Executive Branch and in the Legislature to pay attention to so-called sort of global issues.

The Rise of Global Environmentalism

[38:54]

So the reasons for this are complicated. Let's talk about some specific issues. I'm going to talk first of all about the rise of global environmentalism. We could at the outset draw a distinction between two different kinds of ecological globalization. We might think about the ways in which sort of local environmental catastrophes attract global or transnational opinion.

[39:20]

And indeed oil spills in the 1970s, in particular places, in places like California, in Cornwall off the west coast of England attract global attention. They become sort of, at least for a brief moment, global issues on which international attention fixates. This is significant.

[39:39]

The fact that you know international audiences are paying more attention during the 1970s to you know for example the deforestation of the Amazon is illustrative of a sort of developing global ecological consciousness.

[39:52]

The deforestation of the Amazon may have you know sort of consequences for the global environment as a whole. But it's really a sort of local issue at least in its locus. It affects you know northeastern Brazil primarily. That it is becoming, you know, sort of an increasingly global issue during the 1970s reflects one sort of globalization, a rising sort of international attentiveness, to particular environmental issues or catastrophes.

[40:23]

But there's a second kind of ecological globalization going on during the 1970s and this will involve the rise of concern, or growing concern, with issues affecting the international...ecology as a whole. For example the rise of concern with chlorofluorocarbons, CFCs, in the world's atmosphere is a very global dilemma. CFCs affect not individual nation-states but the entire planet earth.

[40:53]

Population growth will be another sort of ecological issue that in the eyes of contemporaries during the 1970s affects the world as a whole and demands global policy responses.

[41:07]

Why was ecological consciousness rising in the 1970s? Why did it rise in the West? Why did in the rise in the United States in particular?

[41:18]

To some extent the growth of sort of ecological consciousness during the 1970s is a legacy of the 1960s -- of the political and social mobilizations associated with that decade. It might be a legacy even of the counterculture that developed during the 1960s.

[41:33]

Probably no single published book is more influential upon the rise of an organized environment movement in the United States at least than Rachel Carson's↗ Silent Spring↗ -- a book that documented the adverse effects of pollution upon the American ecosystem.

[41:50]

Whether as a consequence of sort of activism or simply awareness the 1970s bring a rise in sort of organized political mobilizations on behalf of the global environment. New organizations are created. Greenpeace↗ for example is founded in 1971 with its mission being to protect the Earth's ecology against the encroachment of human activity.

[42:19]

Environmentalism becomes a popular political cause during the 1970s. The first Earth Day↗ is held in 1970, and it attracts massive participation. Some 20 million Americans participate in the first Earth Day, so this is one marker of sort of rising ecological consciousness.

[42:38]

In 1972 the United Nations holds its first international conference on environmental problems which is a marker of how sort of environmentalism is becoming a prominent issue on the global stage.

[42:52]

Where does this awareness come from? Is it just driven by politics? Is it just driven by sort of consciousness? Perhaps. Technology I would suggest also plays an important role in shaping public and political awareness of environmental issues. Space photography as we've already discussed affords a new perspective on Planet Earth.

[43:12]

Computers allow scientists to model climate change. So this is an important development. Before computers become cheap enough to be situated in university laboratories it's really difficult for climatologists to develop plausible models of global climate change.

[43:28]

Once that technology is more readily available then the range of you know sort of opportunities for climate scientists expands.

[43:37]

Satellite imagery also affords sort of kind of a useful research tool. It allows scientists to map deforestation over time because you can take photographs of say the Brazilian rainforest and see how the scope of the forest is retreating in the face of tract farming.

[43:55]

So there are a number of you know sort of developments that go into the production of a ecological environmental moment in the 1970s -- a moment in which rising attention is being paid to the earth's environment and to humankind's fraught relationship with it.

Limits to Growth Debate

[44:12]

One of the most prominent sort of themes in this global environmental moment of the 1970s will be the limits to growth debate that hinges on the early decades of the 1970s. The limits to growth debate is particularly concerned with population growth though it also emcompasses other forms of economic growth too -- the expansion of industrial production and so on.

