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date: 25 February 2018

Globalization and the Global Political Economy

Summary and Keywords

Like many other social scientific terms, the exact meaning of globalization has always been unclear. It does not have a single point of origin, but emerged in the mid to late 1980s in several disciplines. In the general sense, globalization is the increasing interaction of people through the growth of the international flow of money, ideas, and culture. It first manifested in media and cultural studies as early as the 1970s—the spread of TV, telephones, information and communication technology (ICT), and other media provided an enduring image of the technological “shrinking” of space, a defining trait of globalization. Advances in the means of transport (such as the steam locomotive, steamship, jet engine, and container ships) and in telecommunications infrastructure (including the rise of the telegraph and its modern offspring, the Internet and mobile phones) have been major factors in globalization, generating further interdependence of economic and cultural activities. In connection to the study of globalization, global political economy (GPE), or international political economy (IPE), is an academic discipline that analyzes economics and international relations. As an interdisciplinary field, it draws on a few distinct academic schools, most notably economics, political economy, political science, sociology, history, and cultural studies. Other topics that command substantial attention among IPE scholars are international trade, international finance, financial crises, macroeconomics, development economics, and the balance of power between and among states and institutions.

Keywords: globalization, global political economy, international political economy, media, cultural studies, international relations, economics, international finance


Although the concept of globalization has become pervasive in both media and academic accounts of the world economy, its precise meaning has always presented us with a problem. Like many social scientific terms, globalization does not have a single point of origin, but emerged in the mid to late 1980s in several disciplines. Its first manifestations came in media and cultural studies as early as the 1970s – the notion of the “global village” (attributed to Marshall McLuhan) created by the spread of TV, telephones, information and communication technology (ICT), and other media providing a compelling and enduring image of the technological “shrinking” of space characteristic of many definitions of globalization. Such ideas were further refined to present globalization as a process – as the coming together of the world as one place (Robertson and Lechner 1985; Robertson 1992). Such early sociological/anthropological accounts coincided with increasing interest in the business studies and economics literatures as they picked up on both the implications of and opportunities created by globalization as a strategic move by corporations (Ohmae 1990).

The increasing size and complexity of the world’s largest business agglomerations, the increasing dominance of trade over manufacturing, the rapidly changing geographies and demographies of production and consumption, and the spectacular growth of the financial and other service industries prompted a flurry of interest from a number of disciplinary directions as to what these very large-scale changes might mean (Dicken 1995; Castells 1996; O’Brien 1992). The significance of the internet as an evolving space of political economy, the rise, fall, and rise again of the “dot.coms,” and the growing significance of environmental concerns (pollution, global warming, sustainability, etc.) have all added to the significance of globalization as a key contemporary concept (Beck 1992; Giddens 2003). What has not emerged from all this interest is any consensus as to what globalization precisely is or means.

Political Science, International Relations (IR), and International Political Economy (IPE) were, surprisingly perhaps, a little behind the curve in realizing the potential of seeing the world through the lens of globalization. Although scholars had been writing about “world systems” (Braudel 1979; Wallerstein 1974; Arrighi 1994), the world trade system, institutions of global governance, and aspects of the international/world economy (Strange 1988; Cox 1987) for many years, the concept of globalization only began to filter into the literature explicitly in the late 1980s to early 1990s (Scholte 1993). This happened partly in response to the other literatures cited above, but perhaps more importantly because of substantive changes in the world’s political economy itself. The collapse of the Soviet Union and the Warsaw Pact from 1989 to 1991 and beyond utterly changed the central focus of international relations, replacing a familiar bipolar constellation of power driven by political ideology (however much this was, in practice, a caricature of East–West politics) with a much more volatile, fragmented political world motivated by greed, fear, debt, religion, terror, and so on in addition to a plethora of political ideologies that did not fit the capitalist/communist divides of the past. Globalization as the “world as one place” conceived of by Robertson in the early 1980s had become, particularly after the brutal shock of 9/11 and the subsequent “war on terror,” a globalization characterized by new struggles for power, resources, and attention by new groups and societies in new spaces, new alliances, and using new means (cf. Robertson and Lechner 1985; Gowan 1999; McMichael 1996; Scott 1998; Cavarero 2008).

Throughout its period of rapid assimilation, the meaning of globalization has not remained fixed but has evolved and/or been adapted to encompass areas of social and political life “discovered” to be global in orientation (e.g., risk, AIDs, SARs, global warming, etc). A term originally used to describe the behaviour of institutions and economic actors rapidly became a “project” (McMichael 1997), a strategy, and (according to taste) a marketing tool or a term of abuse. The World Trade Organization, for example, actively promotes itself as an agent of globalization – understood as a positive trend in world trade – while its many detractors actively oppose it for precisely the same reason – though with a rather different reading of the “virtues” of globalization (Conca 2000; Peet 2003).

Despite the fluidity of its meaning, globalization in all its forms exhibits some common features. Most importantly for our purposes, globalization is routinely understood to represent a significant stage in the development of an intensified, world-scale marketplace with a range of concomitant effects on cultural, political, and social identity. As this implies, conventional state-centric and/or “nationalist” views of the world are regarded as increasingly anachronistic. There is, however, no consensus as to when exactly market integration reached such an intensified state, nor on how we go about measuring it. There is not even a consensus as to what constitutes “evidence” for globalization (Palan and Cameron 2009).

Owing to these problems with the empirics, globalization is a term often used differently; as a term that, despite its imprecision, captures a process and an anticipated future of the state of the world economy. This use of the term is essentially teleological rather than descriptive – proposing that as times goes by the world economy becomes ever more integrated, irrespective of what we measure on the way. Where the process will end up is not clear, but the implication is that at some point in an unspecified future, the world economy (and probably the world polity) will function as a single integrated whole. Although implied throughout the literature, few commentators would consciously accept the inevitability of this teleological version of globalization. This leaves many questions unanswered concerning the true nature of globalization. Is it, for example, a secular process or a dialectical process? In other words, is the future of the world inevitably leading to greater market integration, or are there any countervailing forces interrupting or even preventing the process? Is globalization driven by external “laws” (particularly the “laws” of economics), or is it driven by more solidly anthropogenic ideological forces? Is globalization a neutral description of the world out there or a political project in the hands of the powerful? Despite the vast literature on globalization, these sorts of questions are rarely addressed directly, let alone answered. The result is a very expansive academic literature that has quickly coalesced around conventional disciplinary debates – economists theorize globalization as an economic phenomenon, political scientists as a political one, and so on. This “balkanization” of the concept has both hindered debate and compromised what many saw as the potential to use globalization as a mechanism for breaking down disciplinary barriers. One exception to this has been the emergence of International and/or Global Political Economy (IPE and GPE respectively) which have both – in slightly different ways – opened up transdisciplinary debates over the nature and meaning not just of globalization, but of politics and economics more generally.


Within the confines of the discipline of International Relations, an often rather confusing debate has emerged over the use of IPE or GPE. Some use the two terms interchangeably, while others hold that the distinction is important. Although closely related and overlapping, IPE and GPE are not (quite) the same thing. The terminology preferred by different authors often indicates a particular approach to globalization itself. GPE, as its name suggests, takes globalization as an historical process that is already taking place. Complex though it is, the “global” political economy is already a fact and the task of GPE is to make sense of it (Gill and Law 1989; Palan 2000). GPE believes, therefore, that the traditional focus in the discipline of International Relations on the state as the primary unit of analysis is either no longer correct or never was. IPE, again as its name suggests, is more cautious. IPE does not regard globalization as inevitable or, necessarily, as an easily defined historical period but as a complex intervention in an evolving international system. This is not to suggest that IPE simply stubbornly resists the idea of change – far from it – but that it understands the world system as still dominated by state forms, albeit though not the simple, “sovereign” bounded state of conventional IR theory. Globalization in this sense is one aspect of an ongoing debate about the nature and future of the state rather than a definition of its endpoint (Cameron and Palan 2004). Aside from this, admittedly quite nuanced, distinction (more a continuum of positions than a polarized binary), chronologically, IPE precedes GPE by at least two decades. GPE emerged out of a literature that sought to expand the realm of international relations to include economic relations. GPE became current only from the early 1990s onward, reflecting observed changes in the world economy. So, for example, Robert Gilpin’s influential textbook published in 1987 was entitled The Political Economy of International Relations. By 2003, a follow-up and equally influential textbook was entitled Global Political Economy: Understanding the International Economic Order. As this essay covers the theoretical debate chronologically, we will be following the same path, moving from IPE to GPE.

