_Journal of World-Systems Research_, 1995, Volume 1, Number 9
http://jwsr.ucr.edu/
ISSN 1076-156X
Global Cooperation or Rival Trade Blocs ?
Gerd Junne
University of Amsterdam
Oudezijds Achterburgwal 237
1012 DL Amsterdam, The Netherlands
fax 31 20 525 2080
Copyright (c) 1995 Gerd Junne
I. Globalization versus regionalization: different scenarios
I.1. The CPB Scenarios
I.2. The BRIE Scenarios
I.3. The Amsterdam Scenarios
II. Intra-bloc developments as a determinant of
inter-bloc relations
II.1. The cohesiveness of Europe
II.2. An East Asian Trading Bloc?
II.3. Developments in North America
III. Different Theoretical Approaches
III.1. Long Waves Theory
III.2. The Network of Strategic Alliances
III.3. Fragmentation of Companies and
a New Role for the State
III.4. Different Concepts of Control
III.5. Different Cultures
IV. Conclusion
Introduction
This paper examines the question of whether the world will
continue to move towards a liberal, multilateral world trade system
or whether it will fall apart into rival trade blocs. It starts
with a short comparison of different scenarios for the development
of the world economy. It then tries to illustrate the importance of
developments inside the major trade blocs for the relationship
between these blocs, taking as an example (a) the impact of German
unification, (b) the impact of a possible break-up of China, and
(c) the impact of domestic polarization within the United States.
It then discusses how different research avenues give rise to
different expectations with regard to cooperation versus rivalry.
For instance, from a long waves perspective increasing rivalry can
be expected. However, an analysis of strategic alliances points in
the direction of more cooperation and collective management of
international economic relations. And finally, analyses which give
more attention to the internal restructuring of companies lead to
the hypothesis that new societal demands for a more active state
will be articulated, implying more frictions at the international
level. An analysis in terms of "concepts of control" points in the
same direction. The tentative conclusion of this paper, meanwhile,
is that "managed rivalry" will characterize future relations
between the main trading blocs.
[Page 1]
I. Globalization Versus Regionalization: Different Scenarios
We are unable to predict the future of international relations
with any certainty (e.g. Van Ginneken 1993). This is not because
the discipline is still underdeveloped. It is rather because
-the topic of research does not develop independently from how
people think of it,
-the future is the outcome of social struggle, which is still
contingent, and
-social forces interact in a dialectic way: the more the
pendulum sways in one specific direction, the stronger the
countervailing forces become.
Instead of trying to forecast the most probable future
development, it makes more sense to elaborate a number of scenarios
which cover a broader range of possible alternative developments,
and then analyze the social forces that work in favor or against
each of the different scenarios.
I.1. The CPB Scenarios
The present enquiry into whether the world is heading towards
more globalization or more regionalization can build upon earlier
work by many others. An interesting effort was made two years ago
by the Dutch Central Planning Bureau (CPB) in its book "Scanning
the Future," in which it describes four scenarios for the
[Page 2]
development of the world economy. The four scenarios were dubbed
(a) "Global Shift", (b) "European Renaissance", (c) "Global
Crisis", and (d) "Balanced Growth" (CPB 1992a: 22-26, 182-207).
(a) In "Global Shift", Japan and the "Dynamic Asian Economies"
(DAE's) get strongly attached to a free-market orientation. Under
heavy competitive pressure, growth impeding factors in the United
States (such as the low quality of basic education) are tackled by
private enterprise. The resulting recovery of productivity within
the United States generates the financial means by which the
government deficit can be reduced. While the U.S. economy thrives
again, economic reforms in Europe remain half-hearted. The European
bias in favor of security, stability, and risk-aversive behavior
prevails once again. Economic growth slows, and important
industrial sectors quickly lose ground. Social and political
tensions, which have already risen sharply as a result of the
recession, are further inflamed by large migratory movements to
Western Europe.
(b) In "European Renaissance", global competition increasingly
leads to the emergence of world-wide oligopolies and strategic
alliances, supported by governments. In a climate in which
"coordination" rather than the free-market plays a dominant role
in the regulation of the economy, European integration advances
quickly, creating favorable conditions for European business. U.S.
[Page 3]
business, on the contrary, remains unable to change the success
formulas of the past. Increasing U.S. trade deficits strengthen
protectionist moods. Japan and the DAE's reorient their interests
towards Europe and each other.
(c) In "Global Crisis," neither the U.S. nor European economies
prosper. The economic rise of the Far East and the impotence of
Europe and America ensure a deepening of tensions on trade issues;
the major regions of the world gradually degenerate into
antagonistic protectionist blocs. Unable to earn their living by
producing for the world market, the demographic trap in many
developing countries closes, and a worldwide crisis of food supply
occurs.
(d) For "Balanced Growth," an ever stronger drive towards
sustainable economic development and continuously strong
technological dynamism constitute the dominating forces. Reforms
practically everywhere lead to renewed economic growth, which
facilitates an open and cooperative attitude in international trade
negotiations. Both the free-market and the coordination element
play an important role at the domestic level, as well as in the
international economy.
In a follow-up study on perspectives for the Dutch economy
(CPB 1992b:18), only three scenario's were kept. "Global Crisis"
was skipped, because the situation for Europe and the Netherlands
[Page 4]
in "Global Crisis" was roughly the same as in "Global Shift".
Furthermore, it is generally not advisable to work with more than
three scenario's, because it becomes too difficult to compare a
larger number (Schwartz 1991:29).
A number of comments can be made on the scenarios produced by
the CPB. In "Global Shift," the U.S. economy is booming, while the
European economy busts. In "European Renaissance," it is the other
way round. This implies that the interdependence of the world
economy is still limited: The economy in one major region can
prosper for longer periods, while the economy in other major
regions is in a deep recession. Is this plausible?