[44:39]

As we think about the sort of discourse on growth and it limits in the 1970s it's important to begin by reminding ourself that population growth and economic growth are from the global perspective overriding themes of the postwar experience.

[44:54]

The world's population grows very, very quickly from what, under 3 billion in 1950 to...close to over 4 billion by 1970. Economic growth you know sort of proceeds more or less in tandem with population growth.

[45:15]

The world's GDP increases too. And all of this growth creates sort of widespread concern as to...how sustainable growth is. Can the world's population continue to grow at these impressive rates or will growth at some point hit inexorable and inevitable limits, and what then will be the consequences? Will the world's food supply, for example, sustain its rising population or will a growing population at some point face an inevitable famine produced by you know a population increase that expands beyond the capacity of the world to feed it.

[45:53]

These are the issues that the Club of Rome↗ grapples with in its 1972 report The Limit to Growth↗. The Club of Rome is an informal assemblage of demographers and environmentalists, scientists, that convenes in the early 1970s and produces a report that attracts widespread international attention.

[46:13]

The Limits to Growth argues that the world's population and economic growth rates are unsustainable and it predicts catastrophe if these basic rates of growth are not slowed.

[46:23]

It argues that policymakers need to strive to achieve a so-called stable equilibrium, a situation in which the world's population will not grow, in which there will be zero growth. To achieve this the Club of Rome proposes global management of the world's demographic growth. It's a basic assumption of the Club of Rome that international growth cannot be managed at the national level.

[46:48]

That global dilemmas demand global solutions. So there's a political implication to this. And it is that nation-states are unable of responding adequately to new global dilemmas.

[47:00]

Is population growth a security threat? What are its implications for matters of war and peace? This is a question that the United States government actually grapples with. In 1974 the national security council of the United States produces a very lengthy report on population growth as a national security dilemma.

[47:17]

And the US government concludes that population growth will lead to rising food shortages in the developing world, that these will produce political instability, and that the consequences will be upheaval, that you know could be disadvantageous to the national interests of the United States.

[47:34]

So much as national security specialists in recent years have begin to engage with global climate change as a national security threat so too did national security specialists in the 1970s address population growth as a sort of national security challenge.

[47:51]

If this is the threat what is to be done about it? How can the world's population be controlled or managed?

[47:59]

The developing countries, you know, emphasize contraception and family planning as the means to control a accelerating or expanding global population. They promote these policies with particular regard to the developing world. Here of course reactions will be somewhat mixed. China is an interesting case because China decides of its own volition to support you know policies to control and limit the growth of its population.

[48:29]

In 1978 China implements a one-child policy↗. This is a policy that repudiates Mao Zedong's conviction that there could never be too many Chinese Communists. Mao Zedong saw population growth as a source of national strength. But in 1978 the post-Maoist regime rebukes, you know, this view very powerfully.

[48:51]

It introduces a one-child policy, a policy that is often brutal in its implementation and in its consequences, but which does succeed in ending China's long history of recurrent food catastrophe. Famines were until 1978 a recurrent aspect of China's historical experience. After 1978, or since 1978, China has not experienced a famine. And China has been better able to feed itself since making a sort of self-conscious decision to limit the expansion of its population.

[49:23]

But other developing countries are much less enthusiastic than China is to limit their growth in the name of global stability. Developing countries ask, quite reasonably, why should we impose limits on our growth, when the West has grown over a period of centuries within any limits to its growth? The population of Britain expands for example from about 5 to 6 million at the beginning of the 19th century to 30 million by the end of the 19th century. That's a six fold increase over a period of a hundred years.

[49:57]

Why should developing countries not have the opportunity to expand like Britain has done? To industrialize like Britain has done? From their perspective, which are national perspectives, the imperatives of national growth take precedence over the regulation of the world's population as a whole.

The Green Revolution

[50:16]

Of course the catastrophe that is predicted by the Club of Rome does not come to pass -- at least not yet. It doesn't come to pass in the 1970s. The limits to growth are avoided, or at least the limits are moved.

