Modification de A brief history of international capitalism

This lecture is going to provide the reader with a brief history of global capitalism. What is meant by global capitalism or international political economy is the structure and dynamics of the international economic relations.

The first one is called the First Globalization what some others call the ''years of classical liberalism'', the ''golden era'' which is the period from the mid-19th century to the First World war. Then we will look at the inter-war integration of global capitalism. The third period is called embedded liberalism and refers to the first post-war stage in the late 1940s to some time in the mid-1970s and then the last stage that is the current stage of the Second Globalization which begins in the mid-1970s and it is still going up.

=The First Globalization=

In ideological terms, the "Transport Revolution" and "Market integration" in the 18th century come along with the decline of Mercantilism and the rise of liberalism which is the rise of free trade ideology.<ref>Semmel, Bernard. [https://books.google.fr/books?id=WVT8J1YFRqgC&lpg=PP1&dq=The%20Rise%20of%20Free%20Trade%20Imperialism%3A%20Classical%20Political%20Economy%20the%20Empire&pg=PP1#v=onepage&q=The%20Rise%20of%20Free%20Trade%20Imperialism:%20Classical%20Political%20Economy%20the%20Empire&f=false The rise of free trade imperialism: Classical political economy the empire of free trade and imperialism 1750-1850]. Cambridge University Press, 2004.</ref><ref>Kindleberger, C. P. (1975). The Rise of Free Trade in Western Europe, 1820–1875. The Journal of Economic History, 35(1), 20–55. https://doi.org/10.1017/s0022050700094298</ref>

Fichier:Adam Smith The Muir portrait.jpg|A sketch of Adam Smith facing to the right.

Fichier:Portrait of David Ricardo by Thomas Phillips.jpg|Portrait of David Ricardo by [https://en.wikipedia.org/wiki/Thomas_Phillips Thomas Phillips], circa 1821. This painting shows Ricardo, aged 49, two years before his death.

What follows is the [https://en.wikipedia.org/wiki/Manchester_Liberalism Manchester School of Liberalism] that developed around Manchester, which is the site of the first industrial revolution, and notably the hub of the world's textile manufacturing industry, in the late 18th century and early 19th century.<ref>Bresiger, Gregory. "[https://cdn.mises.org/13_1_3_0.pdf Laissez Faire and Little Englanderism: The Rise, Fall, Rise, and Fall of the Manchester School]." Journal of Libertarian Studies 13 (1997): 45-80.</ref><ref>William Dyer Grampp, The Manchester School of Economics (Stanford: Stanford University Press, 1960). 3/16/2020. <https://oll.libertyfund.org/titles/2128></ref><ref>Wallace, E. (1960). The Political Ideas of the Manchester School. University of Toronto Quarterly, 29(2), 122–138. https://doi.org/10.3138/utq.29.2.122</ref> That school of thought came to dominate ideologically in England first, and then it diffused through different channels, first in France and then to the rest of Europe with some exceptions. The Manchester School also refers to a group of men who were responsible for the abolition of [[Between Free Trade and Protectionism: 1846 - 1914|Corn Laws]] and the adoption of free trade by Great Britain after 1846, such as [https://en.wikipedia.org/wiki/Richard_Cobden Richard Cobden] and [https://en.wikipedia.org/wiki/Herbert_Spencer Herbert Spencer]. The [https://en.wikipedia.org/wiki/Corn_Laws Corn Laws] blocked the import of cheap grain, initially by simply forbidding importation below a set price, and later by imposing steep import duties, making it too expensive to import grain from abroad, even when food supplies were short. The aboltion of the Corn Laws the United Kingdom's workers to consume cheaper foodstuffs and ensuring more regular employment initiating symbolically the great era of free trade that lasts until the First World War.