Within and between the evolving debates in IPE/GPE three broad traditions have emerged. The first, which remains dominant, emphasizes a relationship between globalization as a set of practices related to ongoing American economic and military hegemony and the so-called Washington Consensus. This tradition is most commonly linked to GPE. The second, occupying a middle ground between GPE and IPE, stresses the mutually reinforcing relationships between state and globalization as political and economic practices and/or strategies. Globalization is here understood to be functional – as an interrelated set of processes of adaptation and emulation among states competing for power and influence in a changing world. The third, most commonly associated with the critical European or “British School” IPE (cf. Cohen 2008; Blyth 2009), regards globalization as part of a wider and longer-standing process of the redefinition and respatialization of power in the world. As such, globalization is not approached as a fact or as a functional aspect of politics, but as an aspect of the complex discursive reimagining and reinscription of the social, political, cultural, and economic world. As such, globalization is not accorded the status of either teleology or privileged description, but is one concept among many (including state, sovereignty, inclusion, exclusion, exception, etc.) that contributes to the hermeneutic construction of social reality. We will return to these ideas below. Before that, we will review various stages of the complex and changing relationship between IPE/GPE (broadly defined) and the concept of globalization over recent decades.

Interdependence, Stagflation and Multilateralism

Unusually among the social science disciplines engaging with globalization and although reaching for the concept of globalization itself rather late, IPE anticipated many of the debates in the later 1980s in the concept of interdependence. From the early 1970s, writers such as Cooper (1983) and Keohane and Nye (1971; 1977) identified new dynamics which they described as growing or complex “interdependence” between states. The argument was that the success of the multilateral system that was set up after WWII resulted in a growing web of economic, political, and cultural ties between states. This, in turn, was changing the dynamics of interstate relationships. Central to the idea of complex interdependence was the growing degree of trading and investment relationships between states, particularly through the exponential growth of multinational corporations (MNCs) and banking firms (initially US based, but increasingly Japanese and European) stimulated by postwar reconstruction (Barnet 1974). At some point, and this point was certainly reached among developed countries in the late 1960s, the economic welfare of all states, including even the largest among them, the US, was dependent on the continuing growth of international trade and investment. This mutual interest was greatly enhanced in the early 1970s when the US was finally forced to delink the dollar from a fixed exchange rate with gold (the “Gold Standard”), which allowed the rapid growth of international currency and derivatives markets and drew the fates of national economies ever closer (Helleiner 1994).

One important implication of complex interdependence between nations was the growing number of governments actively accepting the proposition that they had far more to gain from cooperating with each other within multilateral frameworks than in selfishly pursuing their national interest. This did not mean, however, that governments always cooperated, or that traditional power politics considerations have faded into insignificance. One dimension of the new research in the emerging field of IPE was how to create multilateral institutions that safeguarded the gains of interdependence without compromising the political sovereignty of the state. This was particularly relevant in the context of increasingly protectionist voices in the US and other countries following the oil crises of the mid-1970s.

The school of interdependence developed a number of propositions that influenced future thinking in GPE on globalization. First, in contrast to traditional International Relations, which considered multilateral venues and international organizations (UN, International Monetary Fund (IMF), World Bank, the General Agreement on Tariffs and Trade (GATT), etc.) as relatively insignificant actors in world politics, the new theories pointed to the centrality of these actors in institutionalizing the new multilateral system. In addition to the large-scale and better-known international organizations, many hundreds of others developed from the 1960s onward, dealing with significant areas of international governance (issues as diverse and important as health, telecommunications, industrial standards, the oceans, etc.) and often with little or no public fanfare. In academic terms this rise in the importance of non-state actors was exemplified by the growing importance of the journal International Organization (IO), which, as its name suggests, was concerned initially with the multilateral system. IO rapidly became one of the premier journals in both International Relations and the newer field of IPE (Cohen 2008).

Second, and related to the new interest in international organizations, came a theory that placed the emphasis on combinations of policies and norms in International Relations. Regime theory, most closely associated with the name of Stephen Krasner (1983; see also Haggard and Simmons 1987; Hasenclever et al. 1997), described how outcomes were produced in the international system by coalitions of policy makers, vested interests, and other purveyors of norms and values – though not necessarily contained within one state or organization. Regimes were produced in practice by the concerted efforts of “epistemic communities” whose shared ideals and/or goals produced new institutions or simply new ways of doing things (Haas 1992; Adler 1992). This, too, had important effects on theory because international politics could no longer be reduced to interstate policy. By expanding the range of contributory factors in the shaping of both formal and informal policy to include norms, habits, beliefs, expectations, and cultures, regime theory laid significant foundations for today’s growing interest in “constructivism.”

Third, the school of interdependence contributed to a new perception of the international sphere as no longer divided simply into self-oriented, generally hostile political entities. Interdependence was as much focused on cooperation as competition, based on empirical evidence from the complex multilateral economies emerging across the North Atlantic, the Pacific, and into the rapidly growing regions of east Asia. Although most of the participants in these regional groupings were committed to multilateralism, there were signs of growing problems in the system. There was growing tension between many states, particularly those most successful in developing export-led growth, e.g., West Germany and Japan. At the same time the US was embroiled in an unpopular war in Vietnam and was encountering domestic issues with the rise of the civil rights movement. The oil embargo and quadrupling of oil prices in 1973/4 both confirmed the power of international regimes (the Organization of the Petroleum Exporting Countries (OPEC) suddenly emerging as an extremely significant international actor in the public as well as the political and academic consciousness) and at the same time appeared to undermine the unity of the fledgling “global” economy. Much of the 1970s and 1980s were periods of “stagflation” in developed economies – a pernicious combination of economic stagnation (i.e., low or zero growth in domestic production/consumption) and high price inflation (stimulated by sharply rising oil prices, domestic industrial subsidies, and relatively high wages in the developed world). In retrospect, this period of labor unrest, industrial restructuring, falling revenues, and high unemployment was one in which many states were forced to adjust to the often painful realities of an interdependent but fiercely competitive “global” political economy.

State Power in an Interdependent System

In light of these developments, IPE began to develop ideas about the nature of power in the international system. For traditional political “realists” powerful states were sources of fear and suspicion internationally. The rise of such states would thus stimulate a defensive alliance of smaller neighbors, with the result that international politics was dominated by accounts of these competing alliances and the “balance of power” between them. Conditions of complex interdependence changed all that. For the first time, powerful states or, as they were now described, hegemonic states, were seen not simply in negative terms as sources of instability, but increasingly in positive terms as actual or possible providers of essential international “public” services.

Experience of stagflation in the 1970s led to renewed interest in another period of economic stagnation, the Great Depression of the 1930s. One study that struck a chord with many was Charles Kindelberger’s study of the causes of the Depression (1973; 1996). Among other things, Kindelberger pointed out the dangers of a relative vacuum in international politics as had happened in the 1930s. The British Empire was in decline, while the emerging power, the US, was neither ready nor willing to assume responsibility for leading the international system. The great tragedy of the 1930s, Kindelberger argued, was this lack of international leadership as “nation” states retreated into hostile isolationism rather than recognize their mutual interests and, as it tuned out, their mutual peril. The pursuit of economic autarky in the name of national power and pride ultimately brought many states to their knees in World War II.