[50:29]

To explain this we need to think about how global agricultural production develops during the 1970s. One of the critical innovations of this decade is a set of associated transformations in agricultural practices in the developing world that are collectively known as the Green Revolution↗.

[50:49]

The Green Revolution involves high yield varieties of grain, the pioneer of which, probably the most important pioneer of which, is the agronomist Norman Borlaug↗ pictured in the slide. Perhaps the most important you know figure in the history of the twentieth century whom you've never heard of.

Norman Borlaug in 2004

[51:05]

How many of you had heard of Norman Borlaug before? Okay, one or two. I mean this is a man whose sort of consequence for world history I mean far, far outweighs the reach of his reputation. The high yield grain varieties which he pioneers at the University of Iowa -- I mean are...above all what enables the developing world to escape the Malthusian↗ trap that the Club of Rome prophesies.

[51:30]

But high yield grain varieties are not all that the Green Revolution depends upon. Fertilizers, pesticides, irrigation, and the mechanization of agriculture all help to expand grain yields.

[51:42]

The Green Revolution has transformative consequences for global food production. It enables the increase of agricultural production by a factor of about two or three. So production of food per hectare of land can double or even triple thanks to the application of these advanced farming techniques.

[52:02]

The Green Revolution on a global scale represents the ecological equivalent of discovering an entirely new North America. It's as if you could create another, you know, continent the size of North America, stick it in the Pacific Ocean and use it to grow food on. That's what the green revolution accomplishes.

[52:19]

So the Green Revolution will allow a growing world to feed itself. Of course the Green Revolution is a one-time fix. You can't continue to expand grain yields beyond the levels that are attained or, you know, in the 1970s.

[52:35]

So whether the dire warnings that the club of Rome offered in the early 1970s are you know still relevant just to a different generation, perhaps our generation, as opposed to the generation of our parents, is an interesting question. It's a discomforting question too.

[52:53]

Because the quick fix that the Green Revolution offered will not necessarily be so easy to achieve as global population once again approaches the limits of global food production. Still the Green Revolution in its own time represents a important, you know, vitally important, accomplishment. It's benefits are particularly pronounced for the developing world.

The Economic Divergence Between the West and the Developing World

[53:19]

Of course in larger terms the developing world continues to lag behind the advanced industrial West. What this chart shows you is GDP per capita organized on a regional basis over the entire second half of the twentieth century.

[53:37]

And what the data shows is that during the 1970s the developing world continues to lag behind the countries of Western Europe, and you know what I've identified here as the Western offshoots -- North America, Australia, and New Zealand -- the settler societies populated primarily by Europeans.

[53:59]

These Western countries continue to proceed far ahead of the developing world. And this divergence in human realities at a time of rising awareness of planetary integration is an awkward thing, it's an uncomfortable thing, and it's a challenge that leaders of developing world countries strive to overcome.

[54:23]

At a time when developing countries are becoming more modern, when literacy is spreading, when inhabitants of developing societies are beginning to have you know expanded access to television, television that affords a window on Western lifestyles, human aspirations in the 1970s are beginning to converge.

[54:43]

And this is a really important theme which attracts you know quite widespread attention in the sort of international relations scholarship of the era: convergent human aspirations in a time of widespread modernization. But the disjoint between the convergence of human aspirations and the ongoing divergence of human realities is striking. Even as the world is becoming one the West continues to have a whole lot more than the developing world does.

[55:14]

Westernerns continue to have more than their counterparts in the developing world. How are these basic inequalities to be overcome? The experience of the 1970s offers few answers. Developing economies continue to adhere to the ISI led growth strategies which had been so popular for the generation of, for the first generation of post colonial leaders.

[55:36]

There's some experimentation with alternative growth models, growth models more oriented towards exports in a few places, places like South Korea, Singapore, Taiwan, will experiment will export led growth models that sort of connect developing economies to the expanding global economy. But for the most developing countries remain in the 1970s beholden to nationalistic growth strategies.

[56:03]

Yet all is not well in the developing world during the 1970s. ISI led growth is, by the 1970s, failing to deliver the returns that it had promised to achieve. The oil shocks are a big exogenous crisis for most developing economies. For all developing world economies that don't produce their own oil a four fold increase in the rise in the price of energy inputs is catastrophic.

