UC Berkeley - HIST 186 - 2012 Spring - Sargent - International and Global History Since 1945 - Lecture 22 - Contesting Globalization - 01h 18m 03s

Introductory Video: José Bové and Anti-Globalization

(recording of the lecture began once the video ended)

[00:00]

Okay, that's probably enough cause I imagine that most of you were not able to follow the French. Did any of you understand it? Okay, good. So a few of you, you know, got a sense of what's going on. But most of you didn't. So let me translate some of this.

[00:14]

Who is the man who we see speaking at the end of the video? His name is José Bové↗. Have any of you heard of him?

[00:22]

Okay, a few of you. José Bové is one of the most prominent critics of globalization in France, arguably, one of the most prominent critics of globalization in the world. The man is a cheese farmer by vocation. He also is a labor activist and has subsequently become a politician. I believe he now sits in the European Parliament↗ where he represents the Greens↗ -- the environmentalist party.

[00:46]

Bové actually has some experience of the United States. It may not surprise you after seeing the video to learn that he lived in Berkeley, California for a while as a child. And it was here in Berkeley that he learned to speak English. I don't know whether it was in Berkeley that he learned his politics -- about that we can only speculate.

[01:04]

Bové won fame and notoriety in 1999 when he led an assault an a McDonald's restaurant in the town of Millau which is just outside of Toulouse in southwestern France.

[01:17]

This became a sort of critical event in the politics of what we might describe as anti-globalization. McDonald's after all is a corporation that symbolizes perhaps better than any other the homogenizing transformative forces of global capitalism.

[01:34]

Yet if we pick apart the event and ask what was actually going on then the politics become a little bit more complicated. This attack on McDonald's serves as a sort of symbol of backlash against globalization, but what were the issues that in this instance moved José Bové, and the cheese farmers whom he represented, to attack the McDonald's restaurant?

[01:57]

Was this just a sort of primal expression of rage against globalization? Against the transformation that Bové might have seen globalization to be making in French society? Or is there something more complex going on?

[02:11]

The answer is that it's actually a little more complex. What provokes Bové's assault on a McDonald's restaurant in Millau is the imposition by the United States of a tariff on French cheese.

[02:24]

After a dispute which begins when the European Union↗ slaps a embargo on genetically modified beef exported from the United States to Europe the European Union responds by imposing, sorry, the United States responds by imposing an embargo an cheese, including the Roquefort cheese↗ that Bové produces.

[02:44]

So Bové is representing a group of farmers whose interests have been harmed, not by globalization as in the liberalization of tariff barriers, but rather by the imposition of tariff barriers that disrupt, you know, the market opportunities for the manufacturers of French blue cheese.

[03:03]

So there's a sort of irony to the scene. Because what Bové is protesting in practice is a trade barrier -- a temporary trade barrier which is imposed by the United States in the context of a dispute over beef.

[03:15]

Yet the event nonetheless becomes construed as an expression of the politics of anti-globalization. So the episode is a little bit more complicated than it might appear at first glance. And this is important because the politics of globalization are complex. And this indeed is something that Bové acknowledges himself. As Bové has developed a second career as a political leader and critic of globalization he has been very careful to decry the suggestion that he is an opponent of globalization as such.

[03:46]

Bové rejects the title of anti-globalization activist. He professes to favor a different kind of globalization -- a globalization more accommodative of the interests of small farmers and producers. But it's important that, to note, that even Bové does not take himself for a proponent of anti-globalization.

Globalization in the Public Consciousness

[04:09]

Nonetheless globalization is a contentious issue. The word has a you know charged set of meanings. It has you know political connotations which we could debate ad infinitum↗.

[04:21]

This is all part of globalization's you know sort of rich history as a discourse. We can talk about globalization as a historical process, a process that involves the long term integration of economies and societies, but globalization also has a history, sort of parallel history, a separate history, as a discourse, as a...chain of ideas, a conversation about the world as well as a descriptor of changes occurring in the world as such.

[04:51]

It's not until the late 1990s that discursive globalization really takes off. And this is important. In the last lecture that we had that focused on globalization I talked a lot about globalizing developments during the 1970s. And I stand by that.

[05:07]

It's during the 1970s that we begin to see the unfolding of processes of trade and financial integration that will produce by the twentieth century's end a substantially more globalizing or integrated world economy.

[05:21]

But it's not until the 1990s, specifically, not until the second half of the 1990s, that globalization becomes the stuff of common conversation, that globalization as discourse really takes off.

[05:35]

And you can see in this chart, what this chart shows you is the frequency with which the word globalization appears in the English language. I think I've showed you this chart already, or a variation of it. It's taken from, the data is taken from, all of the books that Google have scanned across a half-dozen university libraries.

[05:52]

So it's a pretty big data set. And what it shows is that...the second half of the 1990s are really the takeoff period for globalization as discourse, for globalization as a way of talking about changes going on in the world and in the world economy.

[06:09]

And there are other ways that we can sort of measure or demonstrate this. What the Google data shows is the frequency with which the word appears across all of the printed material that appears in the English language in any given year. So this is a very big data set.

[06:24]

But if we take a much smaller data set then we'll see a similar kind of phenomenon. Let's ask how frequently President Clinton, who was President of the United States from 1993 to the beginning of 2001, used the word globalization.

[06:38]

If we tally up Bill Clinton's uses of the word globalization on an annual basis we see a clear pattern. In the second half of the 1990s Clinton talks about globalization a great deal more than he did in the first half of the 1990s.

[06:53]

The term becomes much more familiar as a sort of subject of common discourse in the late 1990s than it had been even in the first half of the 1990s. As globalization becomes the stuff of common parlance it becomes increasingly contested.

The Politics of Globalization

[07:12]

A politics of globalization emerges -- a politics in which we are either for globalization or against globalization. Few things symbolize this better than do the publication in 1999 of two books that offer very different perspectives on globalization.

[07:29]

Thomas Friedman's↗ The Lexus and the Olive Tree↗ appears in 1999 as does Naomi Klein's↗ No Logo↗. These books have very different political presumptions and they offer quite different perspectives on globalization as a historical and economic process.

[07:46]

Friedman who is politically liberal, in sort of the classical sense of the word↗, sees globalization as a process that is basically inevitable, that is driven by technology and innovation and which is inexorable. Nation-states in Friedman's perspective can only accommodate themselves to globalization as best as they can.

[08:09]

It's important, you know and I think when we talk about Friedman's perspective on globalization, to note that politically in the United States Friedman would identify on what we commonly call the liberal side of things -- with the Democratic party rather than with the Republicans.

[08:24]

Friedman is no, sort of hardline proponent of monetarism↗ or market fundamentalism↗ he's a political sort of moderate even, a progressive, who sees globalization as a historical inevitably.

[08:37]

This is very different from the perspective that Naomi Klein offers in No Logo. Friedman, sorry, Klein, Naomi Klein, who is politically a radical, rather than a liberal, sees globalization as driven more by politics -- by the vested interests of the powerful than by fundamental processes of economic change.

