Politics and Markets

Politics and

Markets by C. Kegley

an executive summary

report

Presented by:

Mr. Maian J. Cozo, MSERM

Outline of presentation Overview of Politics and Markets

Three Ideologies of political economy (Gilpin, R.)

Whose “model” Failed? Implications of the Asian Economic Crisis (Lim, L.)

The World is Ten Years Old: the New era of Globalizations (Friedman, L.)

Workers of the World, now what? (Newland, K.)

Competitiveness: A Dangerous Obsession (Krugman, P.)

Dollarization: more straight Jacket than salvation (Sach & Larrain)

Global rules for Global Finance (Kapstein, E.)

The Brave new wired world (Burton, D.)

Overview of Politics and Markets

Global agenda

Monetary instability

to deflationary

pressures

Debt relief to trade

protectionism

Domestic agenda

Economic

stagnation

Unemployment

Budget deficits

Productivity

imperatives


Global agenda

Monetary instability

to deflationary

pressures

Debt relief to trade

protectionism

Global definition

Mutual sensitivity

Mutual vulnerability

Thus, Politics (exercise of power and influence) and economics

(distribution of material wealth) are interconnected.

Political economy

more than 3

centuries

Dominance and

Dependence

Controversies on:

Distribution of

wealth

Process and

Institution that

governs it.

affect EVERYONE!

Overview of Politics and

Markets

Arguments:

Geo-Politics

Geo-economics

Motive force

Struggle for

Supremacy in the

global political

system


Markets

Predictions:


Markets

Competition for market

share, political-military

allies can animate

relations among nations

Commercial

advantage, military

might would determine

who exercise influence

over whom; would feel

threatened and secure.


Kanter (1999):

“we are witnessing

the dawn of

multiple

overlapping

sovereignties”

hence, “ the core

dilemma of the of

global economy is

interdependence

without political

influence”


Markets

Three Ideologies of

political economy

(Gilpin, R.)

For centuries

humanity are

divided by these

ideologies (

Liberalism,

nationalism, and

marxism.

conflict among

ideologies

Their role and

Significance in

the global

market.

Three Ideologies of

political economy

(Gilpin, R.)

Ideology rather than

theory (entails total

belief on system

concerning human

being and society)

These ideologies will

provide scientific

description (how the

world does work

and how world

should work)

Comparison of perspective

Robert Keohane on Liberalism:

“Fragmentation of power between

competing countries leads to

fragmentation of the international

economic regime; concentration of

power leads to stability. Hegemonic

powers have the capabilities to

maintain international regimes that

they favor” (Keohane 1991: 78).

Robert Gilpin

‘As the mercantilist theorist of

American economic

development,, he wrote: "not only

the wealth but the independence

and security of a country appear

to be materially connected to the

prosperity of manufactures"

(Gilpin, 1987: 33)’

Stephen Gill

“the power of capital is both direct (e.g. capital’s

superior bargaining power over labour, or relative to

states which bid for investment against one another)

and indirect (e.g. discipline exercised on firms, their

workers, or on governments in the financial, e.g. stock

and bond markets). Thus the state is also subjected to

market disciplines. Indeed, public policy has been

redefined in such a way that governments seek to

prove their credibility, and of the consistency of their

policies according to the degree to which they inspire

the confidence of investors. In this way, new political

and constitutional initiatives in the sphere of money

and finance are linked to the imposition of macro-

economic and microeconomic discipline in ways that

are intended to underpin the power of capital in the

state and civil society” (Gill, 2000: 2).

“the Asian miracle” 30

years of continuous

rapid economic

growth and industrial

development

1997-1998 collapse of

Southeast Asian

economy (Financial

crisis and recession)

This “Asian economic

contagion” further

spread to neighboring

countries.

Whose “model” Failed?

Implications of the Asian

Economic Crisis (Lim, L.)

Interpretations of the Asian Financial

crisis Liberalism Nationalism Marxism

Causes Crony capitalism,

lack of transparency

Over-rapid

liberalization,

reduced state

capacity to

regulate

Predatory

liberalism,

power of

financial interest,

systematic flaws

Key

Issue(s)

Corruption, lack of

liberal economic

practices

Clash of Anglo-

American vs.

