Day 30 was on November 24 and in this lecture we focused on varieties of capitalism and globalization. The types of capitalism we will cover are Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs)m with globalization we will define what it is, the causes, it relations to the EU, and the political responses to globalization, plus inequality.

First we gotta talk about the “varieties of capitalism” approach. Why? Because it’s in the lecture slides. The VOC approach focused on business firms and their interactions with the government, one another, workers, and sources of finance. That’s it. Okay, moving on to LMEs, they rely more heavily on market relationships. In LMEs firms focus on short-term profits to enhance stock prices. Firms’ relationship to workers is via open markets: there are no strong trade unions, if there are any unions then unionization is low, and there are flexible labour laws. What does “flexible” mean in this context? I don’t know but it doesn’t sound great. Anyway, the government’s role is to ensure proper functioning through anti-monopoly laws and rules governing stock exchanges.

CMEs have conscious coordination among firms, financiers, unions, and government via interlocking ownership and participation. Firms focus on long-term initiatives based on inside information. In CMEs there are stronger unions and high levels of unionization, contrary to LMEs, and worker training is focused within sectors of the economy and within related firms. The government’s role is to negotiate agreements among firms and between firms and unions, and encouraging “insider trading.” Fiscal and welfare policies: less likely to need to pursue fiscal stimulation. Majoritarian democracies tend to have LMEs, while consensus democracies have CMEs.

Globalization is something we hear about everyday every hour, but what is it actually? Globalization is portent of fundamental change and the end of the nation-state: the rapid flow of money, goods and services around the globe will make the nation-state irrelevant (Kenichi Ohmae). The flow of ideas and culture will severely weaken national identity and will require strengthened global governance and a new global civil society. Globalization significantly increased capital mobility. According the critics the state still plays a significant role and skills cluster are not particularly mobile (Iversen and Soskice). What does that mean? I do not know! Globalization may not destroy the state’s response to it depends on the resources at its disposal. A student then asked why would capitalism seek to destroy the nation-state if it needs it to survive; my professor answered that capitalists seek to expand the boundaries of the nation-state rather than destroying it. African countries struggle to attract foreign capital. A majority of foreign investment is due to wealthy nations investing in each other (North America investing in Europe, and vice versa).

let’s look at the causes of globalization. There are two competing approaches: technology and government policies. Technology is said to be the driving force of globalization, government policies made globalization a reality (e.g. WTO, IMF, and WB). Technological changes laid the groundwork for political demands for policy changes but the latter were not inevitable (Iversen and Soskice). There are different implications of the two approaches: if technology is the primary cause then globalization is inevitable and irreversible; if policies play an important role then globalization is subject to change.

So this next section is about globalization and the European Union but its a bit weird in formatting (what it looks like on the lecture slides) so making a nice-ish paragraph will be hard so I’m just going to go point by point:

• Questions about globalization and state sovereignty. • Single European Act of 1987: yielding substantial sovereignty and limiting a single state’s veto power • Maastricht Treaty of 1992: creating Euro; giving up states’ ability to control their own monetary policy and agreeing to limits on their fiscal policy • The Great Recession: disjuncture between the EU’s control of monetary policy and state’s fiscal policy • Debt crises resolved at the expense of debtors and creditors • Preventing future crises: supervision of banks, a permanent fund, etc. • Critics of a common currency: neoliberalism weakening social welfare policies • Brexit

Cool? Cool. Next section: the political responses to globalization. There are two schools of thought, convergence and varieties. The convergence thesis believes that the distinctions among different models of capitalism will tend to disappear. The varieties of capitalism approach goes by the comparative institutional advantage: various institutionalized relationships in each kind of economy are complementary.

Hall and Gingerich tested VOC approaches and found that patterns outlined by VOC approach hold up empirically, comparative institutional advantage holds up (countries conforming to one of the two models with higher growth; countries of more mixed systems with slower growth), and parties in more globalize countries still respond to voters’ opinions and voters still make choices between parties on the left and right economically and believing in the value of their democracy.

Okay that was a bit messy and weird but we’re wrapping up here, so let’s get it done. Globalization and inequality; globalization has freed capital. With this inequality inherently grows under capitalism because the return to capital exceeds the growth of the economy (Thomas Piketty). There is this thing called “The Great Gatsby Curve,” obviously named after the book (I like that book, do you?) and the idea of it is that countries with higher inequality have lower intergenerational mobility; another way of saying this is if the previous generation is poor then the next one will be too.

technological changes put a premium on highly educated workers needed in the new industries. Increased earning gap between the poorly educated and highly educated. Neoliberal policies lead to inequality, policies that foster deindustrialization and fiscal austerity: reduced government services for lower-income citizens. Under neoliberal policies there is a disappearance of the pre-globalization era’s shared interests between skilled and unskilled workers in gaining higher wages, unionization, and social security. Computer technology, greater trade, and the government’s fiscal austerity equally contributed to greater inequality. So in essence: high skilled workers no longer have shared interest with low skilled workers thus resulting in lower rates of unionization.

And that ends day 30.