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Challenging Competion Thomas Friedman is an outspoken proponent of Globalization and in the interest of justice we will allow him to define it: …is not static, but a dynamic ongoing process: globalization involves the inexorable integration of markets, nation-states, and technologies to a degree never witnessed before--in a way that is enabling individuals, corporations, and nation-states to reach around the world farther, faster, deeper, and cheaper than ever before, and in a way that is also producing a powerful backlash from those brutalized or left behind by this new system. (Friedman 2000:9) And Friedman also defines the fundamental motivation of Globalization as: …The driving idea behind globalization is free-market capitalism—the more you let market forces rule and the more you open your economy to free trade and competition, the more efficient and flourishing your economy will be… globalization has its own set of economic rules—rules that revolve around opening, deregulating and privatizing your economy, in order to make it more competitive and attractive to foreign investment. (Friedman 2000:9) …if globalization were a sport, it would be the 100-meter dash, over and over and over. (Friedman 2000:12) To summarize Globalization is the integration of national economies into an eventual evolution into a single global market. It is also the destruction of state power and control in favor of market control to gain competitive edge. The driving force behind this system is competition. The best way to win in this system is to be as competitive as possible. Positivism is the epistemological approach to Globalization. Globalization has its roots in Rational Choice theory which is founded in Positivism. Positivism is grounded in subjective rationality. Subjective rationality is a theory of epistemology arguing that in the world there are only subjects (people) and objects (things outside your mind including other people) and that a subject encompasses rationality as well. Therefore, the object is not knowable except through the rationality of the subject. Classical Positivists embody this in that they believe that the only true knowledge that can be obtained is through empirical investigation. Empirical investigation requires observable and repeatable results of phenomena regardless of who the researcher is. Since the facts being reported can be repeated, are observable, and not dependent on the identity of the researcher, they are considered to be positive in that they stand on their own. (Hollis & Smith, 1991) Positivists argue this is the best way to research because by its nature the facts obtained are value free and unbiased by the researcher. It is important to note that these are the only facts that matter to Positivists, therefore, the metaphysical and spiritual are treated as if they do not exist and do not affect the object. Contemporary research in International Relations has sought to apply Positivism previously reserved to the natural sciences to the social sciences. Neufeld describes it this way: “Present day positivism comprises three basic tenets: (i) truth as correspondence, (ii) the methodological unity of science, and (iii) the value free nature of scientific knowledge.” Truth as correspondence is the ideal that truth should be universal regardless of the time, or researcher the facts will remain true. Objectivity remains the goal as it is acknowledged that the subject (social scientist) and the world (object) are separate. The methodological unity of science refers to the desire to utilize the scientific method in the social science, to find patterns in research. Value free nature of scientific knowledge is self explanatory, research should be limited to the positivist method and study objective phenomena rather then the normative. This formed the basis of Rational Choice theory. Rational Choice theory starts with the fundamental assumption, that all individuals are self-maximizing and rational. Simply, individuals will always do what is best for them via a cost benefit analysis depending on their level of information. Using this ideal it is then possible to extrapolate what individuals will do when exposed to various stimulus. This creates a means of making social science positivist, by assuming that self-maximizing rational individual is a positive statement. Built on top of the ideal of Rational Choice is Public Choice. This is the idea that organizations and states made up of individuals will also be self-maximizing and rational. With this premises it is once again possible to extrapolate the future actions of states and organizations when dealing with different situations. Globalization then is based on Public Choice theory. Globalization is based on the ideal that states are self-maximizing and rational. Given that being more competitive is a good thing and will make you more successful, then it is obvious that states will always strive to be more competitive. Therefore, as a direct result of this competitive drive, states will be more successful. Because, this line of logic is based on positivism it is argued that the beneficial quality of competition is a positive fact since it is built on the fundamental positive fact that individuals are self-maximizing and rational, as a result so are states. Obviously, every individual cannot achieve self-maximization and this is where competition is created. Krugman, takes a very different stance on the importance of competition to Globalization in his paper titled, “Competitiveness: A Dangerous of Obsession”. To do this Krugman relies on constructivism as opposed to positivism. Constructivism like positivism is a subjectivist theory, where the subject finds definition of the chaos of the world by applying its own rationality. Constructivism builds on this, by saying