Asian models

Human suffering

caused by

financial

collapse

Lessons Increase

transparency and

good practice in

developing countries

Limit financial

speculation

through state

policies

REFORM

international

financial system’

defend national

financial system

“The three

ideologies as

discussed by

Galipin of political

economy in some

sense failed.

Whose “model” Failed?

Implications of the Asian

Economic Crisis (Lim, L.)

Early 20th century was

also period of

Globalization

2 dimensions of new era

of globalizations:

Sheer number of

people and countries

able to partake and

affected by this

process

Falling of

telecommunication

cost (rise of new

technology)

The World is Ten

years Old: The New

Era of Globalization

by friedman

Free market capitalism (Driving force of globalization)

Spread of free market capitalism to virtually every country in the globe.

Globalization is Americanization (new culture)

World integration (www) through new technologies.

The World is Ten

years Old: The New


by friedman

In contrast: Berlin wall (division not integration) symbol of cold war era.

Competition bet. US vs. USSR (Driving force)

Missile throw (defining measurement)

Nuclear annihilation (defining anxiety)

The World is Ten

years Old: The New


by friedman

Noted: “Globalization is producing a powerful backlash from those brutalized or left behind by this new system” (world workers)

The World is Ten

years Old: The New


by friedman

“while international

capital and

business feast on

free market…labor

(worker) is not

where to be found.

Globalization

remodels the

structural,

institutional and

political system

which threatens the

labor.

Workers of the World, now what? By Karthleen Newland

In Globalization:

Labor Unions is powerless.

Increases global workforce (influx of female workers)

Low wage worker are more vulnerable

ILO became anachronism (closely tied with trade unions that are having problem with new global economy)


In Globalization:

Worker victims of a “race to the bottom” (wages and working conditions)

promote competitiveness that determines the worker’s plight.


Concern with

“Competitiveness”

brought by

GLOBALIZATION.

He argued that

growth of living

standards is equals

the growth rate of

domestic

productivity. NOT

productivity relative

to competitors.

Competitiveness: A

Dangerous

Obsession

(Krugman, P.)

He added that,

rivalry for status and

power is inevitable.

Countries that will

grow faster will take

the lead. (China)

Competitiveness

should be applied

bet. Countries, not

nation economies.

Competitiveness: A

Dangerous

Obsession

(Krugman, P.)

Dollarization policies

(a proposal to

“dollarized” the

currency of the

developing

countries)

Proposal to

abandon old

currencies and

adopt U.S dollar for

all transactions.

Dollarization: more

straight Jacket than

salvation (Sach &

Larrain)

They argue that

Dollarization policy-

extreme solution to

market stability.

Alt approach is the

flexible exchange

rate bet. national

currencies and

dollar (better than

fixed rate)

Dollarization: more


salvation (Sach &

Larrain)

Why not fixed rate?

pegged exchange

rate system

Imposed discipline

(regulate

production of

money)

they reduce

business

transactions

(exchanging

currencies is

meaningless cause

of stable rates)

Dollarization: more


salvation (Sach &

Larrain)

Why flexible rate?

It regulates the

value (depreciation

or appreciation can

act as shock

absorber for

economy).

what is good for U.S

does not mean

good for other

countries.

With that they

conclude to reject

“Dollarization

policy”

Dollarization: more


salvation (Sach &

Larrain)

Kapstein argue that

there is a need for

global economic

reform (national

and international)

He calls for

abolition of IMF

(Breton Woods

Conference, 1944)

Due to

controversies

(Major actor in

assisting state with

economic

struggles); moral

hazards.

Global rules for

Global Finance

(Kapstein, E.)

Integration of

former communist

countries into free

market capitalism.

China (state-owned

enterprise) and

Russia (Mafia

infested state) bids

for WTO (free trade

system)

Main problem is

how to integrate

China and Russia

into global market

based economy?

Global rules for

Global Finance

(Kapstein, E.)

Bruton,

addressed the

problem of

integration of

China and Russia

by “Networks”

(the epicenter of

the global

economy)

The world is

interconnected

with computers.

The Brave new

wired world (Burton,

D.)

Network economy

have vital

implication to states

pursuit of security,

wealth and

preservation of

culture

The Brave new

wired world (Burton,

D.)

Daghang Salamat..

Documents

Politics and Markets