[08:56]

For Friedman, sorry, for Friedman, for Klein, globalization is as much a policy regime, a set of policy choices, as it is a sort of fundamental process of structural economic change. By defining globalization as a sort of policy settlement rather than a historical inevitably Klein is able to propose alternatives to it.

[09:19]

She denounces globalization and wants to construct sort of alternative solutions by which the world economy might be organized.

[09:29]

The two books have quite different foci. Klein is focused on the rise of corporate power vis-à-vis ordinary people, ordinary citizens and consumers.

[09:37]

Friedman is focused on the rise of the transnational economy and its transformative implications for the politics and economics of nation-states.

[09:45]

So to some extent these are books that are focused on quite different kinds of phenomena. What Friedman is really interested in is the transformation of the world economy in the context of globalization. What Klein is really interested in is the transformation of capitalism. And these are different, you know, kinds of questions. How does capitalism change, how does the global economy change? They're related, obviously, they're related, but there are also key distinctions to be made.

[10:11]

But what's important when it comes to understanding the politics of globalization, and this question of why globalization becomes such a contentious issue, is that even though Friedman and Klein are really talking about quite different things they both presume themselves to be talking about the same thing.

[10:27]

They both presume themselves to be talking at some level about globalization. You know by consequence globalization becomes very contested. On the left insurgents rale against globalization. To some extent there is an insurgency against globalization on the right too. But it's much less captivating.

[10:46]

Pat Buchanan↗, for example, in the United States represents a sort of right-wing critic of globalization but he commands a much slimmer political following than do the forces of anti-globalization on the West.

Protest at the 1999 World Trade Organization Meeting

[10:59]

But if we look at say the protests that unfold in Seattle in 1999 when the World Trade Organization meets↗ we see a powerful backlash again globalization, but we do not really see a coherent political agenda. The reaction against globalization is sort of inchoate.

[11:18]

The Seattle protests nonetheless mark a major landmark in the rise of a politics of anti-globalization. You know what happens is that a meeting of the World Trade Organization takes place in Seattle and there is a massive backlash against it. Seattle experiences major street protests, major demonstrations, far larger than municipal authorities had anticipated.

[11:41]

But who is protesting at Seattle and what exactly do they stand for?

[11:46]

Well, it's clear that some of the protesters embrace a sort of hardline anti-corporate agenda such as that Naomi Klein outlines in No Logo. But others have more traditional economic agendas. Jimmy Hoffa↗, the head of the Teamsters Union↗, pictured in the center of the slide, is prominent amongst the protesters at Seattle. But what does Hoffa stand for?

[12:12]

He's a traditional unionist -- a man who is in some ways fairly conservative in his cultural...attitudes, and expectations...Hoffa is not a representative of...the New Left↗; rather, he's a sort of throwback to the Old Left↗ that preceded the transformations that, you know, the counterculture wrought in the 1960s.

[12:33]

But Hoffa is firmly against trade liberalization. Hoffa stands for trade protection, trade protection that will defend the interests of American workers. So he's able to find temporary cause at Seattle with more ideological critics of globalization who see the whole process as somehow misbegotten and erroneous.

[12:56]

But the political constituencies that sort of assemble under the penumbra of anti-globalization are broad indeed. There are some who just want trade protection to defend American jobs. There are others who see the sort of integrative liberalizing transformation of the global economy as misbegotten from the very beginning and there are others who just despise President Clinton. (laughter from the class).

[13:23]

(student comment)

[13:33]

Absolutely. I think if you were to sort of differentiate between the anti-globalization politics of Hoffa and the critique of, sort of, the New Left inflected radicals, then I think you've hit on one of the key issues which is accountability.

[13:50]

I don't think that Hoffa and the Teamsters cared very much at all about accountability, after all, the Teamsters themselves are not a particular accountable or democratic organization. What Hoffa stands for is the economic interests of his membership -- the economic interests of organized labor.

[14:05]

This is a very different kind of critique from the critique that is offered by... sort of unorganized...or non -- you know not formally organized protesters who rally at Seattle against globalization and denounce it as a process that is anti-democratic. That shifts the locus of decision-making away from the people even away from the nation-state and towards sort of global institutions like the WTO and the IMF.

[14:32]

(student comment)

[14:36]

NAFTA↗ was, we'll be dealing with NAFTA a little later, NAFTA is actually created in 1996. But it's one of these sort of global institutions that becomes a...object of discontent and criticism as the forces of anti-globalization rally. One of the interesting things about NAFTA actually, and this is something to bear in mind, is I made a distinction, a few minutes ago, between the politics of anti-globalization on the left, and on the right.

[15:02]

Well, NAFTA is a good example of a...globalizing sort of institution that is assailed just as powerfully by critics on the right as on the left. Indeed it may be that the sort of right-wing critique of NAFTA is more tenacious even than a left-wing critique. And if you don't believe me just do a cross country drive listening to AM radio, and count the number of times you hear NAFTA mentioned.

[15:27]

The politics of globalization however are you know sort of powerful. They are consequential. Seattle comes as something of a shock to the Clinton administration. Clinton had before Seattle presumed that liberal economic integration was essentially popular with the American people.

[15:48]

The Seattle demonstration cause the proponents of globalization to grapple with the backlash in a sort of serious way for the first time. Of course the easiest response is simply to move the site at which future G7 and IMF meetings will take place. In 2004, for example, when George W. Bush hosts the G8 in the United States, he selects Sea Island, Georgia↗, as the site of the meeting.

[16:17]

Sea Island is the name, as suggests, is a venue not so conducive to mass street protests as Seattle had been. Surprising that he didn't bring the IMF to meet at Berkeley, but...(laughter from the class), he didn't.

Globalization: Policy Choice or Inevitable

[16:35]

Still, Seattle raises important questions. What is globalization? Is globalization a policy choice as Naomi Klein would have it? As the demonstrators at Seattle want to see it?

[16:50]

If globalization is simply a set of policy choices, that are sort of imposed on unwilling and perhaps unwitting people by arbitrary power, whether the power of the United States government or the power of the IMF or so on and so forth -- the idea that globalization is a policy choice, or a set of policy choices, is appealing even essential for globalization's critics.

[17:14]

Because if globalization is just a set of policies than it can be reversed. Alternatives can be conjured through the sort of proposition of alternative policy frameworks, alternative choices, alternative modes of organizing societies and economies.

[17:31]

Conversely if globalization is as Thomas Friedman would have it a sort of inevitable historical process that is driven by technology, by progress itself, than it's far harder to conjure alternatives to it.

[17:47]

If the integration of markets, across space and over time, is sort of an inevitable consequences of transformations in information technology, communications technology, and so on and so forth then it's much harder to construe alternatives to globalization. And this is exactly Tom Friedman's point.

[18:06]

Globalization, Thomas Friedman writes in The Lexus and the Olive Tree, is as inevitable as the weather. There's very little that you can do about it. You can simply accommodate yourself to it as best as you can.

[18:19]

Still, the criticism is powerful and it will define the politics of globalization in the first years of the 21st century. Whether the criticism is accurate or not is an entirely different question and a question that we should think about today.

[18:35]

But something like a coherent critique of globalization does emerge after Seattle. And it emphasizes a number of key changes which critics hold globalization responsible for. Critics argue that globalization involves the purposeful deregulation of economies.