It seems to me that the economies of North America and Western
Europe have become mere communicating vessels. Though differences
persist, the application of new technologies will not take place at
a dramatically different pace: this will differ more from company
to company rather than from country to country. Strong links
between companies on both sides of the Atlantic (often belonging to
the same concerns) mean that demand in one region stimulates demand
in the other. Protectionist measures taken by one side would also
provoke protectionist measures by the other. It seems more
appropriate, then, to conceive a scenario in which the major
industrial centers prosper more or less together and keep a rather
liberal trade system, and another one in which regional rivalry
dominates.
[Page 5]
I.2. The BRIE scenarios
This has been done in a recent project of the Berkeley Round
Table on the International Economy (BRIE). The authors put forward
three different scenarios, which are described as "managed
multilateralism," "benign regionalism" and "regional rivalry"
(Sandholtz et al. 1992).
Managed multilateralism "amounts to an extension of the
post-war American system into a new era in which power is more
evenly distributed" (Sandholtz et al. 1992: 173). Though trade will
not become totally liberalized, governments will be able to agree
on the rules that will govern the international trade system and
these rules will be relatively liberal, leaving the market to
determine the outcomes.
Regional rivalry describes a kind of "twenty-first century
mercantilistic regionalism" (Sandholtz et al. 1992: 174-5).
Governments will worry more about relative positions, rather than
about absolute welfare gains. Relative shifts in positions will
become security concerns for the great powers, thereby greatly
diminishing the chances for collective coordination and leadership
amongst these powers.
Benign regionalism (or "defensive protectionism"), finally,
depicts a situation in which different world regions live rather
independently from each other, "with low levels of sensitivity to
each other's choices and low levels of vulnerability to each
other's actions" (Sandholtz et al. 1992: 174). This last scenario
seems to be the least likely. It does not take into account that
[Page 6]
international interdependence has reached such an intensity that
this scenario can be discarded even in the case that world trade
becomes concentrated largely on intra-regional trade. Even then,
two important levels of interdependence would remain:
(a) Interdependence via international financial markets:
International financial and currency markets actually link
economic developments in all parts of the world. Any kind of
government policy which implies deficit spending and increases
inflationary pressures, will immediately face reactions which will
put that country's currency under pressure and affect domestic
interest rates.
(b) Interdependence via the international ecological system:
Economic policies also affect each other even if no
international transactions in the classical sense take place.
Almost all economic activity, for instance, leads to the emission
of polluting substances and gases which may destroy the ozone layer
or contribute to global warming through the greenhouse effect. In
this way, societies have become much more vulnerable to each others
choices (Cf. MacNeill, Winsemius, and Yakushiji 1991).
As a result, the "benign regionalism" scenario will be dropped.
Instead, we will look for a scenario that takes the increased
importance of the environmental dimension into account.
[Page 7]
I.3. The Amsterdam scenarios
Schwartz has suggested that scenario writers should avoid
depicting an optimistic scenario (like "free trade"), a pessimistic
scenario (like "rivalry") and a "middle of the road" scenario,
because this last scenario would probably be accepted by most
readers as the most probable one, and the whole exercise of
scenario writing would be devalued. He suggested that a third
scenario, instead, should bring in another important factor (e.g.
a fundamental social change, like a shift in basic values) which
the other scenarios do not yet sufficiently take into account. The
increasing importance of environmental imperatives is a case in
point.
Imagine that imperatives of sustainable development get more
attention around the world. This could lead to very different
trade structures, and certainly to new types of trade conflicts
(see Van der Wurff and Kolk 1993). We have therefore decided in
favor of a third scenario in which priority is given to
environmentally-friendly production and trade structures. This
probably would be done in different ways in North America, Japan
and Western Europe, implying new frictions between the trade blocs.
In sum, the three scenarios taken as a point of departure for
future analysis are:
A) Managed multilateralism, in which the vision of a "global
village" - if only for the northern half of the globe - is
approached, the fast introduction of new technologies leads to a
another period of worldwide economic growth, and the leading
trading nations are able to agree on increasingly liberal rules for
world trade and production;
[Page 8]
B) Regional rivalry, in which slow economic growth combines with
highly conflictual relations among the major trading blocs, and
C) Greening of business, in which a high priority is given to the
imperatives of worldwide sustainable development, and economies are
restructured in order to become less environmentally-harmful. This
last scenario will not be extensively explored in the present
paper, but will be considered in future research.
Before we look at the relations between the blocs, however, it
is useful to look at developments within the three blocs, because
these developments can have important consequences for
intercontinental relations.
II. Intra-bloc Developments as a Determinant of Inter-bloc
Relations
What happens with regards to relations between the blocs
depends to a large extent upon developments within the three blocs.
The more united and cohesive the blocs become, the higher the
chances are for inter-bloc conflicts. Conversely, the less united
the blocs are internally, the less intense conflicts between the
blocs tend to be.
This hypothesis will be illustrated by discussing one specific
aspect of cohesiveness for each of the three blocs.
II.1. The Cohesiveness of Europe
A great deal has been published on whether the Common Market
project ("1992") will lead to a "Fortress Europe" or not. Seen from
within the European Union (EU), the Community seems much less of a
Union than is often envisaged from the outside. Already the Union
[Page 9]
can hardly agree on anything, not even on the number of votes
necessary for majority decisions of the European Council of
Ministers, its main decision-making body. And, with every
enlargement, its cohesiveness may decline even further.
It is particularly important to note that, in many instances,
the United Kingdom still plays an independent role within the EU.
The dominant value system within Britain often corresponds more to
that put into practice in the United States than to that on the
European continent (cf. Albert 1991). To some extent, General De
Gaulle proved to be right when he expressed the fear that Great
Britain would act as a kind of "Trojan Horse" in the European
Community.
