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Volume 3, Number 2 Book Review
Barbara Stallings, ed. GLOBAL CHANGE, REGIONAL RESPONSE: THE NEW
INTERNATIONAL CONTEXT OF DEVELOPMENT. New York: Cambridge
University Press, 1995. xviii + 410 pp. ISBN 0-521-47227
$59.95 (hardcover); ISBN 0-521-47806-5 $17.95 (paper).
Reviewed by Gerardo Otero, Department of Sociology and
Anthropology, Simon Frasier University, Burnbay, British
Columbia, CANADA
Barbara Stallings and collaborators have produced an extremely
useful synthesis of developments in the world economy over the
past 15 to 20 years, with thoughtful analysis and generous
statistics to support it. Five economic processes are seen to
constitute the main context for international development in
GLOBAL CHANGE, REGIONAL RESPONSE. The first two -- the end of
the cold war and new relations among advanced capitalist powers
-- constitute the structure for the new global system; while
increased globalization of trade and production, shifting
patterns of international finance, and new ideological currents
that revolve around market-orientation constitute the main links
that unite core countries and their peripheral areas. Defining
development as economic growth plus equity, the authors argue
that the developing country hierarchy that emerged in the 1980s,
with the conversion of a handful of East Asian countries into
newly industrialized powerhouses, was closely associated to this
international context. As well, because developing countries were
associated predominantly with one or another of the dominant
powers of advanced capitalism, the United States, Japan, or
Europe, such regional links also had major consequences for
development. Indeed, a premise of this book is that the Japanese
model of development is more conducive to bring forth rapid
growth with equity than that promoted by the United States and
the international financial institutions.
With the collapse of state socialism, cleavages in the
world economy turned toward differences in the styles of
capitalism and the growing differences among the United States
and its Japanese and European rivals. The latter two seemed
clearly more dynamic in productivity and growth. In the case of
Japan, its savings and investment propensities, time horizons,
the collaborative relationships between public and private
sectors as well as between labor and capital, and views about
security and equality, made it evident that capitalism is not
the same across the globe.
This book's detailed analysis of the effects on
developing countries of belonging to one or another region of
the world is quite revealing. While Africa has been largely
detached from the world economy and runs the risk of
marginalization, Asian countries have been successfully
integrated to the Japanese economy in ways that have allowed
those countries to experience substantial economic growth and
equity. Latin America is somewhere in between, with higher
levels of integration than Africa's.
[Page 347]
Transnational corporations have become the main agents
in the globalization process through production and trade, while
new capital flows are dominated by various economic actors. These
include the international financial institutions, (IFIs, namely,
the International Monetary Fund, or IMF; and the World Bank),
owners of direct foreign investment and portfolio capital, and
governments controlling IFIs and official development aid from
advanced industrial nations. Where direct foreign investment
(DFI) predominates as the form of capital flow, there may be an
overlap with the first link of an integrated production and
trade. One problem for developing countries is that capital
flows have tended to concentrate among advanced industrial
countries, with the proportion increasing from 58% in the early
1980s to 86% at the end of the decade.
But some foreign capital was still flowing toward third
world countries. Put schematically, such capital flows changed
during the 1980s from private loans to public loans and direct
foreign investment. Latin America saw an increased flow
dominated by portfolio capital, Asia by direct foreign
investment, and Africa by grants and concessional loans. The
type of foreign investment flowing into developing countries had
a major impact on their prospects for development. Even though
DFI was seen as the worse type of international capital in the
early 1970s, at the climax of the import substitution
industrialization policies in Latin America, there was a major
reassessment after the debt crisis. This was due to the fact
that DFI has a much longer term outlook than portfolio capital.
By contrast, portfolio capital investments are made with short
term views, may cause appreciation of the currency, and can
leave the country as soon as they entered.
Regional responses to the international context for
development have shaped the impact of global variables. For
Latin America, the combined decline of Soviet and European
support with increased U.S. direct foreign investment has lead
to increased U.S. hegemony. By the 1980s this has meant an
increased influence of neoliberalism in shaping economic policy,
which has also resulted in slow growth and greater inequality. In
each third world region there has come to prevail a different
meaning of market orientation. While in Asia such orientation
has been shaped by Japanese capitalism, which includes a
substantial state intervention and protectionism of key sectors,
Latin America and Africa have followed the Anglo-U.S. lead of
capitalism, which has involved massive privatizations and an
almost indiscriminate market opening to foreign competition.