[18:52]

That in the course of globalization nation-states, in both the West and the developing world, are purposefully dismantling the raft of regulations which they have established during the course of the 20th century to protect citizens and to promote equality.

[19:11]

In other words critics allege that the destructive force of the free market is being permitted to ride roughshod over the interests of citizens and consumers. So the accusation that deregulation is a purposeful choice and a choice with destructive consequences is one of the key allegations that globalization's critics make.

[19:31]

They also see market reform as a self-conscious choice -- not as a...choice that is borne of necessity, out of the failure perhaps of prior economic solutions, but rather as a market choice, a market choice driven to a great extent by ideology.

[19:49]

If you look at the writings of globalization's critics then you'll see that they pay central attention to ideology as a sort of historical force underlying globalizing change from the 1980s onwards. It's ideology as well as the vested interests of the powerful that are really to blame.

[20:05]

So...figures like Milton Friedman↗ and Friedrich Hayek↗ become sort of bête noires for the anti-globalization movement. They will be held accountable for the politics and economics of deregulation and market reform.

[20:20]

And the corollary of this of course will be, as globalization's critics allege, the decline of public sectors -- the decline of public welfare programs most importantly. Who to hold accountable for the changes that globalization brings?

[20:36]

Is globalization an amorphous faceless force for which responsibility cannot be ascribed or held? To some extent you know the critics are vague when it comes to the ascription of specific responsibility. There's a tendency on the part of globalization's critics to indict you know sort of faceless corporations.

[20:56]

But specific accusations are levied at the feet of major international institutions and organizations. The IMF, the International Monetary Fund, and the World Bank in particular, and the government of the United States of America. These I think for the critics of globalization are the three sort of principle forces seen to be behind the globalizing transformation of the world economy from the 1980s onwards.

[21:24]

At this point you know there should already be some sort of alarm bells going off for those of us who have been attentive to the early history of the International Monetary Fund. Because after all if you think about the purposes that the IMF was initially constructed to serve you will recall that the IMF was built at Bretton Woods↗ in New Hampshire in 1994 so as to offer nation-states a modicum of protection against the forces of global economic integration.

[21:53]

The IMF offered you know balance of payments financing for countries experiencing trade deficits so that they wouldn't experience the immediate discipline of market based adjustment.

[22:04]

So if the IMF is responsible for a sort of market fundamentalist version of globalization then we have to you know sort of presume that the role of the IMF has changed substantially since the initial creation of the International Monetary Fund as an international financial institution in the 1940s. But...there's -- these are technical issues -- and we will return to them.

The Course of Globalization in Different Nation-States

[22:28]

What is important now is to sort of think about the key questions that we have to grapple with. How has globalization progressed since the 1980s? When we talk about globalization can we differentiate between the experience of the advanced industrial world, the OECD world, what I mean by OECD, is the countries that are members of the Organization for Economic Cooperation and Development↗. Sort of...the club of rich developed countries...

[23:00]

How has globalization proceeded in the developing world? How different have the experiences been from country to country?

[23:09]

By looking at the history of globalization not from the perspective of the world as a whole but rather from the perspectives of diverse nation-states we might be able to get a better handle on the accusations that the critics have levied. What have been the consequences of globalization for India for example? Or for sub-Saharan Africa? For East Asia as opposed to West Asia?

[23:33]

By focusing on globalization's history from particular vantage points we can better survey, I would suggest, the consequences of globalization for the global economy and of course the people who inhabit it.

[23:49]

So let's start with the developed world. How has the relationship of the developed world to the global economy changed since the early 1980s?

Europe

[23:59]

Let's start by talking about Europe. What have been the major developments in Europe's economy, Europe's relationship to the international economy since 1980?

The Project of European Integration

[24:11]

Well, it would be difficult to talk about the European economy since 1980 without putting the story of European integration at center stage. Europe in 1980 was partially integrated but European integration was by no means wholly complete.

[24:29]

The process of market integration was not complete in 1980 despite the existence of a common external tariff barrier -- a common tariff barrier protecting Europe's economies against imports from the rest of the world.

[24:44]

The scope of enlarge -- the scope of European integration moreover was in 1980 fairly limited. The European Economic Community↗, the EEC, had expanded itself to include nine countries by 1980, the original six countries are joined in 1973 by Great Britain, Denmark and Ireland. This expands the scope of the EEC but the EEC still only comprises a minority of European countries.

[25:12]

Subsequent developments however will greatly enlarge the scope of Europe. In 1981 Greece joins the European Economic Community. In 1986 Spain and Portugal join the EEC. What is it that permits the addition of these three countries to the European Economic Community? Why do they join in the 1980s and not before?

[25:42]

(student response)

[25:47]

No, the euro comes a little bit later. Of course the euro will have consequences for each of these countries.

(student response)

[25:55]

That's right. It wasn't until the 1970s that Greece, Spain and Portugal democratized. And the European Union, the EEC, as it was then, requires as a precondition of membership that members adhere to a democratic form of government.

[26:11]

Authoritarian countries are not allowed to become members of the European Community. Of course what this will mean for Hungary should Hungary continue its present sort of descent into a more authoritarian mode of politics is an interesting question. But for the Iberian countries and Greece democratization was in the 1970s and 1980s a precondition for membership of the European Union.

[26:38]

After the end of the Cold War the scope of the European project expands even more rapidly than before. Austria, Sweden, and Finland all join the European Union in 1995.

[26:54]

In the cases certainly of Austria and Finland the end of the Cold War was a precondition for membership of the European Union. The Soviet Union had at the end of the Second World War some occupation rights in Austria, it agreed not to exercise them in a quid pro quo by which Austria refrained from joining Western institutions.

[27:17]

So in the context of the Cold War Austria could not join NATO↗ or the European Union because to have done so would have been construed by the Soviet Union as a major provocation.

[27:26]

Once the Soviet Union is over, once the Cold War is over, Austria can go ahead and join the European Union. Similarly Finland, a country which shares a long border with the Soviet Union, after 1991 -- Russia, was not able to join Western institutions during the course of the Cold War.

[27:45]

Finland maintained its independence and its neutrality in the Cold War by balancing carefully between the two sides. Membership of the European Union would not have been consistent with the policy of Cold War neutrality. After 1991 however that barrier to EU membership, disappears and Finland joins the union.

[28:07]

Soon former members of the Soviet Bloc will accede to the European project. The Baltic republics, Latvia, Estonia, and Lithuania, join in 2004 as do a handful of major East European countries. Poland, the Czech Republic, Slovakia, Slovenia, and Hungary all join the European Union. So too in 2007 will Bulgaria and Romania.

[28:34]

Parallel to the expansion of Europe in terms of the scope of its membership there proceeds an incremental intensification of integration. The intensity of European integration increases as the scope of the European project widens.

[28:51]

The first key move towards the economic integration of Europe is the establishment of the common external tariff barrier which comes just a few years after the conclusion of the 1957 Treaty of Rome↗ which sets the European project in motion in the first place.