What are the preconditions for European unity? There are
basically three situations which could lead to a united European
stance. One is outside pressure, which has been the strongest
uniting force in the past. The second could be internal dominance
by either one member state (with a united Germany being the most
obvious candidate), or a coalition of core states (a Paris/Bonn
axis, for instance). The third possibility would result from a
complicated bargaining process among the governments of the member
countries. Where the latter is the case the results tend to be
relatively inflexible, which can put some strain on inter-bloc
bargaining because it impedes the usual process of give and take in
international negotiations.
I will not discuss the first possibility, that of outside
pressure leading to European unity, because I instead want to
concentrate on internal developments within this bloc. I therefore
[Page 10]
single out the chances of future dominance of a united Germany for
further discussion. The most important question thus becomes: What
has been and will be the impact of German reunification on European
integration?
Many observers expected (and some still expect) a stronger and
even dominant role of Germany in the EU as the result of German
reunification. During the first years since unification, however,
this has clearly not been the case. On the contrary, optimistic
expectations that the introduction of a market economy would lead
to an explosion of productivity in the former GDR, and that its
population would quickly reach the income level of their Western
compatriots, turned out to be wishful thinking. Instead, Germany
got its own "Mezzogiorno:" a large area that depends for its living
standards on massive state intervention. It is this shift towards
massive state intervention which might be most relevant for future
inter-bloc relations.
The intensity of state intervention is one of the most
contentious elements in the relations between the United States,
Western Europe and Japan. The US government remains the strongest
advocate of further deregulation and liberalization, while Japan
has adopted a cautious stance regarding these issues. European
governments, meanwhile, tend to fall somewhere in between on the
question of state intervention in economic matters.
Before unification the European Community maintained a
delicate balance between governments that were free-market oriented
and in favor of far-reaching deregulation (mainly Great Britain and
the Benelux countries), and governments with a much stronger
tradition of state intervention (such as the southern European
states and France). Germany used to hold a position in between,
and acted as a kind of balancer. As a result of unification,
[Page 11]
however, Germany may lean towards more intensive state intervention
for two reasons: (a) it suffers from structural internal imbalances
which cannot be solved by market forces alone, but which demand
state intervention to prevent these imbalances from becoming
increasingly extreme, and (b) with unification the German electoral
system has expanded to incorporate millions of voters who were
socialized in the context of a strong state which regularly
intervened in all areas of daily life. For many of these people, it
is completely self-evident that the state should intervene heavily
in the economy; they cannot in fact imagine otherwise. With a
changing balance between the forces in favor of more rather than
less state intervention in Germany, the balance of these forces in
Europe in general has changed. As a result, the EU itself may
become more inclined towards state intervention, with clear-cut
repercussions for its future relationship with the United States.
German unification had also other, more short-term
ramifications with consequences for inter-bloc relations: It
delayed European recovery in the early 1990s and undermined
European competitiveness. It delayed recovery because of the
immense transfer payments to East Germany (of annually about 100
billion US$). These payments (mainly for social security) helped
stabilize the social and political situation in the Eastern part of
the country, but at the same time constituted a large-scale shift
from investment to consumption. In order to limit the impact of the
financial transfers on inflation, the Bundesbank had to continue a
tough monetary policy, hindering economic recovery not only in
Germany, but in Europe as a whole. This is one of the reasons why
Europe is emerging from the recession much more slowly than is the
United States.
[Page 12]
Furthermore, the enormous shift from investment to transfer
payments can undermine Germany's (and Europe's) long term
competitiveness on the world market, thus laying the basis for
further conflict between Europe on the one hand, and the United
States and Japan on the other. This is because, sooner or later,
a decline in competitiveness will be translated into protectionist
measures against other trading blocs.
The impact of German unification on European integration and
the relationship between Europe and the outside world is
interesting in itself, but it is even more interesting as it
provides some ideas about what the future enlargement of the
European Union might imply, as Central European countries (Hungary,
Poland, Chechia and Slovakia) join in the first two decades of the
21st century.
II.2. An East Asian Trade Bloc?
In any analysis of present international trade conflicts, the
role of Japan is crucial. However, if we try to develop scenarios
for the development of trade patterns over the next 25 years, the
position of China seems at least as relevant. This idea does not
imply that the role of Japan will diminish; it only reflects the
assumption that changes in Japan's international position will be
much more incremental in the future. Japan's position in
international trade will probably normalize somewhat with
increasing domestic consumption, changes in work ethics, less
pronounced productivity advantages, and less disinclination to buy
foreign products.
[Page 13]
Destabilizing effects for the world trade system might instead
come from China, for it is not the intensity of competition nor the
volume of trade which leads to trade conflicts, but the rapidness
of change and the resulting imbalances. Slow changes can normally
be easily accommodated. Quick changes, however, leave little time
to adapt and easily cause political clashes. It seems that China's
trade will actually increase by large percentages for a while.
While Japan has reached a wage level where rises in the value of
the yen can easily nullify competitive advantages, the wage gap
between China and the highly industrialized countries is
such that the competitive advantage will not easily be destroyed.
If the assumption is correct that China will become one of the
big players in world trade, this would imply a new generation of
trade conflicts. It is highly probable that China will continue to
have strong state intervention in its economy, even if it is no
longer ruled by a communist regime. It will continue to show strong
state intervention because of its relative level of development
(compared to the highly-industrialized countries), and because high
levels of internal inequalities demand a strong state.
However, it is not clear whether this important player in
future world trade will be a state with the present borders of the
People's Republic of China (including Hong Kong and Taiwan).
