Economic Tectonics: The Changing Map of Globalization

The Geography of Globalization

In Global Shift, Peter Dicken presents a geographer's view of the changing global economy. The lowering of trade and investment barriers between nations and the advances in transportation, communication, and information technologies have facilitated not only the explosion of world trade and the interpenetration of markets, but also the development of transnational production networks and the global division of labor organized through the aegis of transnational corporations (TNCs). These transformations have been extremely uneven geographically, leading to increasing prosperity in the "trilateral" world of East Asia, North America, and Western Europe, while leaving the Eurasian heartland, the Middle East, Africa, and Latin America in poverty. At the same time that economic activities have dispersed around the globe and the world economy is becoming increasingly integrated, large areas of the world are only peripheral players in the market and are making very slow progress toward integration. Production networks have simultaneously become more geographically diverse yet concentrated. The dispersion process is fuelled by the search for low-skill, low-wage labor in labor-intensive production activities, while capital-intensive activities, especially those requiring a highly educated workforce, cluster in a few developed countries. Thus trade and investment flows have developed along specific routes between these geo-economic agglomerations, and many areas of the globe remain "off the beaten path."

Dicken describes the geographic structure of the world economy prior to the Second World War as characterized primarily as the developed, industrialized core and the underdeveloped periphery. This core-periphery structure was bifurcated during the Cold War into the capitalist and communist worlds. Each had their own core-periphery relationships, but it was more common for less developed countries (LDCs) to have relationships with both the capitalist and communist cores than for the two cores to trade with each other. Newly industrialized countries (NIEs) began to emerge in the periphery in the latter stages of the Cold War, and a number of these have seen phenomenal growth since the end of the Cold War. The "tiger economies" of East Asia--South Korea, Taiwan, Hong Kong, and Singapore--are the most notable examples. These and other rising NIEs comprise an emerging semi-periphery, with some edging toward integration into the core itself. While the contours of the economic core have shifted to some extent during the 20th century, by and large the core remains where it was a century ago. Few if any countries that were core then could be considered peripheral now. However, the relative economic strength of the various core states, as well as trading relationships between them, has changed over time. Also, the definition of core economic activity changes with advancing technology, with high-tech information and communication research and development (R&D) and services representing higher value-added, tending to displace more traditional, lower-tech manufacturing activities to the semi-periphery.

Dicken points out the diversity in the economic timescape as well as in the landscape, that economic development has been marked by fits and starts, booms and busts, at the global system level and also within specific regions or nations. Thus, despite the high level of economic integration, especially among developed countries, it is possible for some to be in recession while others are experiencing growth. In general, the global economy performed quite well, experiencing steady growth until the "Nixon shocks" and the collapse of the Bretton Woods system in the early 1970s. Since then, overall performance has been much more volatile.

Economic Actors on the World Stage

Dicken believes that rumors of the death of the nation-state are highly exaggerated. It was the economic policies of nation-states toward the lowering of trade and investment barriers that has provided the opportunities and incentives for global economic integration. The state continues to play important roles as a container for distinctive cultural structures and practices, and as a regulator of economic activity (albeit in a diminished capacity in the era of deregulation). Further, since economic data is reported at the state level, nations continue to view themselves as competing with each other, thus society to some extent looks to the state "to promote the general welfare" through a top-level management of the economy in terms of trade, foreign direct investment, and industrial policies, as well as fiscal and monetary policies. Dicken notes that while states may compete to some extent, they also cooperate to achieve positive sum results, as evidenced by numerous regional economic institutions such as the European Union, the North American Free Trade Area, and Mercosur. Examples of cooperation at the global level are the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO).

The diversity of natural endowments, political systems, cultural institutions, and level of economic development have led states to develop diverse economic strategies. While the United States has been the principal promoter of pure capitalism and free markets, Europe has traditionally striven for "capitalism with a social conscience," with the state playing a more active role to mitigate the adverse outcomes of economic competition. In the case of France, the state has had a huge impact on the economy, owning major assets in key industrial and technology sectors and actively promoting a national industrial policy to direct the course of R&D. The UK adhered fairly closely to the European model until the rise of "Thatcherism" in the 1980s, which, paralleling "Reaganomics" in the United States, began dismantling the welfare state, deregulating key economic sectors, and privatizing government assets. Japan shares some similarity with France in that the state has been at the heart of economic strategy, although the strategies, capabilities, cultures of the two countries are quite different and have led to different outcomes. Japan is viewed as the archetypal developmental state, building the nation into an economic powerhouse by vigorously carrying out industrial policy behind strong protectionist barriers. To a large degree, the "tiger economies" and some other NIEs have followed Japan's development model as mediated through their distinctive political systems and cultures.