The conclusions drawn from this were that a successful world economy, particularly under conditions of heightened interdependence, required a strong, hegemonic state to counteract the centrifugal tendencies of an “anarchic” international system (Bull 1977). What became clear, and this view distinguished the fledgling field of IPE/GPE from many other social sciences, was that the open market economy of the kind associated with globalization cannot emerge spontaneously, but requires a robust political and legal structure (Cartapanis and Herland 2002).

It was also clear that such a structure necessitates, in turn, a commitment by powerful or hegemonic states to use their military, political, economic, and diplomatic resources and work in cooperation with others to sustain it. Hegemony played, however, a more complex and diverse role. Kindelberger talked of hegemonic states as playing the role of the “stabilizers” in the world economy (1986) that would:

  1. 1. furnish an outlet for distressed goods;

  2. 2. maintain the flow of capital to would-be borrowers;

  3. 3. serve as lender of last resort in financial crisis;

  4. 4. maintain a stable exchange rate system;

  5. 5. coordinate macroeconomic policies. (1986:152)

Hegemony, in short, provides a proxy for the “public good” in the world economy, a role analogous to the one played by governments, central banks, police forces, and legal systems in the management of the domestic economy. Why the hegemonic state should be prepared to perform all these roles and functions became one important source of debate, as we will see.

Complex interdependence, a concept later to be replaced by globalization, represented a world economy that had reached a level of integration nearly equal to that normally associated with a national economy. Henceforth, the thinking about the nature of global governance and globalization drew very closely on political, economic, and cultural theories of the state in a domestic context. One of the lasting contributions of IPE was to point out that power on the international system had shifted increasingly from military might to economic and financial power. Future hegemons (or hegemonic challenges), therefore, would not be found among countries that maintain a large and strong army (e.g., contemporary Russia or North Korea) but among countries whose economies are the more advanced, creative, stable, and, crucially, integrated into competitive “global” markets (e.g., contemporary China and India).

While complex interdependence captured something essential about the emerging international and/or global political economy, it also had its limits. This is partly because of a tendency to overstate the increasing density of the interdependent world as a “one-way street” and thus to overlook or underestimate countervailing tendencies or alternate explanations, and partly because of the rise of particular analytical methodologies, especially in the US. In the latter case, the rise of formal modeling techniques such as “rational choice theory” or “game theory” has tended to regard the interdependent world as a fact that needed to be explained in ever greater (and more abstract) detail, rather than as an evolving system that still needed to be critically interrogated. Such techniques have dominated IPE in the US for many years and, while they have undoubtedly made significant contributions, are increasingly being challenged by different voices and methods.

Hegemonic Stability Theory

Initially, as we have seen, globalization was treated largely as an economic and cultural phenomenon. IPE was content to leave empirical verification of globalization largely to other disciplines, itself concentrating on the central question of the role of both the state and power in generating order and change in the international system in an era of incipient globalization (even if the term globalization itself was rarely used). Two related conclusions followed the identification of growing interdependence: first, that a new international order was emerging, and second, that any such new order necessarily entailed a different interpretation of the nature and role of states within it. Quite what that order was or would become was initially very ambiguous (and arguably still is). On the one hand, the international system continued to exhibit a traditional bi-power politics in the form of the Cold War. At the same time, a different set of dynamics appeared – specifically the growth of economic power over political and military might – producing a more complex role for the leading international powers.

Partly because of this confused empirical picture, for a while IR and IPE had a schizophrenic existence, oscillating between the traditional power politics of the Cold War and the cooperative politics of complex interdependence. Ultimately this confusion was resolved (at least for a time) by historical events: specifically the tearing down of the Berlin Wall.

The consequence of these momentous events for IR/IPE was to produce a new set of debates – albeit initially within quite narrow parameters. One set concerned the nature of hegemony itself, the other the meaning of power and order in the international system. In the US, the home of the then hegemonic state, the two debates coalesced around an interpretation of America’s role in the world economy as essentially benign: Hegemonic Stability Theory (HST) (Keohane 1984; for discussion see Alt et al. 1988; Gowa 1989; Guzzini 1998). HST’s central claim is “that the presence of a single, strongly dominant actor in international politics leads to collectively desirable outcomes for all states in the international system” (Snidal 1985:579) – a conclusion that, perhaps unsurprisingly, appealed primarily to American scholars. The question that arose immediately, however, was why would this dominant actor bother to provide such altruistic services to the international system? Why should it play this public service role?

One set of answers developed around a hypothetical cost–benefit analysis of the hegemonic state itself. If this state was sufficiently large, the argument went, then “it captures a share of the benefit of the public good larger than the entire cost of providing it” (Snidal 1985:580). The response was, in other words, that international or global stability (political and economic) is sustainable so long as the perceived interests of the prevailing hegemonic state are seen to be met (Keohane 1984).

From around the 1970s, there was also evidence of growing disorder, beginning with the collapse of the Bretton Woods agreement, the oil crisis, the Third World debt crisis of the early 1980s, and a more unilateralist US policy. Such outcomes were predicted by HST and explained as the visible effects of a decline in the relative power of the US. Yet, this interpretation was rejected by others, particularly Susan Strange (1987), who retorted that the US was neither losing power nor was in decline, but was simply ill-prepared – ideologically as well as institutionally – to sustain any form of stable hegemony.

While HST seemed to explain some aspects of the role of a hegemonic state, ultimately it served only to throw into sharp relief the limits to hegemony on the part of individual states. Even the US, with all its apparently unrivaled military, economic, and political power, was bound up in a much more complex and, to some, sinister form of hegemony.

Hegemony and the Washington Consensus

One of the most problematic aspects of HST was its fundamentally state-centric assumption that all states, hegemonic or not, have a distinct and self-identified “national interest” or “reason of state.” From analysis of this, it was assumed that theorists could deduct certain important conclusions regarding states’ behavior. If we know that the British “nation” exhibits certain characteristics, this is to say, then we should be able to predict what Britain will do in certain circumstances, particularly when acting, as it did, as an Imperial hegemon. The problem with this view is that no “nation” is ever a single entity, let alone a bounded and exclusive one, and that there is a multiplicity of possible interpretations of the “national interest” depending on the relationship of the individual or groups in question to power.

In this particular instance, one tradition of thought combined ideas developed by John Hobson (1902) at the turn of the twentieth century in the context of British imperialism with rational-choice theory or cost–benefit analysis. Hobson argued that late nineteenth century British imperialism was definitely not in the interests of Britain as a whole. Specifically, the prevailing structure of British capitalism at the time – both domestically and internationally – worked directly against the interests of the vast working class populations that lived in conditions of abject poverty in what was otherwise the wealthiest nation in the world. But, he pointed out, while the vast majority of the British people were excluded from the fruits of power, an important minority – sections of the military, the civil service, big industrialists, the landed aristocracy, bankers, and so on – gained significantly. Transposed into theories of hegemony, Hobson’s observations suggest that states pursue the interest of class fractions or coalitions of interests that happen to control state power even though this might be to the detriment of the wider “national” interest.

These ideas were adopted by Mancur Olson (1982) who developed a Hobsonian theory of US hegemony (although he never acknowledged his debt to Hobson), arguing that hegemonic power conferred benefits on certain social and economic groups at the expense of others. These groups were the true hegemons, sustaining US foreign and domestic policies in the name of the national interest, despite the fact that other states acting as “free riders” were taking advantage of the situation. Olson’s theories of collective action (1965) were at the heart of an important development of one school of IPE, a school that combined traditional realist theories of International Relations with such rational cost–benefit analysis (considered in IR as “liberalism”) to explain the behavior of states in conditions of complex interdependence or globalization (Rogowski 1989; Frieden 1991).