Indeed, at the present the central state of the PRC no longer has
effective control over some of its provinces. During the next 25
years, furthermore, the very success of certain regions within
China in expanding industrial production will exacerbate internal
tensions. Such increased tensions will emerge between the coastal
provinces, where most capital accumulation takes place, and other
provinces which are exposed to the negative consequences of this
[Page 14]
accumulation process (such as higher prices, a drain on qualified
personnel, and large scale corruption). The inhabitants of China's
less-successful provinces may also suffer from the attempts by
their own polities to catch up with the coastal provinces (e.g. by
imposing higher taxes to offer a better infrastructure, and by
conferring other advantages to companies which are prepared to
shift production there). There have always been tensions between
the more urban coastal provinces and the rural provinces of the
Chinese "hinterland", where many of the more revolutionary
movements find their roots. Indeed, peasant revolts have already
occurred in Eastern China, perhaps foreshadowing more serious
conflicts in the future.
Additionally, thriving small-scale rural industries in
disadvantaged provinces will be increasingly threatened by
competition from large-scale industries, which produce primarily
for the world market but are coming to serve the domestic market as
well. Pressures will therefore build to protect local economies
against outside competition. If local authorities cannot exert
enough influence at the level of the central state, or if the
central government cannot or will not respond to such demands, the
disadvantaged regions may break away. An ideological umbrella which
would justify such a move can always easily be found.
One may even say that the break-up of China is a precondition
for the integration of large parts of the Far Eastern region into
the world market, because neither China nor the world market could
withstand the integration of all of China at the same time.
If the factual, if not formal break-up of China is a
precondition for the rapid integration of parts of this region into
the world economy, much will depend on the concrete modalities of
this break-up. If this is turns out to be a violent process, which
draws neighboring states into the conflict, the entire region may
be paralyzed for a considerable period of time. This would slow
[Page 15]
down the development of the region itself, and the world economy as
a whole, and could perhaps contribute to a worldwide recession and
increasing trade conflicts as well. If, on the contrary, the
internal changes take place in a comparatively smooth way, this
could open the door to another period of rapid economic growth in
certain parts of China which would mean stiffer international
competition for foreign producers in the most affected economic
sectors.
The break-up of China would add to other major recent changes
in the international state system, the most important of which has
been the break-up of the Soviet Union. If we are to learn something
from the far-reaching and largely unforeseen changes in the last
five years, it is to not take the existing state structure for
granted when we speculate on future international developments. Not
only may China follow the example of the Soviet Union, but other
countries show similar tendencies as well. An obvious candidate is
India, where the (albeit cautious) opening of the domestic market
is strengthening tendencies towards unequal development, which in
turn may exacerbate ever-present centrifugal tendencies in this
multi-lingual, multi-religious, multi-ethnic society.
II.3. Developments in North America
Compared to the other two continents, the situation in North
America seems much less complicated. There are few manifest
conflicts between Canada, the United States and Mexico. What could
have important repercussions for intercontinental relations, in
this case, are not so much the international relations between the
three countries, but internal developments within the United
States, where polarization may become exacerbated by the Free Trade
Agreement with Mexico.
[Page 16]
With about 30 per cent of the U.S. population living below the
poverty line, and about as many being illiterate, the North-
South divide does not so much separate Mexico and the United
States--it rather goes right through the United States itself.
It may periodically lead to social eruptions, as in the case
of the recent events in Los Angeles (cf. Davis 1993). These will
remain temporary eruptions, however, because there is no ideology
around which the disadvantaged groups of U.S. society can rally.
Nevertheless, these eruptions will force the U.S. government to pay
more attention to social problems at home.
Such a reorientation would not necessarily imply a more
isolationist policy for the United States. During the last decades,
declarations of a "war against poverty" often went hand in hand
with an internationalist policy, as shown by the Kennedy, Johnson
and Carter administrations. The indirect implications of domestic
policy, however, might lead to new intercontinental conflicts.
Increased government expenditures will, if not accompanied by tax
increases (more and more difficult to accomplish in a highly
internationalized world), lead to higher budget deficits, more
international borrowing, a higher value of the dollar on
international currency markets, and a decline in international
competitiveness of the American economy - with all kinds of
protectionist measures that this may entail.
With NAFTA, North America has internalized the periphery even
more than before, to the extent that social stability has become
increasingly questionable. Any move to improve this situation may
cause additional international conflicts. In addition, the
internalization of the periphery has other important side effects.
It aggravates social cleavages within the United States, and it
[Page 17]
helps to reproduce a specific set of values and attitudes, like
strong individualism at the expense of solidarity, which lays the
basis for different policy orientations in the United States and
European countries.
*
As has been illustrated by the above examples, internal
developments in all three trade blocs have tremendous consequences
for relations between the blocs. They may lead to a stronger
position of the state in Europe, and to centrifugal tendencies
within China and the United States. Finally, all these developments
may increase the intensity of conflicts among the trade blocs, and
contribute to more regionalization rather than globalization of the
economy.
III. Different Theoretical Approaches
In the remainder of this paper, I shall review a number of
different approaches in order to see what they lead us to expect
with regard to future relations between highly-developed
capitalist countries. I shall start with long wave theory. I shall
then try to indicate how changes in corporate structures and
differences in class structures in various regions can give us some
clue as to probable future developments. The main hypothesis of
this part is, however, that structural and economic indicators may
be of limited help in such an analysis. Instead, the following
rather "soft" factors seem to play a primordial role in determining
the nature of future relations: different political projects,
different "concepts of control," different ideologies, and
different cultures provide the basis for political conflicts or
political cooperation.
[Page 18]
III.1. Long Wave Theory
Writers of very different backgrounds (cf. Kennedy 1987;
Mandel 1980; Modelski 1987; Wallerstein 1980) have described the
history of the last 500 years as a history of the rise and fall of
hegemonic powers. Typically, the rise of a new power would coincide
with the spread of new technologies, in which the rising power
would have some advantage. This productive advantage would be
turned into a favorable position in international trade, which in
turn would lead to a central position in the world financial
system. The hegemonic position of this particular state would then
be eroded, however, as a new generation of technologies which
privilege a different core state would emerge (cf. Wallerstein
1980:38-39).