[29:07]

The removal of internal tariff barriers however and the harmonization of regulation come more slowly. Indeed by the early 1980s business groups in Europe are beginning to lament that European integration has not proceeded further than it has done so. Business groups like the European, you know, Industrial Round Table↗ lobby for further integration.

[29:32]

They argue that the completion of the integration -- of the integrative project -- will create a large continental economy which will offer opportunities for economies of scale which a patchwork of national economies does not.

[29:45]

It's not just business leaders it's also European politicians and bureaucrats who are pushing the cause of further integration. Probably the leading champion of integration during the 1980s is the man pictured on the right of the slide -- Jacques Delors↗ -- the Chairman of the European Commission. Delors sees it as his mission to complete and consolidate the integrative project that forebears like Jean Monnet↗ set in motion.

[30:13]

Delors faces some opposition amongst the national governments and in particular amongst the British government of Margaret Thatcher. Thatcher opposes Delors' integrative project. She would prefer for European countries simply to deregulate while maintaining their own sort of national economic sovereignties.

[30:34]

Delors is not so beholden to deregulation and market fundamentalism as Thatcher is, but he wants to create a sort of pan-European market economy which will be regulated and managed by European institutions not by the institutions of the European nation-states.

[30:52]

Ultimately it's Jacques Delors who gets his way. In 1992 the member states of the European Union, all nine of them, agree to create -- sign up to the Maastricht Treaty↗. This treaty is a profound turning point in the history of European integration. It transforms the European Economic Community, the EEC, into the European Union.

[31:14]

The change in names is symbolic and consequential. It suggests a more far-reaching federative project than does economic community. The Maastricht Treaty completes the single market. It provides for the formal and final removal of trade barriers between the countries of the member states.

[31:36]

It also sets in motion the process that will culminate in 1999 with the European single currency: the euro. The Maastricht Treaty creates the so-called European Exchange Rate Mechanism↗ which links the countries, sorry, which links the currencies of Europe's member states together in a rigid matrix of fixed exchange rates.

[31:59]

Exchange rate stability which is enforced by the ERM is a sort of precondition for the replacement of the national currencies by a single currency unit: the euro. The Maastricht Treaty empowers European institutions at the expense of national institutions.

[32:17]

Monetary integration is a major achievement of the 1990s The history of European monetary integration substantially predates the 1990s. We could actually take the story all the way back to the 1970s. After the end of the Bretton Woods system in 1973, when exchange rates ceased to be fixed and become floating, the European countries initially try to preserve a modicum of stability among themselves.

[32:47]

They establish a European exchange rate system that will fix the values of European currencies in relation to each other -- without respect to the United States dollar. So Europe, as early as the 1970s, tries to achieve a degree of monetary coordination that will make Europe a zone of relatively fixed and stable exchange rates. The idea in the early 1970s is that Europe will sort of float en masse against the United States dollar.

[33:14]

This project in the 1970s is unsuccessful. The economic needs of Britain, France, and Germany are too different for these countries to adhere to a single monetary regime. Nonetheless the pursuit of a single European currency renews itself during the 1980s, and during the 1990s monetary harmonization is substantially achieved.

[33:41]

The ERM, the European Exchange Rate mechanism, provides a set of rules that member states have to adhere to if they are to adopt the single currency -- the euro at the end of the decade in 1999.

[33:53]

Of course it should be noted that the -- the ERM is not always as vigilant as it might have been in enforcing rules on member currencies. Rules that require for example governments to run budget deficits within a fairly narrow window are not fully enforced. So in the pursuit of the single currency political objectives, namely the creation of a single currency, takes some precedence over economic objectives. The consequences of this, you know, in a sense Europe is living with today.

[34:25]

Still the euro is introduced in 1999 and the European Central Bank↗ which becomes responsible for the administration of a single European currency. This transforms the European Central Bank, or ECB, into the role of the world's largest and perhaps most powerful central bank.

[34:47]

The ECB, which is based in Frankfurt, Germany, is committed to maintaining the stability of prices throughout the European Union. This is a slightly different role from the role that the American Federal Reserve Bank serves. The Federal Reserve Bank legally has three purposes.

[35:03]

It's responsible for maintaining price stability, it's responsible for maintaining high levels of employment, and it's responsible for maintaining relatively low borrowing costs over the long term. So the Fed has a set of responsibilities towards the real economy, towards the production of employment and the sustenance of long term growth.

[35:23]

The ECB does not have these responsibilities. It is tasked simply with keeping inflation low.

[35:31]

So from a certain point of view the ECB would meet with greater approval from Milton Friedman than would the Federal Reserve Bank of the United States. Because the ECB is focused laser like on price stability whereas the Federal Reserve serves a number of other economic functions.

[35:49]

You know the consequences of this again can be seen in the sort of politics of the present day euro crisis which we'll talk about a little bit more next week, or maybe the week after.

[36:02]

Still the European integrative project continues to proceed onwards during the first decade of the 21st century. The Lisbon Treaty↗ of 2007 further consolidates European integration empowering EU institutions once again at the expense of national governments. The history of the Lisbon Treaty offers a sort of interesting window on a point that was made you know a little earlier about the relationship between economic integration and democracy.

[36:32]

In 2004 and 2005 the member states of the European Union try to create a European Constitution↗. It was going to be called the Constitution of Europe. And this would be a sort of foundational political act in the creation of a pan-European Union -- a political act to parallel and complement the economic integration that Europe had already achieved.

[36:54]

But the Constitution was rejected by voters in both France and the Netherlands in 2005 when it was subjected to popular referenda in those two countries. Voters rejected the European Constitution preferring to sort of remain in a Europe of nation-states than in a more federal European Union.

[37:13]

And at this point the governments who had orchestrated the Constitution in the first place adopted a different strategy. Rather that creating a new Constitution for Europe, which would require the ratification of voters by popular referendum, they decided instead simply to reform existing European treaties as a way of intensifying the European project without having to seek approval from the voters.

[37:36]

So the Lisbon Treaty unlike the Constitution of 2005 was not a new treaty. It was simply a reform of earlier European Treaties which had already been approved by the member states. And this dynamic says something about the relationship, the fraught relationship, between democracy as a political ideal, and integration as the Europeans have pursued it.

[37:59]

Integration has proceeded and has accomplished a great deal but it has not always been fully and formally endorsed by the voters whom European politicians claim to represent.

Economic Growth and European Integration

[38:13]

But what have the economic consequences been? How has the European economy faired in a era of unprecedented and remarkable economic integration?

[38:24]

Insofar as the European project sought to create from the outset an integrated economic union European integration has substantially accomplished its goals. Two-thirds of all trade undertaken today by European states occurs within the European Union. So Europe has become a tightly integrated economic unit.

[38:48]

Great Britain, for example, traded extensively with countries outside of the European Union at the beginning of the 1970s. Much of Britain's trade in the early 1970s was still with the members of the British commonwealth, Canada, Australia, New Zealand and with the United States.

[39:06]

As a consequence of British membership of the European Union Britain's trade has become heavily reoriented towards Europe. And European trade is very extensive. Today if you were to count intra-European Union trade as international trade Europe would account for some 40% of all international trade transactions. The European Union is a very dynamic and very tightly integrated trading bloc.

