The Challenge of Global Capitalism : The World Economy in the 21st Century

Rating:
Summary: Global Capitalism = American Corporate Imperialism
Review: America began opening it's markets to the world in the 1970's. Since then, as the economy has grown steadily, most Americans have seen stagnant wages and the country has seen an increase in all types of inequality. The idea that the problems can be fixed presupposes a will to fix them. There is none. A palliative to this claptrap would be Chambers Johnson's book Blowback.

Rating:
Summary: Don't fear Globalization, just fix it.
Review: In The Challenge of Global Capitalism Robert Gilpin asserts: "The Achilles heel of the post-Cold War world order is the poor public understanding of economic liberalism, of the functioning of the market system, and of how capitalism creates wealth." That heel was showing in Seattle during the WTO meetings last November and again April 16-17 in Washington when in-your-face, "Globalize-This!" protestors tried to block IMF and World Bank meetings. The protestors would serve themselves and their causes well by reading Gilpin's book, which explains how the global economy has developed over the last half-century to reach the current stage of globalization, defined by Gilpin as "the increasing linkage of national economies through trade, financial flows, and foreign direct investment by multinational firms." Globalization holds great potential for good and presents serious challenges. The principal challenge, according to Gilpin, is to find ways to fortify the international financial system against future threats to global economic stability like those caused by the East Asian economic crisis and resulting global economic turmoil of the late 1990s. Although economists and Western governments are not in agreement on all the specific measures to adopt to prevent international financial crises in the age of globalization, most do expect the IMF to play a necessary, constructive role in behalf of international financial stability.

Gilpin educates about globalization, but not as an apologist. Rather, he is quick to point out globalization's faults and to call for corrective measures. Gilpin insists "the fears arising from globalization must be addressed and must not be rejected out of hand." In the United States this means "solutions must be devised for the problems of growing income inequality, the plight of low-skilled workers, and job insecurity. Reforms should include strengthened safety nets, greatly expanded job training, and a new social contract between capital and labor."

Rating:
Summary: reasonable overview for graduate students
Review: Prof. Gilpin has an excellent reputation in the field of IPE, International Political Economy, and I bought this book on that recommendation.

It gives a good overview of major developments in the globalization and globalization debate in the 90s, with political economy analysis and lots of references to economic analysis. I would recommend it for graduate students, but I must say i was a bit disappointed, not much new or inspirational there. I could read the book very quickly without ever really having to stop and think. Here i think it is only fair to reveal my own background, which is in international economic relations and history of EU integration. Some of his points on the nature and development of the European Union and the economics are frankly quite contestable, especially on the openness or closedness of the EU. The debate on 'Fortress Europe' is really out of date by now ever since it became clear that the Single European Act of 1987 and the '1992' project were not about closing the EU economy, quite the contrary. Do I detect an US bias here?

Yes, as prof. Gilpin points out, economists indeed disagree on many key issues. But you will find that strife also within IPE and political science and in any other social science discipline. So? It reflects the complexity of the issues rather than weakness of the discipline, i'd argue (but then, I would would I, as an economist...) A number of problems in globalization and the international financial system are presented as (relatively) new, but I'd argue that more often than not these problems were always there in history. Also, the point that regionalization threatens globalization is too strong as put there, and not necessarily correct and so clear-cut at all: many regional economic agreements were made in the course of the Uruguay Round trade negotiations at GATT/WTO out of frustration with the slow pace of negotiations and as a 'back-up' plan in case of UR failure. Hardly a threat to globalization which, in any case, throughout history never really progressed smoothly at all.

All that said, the book does do a solid job of pointing out some of the main issues and discussions and it will do well as a topical reference book.

Rating:
Summary: To Free Global Capitalism or Too Free?
Review: The main benefit of this book is to provide an overview of international economic forms of cooperation in the 20th century. That overview is, however, flawed by simplifications that often distort rather than illuminate that historical view. The argument about what must be done next is incomplete and unsatisfying. This book is written for the reader who has some college-level training in economics, and is interested in the interaction between national politics and international economics.

The basic argument is that free markets create excesses which can only be eliminated by international intervention. Such interventions were frequent and reasonably effective during the period just prior to World War I and in the free world after World War II. Professor Gilpin argues that parochial American leadership since the end of the cold war has undermined the international political system for stabilizing the international economy. He calls for stronger American leadership in forging a better coalition with the European Union countries and Japan.