Increased economic importance of Japan and the European
Union combined with a decline of U.S. military importance have
led to two competing views on how the new global economic system
will work. One emphasizes multilateral convergence and trilateral
management, while the other stresses regionalization into three
competing blocs. This book argues that a combination of traits
is materializing, simultaneously involving conflict and
cooperation, divergence and convergence.
[Page 348]
Barbara Stallings's concluding chapter provides a most
interesting elaboration of the mechanisms of influence of the
new global economic system in terms of relationships among third
world countries and their respective core countries, as well as
among the triad of core blocs. By building a
"tetrahedron" of such relationships, she offers an
analysis based on figures of trade, direct foreign investment,
and official development assistance. Trade links are strongest
in the countries led by Japan and the United States but weak for
Europe. Trade by multinational corporations data is fragmentary,
but evidence suggests that an increasing amount of international
trade is carried out within firms. This in turn suggests that
intrafirm trade raises barriers to entry, which increases the
value for developing countries to establish links with
multinationals as a way to obtain access to markets.
As mentioned previously, there is an enormous disparity
in the distribution of direct foreign investment in the
tetrahedron. Japan comes out as the country that sends the
largest proportion of its direct investment to the other two
core economic regions: 47% to the United States and 23% to
Europe. The United States sends 36% to Europe but only 2% to
Japan, while Europe sends only 13% of its direct foreign
investment to the United States and about 1% to Japan. This
means that Japanese investment is almost all financed
domestically through its high savings rate, while European
countries invest in countries within their own region. The
United States, by contrast, has come to rely increasingly on
outsiders, which introduces a source of international
instability and friction.
Japan also comes out as the most generous of the three
core regions in terms of official development^@^@^@^@^@^@?@nce,
sending 62% to its integrated countries in Asia, while Europe
sends 47% to Africa, and the United States only 12% to Latin
America. To the extent that these flows are regulated by IFIs
such as the IMF and the World Bank rather than governments, they
have a dramatic impact in terms of imposing neoliberal ideology.
More generally, this book holds the hypothesis that "the
policy packages (models) selected by third world countries will
resemble those advocated by the countries that buy their goods,
supply their finance, and provide their ideological
guidance" (365).
Prospects for developing countries will similarly vary
according to how they each responds to global trends. In Asia,
the NICs are now major players and, as a group, they already
exceed Japan's investment in other Asian countries, although
they still lag behind investments in other countries and
technological capacity. In all likelihood, though, they will
play a major role in integrating China and Indochina into the
Asian regional economy. The situation for Latin American
countries is much more heterogeneous in terms of their potential
for hemispheric integration, and it also depends on whether the
U.S. Congress will agree to preferential trade relations with
more of its southern neighbors beyond Mexico. Finally, there is
a strong concern that Africa will be further displaced by the
European Union in favor of Central and Eastern Europe. In the
long run, a strengthened South Africa might provide an important
growth pole capable of integrating some of the Sub-Saharan
countries, but this may be well into the future. In addition,
argues Stallings, "parts of South Asia, the Middle East,
and even Latin America could also end up in this group" of
marginalized states (386).
[Page 349]
This book represent a great advancement in the
description and explanation of global economic processes, but
its focus tends too be almost exclusively economic. The editor
of this collection was explicit in her introduction about
important aspects that were excluded from analysis:
democratization, ethnic and religious conflicts, and
environmental problems. Obviously one cannot expect that all
relevant aspects of development will be treated in a single
volume. But my critique centers not so much on the absences but
in the selected approach to dealing with the problems addressed.
Throughout the book it is assumed that states are the only valid
actors in making policy choices. It is only in the last page of
the book that the editor acknowledges that some bottom-up
approaches may emerge in searching for alternative development
paths. Even on this point, though, the implication remains that
states from developing countries will be the ones looking, for
instance, for alternative development partners. The book does
not take into account that the social consequences of
neoliberalism are bringing forth new social forces emerging from
civil society, rather than the state. Invigorated social
movements may thus become effective forces which states will
have to reckon with in formulating policy. Neoliberalism is
becoming increasingly contested and the social and political
problems it is causing may determine that its days (or years?)
are counted.
This critique, however, shrinks when compared to the
accomplishments of GLOBAL CHANGE, REGIONAL RESPONSE. This book
will become standard reference for any serious student of
development in the age of globalization. It is a must-read for
specialists, and it could be fruitfully used in upper division
and graduate courses of development economics and economic
sociology. I give it my strongest recommendation.
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