Global political economy, globalization, commodity frontiers and the Great Recession

Transcription

1 Global political economy, globalization, commodity frontiers and the Great Recession

2 Economics & Political Economy Political economy can be understood in two ways Standard political economy Structural political economy Operation of the market Power over & in the market Production, supply, demand, profit, etc. Rules, regulations, laws, charters, influence Strategy within the market to profit Strategy for structuring the market to your advantage

3 Globalization involves Compression of space and time Broadening & deepening of capitalism Hyperindividualism, consumption, the body Self-regulation & self-discipline Disruption of social hierarchies

4 The Great Recession is the current global economic downturn

5 Life on the Global Commodity Frontier A commodity frontier involves the marketing of things that have never before been sold like genes or vital organs for profit & accumulation

6 Snow Crash

7 As with all utopias & dystopias, Snow Crash is an allegory/ parable is about the (then) present when it was written ( ), and not about a real or imagined future.

8 What is Snow Crash about? Globalization & its consequences Fin de siècle capitalism The fragmentation of states and transformation of sovereignty The end of Authority and centralized regulation The Information Revolution of the 1980s The rise and spread of infections and hysterias Commodification of everything, including the body World War in a world without states

9 Background/context

10 There s only four things we do better than anyone else music movies microcode (software) high-speed pizza delivery (p. 2). Now a Burbclave, that s the place to live. A city-state with its own constitution, a border, laws, cops, everything (p. 6).

11 Raven is a nuclear power The United States hardly exists There are only sovereign franchulates & individuals

12 Approximate real value of $100

13 Everything is for sale, everything is a commodity Privatization & sovereignization of everything

14 But who makes the rules? What are the rules? Are there any rules? And what if someone tries to harm or control everyone else?

15 Information is the ultimate currency What is it? From where does it come? What is its value? Who controls information controls the world

16 When I have a programmer working under me who is working with that information, he is wielding enormous power. Information is going into his brain. And it s staying there. It travels with him when he goes home at night. It gets all tangled up into his dreams, for Christ s sake. He talks to his wife about it. And, goddam it, he doesn t have any right to that information. If I was running a car factory, I wouldn t let workers drive the cars home or borrow tools. But that s what I do at five o clock each day, all over the world, when my hackers go home from work (L. Bob Rife, p. 116)

17 Snow Crash is biological and informational. It is a nuclear bomb in an informational world war. (It is also related, of course, to HIV/AIDS.)

18 What does World War look like in a world without nation-states? Reality Good Guys want you to control yourself: Hiro Protagonist, Y.T. Mr. Lee, Ng, Uncle Enzo Metaverse Bad Guys want to control you: L. Bob Rife, Reverend Wayne, Raven, the Feds

19 Snow Crash leads us to the second half of the course and quarter Construction & organization of the global economy and global political economy The dialectics of globalization Global regulation from above and below (including international law) Civil societies, social movements and social change What are we to do?

20 Global Political Economy: In the case of Pietra Rivoli s T-shirt, there are two parts to the economy Scoring in the game : Comparative advantage, int l division of labor, free trade Rules of the game : Regulation, standards, subsidies, Neo-classical economics: Issues of material inputs, supply transport, labor, technology, manufacturing, transport, printing, shipping, wholesaling, demand, retailing, remaindering, used clothing market. Political economy; Issues of rules & regulations, subsidies, tariffs, trade barriers, investment, terms of loans, patents, copyrights, enclosures, exclusion, etc.

21 T-shirts are made everywhere: How did this complex global division of labor come into existence? It s not really new

22 Evolution of contemporary global economy Origins in the Bretton Woods regimes and U.S. military assistance to allies Cold War containment was both an economic and military project U.S. economy became both an engine of global growth and controller of reserve currency *Regulation as used here comes from French regulation theory It includes rules, laws, customs, but has to do with managing society Systemic regulation * became necessary to stabilize the American political economy It is something like the regulator on a turbine or a boiler keeps it going at a specific speed.