Along with that comes a geopolitical context in which England is the dominant power, coined by some authors as [https://en.wikipedia.org/wiki/Pax_Britannica Pax Britannica] with a global economy that is centred and structured around London.<ref>Schedvin, C. B. “Staples and Regions of Pax Britannica.” The Economic History Review, vol. 43, no. 4, 1990, pp. 533–559. JSTOR, https://www.jstor.org/stable/2596734.</ref><ref>Morris, Jan. [https://books.google.fr/books?id=pgftEXaDykkC&printsec=frontcover&dq=Pax+Britannica+By+Jan+Morris&hl=en&sa=X&ved=0ahUKEwiexaDRqp_oAhXODmMBHZUPB3cQ6AEIKTAA#v=onepage&q=Pax%20Britannica%20By%20Jan%20Morris&f=false Pax Britannica : the climax of an Empire]. London: Faber, 1968. Print.</ref> Today, New York is the capital of global capitalism; in the 19th century, London was the capital of capitalism.<ref>MARCHILDON, G. P. (1995). From Pax Britannica to Pax Americana and Beyond. The ANNALS of the American Academy of Political and Social Science, 538(1), 151–168. https://doi.org/10.1177/0002716295538000013</ref><ref> Parchami, Ali. [https://books.google.fr/books?id=Pwt6AgAAQBAJ&printsec=frontcover&dq=Hegemonic+Peace+and+Empire:+The+Pax+Romana,+Britannica+and+Americana&hl=en&sa=X&ved=0ahUKEwjMyNGIq5_oAhUAAGMBHYk0AHYQ6AEIKTAA#v=onepage&q=Hegemonic%20Peace%20and%20Empire%3A%20The%20Pax%20Romana%2C%20Britannica%20and%20Americana&f=false Hegemonic peace and empire : the Pax Romana, Britannica and Americana]. London New York: Routledge, 2009. Print.</ref>

In terms of the overall dynamic of the system exports as a share of the world, output picked just before the First World War in 1913. Although there is a slump in the ratio of exports to the world output in the 1900s, then the share goes up in 1913, the moment when the global economy is the most open during the classic era.<ref>Estevadeordal, Antoni, et al. “The Rise and Fall of World Trade, 1870-1939.” The Quarterly Journal of Economics, vol. 118, no. 2, 2003, pp. 359–407. JSTOR, www.jstor.org/stable/25053910.</ref>

Exports represented 2% of GNP in 1830, in 1860 it was 9% and in 1913 it was 14%. There is an increase in the openness of the European economy. The expansion of trade affects different countries unevenly. These differences reflect several factors, but especially the different size of economies. We see this clearly with the United States, because if we look at the level of exports, they arrive at almost the same level in absolute value as those of Great Britain, but account for only 6% of GDP whereas in the United Kingdom we speak of 18%.

European countries dominate international trade in manufactured goods. More generally, the country's participation in international trade is closely linked to the structure of its economy. At the end of the period, the surplus of exports is impressive for Great Britain while for Latin America it is the opposite. This is typical because it is a region that has difficulty industrializing.  

From that spot in the North Atlantic, a big chunk of the global economy was organized. By repercussion, the rest of the global economy was organized around the British Empire. And of course, China was under the influence of foreign powers and to a large extent of the United Kingdom.

[[File:Bank act 1844.jpg|thumb|upright|Bank Act of 1844.]]

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The issue that crystallized this geopolitical dynamic was the ratification of the [[The Peace of Paris and the League of Nations|League of Nations treaty]]. The League of Nations was the project first and foremost of President Wilson, it was an American project. However, the treaty was negotiated, but the United States Senate refused to ratify the treaty. Therefore, the United States never took part in the look off.<ref>Wright, Q. (1933). Book Review:The United States and the League of Nations: 1918-1920. Denna Frank Fleming. Ethics, 43(3), 350. https://doi.org/10.1086/208092</ref>

In terms of foreign economic policy, there is the rise of economic nationalism that in some cases assumes the form of economic autarky in particular in Nazi Germany, but also in the Soviet Union. In other cases, such as in the case of the United Kingdom, it assumes the form of imperial trade preferences and imperial protectionism within the [[Great Britain: The Largest of Empires at the Service of a Dominant Economy|British Empire]]. In contrast, before, the British Empire was opened to the trade of the world. From 1932, it ceases to be so.