More broadly, the disparity between national and parochial interests could be developed further into a general theory. It could be argued that in conditions of growing interdependence and globalization, politicians were increasingly engaged in “two-level games” (Putnam 1988; Evans et al. 1993; Keohane and Milner 1996; Milner 1997; Moravcsik 1997), internal and external. In order to get elected, politicians had to organize large domestic coalitions, but many of the forces of change that they would subsequently have to manage were emanating from the international arena. For example, between 1980 and 1997, US Fortune 500 companies lost more than 5 million jobs in traditional industrial sectors such as automobiles, steel, textiles, and electronics (Zacharakis et al. 1999): a direct impact on the US of economic globalization. What to do? The answer was not obvious. The role of the modern state and its politicians, according to this theory, was to serve as a mediating agency between the external forces of globalization and internal interests. States in effect were no longer independent sovereign entities as traditional IR took them to be, but were at best semi-independent. They could choose in principle from a whole set of policies, but when the wrong ones were chosen states were punished heavily economically, particularly by the global financial markets (Obstfeld 1998; Harmes 2001).

Despite the dominant rhetoric of economics in the functional management of the international system (e.g., in the World Bank, IMF, and World Trade Organization (WTO)), far from being neutral, a hegemonic globalism clearly represents the material interests of the leading nations and/or coalitions of transnational classes. Indeed the preponderance of economics and econometric methods in (particularly American) IPE is itself regarded as an aspect of hegemonic power – serving to limit explanations of the international system to those that suit the worldview of the US and its allies.

During the 1980s and 1990s hegemonic theorists focused much of their attention on the so-called “Washington Consensus” (Williamson 1989), a set of unwritten but powerful and complementary ideas about the proper nature of the international system shared by the US Treasury, the IMF, the World Bank, and other largely Washington-based organizations as well as the wider political and business establishment. Although the nature and content of the Washington Consensus has changed in different contexts (Williamson 2005), for theorists critical of international hegemony it is an archetypal example of the power of relatively loose agglomerations of organizations and individuals sharing similar assumptions and goals. Although clearly associated with the US political establishment and the power of the US economy, critical hegemony theory does not cast the US as an overarching conspiratorial power-monger but recognizes the much greater power of a coalition of interests among what Kees van der Pijl described as the “transatlantic ruling class” (1984) encompassing many different states, businesses, academics, politicians, and other opinion-formers.

Marxism and IPE

In this context, alternative, critical theories of international/global hegemony developed that accepted much of the empirical evidence underpinning HST, but rejected the conclusion that they were evidence of benign stability. Theorists, drawing originally from aspects of Marxism and from the work of Italian communist philosopher Antonio Gramsci, explained the rise of the interdependent world in terms of political power and influence in addition to economic strength (Cox 1987; van der Pijl 1984; Gill 1993). There were, in fact, a number of ongoing debates within Marxism, from the early years of the twentieth century, which proved highly influential in shaping all subsequent Marxist or Marxian theory of globalization and hegemony.

The first line of thought goes back to Lenin’s highly influential polemical piece, “Imperialism: The Highest Stage of Capitalism” (1972/1917). In what was essentially a pamphlet, Lenin was responding to the important challenges posed by World War I to Marxists and the idea of the coming socialist revolution. Considering the enthusiasm with which the working classes of the different warring nations embraced their respective governments’ policies, the question arose, what was the war all about? How did it fit into Marx and Engels’ scheme of things? What were the implications of the war for the future of socialist revolution? Lenin came with an answer to all these questions. He argued that the rise of what he called “monopoly capital,” large corporations and banks that monopolized markets, created strong bonds between states and these large conglomerations. These organizations (the equivalent of what we now call multinational corporations) evolved and expanded rapidly to dominate their domestic markets in the late nineteenth century. They began to expand their international presence, seeking to control larger and larger markets both in Europe’s colonial outposts and in independent states. The war represented the maturation of monopoly capitalism to the point that the “imperialists,” ever in quest of profits and markets, effectively occupied the entire planet and now faced each other in a life and death struggle. For Lenin, the war was an inter-imperialist squabble that would fatally weaken European capitalist states and offer an opportunity for socialist revolution.

Lenin also introduced another important idea, that of the capitalist “chain.” He argued that the emerging world capitalist market consists of a series of interdependently linked states. The concept of the chain highlighted potential weaknesses in what appeared as a unified international system that could be exploited by socialist revolutionaries. The idea was that internationalization generates strain upon societies. Those that find themselves under greatest stress owing to changes in the world economy become the weakest links in the chain, threatening the integrity of the whole. This connection between interdependence and incipient systemic weakness has been a common theme within Marxist IR and IPE ever since.

All subsequent Marxist theories of IPE and, latterly, GPE assume in one way or another that interstate relations are a proxy for the underlying interests of capital and, therefore, of central significance to class struggle.

Another important idea was introduced by Rudolf Hilferding (1981/1910), who was not himself a Marxist but contributed to later Marxian thought. Hilferding argued that international or global capitalism was undergoing important changes with the rise of “finance capital” to dominance. Hilferding proposed that the interests of the bankers and financiers had become the dominant feature of imperialist state policy. This strand remains extremely powerful in today’s thinking, whereby globalization is interpreted as the reassertion of power of the financial fraction of capital (Dumenil and Levy 2004).

Contemporary Marxian IPE/GPE has drawn these various strands of thought into a more coherent position. Globalization represents the maturation of a trend that goes to the very heart of capitalism as a political, social, and economic system. Capitalism is fundamentally an expansionist system: it seeks either to expand geographically into new markets, to the point that it dominates the entire planet; or it seeks to deepen its roots into society, ceaselessly commodifying all forms of life. According to this view, globalization may signal that capitalism is nearly reaching the end of these processes, and hence may enter into a period of severe crisis. In addition, according to Marxist interpretations, globalization is pursued by a coalition of interests, or class alliance, dominated by American financial capital and American hegemony.

Following the logic of their argument, for critical hegemonic theorists globalization is, therefore, not simply a set of external empirical events, but the widespread adoption and functional application of a series of normative ideas about the world. Robert Cox, in particular, turned interdependence theories on their head, so to speak. International organizations, according to Cox, were not truly new independent “actors” in world politics, but nonetheless critical venues for organizing a hegemonic coalition of classes and fraction worldwide, and for the diffusion of the hegemonic ideology. In terms of the Washington Consensus these consist of (among others): a commitment to “free trade” through the reduction of trade barriers, measures to allow the free flow of capital (but not of people), privatization, deregulation, anti-inflationary monetary policies, the protection of investors, the facilitation of foreign direct investment (FDI), and the encouragement of “alliance capitalism” (Dunning 1997).

More recently Kees van der Pijl has sought to locate current developments in the context of longer-term historical processes. For van der Pijl (1998; 2007), diverse conditions and trends combined to create a new type of state–market relationship in sixteenth century England, which was observed and described by the contemporary philosopher John Locke. This new type of liberal state, founded on constitutional monarchy, produced a small enclave that he described as the “Lockean heartland” surrounded by the more traditional “Hobbesian” state: strong, autocratic, inimical to individualism and free market economics. The history of globalization, according to van der Pijl (1998; 2006), is the extraordinary history of the expansion of these Lockean enclaves, from their modest beginning in England, to western Europe, the colonial US, Canada and Australia, the wider European empires, and, ultimately, the entire world. Each phase of this expansion was accompanied by conflict with Hobbesian states, culminating in the fall of the (Hobbesian) Soviet Union and the transformation of China. Globalization, then, is the Lockean heartland writ large. For van der Pijl, globalization cannot be reduced simply to the interest of a hegemonic class or coalition of transnational classes. Rather, globalization must be seen as a long historical process of institution building and development, the core of which is the modern state, the modern concept of property, and the modern notion of the market relationship. Hegemonic states may come and go, but the institutions of liberal capitalism and modernity are the enduring core of globalization.