23 The information revolution was tightly linked to U.S. Cold War policies The first computers and transistors were military projects

24 HP-35, 1972, $395 TI SR-50, 1973, $150 HP 11C, 1982, $135 HP 10S, 2007, $15 $400 (1972$) = $1,933 (2005$) $15 (2005$) = $3.10 (1972$) HP 35S, 2007, $60 The cost of information processing has dropped radically since the 1950s

25 Globalization is then a consequence of several phenomena since the 1970s End of the Gold Exchange standard Declining profits Inflation Information Revolution High interest rates U.S. Rust Belt Global sourcing Cheap imports

26 Neo-liberal globalization is one form among many: it is the discursive frame through which globalization is made material Neoliberalism is a philosophy in which the existence and operation of a market are valued in themselves, separately from any previous relationship with the production of goods and services, and without any attempt to justify them in terms of their effect on the production of goods and services; and where the operation of a market or market-like structure is seen as an ethic in itself, capable of acting as a guide for all human action, and substituting for all previously existing ethical beliefs. Paul Treanor at:

27 The New Int l Division of Labor is a concomitant of globalization Compression of space and time makes it easier to move long distances and to learn about far away events Increase and acceleration of flows leads to Growing & more rapid movement of people, goods, bads, capital, pollution across borders & through societies Changes in social orders and their regulation replaces management of political economy by separate states with a form of statecorporate hybrid system of governance Destruction of old practices and customs through Churn eliminates some forms of production and ways of life and forces adaptation to new ones

28 Globalization is facilitated by and linked to Industrial Revolutions Under capitalism, those with funds can privately invest in and control the means of production (technology) Goods are manufactured by labor in certain ways and locations under the eye of capital, leading to specific social relations of production Households, families, social relations are organized so as to offer labor for sale and facilitate the survival of the household But capital is always seeking ways to make and sell new goods, organize production more efficiently, lower costs of materials and labor, increase profit margins

29 There have been three industrial revolutions since 1700s ~1800: Development of water and steam power led to rise of industrial cities and semi-skilled working class ~1900: Development of electrical power led to rise of mass production, mass consumption, Fordism, and skilled labor class ~2000: Development of bio-info-nano technologies is leading to rise of knowledge-based commodification, production, consumption and educated working class

30 Old and new international/global divisions of labor illustrates changes in the global political economy Old int l div. of labor was production based New int l div of labor is consumption based Find optimal combination of factors of production and country site for maximizing return on investment Find optimal combination of design skills, assembly sites, tax and social costs, capital investment, shipping and consumption for maximizing return on investment

31 Contemporary globalization has been facilitated by a shift in industrial organization, from Fordism, based on metal-smashing, to post-fordism, based on information commodification.

32 What is a commodity? What is commodification? A commodity is something sold in large quantity There must be a demand for it. It must have a price in the market Commodification involves: Turning something into a commodity Creating demand for a good or service Ensuring that demand continues, either through replacement or upgrading Computers were once specialized devices; today, they are commodities

33 A commodity frontier involves: Finding new goods for which a demand exists or can be created Commodifying new products for profit If possible, establishing monopolies on new goods through property rights

34 Some commodities last a very long time 1968 Volvos which tends to limit the market for new sales and can lead to overproduction Hence, commodity frontiers can involve redesign, new features, sex appeal, all in order to get a buyer to dump the old and buy the new. Planned or intentional obsolescence is another way to maintain a commodity frontier: new computers run only new software which requires prodigious quantities of memory not available on older models.