The central thesis of the book is sound in one area: Unrestrained capital flows can create distortions in a world in which everything else (businesses, people, and trade flows) are not nearly so unrestrained. The problem here is that these rapid capital flows out of a country primarily occur because of years of earlier abuses (as I describe in The Irresitible Growth Enterprise) such as speculative spending on infrastructure and investments that are not needed (as happened in several Southeast Asian countries prior to their currency crises in 1998).

Virtually every problem that Professor Gilpin warns against and wants to solve with international authority is really created by poor national economic policies. We would probably create sounder world economic growth if we focused on encouraging all nations to pursue sound lending, appropriate national borrowing, and constructive trade policies (our attention is usually focused on the last). Where governments are weak or corrupt, abuses will always develop and linger. My counterargument would be that strong democracies will almost always pursue reasonably sound economic policies. Solve that problem of governmental form and effectiveness of political process at the national level, and the world economy will be sound. If this counterargument is right, then we may need a second generation of informational efforts in favor of effective democracy, in the same way that one was needed during the cold war through Radio Free Europe and Voice of America.

At another level, much of what is described here as weaknesses and problems can be attributed to weak currencies. Again, informational efforts and research could help countries with weak currencies appreciate how to strenthen those currencies. Certainly, pegging to stronger currencies is proving to be effective in many cases. Pegging to a basket of stronger currencies might work even better. There could even be a role for pegging to sound economic policies to change expectations, as some South American countries have done.

Many of the worldwide risks today relate to the U.S. trade imbalance. In the same way that greater public awareness and an economic boom led to eliminating the U.S. budget deficits, the trade imbalance can be solved. Again, this is a national issue, not an international one. The weak savings rate in the U.S. can also be solved by changing the tax laws, again at a national level.

Basically, the argument I am making is that the markets are having problems because national politics are impinging too much on free markets. In that regard, the free market of ideas that is democracy can then adjust the national politics to achieve more healthy, free market results. The U.S. should lead the way by improving the savings rate and reducing the trade deficit. That would take many of the strains off of the world economy, and create the basis for another ten years of economic boom in the United States. Can our U.S. politicians get together and work on this after the November election? I certainly hope so.

Another area where Professor Gilpin is misfocused is in his concern about the growth of trading blocs like the EU and NAFTA. Actually, these blocs are creating freer markets within them and are an unavoidable precursor to creating the same level of freedom internationally with all countries. If there were three trading blocs in the world, they would simply merge into one at some point. That would be progress.

Complexity science tells us that having many countries pursuing their own ideas of economic prosperity will work better than having an internationally coordinated system. And the more intelligent, responsive, and focused those countries are, the better the whole system will work.

After you have finished reading this book, can you think of other places where we rely on precedent too much in our thinking rather than potential? If you find any of this happening in your own thinking, how can you learn to seek out better solutions rather than simply aping past solutions?

Rating:
Summary: To Free Global Capitalism or Too Free?
Review: The main benefit of this book is to provide an overview of international economic forms of cooperation in the 20th century. That overview is, however, flawed by simplifications that often distort rather than illuminate that historical view. The argument about what must be done next is incomplete and unsatisfying. This book is written for the reader who has some college-level training in economics, and is interested in the interaction between national politics and international economics.

The basic argument is that free markets create excesses which can only be eliminated by international intervention. Such interventions were frequent and reasonably effective during the period just prior to World War I and in the free world after World War II. Professor Gilpin argues that parochial American leadership since the end of the cold war has undermined the international political system for stabilizing the international economy. He calls for stronger American leadership in forging a better coalition with the European Union countries and Japan.

The central thesis of the book is sound in one area: Unrestrained capital flows can create distortions in a world in which everything else (businesses, people, and trade flows) are not nearly so unrestrained. The problem here is that these rapid capital flows out of a country primarily occur because of years of earlier abuses (as I describe in The Irresitible Growth Enterprise) such as speculative spending on infrastructure and investments that are not needed (as happened in several Southeast Asian countries prior to their currency crises in 1998).