The situation of the 1970s and 1980s seemed to fit this
pattern pretty well. The United States enjoyed a hegemonic position
in the capitalist world-system between the Second World War and the
early 1970s, due to its competitive strength in the two leading
industries in the third quarter of this century: the automobile and
the petrochemical industries. The U.S. position was threatened
when Europe and Japan caught up during the 1970s, however, and was
further eroded when Japanese companies started to take the lead in
some sectors of the electronics and new materials industries.
The 1980s were characterized by a kind of "restructuring race"
among the OECD countries, each of which wanted to get a strong
foothold in new industries such as microelectronics and
biotechnology. Governments expected that such a position would
give them a strategic advantage within the world economy, and would
[Page 19]
not only boost their economic competitiveness but would also affect
the distribution of political power over the long run. This
political climate gave rise to neomercantilistic policies on
technological, industrial and trade matters.
Ironically, tendencies in this direction also stimulated
companies to internationalize at a rapid pace, in order to become
"local players" in all major OECD markets (cf. Ohmae 1985). Foreign
direct investment (FDI) flows in the few years since the second
half of the 1980s have exceeded the total of all FDI flows in
history up to that time, concentrating mainly on investment within
the TRIAD countries (United Nations 1991; Junne 1994a).
The close ties created by FDI and by "strategic alliances"
among firms from different continents have installed very effective
channels for technology transfer. Fast technology transfer has made
it improbable that the history of the rise and fall of hegemonic
powers will continue into the future, because no country will
be able to maintain a durable advantage in a whole range of new
technologies for an extended period of time (which used to be the
basis for a hegemonic position). Technology policies in most OECD
countries have become less concentrated on the development of new
technologies, and instead increasingly focus on the smooth
diffusion of available technologies.
Inasmuch as not technological advantage, but military victory
is held to be the basis of a hegemonic position (see Modelski
1978:217), a similar argument holds true. Given the destructiveness
of modern arms, it is highly improbable that the outcome of a
struggle for hegemony will again be decided by war.
[Page 20]
Periods of undisputed hegemony in the past have tended to be
periods of free trade. Does this imply that long periods without a
hegemon, which we can expect for the future, would take away the
basis for free trade ? This is not necessarily the case. Long wave
theory (and the theory of hegemonic stability) cannot tell us
whether a liberal trade regime will be maintained or not. It only
suggests that the chances for liberalized global trade are slimmer
in periods of disputed hegemony than in periods during which a
clear hegemonic power does exist.
III.2. The Network of Strategic Alliances
To get a better idea of the societal forces that work in favor
or against the maintenance of a liberal world trade system, it is
necessary to look at changes at the micro-level of individual
companies in order to understand the development of the
international "social tissue" which underlies policies of
international cooperation or conflict.
In this respect, one of the most important developments during
the last twenty years has been the proliferation of "strategic
alliances" between companies from different countries. The dynamics
behind this development have been aptly described by Ohmae (1985):
The accelerating pace of technological development shortens the
life cycle of many products. While companies have to spend more on
research and development to keep abreast of technological
developments (they actually often spend more on R&D than on new
buildings and machinery), the time period in which they can recover
[Page 21]
these costs is shrinking. They therefore have to launch new
products in all "Triad" markets (North America, Japan, Western
Europe) right from the start, in order to recover their investment
before a new product replaces theirs in the market.
In order to reduce the risks involved in R&D investment
decisions, to spread the costs of R&D, and to cooperate in
commercializing the results in all "Triad" markets, companies have
joined forces in intercontinental strategic alliances with
companies with whom they may be involved in fierce competition in
other fields. Global competition, according to Ohmae, will more and
more often take the form of competition between international
alliances, in which companies with headquarters in different
trading blocs participate, rather than competition of American
versus Japanese versus European companies.
It is often taken for granted that these networks of strategic
alliances create a kind of safety net under the liberal world trade
regime. Because it is thought that these alliances create an
interest to maintain cooperative international relations, and
because they provide a framework for intensive interaction between
the business elites of the different trading blocs, it is thereby
assumed that they could contribute to the formation of an
international elite consensus which, in the absence of a hegemonic
power, could assure the continuation of a liberal world trade
system.
Reality, however, is probably much more complex. There are at
least three reasons why strategic alliances may not (at least not
always) fulfill this function of "cushioning" the liberal world
trade order.
[Page 22]
1. Many of the alliances may have been concluded with mixed motives
and are not symmetrical in nature. They often constitute a
continuation of competition by other means. The individual
partners often try to get as much as possible out of such
coalitions, while making only modest contributions themselves.
They can also have the purpose of dominating or neutralizing the
partners in other countries, and can thus give rise to conflict
rather than reducing international conflict.
2. If companies do succeed in becoming true "insiders" in the
different Triad markets, with the help of their alliance
partners, they may become less vulnerable to protectionist
policies maintained by the different trading blocs. As a result,
they may make fewer efforts to counter political forces which
demand protection.
3. The increased intensity of contacts does not always lead to
better mutual understanding. Such interaction can also create
a fertile breeding ground for misunderstanding and prejudice.
Much more than in usual trade contacts, alliances bring into
confrontation partners with very different management styles,
customs, and rigidities. As a result, managers often become more
aware of their differences rather than their common interests.
Many of these alliances also have a temporary character, as
they are frequently designed to last only until specific
technologies have become standardized, until more competitive
[Page 23]
partners can be found, or until an independent sales network has
been built up. In such cases, continuous parallel efforts
undertaken outside existing cooperative agreements may give rise to
mutual suspicion and tensions between alliance partners.