[56:27]

It produces price inflation. Price inflation in turn produces political instability. If you want to explain why India, the developing world's exemplary postcolonial democracy, experienced a brief period in which ordinary democratic rules were suspended, the so-called Emergency of 1975 to 1977↗, you should pay some reference to the influence of the oil crisis on India's economics and its politics.

[56:53]

At a time of rampant inflation, of rising political instability, Indira Gandhi↗ in 1975 declares a brief emergency during which the rule of law is suspended. So the developing world struggles in an era of accelerating interdependence and this becomes a concern even for the leaders of the rich industrial world.

[57:12]

What are to be the solutions to the divergence between the developing world's aspirations and its enduring poverty? Developing world leaders in the 1970s propose a radical reform of the international economic system.

[57:27]

A new bloc emerges at the United Nations, the so-called G77↗ Bloc -- a self-conscious counterpart to the G7↗ -- the advanced industrial club. The G77 argues for a radical transformation in the international terms of trade. It argues for a set of international cartel agreements that will raise the price for the developing world's agricultural output. You know cartels on the model of OPEC for the producers of other primary commodities like coffee and rubber and so on.

[57:56]

Developing world political leaders talk about a new international economic order -- an economic order that will be oriented towards the achievement of international distributive justice. These initiatives ultimately come to nothing. What happens instead will be that the developing world comes from the 1980, from the 1980s onwards, to participate increasingly in the globalizing international economic system that takes shape in the West during the 1970s.

Economic Interdependence

[58:25]

And it's to this Western system that we should now turn. I'll try to be brief and succinct.

[58:32]

Let's start just by reminding ourselves that the West at the end of the 1960s is still very much in the throes of the economic controls that are established during the 1930s and in the immediate aftermath of the Second World War.

[58:50]

At the end of the 1960s capital controls↗ continue to restrict the international movement of money. Trade barriers have been liberalized somewhat. But international trade is still sort of relatively small-scale in relation to the size of Western capitalist economies. This is a point which we can perhaps illustrate most succinctly by looking at the data.

[59:13]

I'm just going to show you data from one nation-state here. Because it's in some ways easiest to look at this phenomenon from a particular national perspective. The chart on the right of the slide shows the interdependence of the United States with the larger world economy in the financial sector and in the trade sector.

[59:34]

And what you can see is that in 1950 US sort of interdependence, financially and in terms of trading goods, is much lower than it will become by the sort of 1980s and 1990s. The value of annual trade flows both exports and imports as a fraction of US GDP increases very rapidly particularly from the 1970s. The US becomes increasingly enmeshed with the larger global economy from the 1970s forward.

[1:00:03]

Similarly US stocks of you know, stocks of foreign investment in the United States plus US owned stocks of foreign investment elsewhere, sort of financial interdependence, increases dramatically particularly from the 1980s onwards. The US becomes from the 1970s and 1980s much more enmeshed with the larger global economy.

[1:00:29]

How does this happen? Technology plays a role. We should think if we want to explain processes of financial and trade globalization about the role of technological innovations. Communication satellites which become available from the late 1960s onwords accelerate the velocity with which information can be transmitted around the world.

[1:00:51]

New transatlantic cables, fiber optic cables from the 1980s, reduce the costs of transmitting information and this is really crucial. It facilitates other changes, like the growth of multinational corporations.

[1:01:04]

There are changes that are more you know prosaic than the advent of high technology communications -- simple changes in techniques. The containerization of shipping: a development that begins in the late 1960s. I don't know did any of you see today's San Francisco Chronicle?

[1:01:19]

I needn't have asked; nobody reads the San Francisco Chronicle. (laughter from the class). But...there's an interesting story...interesting in its relation to today's lecture. Apparently today or yesterday the biggest ship ever to enter the San Francisco Bay entered the San Francisco Bay.

[1:01:36]

And this is a container ship. It's a container ship that holds a third more containers than the previous biggest container ship to enter the San Francisco Bay. I don't remember how much but you can look it up in the Chronicle. But the containerization of shipping is a development that has huge implications for international trade. Substantially reduces transportation costs over the you know sort of medium to long term.