[39:33]

What have been the consequences of the European integration project for income distribution within the European Union? This is an important question. Has integration made European nation-states more equal or less equal in terms of the distribution of income among them?

[39:50]

Well, this chart provides you some clues. It shows GDP per capita of seven major European countries including three Spain, Greece and Italy, sorry Spain, two that joined recently, Portugal's not on the chart. There were too many different lines on the chart and it became confusing so I took Portugal off. Sorry -- Portugal.

[40:13]

What you see here though is you see...France and the Netherlands, both long-term members of the European Union, Ireland and the United Kingdom, both of which joined in 1973, Greece and Spain, oh, and Italy too.

[40:27]

And you so see how GDP per capita in these countries changes over time. And what is you know sort of striking about this is the catch up that at least two of the new entrants experience from the 1980s onwards.

[40:41]

Spain, in 1970, lags far behind the countries that are members of the European Union in terms of average GDP per capita. The average Spaniard is much less well-off than is the average French person or the average Dutch citizen. By 2006 Spanish GDP per capita has substantially caught up with the European mainstream.

[41:07]

So for Spain at least integration does produce some convergence in incomes. Ireland's trajectory is particularly striking. Ireland goes from having been one of the poorest countries in Europe in 1970 to being one of the wealthiest in Europe by the early years of the 21st century.

[41:26]

Average GDP per capita in Ireland, in 2006, peaks at almost $30,000 US dollars per year. This is almost as much as per capita GDP in the United States. Far more than it is in most other European countries. Of course Ireland is a particular case. Ireland's economic boom is fueled by a massive influx of debt. The consequences of this too will become transparent in the financial crisis that begins in 2008 which we're going to talk about in due course.

[41:56]

But so far as the basic issue of income convergence goes the European project has been a success. Countries that have joined the European Union have tended over time to catch up with the European Union's wealthiest members.

Political Harmony and European Integration

[42:12]

There have of course been political dividends to the European project too. It should go without saying that Europe has been far more peaceful after the Second World War than it was before the Second World War. Think about Anglo-German relations as a case in point.

[42:29]

We could talk about Franco-German relations and so on and so forth. Europe, perhaps the greatest accomplishment of the European project, has been political rather than economic. Europe...for some four centuries, was the world's bloodiest and most belligerent region. Since the Second World War Europe has been at peace.

[42:54]

There have been no wars fought in Europe in the era of European integration. For a region that...was the crucible of modern warfare this has been a remarkable transformation. Indeed some would go so far, as the British diplomat Robert Cooper↗ did in a recent book, to see Europe as having produced an entirely new kind of international relations.

[43:18]

Robert Cooper argues that the international relations of European states ought to be characterized as a kind of postmodern international relations in which war becomes obsolete and in which the interests of nation-states are bound together tightly and eternally by common international institutions.

[43:35]

The United States, by contrast, Cooper sees as still being mired in the era of modern international relations -- committed to war as an instrument of statecraft. The Europeans, Cooper says, have sort of moved beyond this.

[43:49]

Of course an alternative perspective would be that the Europeans have simply been too cheap to pay for their own defense and have depended upon the United States to defend their interests at home and in the world but...that's a different point of view.

The United States

[44:02]

But what of the United States itself? How has the United States fared in a era of globalization? Now one of the key questions that we have to think about when we think about the United States in the postwar world economy is the question of decline. Has the United States been in decline since 1945?

[44:21]

From a certain point of view the answer is yes. If you look at US GDP as a percentage of world GDP, which is what the yellow line reveals, you see a fairly consistent story since 1945. The United States in 1945, actually in 1950 in the chart, amounted for almost 23% of world GDP

[44:48]

Today the United States, sorry, amounted, for almost 28% of world GDP, today the United States is responsible for less than 20% of the world's gross domestic product. So the US economy has shrunk as a fraction of the overall global economy. This is relative decline sustained over a period of about six decades.

[45:11]

Still it's important to set this in historical context. You have to remember that in 1945 the rest of the world is absolutely devastated by the war. The United States is not devastated by the war. Apart from Pearl Harbor US territory is not directly affected by the fighting of the Second World War. On the contrary the US economy experiences a tremendous boom during the Second World War as American factories make the weapons with which the Second World War is substantially won.

[45:41]

The US position of preeminence that exists in 1945 is profoundly unnatural. It is a consequence of the devastation that the war has brought. Thus it is virtually inevitable that the United States will decline in relative terms after 1945 as the rest of the world catches up.

[46:00]

If you look at the chart in a little bit more detail then you actually can see two distinct phases of decline. The first phase of decline unfolds from about 1950 to the end of the 1960s. This is the relative decline that occurs as Europe and Japan recover from the devastation of the Second World War. As the countries that have been most effected by the Second World War catch up the United States in relative terms declines.

[46:29]

Following the first phase of relative decline there is a period of relative stability in the 1980s and the 1990s. Indeed during the 1990s the US share of world GDP increases very, very slightly. The US is actually doing pretty well in a globalizing world in the 1980s and in the 1990s.

[46:50]

Only in the early years of the 21st century does the United States experience a renewed relative decline. And this is a different kind of relative decline because it can't be explained by other countries' catch up from the Second World War.

[47:06]

It has to be explained through reference to some other cause. Either the United States is really declining, in relative terms, or other countries, non-Western developing countries, are beginning to grow at a much faster rate than the rates at which they had been growing throughout the larger postwar era. So this is a key question, and it's something that we'll come back to in the last lecture of the series.

[47:34]

Just before we leave this chart, I focused on US GDP as a percentage of world GDP, but you might also think about the way -- the changes in US per capita GDP as a fraction of world per capita GDP. How much better off are average Americans as compared to average citizens of the entire world? This is what the blue bars in the chart show.

[48:00]

And the y-axis, the right y-axis, is the key to the blue chart. Here the story is actually really interesting. You can see in the 1980s and 1990s US per capita GDP is growing as a fraction of world GDP. Americans are getting better and better off during the 1980s and 1990s relative to average world citizens.

[48:22]

In 1982 US GDP is about four times -- US GDP per capita is about four times the world average. By the end of the 21st century average US per capita GDP is about -- is close to five times the world average. So the average American in 1980 is four times better off the average citizen of the world. By 2000 the average American is nearly five times better off than the average citizen of the world.

[48:51]

This also will change very dramatically in the first decade of the 21st century. I'm so sorry that you have to graduate in 2014 and not 1984. That would have been a much better year to go out into the workforce.

[49:07]

The US embraces globalization. And the US embraces liberalization as a policy objective through this era. The reasons are not altogether surprising. After all the chart showed us that Americans were becoming much better off in relative terms during the 1980s and 1990s. As a consequence perhaps of this...impressive rise in prosperity their leaders embrace liberalizing policies.

[49:33]

Ronald Reagan of course will embrace a major tax cut at home. It's one of the first things that he pursues as president though of course it should be noted, particularly if you happen to be running for the Republican nomination this year, that Reagan ends up reversing course on his tax cut in 1986 when a Democratic Congress you know sort of protests that it cannot be financed without imperiling major social programs.