The other type of actor on the global economic stage is the TNC. As with states, TNCs vary in power, nature, and organization, and therefore the strategies of TNCs are correspondingly diverse. Some pursue an "international strategy" in that they market their products and services in countries where they have a competitive edge over indigenous firms. Others have adopted a "multi-domestic" strategy, tailoring their products and services to the needs and tastes of individual countries. The "global strategy" is typified by the development of transnational product chains to reduce costs, producing different components in difference countries, then may integrate the final product in yet other countries. Finally, the "transnational strategy" is an amalgam of the multi-domestic and global strategies, taking advantage of the specific skill-base of each country while being responsive to local needs and tastes. Organizational structure among TNCs vary as well, including those based on product and those based on geography, as well as combinations of both.

As one might predict, the interaction between states and TNCs also varies considerably. Some states are highly protectionist, limiting the access of foreign firms to domestic markets and/or discriminating in favor of domestic producers. State policies can vary from one economic sector to another. For instance, the United States is particularly open in its automobile market, allowing unlimited access by foreign producers and treating foreign and domestic companies equally; however, barriers to foreign steel have been raised in recent years, and barriers to certain foreign agricultural products remain high.

What seems to be missing, however, is an analysis of how TNCs seek to influence state policy. This can range from lobbying one's own government for protection from foreign competition, to lobbying or bribing foreign government officials for access to their countries' markets, to instigating coups and armed interventions as in the United Fruit Company's involvement in the 1954 Guatemala coup and ITT's role in toppling Chile's Salvador Allende in 1973.

Environmental and product safety regulations can also be a bone of contention with companies (either directly or through their national governments) complaining that high standards constitute unreasonable barriers to trade. For example, Methanex, the Canadian firm that manufactures the gasoline additive MTBE, is suing the state of California over its ban of the product, a known carcinogen that does not chemically break down readily and has seeped into the state's water table.

TNC Case Studies

In each of his case studies, Dicken presents more detailed analyses of state and corporate strategies.

Dicken's description of the automobile industry illuminates the diversity in production models. The traditional model was one of mass production based on standardized, costly, and inflexible platforms (the Fordist model). The Japanese auto industry innovated the lean production model, characterized by lower production costs, product diversification, and increasing worker responsibility over a wider set of tasks, thereby improving job satisfaction and increasing quality. Most auto production now reflects a combination of the two models as dictated by product strategy. Ford was an early implementer of the "world car strategy," drawing on a global production network to effect an efficient division of labor and to deliver standardized, low-cost vehicles worldwide. Other companies, such as BMW, have opted for the "niche market strategy," producing in low volume to small markets at premium prices.

State policy towards the high-tech sector has also varied from one nation to another. Some have fostered production by domestic companies and excluded foreign producers, others have sought to attract foreign firms to produce locally, and still others have bought semiconductor devices on the open market to focus on developing end uses. Implementation strategies for such policies have been diverse as well. US policy was fairly indirect at first, stimulating R&D primarily via aerospace and defense contracts; however, the government became interested in a more direct approach as US dominance of the industry faded in the face of Japanese competition, eventually taking a lead role in the formation of the semiconductor R&D consortium Sematech. Other governments, such as Japan, South Korea, Taiwan, Singapore, and Malaysia, have taken much more active roles in promoting high-tech development.