==Trend in protectionism in the 1920s and 1930s==

There are German and Japanese attempts to form close regional trade blocks in the 1930s. That begins before Hitler takes power in 1933 with an attempt in 1931 to form a customs union between Germany and Austria.<ref>Orde, A. (1980). The Origins of the German-Austrian Customs Union Affair of 1931. Central European History, 13(1), 34–59. https://doi.org/10.1017/s0008938900008992</ref> It took also other forms, such as attempting to form preferential trade agreements with states in Eastern Europe as with the Schacht Agreements.<ref>Eichengreen, B., & Irwin, D. A. (1995). [https://www.dartmouth.edu/~dirwin/docs/Blocs.pdf Trade blocs, currency blocs and the reorientation of world trade in the 1930s]. Journal of International Economics, 38(1–2), 1–24. https://doi.org/10.1016/0022-1996(95)92754-p</ref><ref>Spaulding, Robert Mark. “German Trade Policy in Eastern Europe, 1890-1990: Preconditions for Applying International Trade Leverage.” International Organization, vol. 45, no. 3, 1991, pp. 343–368. JSTOR, https://www.jstor.org/stable/2706735.</ref><ref>Batou, Jean, and Thomas David. Uneven development in Europe : the obstructed growth of the agricultural countries, 1918-1939. Genève: Droz, 1998. Print.</ref><ref> Melo, Jaime, and Arvind Panagariya. New dimensions in regional integration. Cambridge New York, NY, USA: Cambridge University Press, 1995. Print.</ref><ref> Forbes, Neil. Doing business with the Nazis : Britain's economic and financial relations with Germany, 1931-1939. London Portland, OR: Frank Cass, 2000. Print</ref> Japan tries to set up the [https://en.wikipedia.org/wiki/Greater_East_Asia_Co-Prosperity_Sphere Greater East Asia Co-Prosperity Sphere]. It was an attempt initiated during the Shōwa era to create, for the benefit of the Empire of Japan, a self-sufficient bloc of Asian countries led by Japan and not dependent on Western countries. Japan invaded China in 1937, takes over the Philippines, and attempts to proceed in the same way as Nazi Germany, but in the East Asian economy.<ref>Kerry A. Chase. [https://www.press.umich.edu/pdf/047209906X-ch3.pdf CHAPTER 3: Interwar Trading Blocs - Japan, Britain, and Germany, 1919–39]. In ''Trading Blocs: States, Firms, and Regions in the World Economy''. The University of Michigan Press</ref>

Then Latin America, in particular, Argentina abandoned free trade in the 1930s. trade openness significantly declined during the 1930s while Argentina showed high openness ratios ranging from 30 to 40 per cent during the first globalization era.<ref>Brambilla, I., Galiani, S., & Porto, G. (2018). [https://latinaer.springeropen.com/articles/10.1007/s40503-017-0050-9 Argentine trade policies in the XX century: 60 years of solitude]. Latin American Economic Review, 27(1). https://doi.org/10.1007/s40503-017-0050-9</ref> Until the 1930s, the economy of Argentina and other Latin american countries were centred on the export of raw materials and the dominance of landowners over capital and the working class. This can be explained as following the 1929 crisis, raw materials prices collapsed while the prices of manufactured imports do not falling.<ref>Iriye, A, Akira Iriye, and Saunier. The Palgrave dictionary of transnational history. New York: Palgrave Macmillan, 2009. Print.</ref>

That corresponds to the collapse of the international trading system in the early 1930s. There is one date that marks the reversal of that trend. It is 1936 and the [https://en.wikipedia.org/wiki/Tripartite_Agreement_of_1936 Tripartite Agreement of 1936] between the United States, the United Kingdom and France. Subscribing nations agreed to refrain from competitive depreciation to maintain currency values at existing levels, as long as that attempt did not interfere seriously with internal prosperity.<ref>Wikipedia contributors, 'Tripartite Agreement of 1936', Wikipedia, The Free Encyclopedia, 18 December 2019, 07:56 UTC, <https://en.wikipedia.org/w/index.php?title=Tripartite_Agreement_of_1936</ref> That is the first attempt to restore some kind of international monetary system based on active cooperation between central banks. Central banks from now pledge to help each other, counteract outflows of gold and money in order to stabilize exchange rates between the major currencies that make up the world economy. The agreement stabilized exchange rates, ending the [https://en.wikipedia.org/wiki/Currency_war currency war] of 1931 - 1936, but failed to help the recovery of world trade.<ref>Robert A. Mundell and Armand Clesse (2000). The Euro as a stabilizer in the international economic. Springer. p. 284. ISBN 978-0-7923-7755-9.</ref>

==The advent of Pax Americana==

The United States promotes multilateral liberalization in trade and financial flows. It keeps its domestic market open for its allies, and that is a significant feature of the few decades following the end of the Second World War. The United States notably becomes a source of international investment for construction in particular in the late 1940s and the early 1950s operating also in Europe, Japan and Korea. It stabilizes the international economic system by providing finance and creates space by doing so to reconcile external imperatives and domestic policy autonomy across the world.