With the new emphasis on institutions and ideas came a new set of understandings of the nature of modern politics. Ideas and assumptions about the nature of the world do not emerge from a single source, but once they have become established as truths in the minds of prominent individuals, and once they are written into the fabric of particular institutions, they become very hard to resist. For example, the monetarist theories developed by economist Milton Friedman in the 1970s, although strongly contested at the time, went on to gain the expedient political patronage of a number of powerful Western governments (e.g., as “Thatcherism” and “Reaganomics”) and from there to shape the political and economic norms and practices of international organizations (WTO), development theory and practice (de Soto 2000), academic political science (Bobbitt 2002), and the US government itself (neo-conservatism in the Bush administration). What many people now refer to with the blanket term “neo-liberalism” (Harvey 2005) is essentially the hegemonic power of the Washington Consensus after 20 years.

Disorderly Hegemons

Another problematic assumption of HST was the equation between hegemony, power, and international order. The apparent decline in international order witnessed in the 1970s and 1980s, exemplified by the gradual breakdown of the Bretton Woods system, was interpreted by HST scholars as evidence for the decline of the US. Two alternate interpretations also emerged, however, to challenge this assumption. First, Susan Strange argued that the US was not in decline, but that its political structure and institutional make-up made it ill-suited to pursue consistently the orderly role attributed to it by HST. The second approach, to which we will return in a moment, argued that disruption and change are core dynamics of a competitive globalized capitalist economy – globalization is not a product of stability but develops out of, and in turn produces, great volatility.

Strange objected to HST on two grounds. First, she argued, IR theories misunderstood the nature of power, focusing purely on “relational” power – on the formal and visible aspects of power in interstate relationships. Second, Strange argued that this more sophisticated understanding of power revealed that the US was not in decline – or, at least, not yet.

Power in the modern world, Strange argued, was exercised less through formal power politics than through the structural power held by sections of the military, diplomats, corporations, and banks (1987; 1988). The US may have appeared to be in decline in terms of formal political influence, but only if the complex exercise of power was reduced to what was rapidly becoming a relatively small part of the overall picture. In reality, American businesses and American capital were deeply embedded in the fabric of the world economy, to the extent that the US was able to exercise a form of “structural” power at least equal to its formal hegemonic role. Apparent volatility in the world market was due, in part, to the internal dynamics of the US political system that gave so much power to vested interests and to regional and state organizations. To use the two-level game metaphor, US politicians were ill-equipped to advance the long-term interest of the US and world capitalist economy, and were far more attuned to the short-term interests of their constituencies. Rather than act as a responsible hegemon, Strange argued, the US preferred to export its internal problems to the world in the form of inflation in the 1970s, growing debt in the 1980s, and a disastrous expansion of consumer credit risk in the 1990s, and let everyone else suffer the consequences. In a prescient work published in 1986 that envisaged the kind of global crisis that erupted in August 2007, Strange enumerated the reasons why she thought the world economy was evolving from a multilateral system anchored in Keynesian ideas to what she described as “Casino Capitalism”: a global economy dominated by speculative booms and busts. Such a volatile economy did not emerge because of the existence or not of a hegemonic state, as HST believed, nor was it a consequence of the ability of parochial interests in the US to impose their will on the majority, as Mancur Olson’s followers believed. Rather, it came about through a series of decisions or, equally important, non-decisions made at various levels and often with wholly unintended consequences, by various US administrations, their political and economic allies, multinational corporations, banks, international accounting, law firms, and others.

The Competition State

Although coming from disparate perspectives, scholars such as Kees van der Pijl and Susan Strange shifted the argument from the orderly wing of hegemony, whether the HST or Gramscian version, to a much more disorderly globalization – pointing out both the evolutionary nature of the system and the importance of institutional development within it. Most importantly, both demonstrated the widely distributed and fragmentary nature of power in the global system and in particular the growing importance of non-state actors in shaping outcomes. Alongside the apparent proliferation of these elements, however, the conventional containers of political and economic power – states – continued to have considerable influence. This apparent maintenance of order within the volatility of the global political economy gave rise to repeated attempts to “bring the state back in” to analysis of the global system (Evans et al. 1985). Perhaps the most significant of these within IPE, the idea of the “competition state” (Strange 1987; Cerny 1990), does not entirely reject the theory of hegemony, but argues that it has tended to sideline the continuing role of the “sovereign” state in determining outcomes both domestically and internationally. Theorists of the competition state argue, based on empirical analysis of the emerging political “architectures” of the modern state (Cerny 1990), that the state nevertheless remains a key site of political influence even under conditions of globalization. The state was not “withering away” and globalization does not imply a “borderless world” (Ohmae 1990), rather the state was changing in response to globalization, and as it did so, it shaped the nature of globalization itself.

For example, state theorist Bob Jessop has argued over many years that the state has not disappeared in the face of globalization (however understood) but has adapted itself to new conditions and has in many ways itself driven globalization. Drawing on the earlier state theories of Nicos Poulantzas, Jessop argues that the state has transformed itself from a normative model, based (in the 1950s and 1960s) on a Keynesian corporatist national welfarism, to a more open and fluid model he describes as the Schumpeterian Postnational Workfare State (SPWS) (Jessop 1993; 2002; 2007). A key aspect of this transformation in the nature of the state has been the adoption of the principle of “competitiveness” into all aspects of state governance. Rather than national wellbeing (social, cultural, and economic) being secured through a strong, interventionist, nationalist, and militarist state, the emergent state form emphasizes its role in “enabling” its citizens (individual and corporate) to compete in the emerging global marketplace. The interventionist role of the state thus shifts from being one where it is actively involved in the running of the national economy to one where the state trains and disciplines its workforce in line with the needs of transnational capital. The central function of the competition state is to maximize the potential capture of highly mobile investment (through low taxes, low regulation, low wages, high skills, low rates of industrial unrest, etc.) in order to guarantee levels of domestic employment, national income, and its own fiscal take. Jessop coined the term “hollow state” to describe this new form, echoing the functional but empty practice of the “hollow corporation” (Jessop 2002).

Globalization in this context also notes the “global” spread of powerful ideas and norms, but does not see the outcome as being the diminution of state power. Rather, competition state theory sees the globalization of a particular state form (analogous to the earlier spread of the sovereign national state) which then instantiates a further set of global and domestic norms. Contrary to the expectations of many early globalization theorists, the rise of a globally interdependent economy has, if anything, seen a proliferation rather than the dissolution of state boundaries. The key change to have taken place with the rise for the competition state has been a change in the way those boundaries are administered (particularly the rise of freely mobile capital accompanied by growing restrictions on labor), rather than their wholesale removal or blurring.

A notable aspect of competition state theory is that it does not propose that a single form of nation state has been supplanted by a single form of competition state. Just as there have been many different states in the past, so the era of the competition state is one in which state form has proliferated as different regimes seek to capitalize on whatever strengths they have in the context of a global political economy (real or perceived). An influential study by Michel Albert (1993) identified the different developmental trajectories of the Anglo-Saxon model of capitalism, as compared to the European or the Rhineland model. The Anglo-Saxon model was increasingly oriented toward short-term profit models, dominated by shareholders and Wall Street; characterized by growing individual, corporate, and government debt; and driven by an inflated housing market. The European model was centered on quality manufacturing; strong links between finance and industry; the maintenance of a functioning welfare state; and export-oriented growth in the context of a repressed financial system. Similarly, in the context of east Asia, Amsden (1989), Cummings (1984), and Weiss (1997) demonstrate the diversity of state forms that emerge under the umbrella of the developmental state.