[1:01:58]

Computers are also very important to the story of globalization. They facilitate the outsourcing of production -- the movement of goods. It's very difficult to have containerization without computers because who knows where all the goods are on the boat if you don't have a computer, right.

[1:02:14]

It's very important to have a sort of computer card index that explains what...which containers contain which goods and where they need to go. So the advent of sort of high-tech computer based systems for managing the shipment of goods is an important aspect. These are sort of to a great extent interlinked developments.

[1:02:32]

And they produce substantial changes in the structure of the global economy. Consider the rise of the multinational corporation. This is one of the signal developments of the 1970s. One of the really important, really powerful symptoms, that suggest that big things are changing in the structure of the international economy.

Multinational Corporations

[1:02:51]

Multinational corporations are crucial -- are crucial motors of globalization. Up to a third of all international trade is intra-firm trade -- which is to say it occurs within corporations

[1:03:04.]

Multinational corporations don't only move goods they also move knowledge and techniques -- techniques for manufacturing you know particular commodities, and so on.

[1:03:17]

The history of multinational corporations of course goes back a long way. I referred earlier in the lecture to the European trading companies of the 18th century: the British East India Company, the Dutch VOC -- these could be seen as precursors to the modern multinational corporation.

[1:03:32]

But there are crucial distinctions to be made. The modern multinational corporation is different in key respects.

[1:03:40]

Whereas foreign direct investment in the age of British imperialism had tended to take the form of standalone investments, you know, the creation of a you know sort of British financed railroad in North America for example. Foreign direct investment, after the Second World War involves the creation of vast networks of corporate subsidiaries and affiliates. IBM for example will invest aggressively in the creation of research and production facilities in Europe during the 1960s and 1970s.

[1:04:12]

It's not creating standalone investments that manage themselves. Rather it's creating subsidiary branches of the IBM corporation linked within some vast transnational corporate structure.

[1:04:24]

One of the key developments which really distinguishes the modern multinational corporation from its historical predecessors is the transnationalization of production. The breakdown in effect of the old factory conveyor belt into...a set of separate processes that can be parceled out internationally so as to take advantage of the comparative advantages that particular nations offer as sites for particular phases of the productive process.

[1:04:53]

So Apple for example can design a computer here in you know Cupertino, California where you know skilled knowledge workers are readily available. And then outsource the manufacturing of that computer to China where you know cheap skilled labor is available to assemble the whole thing.

[1:05:09]

And of course the you know process is much more complicated than that. Because the computer that is assembled in China is not manufactured entirely in China. You know the aluminum that goes into it will be mined somewhere else based upon the comparative availability of aluminum and so on.

[1:05:23]

The transnationalization of production is a distinctive and novel characteristic of the modern multinational. And it depends upon the modularization of production -- upon the breaking down of productive processes into distinct steps that can be outsourced.

[1:05:40]

The idea that you know...article like a computer would be manufactured in the same factory complex in which it's designed -- you know that's a 19th century model of capitalism or maybe an early 20th century model of capitalism. It is not how the transnational corporation works. The transnational corporation will disaggregate production so as to be able to take advantages of the comparative -- so as to be able to benefit from the comparative advantages that an integrating global economy offers.

Foreign Direct Investment Within the Capitalist West

[1:06:08]

Where does this mostly happen? I mean what is the scope of the multinationalization of business during the 1970s? Here the answer may be surprising.

[1:06:18]

If we look at where the money goes, where foreign direct investment takes place, then what we see is that during the 1970s most foreign direct investment occurs within the OECD economies, among Western Europe, the United States and Canada.

[1:06:35]

Western corporations are investing in Western countries for the most part. The developing world receives much less FDI from the United States than Western Europe does. Indeed Western Europe is the principle, you know sort of site of development, for the modern you know multinational business. American car corporations, American computer corporations and so on, create affiliates in Western Europe -- not in the developing world.