that human institutions are really just agreed upon ideals between people (Teschke & Heine, 2002). Money is an example of this, if everyone in a society did not agree that money was a legitimate way to pay debts, then money would have no value, since its value is dependent on the agreed upon ideal of its value. To take this idea further into International Relations, it is clear that states and international bodies are also bodies composed of agreed upon ideals of people. Teschke & Heine, put is this way, “historically varying forms of conflict and cooperation are predicated upon inter-subjectively constructed institutions.” The word commonly used to describe these phenomena of shared ideas is ‘inter-subjectivity'. According to subjectivists reality is ordered by the subjects' rationality, when subjects agree on ideas or ideals, this is an instance of ‘inter-subjectivity'. An easier way to think of this is as a shared point of view. Teschke & Heine explained it as, “The very possibility of if successful international institution building rests on collective acts of intentionality, that shape converging fundamental norms and values among participating actors. Shared norms and values point to successful processes of communicative agreement that constitute the differentia specfica of the social world.” It is through these common ideals that social institutions arise from. From this rules are created which are critical parts of any institution as Teschke & Heine argue, “rules provide systems of meaning that act as frames of reference for collectively binding and norm-governed action.” The United Nations is such an institution founded on the ‘inter-subjectivist' ideal of world peace and global community. With that inter-subjective ideal to bind them, they created a system of rules to solidify and normalize their institution. This is critical for institutions since political authority is derived from stable and consensual communities of value. (Teschke & Heine, 2002) This is in direct contrast with positivism that does not acknowledge ‘inter-subjectivity' that is considered meta-physical and as a result an invalid form of knowledge. Positivists also do not study social science from the stance of common ground between people, they stick with the rational choice approach of extrapolating the decisions of one to many. Positivists also do not see rules as a means of maintaining and creating institutions, instead they are stimuli that effect individuals, or more simply variables on the subject. Krugman begins his critique of competition by highlighting the fact that competition is an inter-subjective fundamental component of globalization. Specifically Krugman says globalization assumes, “that a country's economic fortunes are largely determined by its success on world markets”. Corporations are built and compete on the premise that their success on the global market will make or break them, therefore many people assume that countries are like corporations in this way, i.e. another inter-subjective component of globalization. Krugman, points out however that there are serious fundamental differences between a corporation and a state. Perhaps, most obviously, while corporations can go bankrupt due to poor competitive performance, states cannot ever go bankrupt. This creates a paramount difference between that two in that a fight survival of the corporation is much more dire then the mere marginal improvement of a state's economy. Krugman quotes, Laura D' Andrea Tyson of the Council of Economic Advisors Chairman on competition, “our ability to produce goods and services that meet the test of international competition while our citizens enjoy a standard of living that is both rising and sustainable.” Krugman argues in response, what if you have a very nationalistic economy that relies very little on trade? Then the most influential factor for raising the standard of living is productivity growth, because changing the exchange rate is all it will take to get a positive balance of trade which has a very limited impact on the domestic population as a while. Even in the United States the leader and standard bearer of globalization, according to the CIA world fact book 2002, U.S. exporters were only 15% of GDP this means 85% of the goods and services in America were consumed in America ! This means that while a corporation cannot depend on its labor force to consume 85% of what it produces, a country can, making it less reliant on outside dependency for consumers and as a result does not need to be as competitive. On the other hand though according to Krugman, if the state is dependent on trade and severely devalue their currency to sell exports, it will damage its buying power to a degree that will hurt the standard of living. Krugman then argues that most important factor in raising the standard of living is to raise domestic productivity, because statistics show that as domestic productivity so does the standard of living. This is an important point in that it means that domestic factors play a far greater role in raising the standard of living then international competition. Another way countries differ from corporations is that trade is not a zero sum game. Krugman uses the example that if CocaCola gains market-share, this is at the expense of Pepsi. However, this is not the case for states, productivity gains can be made domestically without effecting international markets, because the majority of what is being produced in a state is consumed by its own domestic population. Using Constructivism, Krugman was able to demonstrate that the inter-subjective Ideal of competition is not well founded. In fact, it could be ultimately detrimental to the domestic population of a state, if policy is decided on the basis of what is best for competition rather then what is best for raising domestic production. |