There has been a powerful academic debate about how to describe globalization. The debate began in the late 1980s, and has moved through two stages in a short time. The first began when politicians, and the media, discovered the reality of globalization. It was seen as a vast all-conquering monster, which would swallow up civil society, the welfare state, and the nation-state. Capital, culture, and communications would erase what had been accepted for decades, if not centuries, and the "false dawn" (Gray 1998) of globalization would herald the destruction of much of our civilization. The response by many academics has been that this literature is crude and uncritical and generates a powerful mythology. They argue that the mythology of business globalization is not to be accepted at face value. From 1995 to 2000, a second wave of academic debate debunking globalization developed, which spelled out these reservations about the use of the term as a world-conquering fact of our times.
The economic arguments are complex, but can be summarized. First, it has been argued that high levels of social expenditure on the welfare state correlate positively (in regions such as Scandinavia) with competitive advantage in the world economy, so it is not true that globalization means the end of the welfare state. There is no reason to expect deeply rooted domestic institutions to be radically altered because they adversely affect the profitability of firms. This is particularly true of the welfare state, which remains extremely popular among most citizens of the OECD. Second, productive capital and foreign direct investment (FDI) are not as mobile as had been thought. Such movement occurs in certain cities and industries, primarily in the great trading blocs, although here too national boundaries remain important. Domestic producers, especially in the United States and Asia, still largely satisfy domestic demand. Indeed, FDI flows as a percentage of gross domestic product in many advanced industrial countries are no greater now than they were during the period 1900-14. Thus European financiers and industrialists, or their American and Asian counterparts, have done no more than return to the sort of economy common before World War I, with foreign imports, exports, and capital investments again becoming a central part of the economy. The two differences are the much smaller role that migration plays now, compared with the beginning of the twentieth century, and the far greater role of international financial speculation today. The final factor is that productive capital continues to be highly aware of national economic regulation, as it always has been, even given the withdrawal of the state from many areas of economic life.
The counter-argument spells out the falsity of the first-wave argument in the economic debate about globalization. Indeed, many commentators point to the patterns of trade before 1914 as a much more integrated global system, where labor was free to move around the globe, bringing millions through Ellis Island off New York as immigrants to the New World. Keynes, in a well-known passage, reflects on the ease of travel and investment of capital, and the speed of communications, in the period 1900-14. While globalization is a reality, it is also far less of a new phenomenon than we might think.
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