[1:07:00]

The United States itself is a recipient of substantial FDI. German car manufacturers for example will invest heavily in the southern states of the United States in production facilities. Why do they do this? Why do Western businesses invest in other Western countries?

[1:07:20]

Well, there are advantages in this multinationalization of production. It enables corporations to surmount tariff barriers. Mercedes doesn't have to pay American import duties on a car that it manufactures in the United States. So it makes their products more competitive in US markets. It also locates the production of the products closer to the markets in which they can be sold.

The Implications of Economic Interdependence in the Larger World

[1:07:43]

So it reduces you know transportation costs. What are the consequences of this for international relations? What does the rise of the multinational signify about the changing state of world affairs?

[1:07:54]

Here one of the most sort of articulate spokespeople for the transformative impact of multinationalization is Jacques Maisonrouge↗ -- a man who was himself an exemplary sort of multinational businessman. Maisonrouge was a French engineer who became a high level vice president at IBM. He was IBM's vice president for international operations in the late '60s and 1970s.

[1:08:18]

Maisonrouge also became a sort of notoriously effective spokesperson for the transformation that multinational business was producing. And here's an example. The world's political structures are completely obsolete Maisonrouge declared in a public speech. The critical issue of our time is the conceptual conflict between the global optimization of resources and the independence of nation-states.

[1:08:40]

So for Maisonrouge national sovereignty, political sovereignty, isn't anachronism. It's just an impediment to the the most efficient possible allocation of resources -- something that multinational corporations are much better positioned than nation-states to accomplish.

The Transformation of Capitalism

[1:08:58]

Let's talk next about finance. Talked about production -- what about finance? The story of financial globalization begins in the 1960s. Here the signal development is the rise of the Euromarket? What is the Euromarket? The Euromarket is an offshore market for dollars -- held mostly in London.

[1:09:21]

It grows quickly during the 1960s and plays a role in the breakdown of the Bretton Woods system. The end of Bretton Woods delivers a further impetus to the globalization of finance. It creates opportunities for bankers to you know profit from arbitrage based upon fluctuating currency values. The petrodollar crisis as I've already discussed further bolsters the development of a globalizing financial system.

[1:09:47]

Banks can profit through the recycling of petrodollar earnings, earnings that accrue to the exporting states, by lending those monies to oil importers so as to finance the balance of payments deficits that the oil crisis produces.

[1:10:04]

So the history of financial globalization really hinges on a series of key developments in the late '60s and early '70s. The rise of the Euromarkets, an offshore market for dollars based in London, the end of the Bretton Woods system and the opportunities that that creates for sort of further financial globalization. And the oil crisis which delivers a big shot in the arm to financial market integration.

[1:10:29]

What are the underlying causes? Technology is important, the reduction in the costs of communications technology facilitates the rise of international banking.

[1:10:41]

Business innovation is important. You know bankers are adept at devising ways to avoid the capital controls that nation-states try to implement to restrict the international movement of funds.

[1:10:52]

Policy choices are also important. Governments decide to reduce controls on international capital mobility. The United States in 1974 removes all of the capital controls which had been you know...used during the Bretton Woods era to defend the fixed exchange rate of the dollar. Great Britain in 1979 follows suit and removes all of its capital controls.

[1:11:17]

West European countries, other West European countries, will follow in the 1980s. So there are policy choices that are made to...accept if not to advance the cause of financial globalization.

[1:11:30]

Financial globalization has important political consequences. It renders national macroeconomies more interdependent -- far more interdependent than they had been in the heyday of the Bretton Woods era. It also raises the you know prospect that national economic sovereignty is being you know sort of penetrated by, qualified by, free floating movements of global financial capital.

[1:11:55]

This is remarked upon at the time, I'm going to show you a video clip even though I don't have time really that comes from a terrific 1976 movie Network↗ in which one of the characters, Ned Beatty, played by Ned Beatty↗, delivers a sort of homily on the globalization of finance and it's implications for international politics.

[1:12:15]

Arthur Jensen: You are an old man who thinks in terms of nations and peoples. There are no nations. There are no peoples. There are no Russians. There are no Arabs. There are no Third Worlds. There is no West. There is only one holistic system of systems. One vast and immane, interwoven, interacting, multivariate, multinational dominion of dollars: petro-dollars, electro-dollars, multi-dollars, reichmarks, rins, rubles, pounds, and shekels.

