This book analyzes the globalization of the world economy and its real as well as its alleged implications for the international political economy. Since the end of the Cold War, globalization has been the most outstanding characteristic of international economic affairs and, to a considerable extent, of political affairs as well.
Yet, as I shall argue throughout this book, although globalization had become the defining feature of the international economy at the beginning of the twenty-first century, the extent and significance of economic globalization have been greatly exaggerated and misunderstood in both public and professional discussions; globalization in fact is not nearly as extensive nor as sweeping in its consequences (negative or positive) as many contemporary observers believe. This is still a world where national policies and domestic economies are the principal determinants of economic affairs.
Globalization and increasing economic interdependence among national economies are indeed very important; yet, as Vincent Cable of the Royal Institute of International Affairs has pointed out, the major economic achievement of the post-World War II era has been to restore the level of international economic integration that existed prior to World War I. 1 My 1987 book lacked an adequate domestic dimension. It analyzed the international economy as if domestic economic developments were of only minor importance.
In part, this neglect was due to my desire to help advance an autonomous, self-contained international political economy. The present book attempts to overcome this unfortunate weakness through a focus on what I call “national systems of political economy” and their significance for both domestic and international economic affairs. As national economies have become more and more integrated, the significance of the fundamental differences among national economies has greatly increased.
The 1987 book had several other serious limitations, including its treatment of the multinational corporation, economic development, and economic regionalism; although I discussed all three of these important subjects at that time, much more needs to be said, especially in light of subsequent developments. In the mid-1980s, a revolution in international economic affairs occurred as multinational firms (MNCs) and foreign direct investment (FDI) began to have a profound impact on almost every aspect of the world economy. In the 1960s and 1970s, increased international trade transformed international economic affairs.
Subsequently, in the 1980s, the overseas expansion of multinational firms integrated national economies more and more completely. Moreover, whereas the term “multinational” had been synonymous with the expansion of American firms, in the 1980s firms of other nationalities joined the ranks of multinationals. Most importantly, MNCs led the way in internationalization of both services and manufacturing. My discussion of economic development in the 1987 book has become totally outdated; scholarship at that time gave serious attention to quasi-Marxist dependency theory and the deep division between the less developed and the developed world.
Today, the debate over economic development centers on the appropriate role for state and market in the development process. In the conclusion to the 1987 book, I referred to economic regionalism as the wave of the future. Today, economic regionalism has reached flood tide and is having a significant impact on the international economy. Financial developments since the mid-1980s have greatly increased the integration of the world economy and, therefore, deserve attention.
This book also addresses the question of whether or not the increased importance of the market in the organization and functioning of the global economy means the end of the nation-state and of international political economy as that term is defined in this book. Those familiar with my past work will not be surprised to learn that I think not. The principal purpose of this book is to draw upon these real-world and recent theoretical developments in order to formulate a more comprehensive understanding of international political economy than in my earlier publications.
The eclectic 1987 book presented what I considered to be the three major perspectives on international political economy (IPE)–liberalism, Marxism, and nationalism; this book takes a consciously realist or state-centric approach to analysis of the international economy. Differing from many contemporary writings on the global economy, I believe that the nation-state remains the dominant actor in both domestic and international economic affairs. Believing that both economic and political analyses are necessary for an understanding of the workings of the international economy, this book integrates these distinct modes of scholarly inquiry.