[49:58]

Reagan is much more pragmatic than his followers might have it today on the issue of tax cuts. Besides pursuing tax cuts which are intended to stimulate the economy Reagan also continues the deregulatory project that the Carter administration set in motion.

[50:18]

Reagan does not really talk much about globalization. This is not surprising. The term has not yet become current currency. It's in the 1990s that globalization becomes a thing of widespread discussion and it's in the 1990s that the United States will self-consciously embrace the promotion of globalization as a foreign policy and strategic objective.

[50:44]

Here the key figure is Bill Clinton. Bill Clinton becomes president, he campaigns for the presidency in 1992, and he becomes president in 1993 with economics as his primary commitment and purpose.

[51:00]

James Carville↗, Clinton's principle electoral strategist, coins the phase, "it's the economy, stupid"↗, and this becomes Clinton's core political strategy. Clinton lambastes his opponent, George H. W. Bush in 1992, for having failed to do enough to improve the well-being and the welfare of ordinary Americans.

[51:20]

Clinton makes the promotion of economic growth, and the reform of the American economy his primary objective as president. And he also makes the promotion of globalization his core foreign policy goal. And there is a obvious...synergy between those domestic and foreign policy agendas.

[51:39]

Clinton wants to expand opportunities for the United States and the world. He wants to solicit foreign investment in the United States -- the promotion of growth at home, and the promotion of globalizing integration in the world at large are for Clinton flip sides of the same coin.

[51:55]

So for Clinton globalization becomes both domestic and foreign policy strategy -- indeed it blurs the distinction between these two things. This is convenient for an administration that otherwise has very little foreign policy strategy.

[52:10]

After all for forty years before Bill Clinton American Presidents had adhered more or less to a policy of anti-Soviet containment. With the end of the Cold War American foreign policy is sort of at a loose end. With is to be the purpose of American power in the world now that the Cold War is over?

[52:29]

Bill Clinton doesn't have a particularly coherent answer to that question but the promotion of globalization becomes almost by default the purpose of American foreign policy in the 1990s.

[52:42]

Still, the Clinton administration takes important strides towards the creation of a more integrated, more globalized world. There are some key moves. Including the bail out of Mexico in 1995.

[52:55]

When Mexico comes to the United States -- experiencing major budget deficits on the cusp of a default that would have had catastrophic implications for the world economy -- Bill Clinton agrees to lend the Mexican government a substantial sum of money to tide it through the crisis and to enable it to put its own house back in order.

[53:15]

This is really important. Clinton acts in part because he fears that failing to act will result in the implosion of Mexico which will have a you know very serious consequences for the United States, particularly for the southwestern United States, but he also acts to bail out Mexico because he believes the stability of the world economy to be at stake.

[53:36]

Bailing out Mexico is not a particularly popular move at home. The Congress will not support it. The Congress says that the Mexicans have spent too much and taxed too little. It's time for the Mexicans to put their own house in order. We shouldn't be bailing them out. You can hear similar kind of discourse to this if you read any German tabloid newspaper today -- go to Das Bild and search for Greece.

[53:56]

But despite political opposition at home Clinton acts to bail out Mexico. It's a bold move and it's ultimately a successful move. Clinton rescues Mexico and helps Mexico to continue to grow through the 1990s. And actually the story of Mexico's economic development in the 1990s and beyond is a pretty good story and Clinton helps to make it possible by acting to help Mexico in the context of a serious financial crisis.

[54:22]

Clinton also plays a leading role in the orchestration of the WTO -- the World Trade Organization↗ in 1995. The WTO is based out of the GATT -- the General Agreement on Trade and Tariffs↗ which is signed in 1947 -- the GATT -- the WTO -- transforms the GATT into a more far-reaching and sort of transformative organization.

[54:45]

The WTO will have enhanced powers to mediate trade disputes and to promote trade liberalization as a global objective. Committed to trade liberalization as a national policy agenda Clinton is highly supportive of the WTO. It's a crucial instrument for promoting the globalization of trade.

[55:05]

In 1996 Clinton participates in the creation of NAFTA↗. And NAFTA has been a long going project. The discussions to create NAFTA begin under Ronald Reagan -- continue through the Bush administration and culminate with Bill Clinton. Interestingly, and we're going to talk about this in a few minutes, the initial impetus behind NAFTA comes not from the United States but from Mexico.

[55:29]

The Mexicans move at first to propose the creation of a free trade agreement with the United States. The Clinton administration, like its predecessors, sees this as an opportunity to create an integrated trading bloc in North America.

[55:44]

As a trading bloc that will include both high-income and middle-income countries NAFTA will face challenges that the European Union does not face. Remember that the member states of the European Union are all high-income countries -- at least until 2004.

[55:59]

NAFTA is a different kind of trade agreement and it will face particular challenges. Ones which we'll talk about when we come to talk about Mexico in just a few moments.

[56:08]

The United States proactively embraces globalization in the 1990s and appears to do fairly well out of it. The improvements that we saw in US per capita GDP, in relative terms, are striking through this era. But there are some consequences that globalization brings for the United States which might, depending on your point of view, be characterized as adverse.

[56:34]

Manufacturing declines as a share of overall US output. This is not good news if you happen to work in manufacturing. Not good news for labor unions and so on and so forth. US based corporations find themselves in a globalizing world, increasingly able to export manufacturing jobs to cheaper locations -- read China.

[56:59]

New jobs will be created in the service sector and unemployment stays relatively low at least until 2008. Still whether the jobs that are being created in a globalizing service economy are as good as the jobs that had existed in manufacturing sites is not altogether clear.

[57:17]

It's certainly the case that in real terms increases in middle class household income in the United States during the 1980s and 1990s are much less than are increases in the net worth of the American economy.

[57:32]

Globalization certainly erodes opportunities for industrial labor on the part of the American working classes. But what are the alternatives to globalization? How differently could things have been orchestrated? How differently could things have been structured?

Japan

[57:49]

Here Japan may offer some salutary advice. What is Japan's relationship to the global economy and how has it changed over the past half-century?

[58:02]

What is the story of the Japanese economy in these years? Let's start with the story of the Japanese economy. Japan is one of the miracles of the early postwar years. Between the 1950s and the 1980s Japan's economy grows at a impressive clip. Japan's share of the world's GDP grows from about 3% in 1950 to almost 9% by 1990.

[58:30]

This is a stunning transformation in Japan's economic prospects. Japanese GDP per capita increases impressively too. In 1950 average Japanese household incomes are less than are average world household incomes. The average Japanese citizen is worse off in 1950 than is the average citizen of the world.

[58:52]

By 1990 the average Japanese citizen is almost four times better off than is the average citizen of the world. This is a remarkable accomplishment. How is it achieved?

[59:05]

The Japanese government after the Second World War pursues what might be characterized as statist↗ growth strategies. MITI, the Ministry of International Trade and Industry↗, orchestrates growth. It plans growth. It supports national economic champions.

[59:21]

To what extent does Japanese success depend upon the global economy? Here exports are absolutely crucial. Japan pursues an export-led growth strategy. So Japan aggressively exports manufactured industrial goods: automobiles, household appliances, increasingly from the 1960s onwards, electronics, to the rest of the world, and in particular to the United States.

