A rchive Date
[ 15-02-2004 ]
Category
[ International Relations ]
sub-Categoy
[ Economics ]
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[www.gmupolicy.net/oxford2004/The%2520Challenge%2520of%2520Global%2520Capitalism.doc+The+United+States+and+the+regionalisation+of+the+world+economy
INTERNATIONAL COMMERCE & POLICY
GLOBALIZATION & ECONOMIC UNCERTAINTY: THE ROAD AHEAD
Professor Desmond Dinan
The Challenge of Global Capitalism
Book Review
By Robin Otto
Oxford Study Abroad / Summer 2002
EXECUTIVE SUMMARY
For Robert Gilpin, The Challenge of Global Capitalism will be the ability of a dominant power to assume leadership and rebuild the eroding political foundation between the major powers in order to rescue our fragile global economy. Gilpin acknowledges a number of global trends, which could adversely affect the future of our global economy. But, for Gilpin it is economic regionalization, financial instability, and trade protectionism, which in the absence of a strong political foundation are the real threat to the Second Great Age of Capitalism.
THE CHALLENGE OF GLOBAL CAPITALISM
Robert Gilpin, the Eisenhower Professor of Public and International Affairs Emeritus at Princeton University provides the reader with a comprehensive look at our world economy in the 21st century with The Challenge of Global Capitalism. Gilpin's background as the father of the theory of hegemonic stability, believes that a successful global economy requires leadership by a dominant power. In his book he advances this theory by arguing it is politics and not technology which will determine the future of global capitalism. Using his theory, Gilpin contends that leadership by a dominant power(s) will be required to rebuild a solid political foundation among the major powers in order to rescue our fragile global economy.
The greatest strength of this book lies in Gilpin's ability to provide the reader with a well organized explanation of the key role that trade liberalization, the international monetary system, international finance, multinational corporations, regionalization, and American trade policy play in economic globalization. He begins by providing us with the historical evolution of our global economy dated back to the end of the Cold War and then addresses the current state of global capitalism and the requirements for a successful global economy.
Gilpin is clearly in favour of global capitalism, but manages to provide us with a fairly well balanced perspective on the strengths and weaknesses inherent in the United States capitalist system. Gilpin does demonstrate a degree of bias in his characterization of other capitalist systems by failing to acknowledge the trade-offs that exist for benefits between competition and cooperation in other capitalist systems.
The impact of global driers is a key ingredient in Gilpin's prediction for the future of global capitalism. For example, demographic trends in the case of rising birth rates and aging populations will have a significant impact on our global economy. National and international governance as global drivers will need to adapt their structures to respond to an increasingly dynamic global environment. Gilpin recognizes that the lack of rules, uniformity, and authority needed to govern trade, investment and currency systems could weaken efforts to manage global capitalism.
The structure of the GATT/WTO, which is based on the old economy model, provides an excellent example of the need for reforms. While it appears the WTO has established an effective dispute resolution system, mechanisms have yet been instituted to tope with the new eonomy model being utilized by the international business community today. These circumstances have created the need for significant reform and strengthening of the WTO before it can effectively govern issues of competition, investment, intellectual property rights, along with trade and the environment. Destabilizing financial flows are another source of concern and will require some sort of effective international governance in order to avoid another global financial crisis. What Gilpin misses in his analysis of global drivers is the potential of non-state actors as well as government to shape the future of the global economy. Additionally, he fails to acknowledge the possibility of a more socially responsible multinational corporation at a time when consumers are demanding more accountability.
The main support for Gilpin's thesis is provided in his detailed historical account of the circumstances which allowed the United States to provide the leadership needed to support an open international economic system following World War II. He concludes that since the end of the Cold War and in the absence of a Soviet threat the political bonds between the major powers have weakened with each power giving priority to their own national interests. Evidence of the growing political disconnects between the United States and Europe politically can be seen in their current relations on trade issues. The European Union's Common Agricultural Policy (CAP) has been and continues to be a source of friction between them and the United States. Further evidence can be found in a number of WTO disputes between the United States and the European Union. Differences in the goals pursued by each in the Doha Agenda also provide an excellent example of the increasing polarization between two of the world's major powers.
From Gilpin's perspective it is this erosion of the political bonds between the major powers that has contributed to what he calls our fragile global economy. Gilpin believes strategic trade policies, powerful multinational corporations, destabilizing financial flows, economic blocs, opposition from labour groups, environmentalists, and the general public are all factors which threaten the future of global capitalism. In the final analysis, Gilpin calls for the United States to step forward and provide the leadership needed to gain cooperation in the task of rebuilding a strong political foundation for a successful global economy.
Gilpin's preoccupation with regionalisation is evident in his extensive coverage of North American, European, and Japanese regionalism. In the case of European regionalisation, the European Union most closely resembles an integrated network model where responsibility is widely diffused among member states, but are all linked together as a network of resources and capabilities. This strategy by design allows the European Union to create a value chain capable of competing in a global economy.
Gilpin concludes his assessment of European integration by minimizing the European Union's current achievements and in the end finds their future uncertain. While I agree with Gilpin that the future of the EU is uncertain, I disagree that Europe continues to be primarily a geographic expression. While the scope of the EU role is currently limited to that of a trade actor, their legitimacy as a significant player is recognized in their negotiations with the United States, the WTO, Japan, and with multinational corporations as a formidable force on trade issues. Furthermore, I agree with John Vogel's assessment that the European Monetary Union will have the effect of elevating economic integration of the European Union, which in turn will allow them to be seen as a true international economic actor.
In the end Gilpin focuses on what he sees as an increase in regionalisation and trade protectionist measures as the real treat to the success of the Second Great Age of Capitalism. I agree with Gilpin that the economic blocs created during the course of regionalisation present challenges to global capitalism. However, I do not see regionalisation as a threat, but simply an economic strategy employed by each member of the Triad in order to be competitive in an international economy.
Regionalisation may simply be the vehicle needed to provide an opportunity for the world economy to adapt to a rapidly changing environment. Unlike Gilpin, I prefer to contemplate the possibility of a third way and view regionalisation as the stepping stone needed to transition to global capitalism.
Finally, I agree with Gilpin's assertion that globalization has not replaced the state, national differences, and politics. The fact is clearly reflected in the difficulties associated with attempts to regionalize. However, in my view increased integration may replace the state, as we know it today with a more collaborative, multi-dimensional institution in order to adapt to the differences encountered in the process of globalization.
Overall, Gilpin has provided us with an interesting analysis of what he views as the challenges of global capitalism. He also provides us with his opinion as to what should be done to meet the challenges posed by globalization. However, in my view he falls short by failing to explain how to accomplish the goals he has set forth in his book. Finally, I believe that Gilpin did not give adequate consideration to the role that the European Union, multinational corporations, non-governmental organizations, and other international institutions play in determining policy along side what he has defined as the nation-state in the 21st century. Gilpin's emphasis on the role of leadership and politics is well taken. However, the role that other global drivers and trends will play should not be underestimated. Perhaps a larger worldview where the multinational corporations are seen as a vehicle capable to moderating the strength of economic blocs will be the key to linking the world economy?]
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