[1:12:52]

Arthur Jensen: It is the international system of currency which determines the totality of life on this planet.

[1:13:02]

This is a great movie. One of my favorite '70s movies, so I really recommend it if you haven't seen it. But...it gives you a sense of the...discourse of the time, a discourse that is really not so different from the discourse of our own times when it comes to the relationship between global finance and nationality constituted political authority.

[1:13:22]

Indeed the acceleration of financial interdependence, the rise of the multinational corporation during the '70s, create a set of questions as to the future of political management of economic affairs. Is public policy up to the task or does globalization render national regulation irrelevant or ultimately futile?

[1:13:44]

Perhaps there is is a dynamic in play whereby globalization, a process that enables business actors and financial actors to escape the bounds of national regulation implies an implicit process of deregulation.

[1:13:59]

That would be you know kind of logical enough to infer. Insofar at capital becomes in a globalizing world less subject to the jurisdiction of national political authorities what restrictions, what regulations, are to bind business actors? These are questions that globalization conjures.

[1:14:19]

One alternative would be the reconstitution of regulation on a transnational or even global scale. Can nation-states cooperate to achieve the kinds of sort of regulatory function collectively that individual nation-states used to be able to exercise within their own sort of territorial domains? This is one possibility. International organizations like the International Monetary Fund try during the 1970s to reconstitute stable sort of institutional regulatory arrangements on a transnational scale.

[1:14:52]

The IMF tries to devise sort of new rules for international monetary order to replace the Bretton Woods rules that collapsed in 1971 to 1973.

[1:15:02]

Compromise on sort of the constitution of a recast international regulatory order proves very difficult to accomplish however. In part this is because the interests of nation-states are enduringly national and there not always convergence. Instead market determination, at least of currency values, ends up being the de facto solution to the management of international monetary relations.

[1:15:25]

It's too difficult to get nations to agree on a sort of consensual multilateral framework for managing currency values in a post Bretton Woods world. So the de facto alternative is to let markets determine the value of currencies.

[1:15:38]

Still governments will come together to manage at least the most disruptive aspects of economic globalization. This is something that the Trilateral Commission↗ proposes. We've talked a little about the Trilateral Commission. The Trilateral Commission in essence comes into being as a sort of answer to the question of what are globalization's implications for governance.

[1:16:03]

The trilateral concept is that an informal dialog amongst business leaders, policymakers and academics within the OECD countries will be able to devise sort of consensual solutions that countries will follow of their own volition.

[1:16:17]

By consequence we see the rise of new relationships of policy coordination during the 1970s. The most sort of important symbol of which is the G7 summits -- summits that begin in the mid-1970s and continue through to the present day.

[1:16:31]

But still the question of whether globalization necessarily limits the scope of government endures. Will it ever be possible for governments acting collectively and multilaterally to regulate and to govern economies so effectively as nation-states had once been able to do?

[1:16:49]

Here we have to you know sort of ask the question of whether governments in the 1970s are becoming less willing, less eager, to attempt the tasks of economic regulation.

[1:17:00]

The Keynesian consensus after all experiences a crisis during the 1970s. Interdependence makes it harder for governments to exercise the regulatory managerial responsibilities that Keynes argued that they should exercise.

[1:17:15]

The great inflation disrupts the credibility of Keynesian solutions as a sort of plausible framework for managing national macroeconomies. Instead classical liberalism, liberalism that emphasizes the utility of markets as mechanisms for determining the allocation of scarce resources, reasserts itself. After Keynes, Friedrich Hayek↗ the exemplary sort of liberal economist of the twentieth century, experiences a heyday.

[1:17:44]

Hayek's writings become widely circulated and widely discussed in the 1970s. Hayek will -- wins the Nobel Prize for economics in 1974 -- which is illustrative of the ways in which the priorities of professional economists are shifting.