[59:46]

The United States in the context of the Cold War is accommodative of Japan's export-led growth strategy. Indeed in 1961 the Japanese Prime Minister Hayato Ikeda↗ tells President Kennedy of the United States that he's really worried about Communism in Japan.

[1:00:02]

That he fears that you know he may be overthrown by Communists in a few years if the United States does not open its economy to Japanese exports. Kennedy at this stage is convinced that opening the American economy to Japanese exports would be a really smart move. Because otherwise Ikeda might be overthrown by Communists.

[1:00:20]

It's a very smart move on Hayato Ikeda's part. The United States in the early 1960s opens its economy to Japanese exports -- becomes the primary market for Japanese manufactured goods.

[1:00:32]

Japan does not have to reciprocate by opening its domestic market to American exports. So Japan experiences the benefits of international trade without paying the reciprocal price and opening its own domestic economy to foreign goods.

[1:00:49]

This is a very successful formula for Japan. Japan grows very, very quickly. Japan imports Western technology, deconstructs it, and builds it better than Western companies had been building it. By 1990 Japan looks like a sort of economic miracle.

[1:01:07]

It looks even like the Japanese miracle of export-led growth and protectionism at home might have a great deal to commend it over the more liberal model that the United States embraces. Japan has done very, very well.

[1:01:21]

But we should qualify, you know, these observations about Japanese success with a sort of recognition that Japan is in a sense a free rider on globalization. Japan enjoys the globalization of markets without globalizing its own domestic market. And Japan also enjoys US military protection. Japan is able to spend very, very little on defense through the entire Cold War era.

[1:01:47]

Japan spends less than 1% of its annual GDP on defense. And this is really remarkable if you think about where Japan is located. East Asia is a pretty dangerous neighborhood throughout the Cold War era and into the present day. Japan is really close to North Korea. One of the nuttiest states in the world.

[1:02:06]

If you were that close to North Korea, and you were not protected by the United States military, and you were Japan, you'd be spending a lot more than 1% of your GDP each year on defense. And that would of course reduce the amounts that are available to spend on other things. So Japan benefits from the protection of the United States. Nonetheless Japan's success is very, very impressive from the 1950s through to the 1980s.

[1:02:32]

At the end of the 1980s however Japan experiences an asset price bubble which produces a stunning increase in the value of Japanese stocks and in the value of Japanese real estate. The bubble is so dramatic that by the end of the 1980s the Japanese Imperial Palace↗, and the sort of grounds on which it is located, are valued at a higher price than the entire state of California.

[1:02:58]

Japan is worth more, this, the Imperial Palace and its grounds, are worth more than California. This is how dramatic Japan's real estate bubble is.

[1:03:08]

The bubble, as bubbles do, bursts in 1991↗. And Japan experiences a serious and sustained recession↗. The social impact of the recession is cushioned by you know relatively high saving rates and an expansive social safety net, but Japan in the 1990s slows quite dramatically.

[1:03:33]

The luster wears off Japan's model. In this era of retrenchment Japan will begin very faltering to embrace processes of economic reform. Japan will consider whether it needs to open itself more vigorously to the world market. Perhaps the discipline of imports and competition will force Japanese companies to become more competitive in global markets.

[1:04:01]

But Japan in a sense is still sort of enmired in a trap. It's a very affluent society, a society with a good standard of living, but it's a society that is struggling to maintain its competitiveness in the global marketplace and still deliberating as to how open to external competition it should be.

[1:04:19]

Still, Japan experiences a remarkable catch up as you can see in this chart here. No, I'm sorry, this chart does not show Japan's economic catch up. What this chart shows is Japan's openness to the global economy. And this is the point on which I conclude.

[1:04:39]

At least the discussion of Japan, but there's more to come, you're not getting out ten minutes early. (laughter from the class). For all of Japan's success Japan remains amongst the G7 countries unusually closed. If you look at Japan's globalization which is represented here on the KOF Globalization Index -- it's a 1 to 100 scale with 1 being absolute closure and 2 being absolute openness.

[1:05:03]

Japan's economic openness lags far behind that of the other G7 economies. Japan is relatively closed. It becomes a little bit more open in the early decades of the 21st century. Whether Japan will continue to open itself to the market or not remains to be seen.

The Four Asian Tigers: Hong Kong, Singapore, South Korea, and Taiwan

[1:05:19]

In the...interim countries building upon the lessons of Japanese success have ended up doing even better than Japan itself. Japan's successes in the 1950s and 1960s are inspiring to the leaders of some other East Asian countries.

[1:05:38]

Leader of these other countries, four in particular, will implement growth strategies that self-consciously mimic the successes of the Japanese model. These four countries: South Korea, Taiwan, Hong Kong, and Singapore become known in due course as the East Asian Tigers↗ -- the Four Tigers.

[1:05:58]

Ezra Vogel↗ in 1991 I think calls them the Four Little Dragons. But their economic success is one of the most impressive phenomenon of the globalizing world economy in the 1980s and 1990s.

[1:06:12]

The World Bank in 1991 publishes a report called the East Asian Miracle which sort of gives a name to this stunning transformation in the economic prospects of industrializing capitalist East Asia during the last decades of the 21st century.

[1:06:28]

Consider the performance of the East Asian miracle economies, Hong Kong, Singapore, Taiwan in purple and South Korea in blue against global averages, which are illustrated on the white dotted line. Through to the 1970s the performance of these four economies maps global averages fairly closely.

[1:06:52]

From the 1970s onwards these countries takeoff. They takeoff very dramatically and they vault themselves into the first rank of developed economies. Singapore and Hong Kong are today among the most affluent societies on earth in terms of the well-being of average citizens. These are truly remarkable transformations.

[1:07:13]

How are they accomplished? In each of the four contexts the solutions that governments pursue are somewhat different. But there are similar themes which enable us to talk about these four states as sort of a common genus even if their particular experiences are different.

[1:07:32]

The stories of sort of the East Asian...economic transformations, called the East Asian miracle, are told in much more detail in your reading package in Dan Yergin↗, in Dan Yergin's book The Commanding Heights↗ so you can get a fairly nuanced sense of the narrative from those readings.

South Korea

[1:07:52]

But let's just try to summarize some of the key points. South Korea, of course, is devastated by the Korean War. The Korean War is absolutely catastrophic. South Korea is very poor. In the early 1950s average incomes in South Korea are less than those in some sub-Saharan African countries.

[1:08:11]

Under the dictator Park Chung-hee↗ South Korea pursues an ambitious state-led modernization strategy. The state encourages and supports large sort of national industries. The so-called chaebols↗ which are conglomerations, industrial, conglomerization, conglomerations, specializing in multiple types of production. Hyundai for example specializes in both engineering and the manufacture of automobiles, and a number of other things besides.

[1:08:42]

The Samsung group is similarly diversified. These industrial groups, the chaebols, receive extensive and arguably indulgent support from the South Korean state.

[1:08:54]

South Korea has become highly globalized, even as the state has provided extensive support to national industrial champions, South Korea has opened itself to the world economy. South Korea is today the world's fifth largest exporter. It's also the world's seventh largest importer.