In similar vein, Palan and Abbott (1996) argued that the competition state took a diverse form, from the east Asian developmental model to the European welfare state, from regional organizations such as the European Union (EU) and the North American Free Trade Agreement (NAFTA) to the smallest jurisdictions. Globalization has given rise to a new array of incentives and costs, and different states have responded by adopting diverse competitive strategies – often adopting more than one strategy, and typically, pursing strategies without much conviction. The result is that globalization is characterized by a new international division of labor, in which different states specialized in different sectors of an increasingly globalized world economy. Some states sought to compete for the high-value-added high tech industries, while others took advantage of plentiful, relatively low-skilled populations. Some competed in manufacturing, others sought to attract mobile capital.

Competition and diverse state strategies produced another unintended outcome. While each state chose to pursue a unique blend of strategies for reasons that suited it, the combined effect of the different strategies was to create a political and legal infrastructure that accelerated trends toward globalization. For instance, many of the smallest jurisdictions reinvented themselves as tax havens as the only means at their disposal to capture a portion of mobile capital. With little else to offer, they effectively commercialized their sovereignty (Palan 2002), reducing or eliminating taxation, enacting sweeping secrecy laws, and easing rules of incorporation and regulation. In doing so, perhaps unintentionally, they linked to the fledgling Euromarket that emerged in London in 1957 (Burn 2006) to create a truly global, and rapidly expanding, offshore financial market. Corporations and banks also use the Euromarkets extensively to channel revenues and generate additional profits on turnover, further accelerating the trend toward the globalization of financial services.

Competition state theory also reached another important conclusion about globalization. Competition states could compete in two main ways. First, they could adopt “Washington Consensus”-type policies and compete over market share in ways analogous to business corporations. Alternatively, and potentially more lucratively, states could try to change the “rules of the game” of globalization to their advantage – the rules of investment, accounting, exchange rate, capital transfer, and property ownership that are at the very core of every business model. Since only the most powerful economies could compete in this new game, competition state theory predicted that globalization would not result in a homogenous global market, but rather would greatly privilege those state and corporations which were economically, politically, and, increasingly, legally powerful enough to set the agenda of polities and economies. The theory suggested that the reason for emerging regional organizations such as the EU or NAFTA was precisely to compete in the game of controlling the world economy (Palan and Abbott 1996). It also suggested that twenty-first century globalization would be dominated by giant economies including these regional agglomerations and emerging industrial and financial states such as China and India.

Globalization and Institutional Diversity

This type of work has led to two approaches founded on synergies between IPE and comparative politics, on the one hand, and IPE and political economy on the other.

The first approach developed the idea that institutional variety within and among developed and developing economies was evidence of varieties of capitalism itself (Crouch and Streeck 1997; Hall and Soskice 2001; Hodgson 1996). The central idea here is that capitalism cannot be studied in the abstract as a purely economic phenomenon, but must be analyzed through concrete empirical instances. Despite the clear invocation of historical materialism in this, there was no wholesale return to Marxism itself. The varieties of capitalism theory argues that the world economy is embedded in a complex institutional web centered on, and to some extent produced by, particular states. Different state forms – in terms of size, scale, nature of political economy, culture, religion, legal tradition, and so on – produce variants of capitalism inflected by local conditions. In this context, it is meaningless to consider globalization as a homogenous space. Aspects of what has come to be called globalization may generate homogenizing trends, but instead of accepting these as representing the whole of globalization (as though it was itself a homogenous phenomenon) it is also important to identify and explain the many counter-trends. For too long globalization was little more than shorthand for a particular reading of Anglo-American capitalism exported wholesale to the rest of the world. Other parts of the world, however, particularly Europe and the booming economies of east Asia, offered alternate models that might even turn out to be more successful in the future. Such analysis helped drive an increasing shift in IPE away from abstract theories of markets and state to empirically driven institutional theories.

Even more intriguing, much of the globalization debate was predicated on the assumption that the modern liberal and pluralist state is the only functional form of modern capitalism. The assumption was that hi-tech industries such as IT, biotechnology, aerospace, pharmaceuticals, artificial intelligence, and so on, combined with modern consumer-oriented traditional industries, can flourish only in what Jessop refers to as the “capitalist type of state” (2002). The argument in favor of this idea – an integral part of the Washington Consensus – was that a “knowledge economy” flourishes only in a free-thinking society where contrarian thought and risk taking (intellectually and financially) are encouraged. However, in the past decade or so, different sorts of capitalism began to flourish in states that did not conform to this neoliberal model – most notably in China, a socially and politically conservative state with little appetite for “bourgeois democracy.” There were signs of other successful autocratic models emerging in Latin America, the Middle East, and Russia. Indeed, it appears that just as van der Pijl’s “Lockean heartland” appears successfully to have conquered the entire world, it is crumbling from within.

The notion of institutional diversity links, then, to another set of ideas which were developed throughout the twentieth century, most notably by the French school of regulation. French regulationists interpreted the rise of American hegemony and globalization as the diffusion of a particular type of state–market solutions to the problem of industrialization, a solution it named “Fordism.” This approach argues that late nineteenth century capitalism generated a fundamental disjuncture between the ability of the new type of corporate structures to produce goods, which now, armed with superior technology, production technology, and most importantly, logistical organization and finance (Chandler 1977), could expand ad infinitum, and the delayed development of the political systems that have traditionally repressed labor and wages (Halperin 2004). The result was growing disparity between supply and demand – the latter being insufficient to sustain industrial growth based on domestic market activity alone. During the 1920s, various ideologies and political parties emerged proposing solutions to this underlying structural problem. Stalinist communism offered a totalizing solution by nationalizing the entire economy and society and organizing the whole thing on the basis of five-year plans. Fascism offered a “national-socialist” solution that nationalized key nodes of consumption and production and put the state on a war footing. In the US, a different model was developed under Roosevelt’s New Deal from 1932 onward, which mobilized huge numbers of unemployed workers on federal work programs. This did not involve nationalization – any suspicion of which was strongly resisted by big American capital – but was an essentially Keynesian policy of demand-side support under the guidance of American “constructivist” institutionalists such as Adolph Berle and Harry Hopkins. Ultimately the problems that these three models were intended to address were only “resolved” when they went to war with each other in 1939.

While the New Deal had struggled to reduce unemployment, during the war the US economy nearly doubled in size. The result was that after the war America emerged as the de facto political and economic hegemon state – the more so since its main prewar rivals, Germany and Japan, had at least temporarily been eliminated. An essentially Fordist model of capitalism flourished during the 1950s and 1960s with the rapid rise of domestic consumer-led industrial giants and multinational corporations based on huge flows of FDI supported by the Marshall Plan.

Fordism itself eventually collapsed in the 1970s as “post-Fordist” MNCs developed with much more diverse industrial and financial profiles in Japan, Europe, and the US. While the Japanese perfected such innovations as “just-in-time” inventory control and lean production technologies, in the US a new form of attenuated corporate organization, described by the portmanteau term “Wintelism” (Microsoft Windows and Intel), emerged along Silicon Valley and Boston’s Route 128 (Borrus and Zysman 1997; Saxenian 1996). Other interesting developments were seen in the rise of new manufacturing regions such as the “third Italy” and, more recently, in the rapidly growing mega-cities of southern China (Wu 2007).