Virtually every problem that Professor Gilpin warns against and wants to solve with international authority is really created by poor national economic policies. We would probably create sounder world economic growth if we focused on encouraging all nations to pursue sound lending, appropriate national borrowing, and constructive trade policies (our attention is usually focused on the last). Where governments are weak or corrupt, abuses will always develop and linger. My counterargument would be that strong democracies will almost always pursue reasonably sound economic policies. Solve that problem of governmental form and effectiveness of political process at the national level, and the world economy will be sound. If this counterargument is right, then we may need a second generation of informational efforts in favor of effective democracy, in the same way that one was needed during the cold war through Radio Free Europe and Voice of America.

At another level, much of what is described here as weaknesses and problems can be attributed to weak currencies. Again, informational efforts and research could help countries with weak currencies appreciate how to strenthen those currencies. Certainly, pegging to stronger currencies is proving to be effective in many cases. Pegging to a basket of stronger currencies might work even better. There could even be a role for pegging to sound economic policies to change expectations, as some South American countries have done.

Many of the worldwide risks today relate to the U.S. trade imbalance. In the same way that greater public awareness and an economic boom led to eliminating the U.S. budget deficits, the trade imbalance can be solved. Again, this is a national issue, not an international one. The weak savings rate in the U.S. can also be solved by changing the tax laws, again at a national level.

Basically, the argument I am making is that the markets are having problems because national politics are impinging too much on free markets. In that regard, the free market of ideas that is democracy can then adjust the national politics to achieve more healthy, free market results. The U.S. should lead the way by improving the savings rate and reducing the trade deficit. That would take many of the strains off of the world economy, and create the basis for another ten years of economic boom in the United States. Can our U.S. politicians get together and work on this after the November election? I certainly hope so.

Another area where Professor Gilpin is misfocused is in his concern about the growth of trading blocs like the EU and NAFTA. Actually, these blocs are creating freer markets within them and are an unavoidable precursor to creating the same level of freedom internationally with all countries. If there were three trading blocs in the world, they would simply merge into one at some point. That would be progress.

Complexity science tells us that having many countries pursuing their own ideas of economic prosperity will work better than having an internationally coordinated system. And the more intelligent, responsive, and focused those countries are, the better the whole system will work.

After you have finished reading this book, can you think of other places where we rely on precedent too much in our thinking rather than potential? If you find any of this happening in your own thinking, how can you learn to seek out better solutions rather than simply aping past solutions?

Rating:
Summary: Good start for a basic understanding
Review: This is a higly readable and extensive survey of the major IPE issues facing Americans and the rest of the world today. It successfully analyzes and challenges the economists' arguments about the primacy of economics, or even economic theory, over politics or political science. This is an excellent book for someone just beginning to educate themselves about the nature and state of the international economy. It's significantly broad, but also does an excellent job of explaining complex phenomena. However, I have a few caveats. First, it moves too quickly and soflty over the larger issues, specifically, whether globalization has been helpful or harmful to the world polity. I agree with a previous review that it overestimates the threat of EU protectionism. In fact, he overestimates the threat of protectionism entirely. The greatest threat to, or promise against, globalization is the rise of social protest movements across the globe, being channeled in new ways not seen before. Therefore, I would urge most people to read this book, but then pick up either a contrarian book, like Grieder's One World: Ready or Not, or Globalization by Sasskia Sassen. Avoid Friedman's The Lexus and the Olive Tree at all costs.

Rating:
Summary: Good start for a basic understanding
Review: This is a higly readable and extensive survey of the major IPE issues facing Americans and the rest of the world today. It successfully analyzes and challenges the economists' arguments about the primacy of economics, or even economic theory, over politics or political science. This is an excellent book for someone just beginning to educate themselves about the nature and state of the international economy. It's significantly broad, but also does an excellent job of explaining complex phenomena. However, I have a few caveats. First, it moves too quickly and soflty over the larger issues, specifically, whether globalization has been helpful or harmful to the world polity. I agree with a previous review that it overestimates the threat of EU protectionism. In fact, he overestimates the threat of protectionism entirely. The greatest threat to, or promise against, globalization is the rise of social protest movements across the globe, being channeled in new ways not seen before. Therefore, I would urge most people to read this book, but then pick up either a contrarian book, like Grieder's One World: Ready or Not, or Globalization by Sasskia Sassen. Avoid Friedman's The Lexus and the Olive Tree at all costs.