[1:09:11]

So imports have increased at the same time as exports have increased. South Korea has become truly integrated to the global economy -- more integrated in many respects than Japan is.

Taiwan

[1:09:23]

Taiwan's story is somewhat similar. The Kuomintang↗, after the end of the Chinese Civil War↗, pursued an agenda of economic reform and economic opening. The Kuomintang, which was the Chinese Nationalist Party which at the end of the civil war, controlled only the island of Taiwan promoted social reform projects including mass education and land reform. These would help to establish a basis for subsequent affluence.

[1:09:52]

Taiwan has also pursued a strategy of aggressive enagement with the global economy. Taiwan has invited foreign direct investment which Japan has not done and has established free trade zones to encourage foreign corporations to set up shop on Taiwanese soil.

[1:10:09]

Taiwan's engagement with the global economy was initially mediated principally through the United States. Since the 1990s Taiwan has sort of refocused its export portfolio and investment portfolio increasingly on the Chinese mainland.

[1:10:25]

This is one of the paradoxes of Taiwan today. Taiwan is closely interdependent with the People's Republic of China yet retains a very fractious relationship with the PRC. The PRC considers Taiwan to be a breakaway province of China and will resist, presumably with force, any attempt by Taiwan to formally secede from the People's Republic, and to establish itself as a sovereign nation-state in the eyes of the international community.

[1:10:51]

But the status quo has been highly profitable for both Taiwan and of course for China.

Hong Kong and Singapore

[1:10:59]

The next two of the East Asian miracle economies, Hong Kong and Singapore, are somewhat different from the first two cases. Hong Kong and Singapore are both much smaller. They're both city-states.

Hong Kong

[1:11:10]

Hong Kong was a British colony that reverted in the late 1990s to Chinese rule. Today it's legally subject to the People's Republic but it retains substantial political and economic autonomy.

[1:11:24]

It's a highly globalized economy. Taiwan's population is about five million. Yet -- Tai -- sorry, Hong Kong's population is about 5 million, yet Hong Kong accounts for about 3.5% of total world exports. This is a country that is a highly productive trading state.

Singapore

[1:11:43]

Singapore's story is very similar. Singapore after 1965, when it is expelled from Malaysia, embraces globalization as a strategy for economic growth and development. Singapore specializes not only in services, at which it excels, but also in manufacturing.

Similarities and Contrasts Among the Four Asian Tigers

[1:12:02]

Indeed the particular mixture of growth strategies that the four East Asian miracle economies pursue is somewhat different. South Korea and Taiwan invest much more heavily in manufacturing than does Hong Kong. I mean Hong Kong derives its affluence primarily from the provision of services -- banking, shipping, law, and so on.

[1:12:25]

Singapore, similarly invests in services but also has a substantial manufacturing portfolio. Of course geography substantially dictates the opportunities for specialization on the basis of comparative advantage like this. Taiwan and South Korea are much bigger than Hong Kong. Hong Kong which is a city-state has less scope to specialize in manufacturing than do the others.

[1:12:49]

So these are different economies. They pursue somewhat different kinds of growth strategy but there is a key denominator and that is the relationship with the global economy. South Korea, Taiwan, Hong Kong, and Singapore all pursue export-led growth strategies while at the same same opening themselves to the global economy.

[1:13:09]

These countries all embrace foreign trade and foreign direct investment. They do very, very well. Their stories are some of the most you know sort of heartening stories about globalizing economic change in the last decades of the 21st -- of the 20th century.

Latin America

[1:13:26]

What about Latin America? Here the story is a little bit different. It will also have to be fairly succinct. Latin America through most of the 20th century cleaved tightly to ISI-led growth strategies -- to import substituting industrialization↗.

Bolivia

[1:13:42]

This begins to change in the 1980s. Bolivia, as you will read in the reading for this week, is one of the first countries to experience a shift towards the global economy.

[1:13:52]

It implements a program of so-called shock therapy↗ in the 1980s eliminating most controls and tariffs on the economy. Bolivia by consequence becomes a pioneering case of Latin American globalization. Yet when we look at Bolivia's economic performance from the 1980s through to the present it does not seem that globalization has done Bolivia nearly so much good as it has done for the East Asian Tiger economies. The reasons for this you will have to contemplate carefully.

Mexico

[1:14:19]

In other contexts; however, engagement with the global economy has produced better results for Latin American countries. Mexico, indicated here in light green, experienced a major economic crisis in the early 1980s. Mexico was a primary victim of the Latin American debt crisis.

[1:14:37]

The debt crisis produced a sharp decline in average GDP per capita in Mexico. Beset by failure, the Mexican government in the mid-1980s, adopted for a major strategic reorientation towards the global economy.

[1:14:52]

Beset by failure, by the failure of ISI-led growth strategies, the Mexican government decided self-consciously to open Mexico to the world, to solicit foreign direct investment, and to seek opportunities for exports elsewhere, specifically in the United States of America.

[1:15:09]

It's at this juncture, in the context of a Mexican initiated opening to the world, that Mexico initially proposes creating a free trade agreement with the United States, an agreement that will become NAFTA.

[1:15:20]

After this crisis Mexico has grown at a relatively stable rate. Mexico has recovered, more than recovered, from the crisis of the early 1980s even though its growth rates have been slower than elsewhere.

Brazil

[1:15:34]

Other Latin American countries too have begun to embrace globalization. We don't have opportunity to talk at great length about Brazil, but Brazil might be mentioned because it is part of the group of four major developing economies -- identified in 2008 by a Goldman Sachs economist as the BRICs↗ -- Brazil, Russia, India, and China.

[1:15:56]

Brazil's story is remarkable not so much for the rapidity of its growth, which has been fairly slow, even up to the present, by comparative global standards, at least if the standards be East Asian ones, but for the facility with which Brazilian leaders and economic planners have combined global engagement with an ongoing commitment to social progress.

[1:16:20]

Here the experience of Brazil's President Luiz Inácio Lula da Silva↗ is exemplary. Lula opened Brazil to the global economy, embraced globalization as a sort of growth strategy, while at the same time maintaining and expanding the Brazilian state's commitment to antipoverty programs.

[1:16:38]

One of Lula's major innovations was a program called Bolsa Família↗ which provides poor Brazilian families with cash transfers in exchange for sort of inoculating children against viruses and sending their children to schools.

[1:16:53]

So the Bolsa Família program is a good example of a kind of program that an ambitious globalizing state has pursued to remedy poverty and social inequality while at the same time engaging proactively with the global economy.

Other Nations including China

[1:17:10]

There are other cases we could consider. Brazil and most importantly of all -- sorry -- there are other cases we could consider -- India and most important of all China.

[1:17:20]

China is so important that I thought that we would save China for a lecture of its own. So on the syllabus we have a lecture marked out, I think next week, on the experience of the People's Republic after the late 1970s.

[1:17:36]

So we'll be coming to talk about China in due course. That will be sort of the most important of the BRIC economies...That will sort of give us an opportunity to complete the story of the developing world's globalizing transformation in the last you know decades of the 20th century and the first years of the 21st.