A detailed empirical study is therefore warranted on the
political implications of international strategic alliances between
companies. The above remarks can only give some plausibility to the
idea that the proliferation of strategic alliances does not
necessarily underpin the liberal world trade order. In fact,
parallel developments at the company level may work in the opposite
direction.
III.3. Fragmentation of Companies and a New Role for the State
The accelerated pace of technological development has not only
led to a concentration of capital and closer international
cooperation among companies. It has also fostered trends moving in
the opposite direction: Companies split up, decentralize and
concentrate on core activities, contracting out many of the
activities that used to be carried out in-house. There is not only
an increasing number of small companies, but the large companies
actually reorganize themselves in such a way that they increasingly
resemble a bunch of relatively independent companies (or "business
units"), which deal with each other at arms-length. Companies are
forced to do so, because the company headquarters is no longer able
to follow technological and market developments as closely as is
required to continuously adapt activity to changing circumstances
[Page 24]
and new challenges. In the extreme, one can state that "we are
approaching an economy of one-person organizations" (Fortune, 4
April 1994).
An increasing share of smaller companies in the economy (or of
business units that are part of larger organizations, but behave
largely as if they were independent companies) will lead to a new
demand for a more active state (see Figure 1). Smaller companies
are much more dependent than larger companies on the smooth
functioning of the social system of which they form a part. They
are also much more dependent upon the external provision of inputs
of all sorts (supplies, educated labor, information, capital). They
thus depend more than large companies on the state to guarantee the
social conditions of production.
With more intensive state activity, however, the likelihood
increases that the activities of different states will clash, at
least insofar as there are no mechanisms to assure that state
activities will remain compatible and not lead to new trade
barriers.
We therefore have to turn to those ideas and traditions which
inspire state activities in different world regions. It is my
contention that these "soft" factors are at least as important as
the "hard" factors of economic structures, industrial profiles,
trade deficits, etc. Structures can be quite unbalanced, but as
long as people do not regard them as a problem they will not give
rise to conflicts. On the other hand, structures can be as
compatible and symmetric as one might wish, but conflict could
still arise if these structures are interpreted in a way that would
urge the actors to take conflictive action. Such "hard" factors as
the distribution of economic capabilities define the realm of the
possible, "but the outcomes remain contingent on the beliefs and
actions of the major protagonists" (Sandholtz et al. 1992:198).
[Page 25]
Figure 1: Proliferation of Small Companies and
Intensification of State Activity
____________________
|Increasing share of|
__________| smaller companies |_________
| | in the economy | |
| |___________________| |
| | |
_______V____ | ______V________
|more need | ________V_________ |stiffer |
|for | |larger business | |international |
|guarantee | | cycle | |competition |
|of social | |fluctuations | |and resulting |
|conditions | |_________________| |need for |
|of | | |compensation |
|production | | |of losers |
|___________| | |______________|
| | |
| | |
| _______V__________ |
| |intensification | |
|----------->| of state |<-----------|
| activity |
|________________|
[Page 26]
III.4. Different Concepts of Control
International relations have undergone a profound change in
the last hundred years. Starting early in this century, a zone of
highly-developed capitalist countries has developed in which civil
society is not dominated by the state, and where a myriad of
interactions links different societies to each other. These
societies are related to each other in such a way that the chance
of warfare among them seems to be excluded. This area, to some
extent modelled after the British Commonwealth (Van der Pijl 1992:
58-59), originally included Great Britain and the United States
and, from the mid-1950s onwards, was slowly extended to incorporate
France (with the Briand/Kellog Pact of 1928) and other parts of
Western Europe.
Kees van der Pijl (1989:19) calls this area the "Lockean
heartland", because the role of the state is subordinated to civil
society, and politics are oriented more towards welfare
maximization rather than towards the maximization of power.
Within this geographical area, the chances of war can be regarded
as nil. This undermines the distinction between international and
domestic politics, according to which international relations are
characterized by the possibility of war, since sovereign states
are not disciplined by any overarching authority. Within the
"Lockean heartland" (actually roughly the OECD area), it therefore
becomes more difficult to differentiate between international and
national politics. International as well as national relations
within this area can be conceptualized more accurately as rivalry
between political projects, carried by transnational coalitions,
rather than as rivalry among states.
Van der Pijl (1984) has extensively discussed those political
projects ("beheersconcepties" or "comprehensive concepts of
control") which (a) can be traced to specific interests dominating
specific phases of capital accumulation, but (b) are broadened to
such an extent that they also accommodate other interests. They
can thereby qualify as possible hegemonic projects at any given
point in time. "International liberalism" was such a project, and
[Page 27]
it was hegemonic throughout the 19th century until about 1875, when
it started to become challenged by "state monopolism". It was only
after the Second World War that a kind of synthesis developed in
the form of "corporate liberalism", which, from the 1970s onwards,
has been challenged by "neo-liberalism".
The future world order depends to a large extent on the degree
to which neo-liberalism gets or remains accepted as the dominant
ideology guiding economic policy, and on the alternative concepts
which might come up. If neo-liberalism gets accepted everywhere,
then a multilateral free-trade system (not even a managed one) will
be strengthened.
The neo-liberal recipe, however, does not lead to a stable
situation. Unbridled free markets lead to backwash effects and
unequal development, which sooner or later provoke protectionist
reactions. Refraining from state intervention would also increase
environmental problems to such a degree that the resulting
pollution would enforce a replacement of the political project. The
actual strength and spread of neo-liberalism is, therefore, not due
to its intrinsic merits, but more to the fact that there is
currently no convincing alternative around which critics of
neo-liberalism could rally.