In turning to the world of international financial services, Dicken elaborates on the strategies of companies in the face of the global competition brought about by deregulation, the relaxation of capital controls (led by US and European governments), the replacement of the fixed with a floating system of currency exchange rates, and the rise of transnational trade and manufacturing. Financial institutions have responded by gobbling each other in mergers and acquisitions in order to command greater assets and diversify both in terms of geography and lines of business, transnationalized their operations to make them less susceptible to localized economic downturns or financial crises, and diversified by creating and marketing new financial products and services. Banking, securities transaction, accounting, investment consulting, and insurance… many or all can now be had in one-stop shops, and new financial instruments such as derivatives have been invented. Additionally, the transnationalization process has allowed financial institutions to geographically separate "front office" customer service and "back office" clerical functions; the latter can be relocated to low-wage countries. Paradoxically, despite these transnationalization processes, financial institutions remain headquartered in a few cities such as London, New York, and Tokyo, primarily due to the cachet of these cities as financial capitals of the world.

Globalization's Losers

Globalization's winners are obvious: the bourgeoisie of the industrialized states that directed the neoliberal policies of those states to facilitate the globalization process. They invent the game and write its rules, they shape the playing field, they buy the teams and equipment, and they win. No surprise there.

Dicken catalogues the growing inequalities to which globalization has given rise across an astounding range of measurements: between and within regions and states, and even within cities. The widening gulf between the haves and the have-nots, between the employed and the unemployed, is sharply defined in terms of ethnicity, gender, and age. He notes the broad interregional shifts, such as from America's old industrial "rust belt" to the "sun belt," and the relative decline of metropolises as centers of manufacturing as lighter, decentralized, information-based enterprises have dispersed to the smaller cities and suburbs. Blue collar jobs are being exported to the NIEs, and those who cannot retrain themselves for white collar jobs find themselves among the losers.

He takes note of the accelerating environmental destruction fueled by globalization, and how this is particularly impacting the developing world. Manufacturing is being attracted to the global south not only by low wages and labor standards, but by low environmental standards that serve to externalize production costs. Export-led growth strategies dependent on narrow economic bases are promoting intensive and unsustainable agricultural practices, the clear-cutting of forests both to export lumber and to clear land for agricultural production, and strip-mining, all of these on an ever-increasing scale in a desperate effort to compensate for falling prices for primary products. The global south is exporting its environmental capital northward, capital that cannot be reclaimed once it is consumed, and that cannot easily be regenerated if at all; when it is gone, growth will cease and these fragile, undiversified economies will crash. The global south loses, and the planet itself loses.

Globalization Sans Governance

Dicken discusses how nation-states, having let the genie out of the bottle through policies of floating exchange rates, financial services deregulation, and capital controls relaxation, coupled with the development of information and communication technologies, now are in a rather uncomfortable position in living with the genie. The creation and control of money was among the most jealously guarded powers of the state, defining an essential element of its legitimacy and sovereignty. However, financial transactions at the speed of light have effectively increased the volume of money in circulation. Moreover, this fast and furious whirlwind of money is worldwide, with the result that significant fractions of a nation's currency are held by foreigners outside the nation's borders and beyond the government's regulatory reach. Worse still is the rise of what Susan Strange calls "casino capitalism," or what Thomas Friedman calls the "electronic herd:" millions of speculators around the world sitting in front of computer screens and moving vast sums of money from place to place, speculating on the fluctuation of currency values. These tidal waves of money sloshing around the planet dwarf the reserves of national central banks, severely limiting the state's ability to protect the value of its currency should speculators get spooked and stampede out of the country.

The same genie has led to the rise of offshore financial centers in countries with little or no regulation or taxation. Such offshore banks have been havens for hiding and laundering illegally acquired funds such as drug money, as well as funds used to finance criminal and terrorist activities. The Bank of International Settlements only informally supervises transnational financial institutions; however, it may be trending toward a regime with more teeth.

The nation-state, while still a highly significant actor, faces increasingly intractable problems in regulating the ever more flow-intensive, globalized economy. Economic regulatory institutions such as the World Bank, the IMF, and the WTO are chartered to address the specific issues pertaining to development, monetary, and trade policies, to the exclusion of "externalities" such as labor conditions and environmental damage. Even within the exclusively economic realm, these institutions focus on their specific agendas rather than joining forces to craft a coordinated economic global strategy. Also, they treat the distinct but interconnected problems of developed and developing countries as separate issues rather than seeing the big picture. This is understandable, since the power distribution in these international economic institutions overwhelmingly favors the developed global north ("us") over the developing global south ("them").