But just as the United States is doing, there are vast chunks of the world that stand aside. Those are the so-called second and third worlds. The second world is the world under the domination of the USSR and China after 1949. The Third World is the former colonial world that will, later on, give rise to the non-aligned movement and the [https://en.wikipedia.org/wiki/Group_of_77 Group of 77] (G77) in the United Nations.

Those states pursue inward-oriented industrialization and development. In the case of Latin America and Asia and particular India that takes the name of [https://en.wikipedia.org/wiki/Import_substitution_industrialization Import substitution industrialization] (ISI).<ref>Silva, E. (2007). The Import-Substitution Model. Latin American Perspectives, 34(3), 67–90. https://doi.org/10.1177/0094582x07300589</ref><ref>Baer, Werner. “Import Substitution and Industrialization in Latin America: Experiences and Interpretations.” Latin American Research Review, vol. 7, no. 1, 1972, pp. 95–122. JSTOR, https://www.jstor.org/stable/2502457.</ref><ref>Sapelli Claudio. 2003. [https://repositorio.uc.cl/bitstream/handle/11534/4837/000352269.pdf?sequence=1 The Political Economics of Import Substitution Industrialization] - [https://www.uc.cl/ Pontificia Universidad Católica de Chile] - [https://economia.uc.cl/ Instituto de Economia]</ref>

The idea is that to develop industrial capacities and technological capacities, a country has to see a lot of itself from the world economy. In order to keep out the imports of more advanced countries that prevent its own industry from acquiring those capacities and developing its own economies of scale, the country has to reserve the domestic market to its own industrial firms. It is, therefore, necessary for them to replace these imports with domestic production to gaining their independence. They do so notably by placing high tariffs on imports and by implementing protectionist and inward-looking trade policies. For those countries, it is an attempt to reduce foreign dependency through local production of industrialized products, whether through national or foreign investment, for domestic or foreign consumption.  

There are two aspects to this. One is the way infrastructural investment in the developing world is going to be financed from now. It is no longer done through private funds and bank lending done from London and New York. It is to be done by public credits extended by international organizations or the United States Treasury. That is the origins of [https://en.wikipedia.org/wiki/World_Bank_Group the World Bank Group] (WBG) composed by five members institutions which are the [https://en.wikipedia.org/wiki/International_Bank_for_Reconstruction_and_Development International Bank for Reconstruction and Development]  (IBRD), the [https://en.wikipedia.org/wiki/International_Development_Association International Development Association] (IDA), the [https://en.wikipedia.org/wiki/International_Finance_Corporation International Finance Corporation] (IFC), the [https://en.wikipedia.org/wiki/Multilateral_Investment_Guarantee_Agency Multilateral Investment Guarantee Agency] (MIGA) and the [https://en.wikipedia.org/wiki/International_Centre_for_Settlement_of_Investment_Disputes International Centre for Settlement of Investment Disputes] (ICSID). The first two are sometimes collectively referred to as the World Bank.<ref>Wikipedia contributors. (2020, March 29). World Bank Group. In Wikipedia, The Free Encyclopedia. Retrieved 09:01, April 4, 2020, from https://en.wikipedia.org/w/index.php?title=World_Bank_Group&oldid=948011839</ref>

The International Bank for Reconstruction and Development (IBRD) was precisely established in 1944 to offers loans and finance infrastructure projects in middle-income developing countries such as Africa, Latin America and Asia. Along with that, there are American initiatives for reconstruction in Western Europe and Japan. That is the [https://en.wikipedia.org/wiki/Marshall_Plan Marshall Plan] and its Japanese equivalent introduced in 1947. A functional equivalent to those plans is the boost to the Korean economy that comes out of wars spending during the Korean War in the Korean Peninsula in the 1950s.  