Winfried Ruigrok and Rob van Tulder (1993) have used the term
"concept of control" in another way. They have tried to show how
the specific ways in which companies can organize their relations
with governments, trade unions, financing institutions, suppliers,
distributors and competing companies, coincide with specific
strategies of internationalization and specific preferences for
international trade policies (Ruigrok and Van Tulder 1993:195-204).
On the basis of a detailed analysis of firm strategies, based
primarily on their empirical research on the automobile industry,
these authors distinguish five different "concepts of control"
(i.e. coherent ways to solve different control problems which a
company faces): "flexible specialization","industrial democracy",
"(macro)Fordism", "(micro-)Fordism", and "Toyotism" (Ruigrok and
Van Tulder 1993:110). The links to internationalization strategies
and international trade policies are as follows:
Firms which follow the "flexible specialization" concept (e.g.
networks of small cooperating firms, such as are found in the
[Page 28]
textile and shoe industries in Italy and in the machine-building
industry in Germany) tend to produce primarily for the domestic
market. They do not generally internationalize their production or
try to protect their domestic markets. Where they do
internationalize, they do so by direct export and they therefore
prefer to have foreign markets as open as possible. They therefore
tend to "favor a unilateral trade regime: a combination of domestic
trade barriers ... and foreign expansionist trade policy
strategies" (Ruigrok and Van Tulder 1993:195-196).
A regime of "industrial democracy," which often develops in
government-dominated industries such as telecommunications, defense
industries, and utilities, implies barriers to the transfer of
production abroad and instead relies on exports as the dominant
form of internationalization. "If faced with severe import
competition, government will be inclined to establish production
cartels, provide subsidies, or take antidumping measures" (Ruigrok
and Van Tulder 1993:198).
"Fordist" firms, or vertically-integrated, mass-production
firms, try to establish an international (intra-firm) division of
labor and are therefore interested in a free trade system regulated
by a multilateral trade regime.
Companies adopting a "Toyotist" concept of control, by
instituting networks of dependent specialized suppliers, a
dependent local government, etc., try to keep foreign markets open,
if necessary via unilateral trade policy preferences. If they
internationalize, they follow a pattern of "glocalization" rather
than "globalization." That is, they try to insert a complete
production process (including captive suppliers) into a foreign
context (without a complex inter-continental, intra-firm division
of labor), and they also try to serve entire regions from the
facilities in the country where the investment is placed. Once
installed in all major regions, the free trade orientation will
give way to more pragmatic considerations (Ruigrok and Van Tulder
1993:200).
This analysis links developments at the firm level to trade
policy orientations, though the postulated relationships still need
[Page 29]
empirical verification. If the relationship is strong, changes in
company structure and strategy could be used as a kind of "early
warning indicator" for changes in international trade policy. It is
not certain, however, that the trade policy establishment will
always react to changes in company structures and strategies, in
any case not in all sectors. Some sectors have much better access
to the policy establishment than others, and some changes might not
be translated into policies because they do not correspond to the
overall ideological orientation of the policy makers.
III.5. Different Cultures
With the end of the Cold War, one important disciplining force
has gone which in the past placed limits on the intensity of
conflicts occurring among capitalist countries. Since capitalism is
no longer challenged by socialism, however, more attention is being
paid to the continuing differences that exist between different
types of capitalism which lie at the heart of renewed international
conflict. This has increased awareness that, in spite of all the
possible harmonizing pressures of international capitalism, quite
different traditions have developed in the capitalist world.
Namely, different sets of institutions with different accompanying
ideologies are tending to reproduce themselves.
A good example of such an analysis is Albert (1991), who
draws a distinction between an Anglo-Saxon and a "Rhineland"
version of capitalism (the latter being somewhat similar to the
Japanese one). The following table summarizes the major differences
which he describes:
[Page 30]
Differences between Anglo-Saxon and Rhineland Capitalism
according to Michel Albert
_____________________________________________________
| | Anglo-Saxon | Rhineland |
| | Capitalism | Capitalism |
|_______________|____________________|_______________|
| Income | high salary | small salary |
| differentials| differences | differences |
|_______________|____________________|_______________|
| Social | little social |well elaborated|
| Security | security | system of |
| | |social security|
|_______________|____________________|_______________|
|Recruitment | hire and fire |conservation of|
| | |"human capital"|
|_______________|____________________|_______________|
|Type of work | highly Taylorized | more |
| | |versatile jobs |
|_______________|____________________|_______________|
|Source of |stock exchange more |banks more |
| capital |important than bank |important than |
| | | bank |
|_______________|____________________|_______________|
|Attitude | borrowing is | saving is |
|toward credit | stimulated | stimulated |
|_______________|____________________|_______________|
|Regulation |comparatively little|more intensive |
| | regulation | networks of |
| | | regulations |
|_______________|____________________|_______________|
One set of institutions continually fosters individualism,
while the other is based upon stronger notions of solidarity. The
different attitudes have a direct impact upon negotiations on
international institutions. Where one government opts for greater
state intervention to achieve more egalitarian structures, this can
[Page 31]
easily be interpreted as market interference by another. Where hire
and fire attitudes prevail, companies will be less inclined to
invest in their employees. Where the stock exchange plays a more
important role than banks, a short-term perspective on profit
making will prevail. Where borrowing is systematically stimulated
rather than saving, it is no wonder that large public deficits
occur.
Different basic values are not independent from the class
structure that they produce, and that in turn reproduces them.
Large social differences and large-scale social segregation
reproduce strong individualism, which in turn tends to exacerbate
large social differences. These different attitudes thus tend to
perpetuate themselves, staying with us and shaping the experiences
and social values norms of future generations.
In concrete terms, they imply basic differences with regard to
the appropriate role of the state and the market. They create the
breeding ground for diverging ideologies which will shape the
perception of policy makers, and which will lie at the basis of
continuous conflict between the United States, Japan and Western
Europe.