The development of new institutional and corporate forms was in part due to the unprecedented scale that many private sector businesses achieved, but it was also a product of new opportunities arising from aspects of economic globalization itself. For example, the ease with which money and other assets can be moved through relatively unregulated global financial markets has caused many companies to place as much or more emphasis on their “treasury function” as on more conventional activities such as manufacturing, retail, or even traditional forms of investment. During the 1980s and 1990s many firms began to actively exploit legal loopholes in and between sovereign jurisdictions to minimize taxation through “tax planning” and to maximize corporate and individual revenues (Palan 2003). For example, throughout the 1990s the world’s major accountancy firms actively marketed so-called “tax shelters” to large business corporations. Unlike tax havens, tax shelters did not require the real or virtual relocation of assets or cash to a different jurisdiction, but redefined assets of one kind (i.e., a taxable kind) as a different one. Cash would be “converted” into various types of investment bond that would then be used to fund investments or remunerate individuals without being “visible” to tax authorities. To facilitate these transactions, companies established networks of shell companies, trusts, hybrid firms, and “Special Purpose Vehicles,” both on and offshore, creating corporate structures of deliberately bewildering complexity and, often, high levels of secrecy. While these can be very effective for the companies in question – approximately two-thirds of US and UK large firms paid no corporation taxes in the late 1990s – they also exposed the weaknesses of a system with little or no regulation. The collapse of the Enron Corporation, for example, revealed how company directors had used a series of shell companies and trusts to conceal massive losses from shareholders, defrauding and bankrupting many people in the process (Palan et al. 2010).

The institutional variety produced by responses to globalization in both states and firms thus has a dialectic character. Although certain states have taken action to rein in some of the worst excesses of the tax shelters – many US-based schemes were closed down by the FBI and large fines imposed – their emergence along with the complexity and diversity of corporate structure changes the ways in which and the degree to which states can engage with the corporate world. Such changes fundamentally “displace” sovereign jurisdiction (Cameron 2008), but in ways that mean that states and firms are engaged in a continual process of mutual adaptation and constitution.

Globalization and Civil Society

Partly in response to the emergent complexity of a global political economy, and the new constellations and spatializations of power it necessarily entails, “globalization” both in theory and practice has not been confined to big firms or governments. From the outset, globalization has been defined and shaped by a “new” politics of “global civil society” groups. The assertion that there is such a thing as a global civil society is a contentious one – the unbounded nature of the global clearly posing definitional as well as practical challenges to such an idea. However, over the past 20 years there has been a proliferation of organizations of various kinds that, taken together, constitute the emergence of what many regard as a fledgling global society (Sklair 1991; 2002; Scholte 1993; Walzer 1995; Held 1995; Hirst 1997; Falk 2003; Anheier et al. 2003) or, for some, even a global state (Ruggie 2004; Frankman 2004).

Although these various authors share a vision of a global social system as part of and/or in contradistinction to a global political economy, they are a very diverse group. For many, the assertion of global civil society emerges from traditions of (predominantly leftist and/or Marxian) oppositional politics and has a distinctly radical, even revolutionary agenda closely linked to the anti-globalization movement and the Global Social Forum (Gills 2000; Sklair 2002). From a different political perspective, many seek to reform rather than revolutionize globalization, through processes of transnational democratization, institutionalism, and/or communitarianism (Hirst 1994; 1997; Held 1995; Archibugi et al. 1998; Anheier et al. 2003; Falk 2003). In addition to these various general “activist” positions, many authors adopting a broadly global civil society perspective focus on particular issue areas. These include taxation (Patomäki 2001; Frankman 2004), agrarianism and development (McMichael 1996; 1997), environmental protection (Elliott 2004), consumerism (Ritzer 2007), commodification (Williams 2005), financialization (Martin 2002), urbanization (Soja 2000; Keil 2001), and so on. All of these different accounts of globalization coincide with the main themes of GPE as all, in one way or another, explore aspects of governance beyond the formal state. In many cases they are also linked to emergent institutions of governance such as, for example, the major environmental charities and organizations (e.g., Greenpeace, Oxfam, War on Want, Friends of the Earth, etc.) or with particular institutions of global governance (World Economic Forum, UNESCO, World Bank, etc.).

The result of these various interventions in the globalization debate is very varied and, as a consequence, hard to gauge. The anti-globalization movement (or, at least, sections of it) claims to have defeated elements of the global economic system (particularly the Multilateral Agreement on Investment that was dropped from the international agenda after the G7 meeting in Seattle and the attendant “Battle of Seattle”), though such claims are contested. Despite this, the various global civil society movements have undoubtedly had considerable influence on the “shape” of the global system through campaigning and lobbying and, more recently, through the forging of strategic alliances – even with former opponents. Whether this will lead to a form of “globalization from below” as many have called for – putting those voices currently often silenced in the globalist debate at the center of affairs – remains to be seen.

Globalization and Volatility

As noted above with respect to HST, and as became all too apparent to ordinary borrowers, consumers, and workers in the course of 2008 as the “sub-prime crisis” and the “credit crunch” unfolded, whatever else it may be, globalization has not been a source of economic or political stability. “World” economies (Braudel 1979) have been highly volatile in the past. The competitive environment produced by nineteenth century imperialism ultimately produced the carnage of World War I. The economic boom that followed 1918 ended in the Wall Street Crash of 1929 and produced another world war. While these and many other comparable historical examples are, of course, very different, there are some similarities. First, rising volatility has often accompanied periods of massive profitability – high returns encouraging risk taking. Second, that same profitability has often been associated with the overvaluation of capital assets – price “bubbles” such as the “South Sea Bubble” of the late eighteenth century. Third, volatility often signifies a lack of effective regulation, either because it simply has not evolved at national or international levels to cope with new elements of the economy (e.g., the offshore currency markets from the 1970s onwards) or because of active avoidance on the part of the owners of capital (or both). Fourth, in all cases the growing and proliferating risks associated with overvaluation and undercapitalization were either misrecognized or ignored. Together these various factors produce a situation where accelerating economic growth is fueled by intense activity in the riskiest of markets, producing volatility as inevitable “corrections” wipe value from all aspects of the economy.

Within IPE, a school of thought had emerged which equated the type of globalization promoted by the US and associated with the Washington Consensus with the abandonment of Keynesian economics and a political move dangerously encouraging market volatility. To the “casino capitalist” society of 1986 Strange added her Mad Money (1998) and Louis Pauly pointedly asked (1997) Who Elected The Bankers? A steady stream of critical studies of the direction of the global economy emanated particularly from the so-called British school of IPE. The British school saw globalization as increasingly dominated by an extraordinary profitable financial system. Some of this work was Gramscian in orientation (Harmes 2001), but some also linked to the Minskian wing of theories of financial crisis (Nesvetailova 2007).

By this time, traditional theories of globalization, which regarded it as an inevitably linear process, were inverted. Instead, contemporary GPE research increasingly conceives of globalization as a particular type of agglomerative process, as one option among many chosen (and this is where the debate lies) for political or institutional reasons, or both. Dumenil and Levy (2004), for instance, see globalization as response to the Fordist crisis of the 1970s. They have demonstrated clearly that a crisis of corporate profitability was resolved in a contradictory manner. On the one hand, average corporate profits rose both in the US and in Europe from the early 1980s until presumably the crisis that began in August 2007. At the same time, real wages remained stagnant in the US, and rose only slightly in Europe, while Japan has been in the economic doldrums since 1993. Combine these two trends and a clear picture emerges, they believe, that shows that US-led globalization was at core an offensive measure of the dominant classes against the restricted environment of the Keynesian area. Just as Hobson and Olson in their respective studies revealed the selective and exclusionary politics of the state, so the chosen path of globalization has suited the interests of the powerful few.

A related but different approach was developed by Nitzan and Bichler (Bichler and Nitzan 1996a; Nitzan 1998). Returning to the American evolutionary economist Thorstein Veblen, they argued that the core dynamics of capitalism is misunderstood by both neoclassical economists and Marxists, which in turn has contributed to a profound misunderstanding of the relationship between state, class, and the economy in the era of globalization. Since the late nineteenth century, they argue, two important changes have taken place. First, capital has become primarily “future oriented,” based less on current auditable capacity or plant than on “anticipated future earnings.” It is, therefore, profoundly speculative. Second, the dominant forces in capitalist economies are the new class of “absentee owners,” businessmen and/or investment institutions who have little or no interest in their holdings, but who are experts in manipulating ownership and using financial leverage techniques in order to augment their capital. The new owners of capital are not interested in maximizing profits as neoclassicists believe, nor in maximizing exploitation as Marxists believe. Rather, the new owners of capital are engaged in the ancient art of power. This is witnessed in what Nitzan and Bichler call “differential accumulation”: the owners of capital are interested, first and foremost, in “beating the average” profitability of the sector in which they engage; they are interested, in other words, in controlling a larger share of capital, which Veblen defined as a society’s aggregate knowledge, know-how, habits of thought, and technique.