35 The trick with commodities is to make things with no apparent value both scarce and costly Create demand for new products, e.g., MP3 players Commodity frontier relies on the creation of scarcity Privatize a public resource through enclosure, e.g., pollution permits Develop new services that people seek, e.g., medical interventions If you can create a monopoly, even for a limited amount of time, you can generate windfall rents on the good or service

36 Private property (PP) is at the heart of capitalism: With any new product, it is important to establish proprietary rights John Locke Improving nature through labor entitles one to ownership Returns from property encourage effort to be more productive Milton Friedman Kenneth Arrow Only private property provides returns required to foster individual initiative and invention If "information is not property, the incentives to create it will be lacking. Patents and copyrights are social innovations designed to create artificial scarcities where none exist naturally... These scarcities are intended to create the needed incentives for acquiring information. (p. 125, in: "The economics of information: an exposition," Empirica 23, #2 (1996): )

37 Information and knowledge can be transformed into new commodities, to be bought and sold Consumer preferences Segmented markets Software revisions DNA Organ trade

38 Intellectual Property Rights From the WTO web site on TRIPS: Intellectual property rights are the rights given to people over the creations of their minds.

39 Intellectual property rights (IPRs) create private property, scarcity, monopoly, and incentive or so it is said which allows owners to reap appropriate profits IPRs are title to forms of knowledge that prevent non-owners from use without payment or license Trademarks Patents Copyrights

40 What are the effects of IPR monopolies? Owners of IPRs enjoy a monopoly for a specified period of time Others must buy a license and pay royalties to use or produce the good The high costs of some innovations are impossible for the poor to pay Monopoly prices may make some goods inaccessible to the poor New technologies remain under control of corporations in rich countries Poor countries have access only to older generation technologies Power relations are maintained via the control of knowledge and goods Open-source intellectual goods are faced with a restrictive environment

41 Historically, IPRs were granted nationally One had to apply for a patent or copyright in every country Failure to patent meant your book or invention could be pirated Paris Convention of 1882 est. uniform int l patents Berne Convention of 1886 est. uniform copyrights Until well into the 20 th century, the U.S. was a signatory to neither

42 Sometime during the 1960s and 1970s, the economic potential of technological and biological patents became of central concern to the U.S. government TRIPS (Trade-Related Aspects of Intellectual Property Rights) was a political and social innovation by the United States to enable corporations to assert control over products S/he who can establish binding rules of the global political economy can do so to his/her advantage Trade-related Intellectual Property & Services (TRIPS) was the brainchild of U.S. govt. & pharmaceutical entrepreneurs TRIPS sets minimum standards for protection of intellectual property, which WTO members must follow WTO Dispute Resolution System as well as national courts can enforce IPRs under the terms of TRIPS

43 New commodity frontiers are being explored in knowledge, culture, and the body Knowledge Software, biotech, nanotech, consumer preferences, personal data Culture Music, media, dress, food, lifestyles, identities, living spaces, religions, travel Bodies Genetic modifications, body modification, organs, appearances, sex tourism & workers

44 The Great Recession: Causes, Consequences, Implications Savings glut or spending spree?

45 Hypothesis #1: Asian countries have been hoarding dollars to avoid another financial crisis like 1997 Asian economies have been exporting to the U.S. market much more than importing from the U.S. U.S. consumers happily bought cheap goods, especially from China Rather than revaluing their currencies or inflating their own economies, they have been buying U.S. Treasury bonds This has kept U.S. interest rates low and encouraged the housing bubble It also provided cheap money to Americans to buy Asian goods

46 Hypothesis 2: The U.S. Federal Reserve held down interest rates in order to facilitate government borrowing, large deficits & private investment As the dot com bubble burst, the Fed lowered interest rates to sustain economic growth Low interest rates fostered low inflation, rising real estate prices, & growing liquidity U.S. production in Asia provided cheap goods in exchange for dollars Asian countries bought U.S. T-bonds at low interest rates, which provided money for government military deficits CDOs & credit default swaps provided higher returns on money, and the world invested in them These turned out to be unsafe investments, leading to credit crunch, insolvency, retrenchment

47 What happens next? Massive deficit spending to reinflate the economy could lead to inflation Banks have been hoarding cash because the value of securitize paper remains uncertain Businesses have been downsizing because of lower demand and credit crunch People are spending less due to economic & job uncertainties Educational institutions are cutting back due to decreased revenues & funding But it might all just pass