IV. Conclusion
On the basis of the considerations presented in this paper, I
expect that future relations between the different trade blocs will
be characterized by "managed rivalry." That is, state intervention
will increase again in the aftermath of neo-liberalism. Different
traditions will assure that state activities take different forms
in the different trade blocs, which will lead to a new generation
of trade conflicts.
However, rivalry will remain contained. International
interdependence has reached such a degree that protectionist
measures not only hurt foreign actors, but increasingly also run
against the interests of some domestic constituencies. As a
consequence, an uneasy balance between liberalism and protectionism
will continue to exist, with the emphasis gradually shifting back
and forth within the different trade blocs.
[Page 32]
REFERENCES
Albert, Michel. 1991. Capitalisme contre capitalisme. Paris:
Editions du Seuil.
Bornschier, Volker. 1994. "Hegemonic Decline, West
European Unification and the Future Structure of the
Core." Paper prepared for the XIIIth World Congress of
Sociology, July 18-23, Bielefeld.
CPB (Central Planning Bureau), 1992a. Scanning the
Future. A Long-Term Scenario Study of the World Economy,
1990-2015. The Hague: Sdu Publishers.
CPB (Central Planning Bureau), 1992b. Nederland in
drievoud. Een scenariostudie van de Nederlandse economie,
1990-2015. Den Haag: Sdu Uitgeverij Plantijnstraat.
Davis, Mike. 1993. "Who Killed Los Angeles ? Part Two: The
Verdict is Given," New Left Review, Number 199, May-June,
29-54.
Garten, Jeffrey E. 1992. A Cold Peace. America, Japan,
Germany, and the Struggle for Supremacy. New York: Random
House.
Junne, Gerd et al. 1993. Structuurverandering in
Wereldhandels-stromen. Final Report on "Changing Patterns
of World Trade" for the Dutch Ministry of Transport.
Amsterdam: University of Amsterdam.
Junne, Gerd. 1994a. "Multinational enterprises as actors,"
in: Walter Carlsnaes and Steve Smith (eds). European
Foreign Policy: The EC and Changing Perspectives in
Europe. London: Sage.
Junne, Gerd. 1994b. "The end of the dinosaurs ? Do new
technologies lead to the decline of multinationals?"
Discussion paper for the workshop on 'Technology, Change
and the Global Political Economy', Barnsdale Lodge,
Rutland (UK), 4-6 May 1994.
Kennedy, Paul. 1987. The Rise and Fall of the Great
Powers: Economic Change and Military Conflict from 1500
to 2000. New York: Random House.
MacNeill, Jim, Pieter Winsemius, and Taizo Yakushiji.
1991. Beyond Interdependence: The Meshing of the World's
Economy and the Earth's Ecology, A Trilateral Commission
Book. New York: Oxford University Press.
Mandel, Ernest. 1980. Long Waves of Capitalist
Development: The Marxist Interpretation. Cambridge:
Cambridge University Press.
Modelski, George. 1978. "The Long Cycle of Global Politics
and the Nation State," Comparative Studies in Society
and History 20: 214-235.
Modelski, George (ed). 1987. Exploring Long Cycles.
Boulder: Lynne Rienner Pub.
Ohmae, Kenichi. 1985. Triad Power: The Coming Shape of
Global Competition. London: Collier and Macmillan.
Roobeek, Annemieke. 1990. Beyond the Technology Race: An
Analysis of Technology Policy in Seven Industrial
Countries. Amsterdam: Elsevier.
Ruigrok, Winfried and Rob van Tulder. 1993. The Ideology
of Interdependence: The Link Between Restructuring,
Internationalization and International Trade. Ph.D.
Dissertation. Amsterdam: University of Amsterdam.
Sandholtz, Wayne et al. 1992. The Highest Stakes: The
Economic Foundations of the Next Security System. New
York: Oxford University Press.
Scherrer, Christoph. 1994. "The Commitment to a Liberal
World Market Order as a Hegemonic Practice: The Case of
the USA." Paper prepared for the XIII World Congress of
Sociology, Bielefeld, July 18-23.
Schwartz, Peter. 1991. The Art of the Long View: Planning
for the Future in an Uncertain World. New York: Doubleday.
Thurow, Lester. 1992. Head to Head: The Coming Economic
Battle Among Japan, Europe, and America. New York: Warner
Books.
United Nations. 1991. World Investment Report: The Triad
in Foreign Direct Investment. New York: United Nations
Centre on Transnational Corporations, ST/CTC/118.
Van der Pijl, Kees. 1984. The Making of an Atlantic
Ruling Class. London: Verso.
Van der Pijl, Kees. 1989. "Ruling Classes, Hegemony, and
the State System: Theoretical and Historical
Considerations," International Journal of Political Economy,
19,3:7-35 (Fall).
Van der Pijl, Kees. 1992. Wereldorde en Machtspolitiek.
Visies op de internationale betrekkingen van Dante tot
Fukuyama. Amsterdam: Het Spinhuis.
Van der Wurff, Richard and Ans Kolk. 1993. Wereldhandel
en Milieu: Vier scenario's voor 2018, Deelstudie
uitgevoerd in het het kader van het onderzoeksproject
"Structuurveranderingen in Wereldhandelsstromen" in opdracht
van het Ministerie van Verkeer en Waterstaat en de Stichting
Coordinatie Maritiem Onderzoek. Amsterdam: University of
Amsterdam.
Van Ginneken, Jaap. 1993. Rages and Crashes. Over de
onvoorspelbaarheid van de economie. Bloemendaal: Aramith
Uitgevers.
Wallerstein, Immanuel. 1980. The Modern World-System II:
Mercantilism and the Consolidation of the European
World-Economy, 1600-1750. New York: Academic Press.
|