[1:17:59]

But the most influential economist of the decade is not Hayek who by this point is a very old man but Milton Friedman↗. A liberal economist who insists upon the preferability of market-based solutions over regulatory solutions. Friedman argues that government has gotten too big in the age of Keynes.

[1:18:19]

That big government is part of the problem. That government is responsible for the inflationary crisis of the 1970s -- for the failure of sort of growth to reassert itself. Friedman offers a set of radical solutions: spending cuts, tight money policies, reduction in sort of interest, increase in interest rates that will he argues quench the great inflation of the 1970s.

[1:18:42]

But the basic concept is one that advocates markets as the solution to the ills that ail the West. The rediscovery of markets is a overriding theme in the sort of economic thought, professional economics thought, of the 1970s.

[1:18:58]

But how and when is it translated into policy practice? Great Britain here is in the vanguard of the neoliberal shift. Intellectuals within the Conservative Party↗, in particular Keith Joseph↗, who'll you have the opportunity to read about in this week's reading package, offer a set of neoliberal policy solutions as a prescription for the dilemmas of the Keynesian welfare state.

[1:19:20]

In Britain it's Margaret Thatcher who puts this neoliberal synthesis into action as Prime Minister -- a role that she assumes in 1979 when she leads the Conservative Party to election victory.

[1:19:31]

Thatcher privatizes some of the state industries that had been nationalized after the Second World War. She privatizes coal and steel. She privatizes electricity. She privatizes telecommunications. She implements a broader set of market oriented reforms. She enables sort of individuals who live in public housing for example to purchase the public housing units that they inhabit.

[1:19:51]

She argues that this will create a stakeholder society in which individuals have a sort of direct investment in the housing that they inhabit.

[1:20:02]

How crucial was Thatcher? Well, this is a question that we can sort of discuss when we return to the neoliberal shift. But let's, by way of conclusion, think about the ways in which similar changes proceed elsewhere including in the United States.

[1:20:17]

In the United States it was not a Republican administration, an administration of the right, but a Democratic administration that made the first really key moves. Jimmy Carter as President is unfortunate enough to inherit a stagnant economy.

[1:20:30]

He's caught in a very difficult bind. Inflation is a huge dilemma for the Carter administration. How to slay inflation? That's one big policy dilemma. On the other hand unemployment is a big problem for the Carter administration in the second half of the 1970s. How to expand employment? How to reduce unemployment? These are the two dilemmas that Carter has to, has to address.

[1:20:52]

At the same time Carter is eager to deregulate the economy. He has a small business background. He believes that excessive regulation is stifling to business and innovation. So the Carter administration makes moves to deregulate trucking and aviation.

[1:21:07]

Around the same time a Supreme Court decision results in the effective deregulation of some personal financial services. The details are not important. What's important is the ways in which these shifts adhere to a common logic, a logic of deregulation, a logic of market determination.

[1:21:25]

Carter initially prioritizes the fight over inflation. He pursues a stimulus package to expand the economy, to put Americans back to work, but in 1979 he makes a key shift to prioritize the fight against inflation over the fight against unemployment.

[1:21:39]

This is a shift that is...sort of a key pivot in the transition from Keynesian welfare economics to what we would -- might characterize instead as neoliberal economics. Economics more oriented with market solutions, with allowing markets to determine their own sort of trajectories.

[1:22:00]

The Reagan administration essentially accepts the policy synthesis that Carter produces. Reagan will cut tax rates and continue deregulation. But Reagan does not orchestrate much sort of radical reform beyond that which has already been set in motion.

[1:22:15]

On the contrary he will govern as a pragmatic President who has to rule with a Democratic legislature. So the United States experiences a sort of shift towards the market at around the same time that Great Britain does. But it's a shift that occurs under a different kind of administration, a Democratic center-left administration, rather than a Conservative center-right administration.

[1:22:35]

And this ought to provocative as we think about the role that politics play in determining the sort of market oriented shifts of the 1970s. You know these are issues that we'll return to and they're issues that you'll engage in your readings and your section discussions. But what's clear is that by the end of the 1970s the capitalist world is headed in a very different direction from that which it appeared to be following at the beginning of the decade.