Efforts to regulate the behavior of TNCs have been anemic, with few exceptions such as blocking the Multilateral Agreement in Investment. Instead, international agreements such as the numerous rounds of the General Agreement on Tariffs and Trade (GATT) have served to make the world safe for the TNCs. In reining in the TNCs, there have been no significant victories, only some stubborn delaying actions. What little progress that has been made has been through the efforts of nongovernmental organizations (NGOs) to promulgate labor and environmental norms, resulting in some voluntary coalitions of TNCs adopting those norms. On balance, these few examples of self-restraint hardly seem adequate in the face of the permissive IMF-WTO regime, the former holding the power of the purse, the latter wielding the force of law.

Dicken points out the natural tension between the desire for economic development, the desire for better working conditions, and the desire for a better environment. These are all essential components of "the good life;" we all want these things, but each individual, each socioeconomic class, and each nation has different priorities. The hodgepodge of intergovernmental organizations (IGOs) does not appear to be entirely up to the global governance challenges of tackling comprehensive and integrated solutions to international trade and finance, and social and environmental justice. All of the "externalities" must be internalized and brought to book. All of the ledgers--economic, social, environmental, et cetera--must be brought to the same table and mutually balanced. Globalized humanity is more than about the globally interconnected "economic man," it is also about our global social connections and responsibilities, and about our competent stewardship of the globe that supports our very existence. Dicken suggests that the question of where we should be going, where we want to be, is a matter of values. Wisdom would suggest a balance of values.

Conclusion

In his exhaustive examination of the geography of globalization, Dicken concludes that space and place still matters. His presentation of the evidence is monumental and persuasive. His thorough description of the geographic concentration of certain economic activities and the growing disparity of incomes with and between regions, countries, economic classes, and gender, ethnic, and age groups, effectively debunks the neoliberal claim that "a rising tide lifts all boats," and lends great weight to the arguments of cost of production theorists, Marxists, and dependency theorists. Yet Dicken only makes passing references to neoliberal market capitalism and classical theories of international trade based on comparative advantage, without a thorough examination of this ideological foundation for corporatist globalization. He makes no mention of the alternative economic perspectives: their explanation of how we have gotten here, where we might be going, and remedial prescriptions. Instead, he focuses on the geographic distribution of economic activity.

Although Dicken states that globalization is a syndrome of processes rather than a single, unified phenomenon, he deals almost exclusively with economic processes and tangentially on how technological advances have facilitated them. His treatment of globalization falls far short of being multi-disciplinary as he claims. It is really only in the final chapter that he turns from matters of economic geography to some of the issues studied by the other social sciences, and by beginning this effort at the end, he dooms himself to too little too late in this regard.

In treating globalization as primarily an economic process, he pays little attention to the political processes that spawned globalization and continue to shape it. He mentions the challenges that states face in dealing with the forces and consequences of economic globalization, but does not mention the penetration of government by the private sector through revolving doors, that it is the corporatists in their sometime capacities as government ministers who have constructed the juggernaut and set it in motion down their preferred path.

Nor does Dicken adequately address the cultural dynamics of a process that is on the one hand tending to homogenize world culture, while simultaneously offering us as individuals a culturally richer experience by exposing us to cultures around the world. Also to be considered is the cultural backlash against these two trends. Dicken mentions French and Canadian efforts to defend their cultures from the American invasion, but these are only two examples, and his treatment is superficial.

Although he mentions the Battle of Seattle and some of the more prominent NGOs and pressure groups that participated in it, he fails to point out that it was preceded by others, and barely mentions the continuation of these protests around the world. Also, he fails to mention that the coordinated action of such geographically and ideologically disparate groups is itself an example of anti-neoliberal globalization and a countervailing force to transnational corporatism. This broadening and deepening network of NGOs constitutes the emergence of global civil society. Globalization is facilitating the coalescence of global social and political norms. These social forces in turn may have economic impacts that go well beyond pressuring Starbucks to buy "fair trade beans."

Withal, Dicken presents an exhaustive study of the geography of economic globalization. As such it is an impressive work and is unquestionably valuable as a factual reference, but it is not a multidisciplinary investigation of the full human ecology of globalization.