Veblen showed that in this game of power, those who are able to control the greater part and then disrupt (or sabotage) their competitors, and in particular those who are able to disrupt the entire organization of a sector or even the capitalist economy itself, are able to reap enormous benefits. This is not the same as the neoclassical and/or Marxist theory of monopoly, because such actors do not need to control entire industrial sectors to exercise their power. Rather, they need to accumulate a diversified portfolio of assets that allows them sufficient financial complexity and expertise to exploit the volatility of unregulated “global” markets. Volatility, therefore, is not an unfortunate outcome of a capitalism to be avoided wherever possible but lies at the very core of the way a capitalist economy operates.

A third set of theories addresses the increasingly “nomadic” tendencies of modern capitalism (Palan 2003; van der Pijl 2007). Following ideas developed by Deleuze and Guattari, Palan has argued that globalization is characterized by a shift from a relatively fixed territorial mode of social organization to a dis-located nomadism founded on permanent movement. Nomadic capitalism therefore has a different relationship to space and territory, with the result that the dominant form of social organization – the nation state – again appears to be in decline or, at the very least, to be economically anachronistic. Postnational or post-territorial capital transcends existing state boundaries – those still plotted on “political” world maps – creating an often uncomfortable sense of virtuality and abstraction. This apparent diminution of the space economy of the state lies at the heart of a conservative backlash against aspects of globalization. Theories of nomadic capitalism maintain that the deepest and perhaps most trenchant critique of globalization emanates not from class or parochial interest, but if anything from the deep sense of personal psychological insecurity created by its essential placelessness. The reaction to globalization takes the form of calls for a return to “traditional values,” i.e., to the apparent stability provided by the territorial mode of social organization, and to a reimagined stable past which was founded on “real” moral values, of family, nation, religion (Palan 2003). For example, in the UK it is the conservative right that most oppose what they see as the left-internationalism of the Euro as a postnational currency, despite its connection to theories of free trade.

Reflexive and Discursive Globalization

Nomadic and evolutionary theories take us back full circle to the original theories of globalization, to cultural theories. Whether or not one accepts the teleologies inherent to the term “globalization,” there are undoubtedly real changes taking place in the world and these need to be explained. However, as many working in the so-called European or British Schools of IPE have argued, terms such as “complex interdependence,” “globalization,” “nation state,” “sovereignty,” and so on have a complex relationship with the real world. In all cases, such terms are to some extent normative and their widespread acceptance, dissemination, and use makes them more than simple descriptions of external conditions. As we have argued elsewhere, for example (Cameron and Palan 2004), a concept as far-reaching as globalization has effects far beyond those of mere description. If enough people actively believe in globalization – or even simply in its component parts as expressed in the Washington Consensus outlined above – then they will alter their behavior accordingly. In other words, irrespective of whether we can definitively prove that something called globalization exists – is “real” – it becomes real in the actions of those who believe that it is real. So, for example, company directors preparing business plans and investment strategies for decades ahead will factor in anticipations of aspects of globalization (currency controls, interest rate convergence, lower trade barriers, etc.). These strategies will, in turn, create and/or accelerate the very trends they seem to be responding to. This kind of “performativity” is by no means new – it has been observed in many different historical contexts (e.g., MacKenzie 2006) – but is relatively new to GPE.

The idea that a concept such as globalization is performative has significant implications for the nature of GPE as an academic practice. Firstly, it fundamentally changes the nature of the empirical project of GPE. The established empirical realities underpinning the likes of HST, for example – states are “real” entities with identifiable national interests and other crypto-personal attributes – is rejected in favor of a far more complex empirical domain in which reality in all its aspects is continually remade and redefined though complex webs of narratives, discourses, performances, and practices including, but not reducible to, those of the “usual suspects” of realist political science – politicians, governments, firms, civil servants, etc. Second, and following from this, the emergence of a “post-rationalist” GPE encounters significant methodological issues (Palan and Cameron 2009). Not only can it no longer simply examine the empirics of rationalist political science, it can no longer do so in the same way. This is not least because GPE as a practice itself becomes part of the subject domain. GPE must examine reflexively its own assumptions, narratives, performances, and so on as part of an attempt to make sense of a complex and emergent world.

As this implies, the relationship of GPE to globalization is a complex one. GPE no longer simply theorizes and/or describes a process of globalization taking place “out there,” but is an integral part of the process of its creation – GPE has supplied parts of the narrative and practice of globalization. This is as true of the American realist and rationalist traditions within IPE who may themselves regard globalization as unproblematic as it is for the more theoretically inclined “hermeneutics” tradition in Europe. Indeed, ironically, the closer relationship between American IPE and governance arguably makes the rationalist approaches much more actively performative with respect to globalization than any other. To return to the critical approaches to hegemony outlined above, perhaps there is no more powerful form of hegemonic knowledge than that which regards itself as unproblematic – as neutral description rather than active creator.

For such post-rationalist GPE, which is a truly diverse and broad movement, the significance of Foucault’s work in particular cannot be underestimated. Among other things, Foucault problematized the concept of agency in a way that places Marxism (after Marx) and mainstream political economy firmly in the camp of “rationalism.” Foucault’s studies of power and discipline have demonstrated that historical change comes about at least in part through collective agencies that cannot be defined as institutions or as social classes, but are contingent forms of alliances and identities emergent in discourse. In Discipline and Punish (1977), for instance, Foucault identifies a group of reformers that innovate new forms of discipline and power. These “regional” studies then provided the basis for his research into the history of subjectivity, or the very historical conditions that have produced the modern subject and modern rationality as the underlying “infrastructure” of modern capitalism.

Today’s critical wing of IPE is a mixture (but not a synthesis) of Marxist, institutionalist, and poststructuralist thought. Marxism provides us with a strong hypothesis about the long-term trajectories of capitalism. But Marxism has proved particularly weak in predicting or prescribing short- to medium-term trends. The challenge for critical IPE students today, then, is to bridge the broad social critique of Marxism with the robust empirical bent of institutionalism and poststructuralism (Rosamond 2006).

Globalization and GPE

As we have tried to illustrate above, the relationship between IPE and GPE intellectual practices and globalization as a theoretical and empirical subject (or problem) is complex and fluid. It is complex in part because of what they share. Just as there is no single, definitive definition for globalization, so there is no single or definitive role for IPE/GPE. Lacking a strong disciplinary identity in its own right, IPE has evolved into a variety of intellectual spaces, a process that is by no means completed. IPE and GPE have done so largely alongside the evolution of what has come to be known as globalization and for the most part as a direct response to it. In that sense the vaguely defined academic domain of IPE and the vaguely defined concept of globalization have a symbiotic and mutually constitutive relationship.

The significance of this here is that whatever else it might be, globalization articulated by and through IPE and the other social sciences is part of a debate about the nature and location of power once the state as an exclusive, sovereign “power container” can no longer be sustained. In their various ways, HST, complex interdependence, the competition state, and all the other manifestations of the globalization debate are all attempting to account for the nature of power in a “postnational” world. As we have discovered in relation to the “credit crunch” of 2008, the emergent nature of power remains a pressing political, economic, and legal issue in the contemporary world. IPE’s failure to finally define globalization, therefore, is less evidence of the weakness of its theories or methods than of the enormous complexity of the task it undertakes.


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