To a large extent, the origins of what later on was to be called the Western European economic miracle, the [https://en.wikipedia.org/wiki/Japanese_economic_miracle Japanese Economic Miracle], and the [https://en.wikipedia.org/wiki/Miracle_on_the_Han_River Korean Economic Miracle] have to do with the fact that early on the American government decided to fund major investments in infrastructure in those countries to provide them with a platform on the basis of which economic development was going to take place in its allies.<ref>Crawford, Robert J. "Reinterpreting the Japanese economic miracle." Harvard Business Review 76.1 (1998): 178-183.</ref><ref>Hassink, R. (1999). South Korea’s economic miracle and crisis: Explanations and regional consequences. European Planning Studies, 7(2), 127–143. https://doi.org/10.1080/09654319908720508</ref><ref>Foreman-Peck, J. (2014). European Industrial Policies in the Post-War Boom: “Planning the Economic Miracle.” In Industrial Policy in Europe after 1945 (pp. 13–47). Palgrave Macmillan UK. https://doi.org/10.1057/9781137329905_2</ref>

The other important trend is the culmination of the shift away from the [https://en.wikipedia.org/wiki/Spoke%E2%80%93hub_distribution_paradigm hub and spoke structure] of the Classical Era towards the years of multinational enterprises. That is a trend that began in the 1920s with American corporations investing in Europe and to a much lesser extent in Japan, but mostly Europe.  

In the 1990s, after the second and third worlds stopped pretending to pose a challenge to the American economy, reintegrated fully the global economy dominated by the United States. There was a lot of talks about the American unipolar moment, a moment of unprecedented dominance by one single grade power of the global system.<ref>Sheetz, M., & Mastanduno, M. (1998). Debating the Unipolar Moment. International Security, 22(3), 168–174. https://doi.org/10.1162/isec.22.3.168</ref>

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Along with the relative decline of Keynesianism ideology, there is the rise of what many people call [https://en.wikipedia.org/wiki/Neoliberalism neoliberalism] or the [https://en.wikipedia.org/wiki/Washington_Consensus Washington Consensus] as it was coined by [https://en.wikipedia.org/wiki/John_Williamson_(economist) John Williamson], an economist in 1990 describing policy reforms that the International Monetary Fund, World Bank, and U.S. Treasury advocated for emerging-market economies.<ref>"[https://web.archive.org/web/20170715151421/http://www.cid.harvard.edu/cidtrade/issues/washington.html Washington Consensus]". Center for International Development | Harvard Kennedy School of Government. April 2003. Archived from the [https://www.hks.harvard.edu/centers/cid original] on July 15, 2017. Retrieved August 24, 2016.</ref><ref>Williamson, John. "[https://heinonline.org/HOL/LandingPage?handle=hein.journals/lbramrca15&div=5&id=&page= A short history of the Washington Consensus]." Law & Bus. Rev. Am. 15 (2009): 7.</ref><ref>Naím, Moisés. “Washington Consensus or Washington Confusion?” Foreign Policy, no. 118, 2000, pp. 87–103. JSTOR, https://www.jstor.org/stable/1149672.</ref><ref>Williamson, John. "[https://elibrary.worldbank.org/doi/pdf/10.1596/0-8213-5872-3#page=47 The Washington Consensus as policy prescription for development]." Challenges in the 1990s 33 (2004).</ref><ref>Agarwal, Prateek. “[https://www.intelligenteconomist.com/washington-consensus/ Washington Consensus].” Intelligent Economist, 10 Feb. 2020.</ref> According to Williamson it "refer to the lowest common denominator of policy advice being addressed by the Washington-based institutions to Latin American countries as of 1989.”<ref>Williamson, John. “[http://documents.worldbank.org/curated/en/624291468152712936/What-should-the-world-bank-think-about-the-Washington-consensus What Should the World Bank Think About the Washington Consensus?]” World Bank Research Observer. Washington, DC: The International Bank for Reconstruction and Development, Vol. 15, No. 2 (August 2000), pp. 251-264.</ref> It is a set of broadly free-market economic ideas with the dominant view of that the economy has to be privatized, has to be deregulated and has to be opened up to international. Williamson  identified ten principles which are:<ref>Pettinger, Tejvan, et al. “[https://www.economicshelp.org/blog/7387/economics/washington-consensus-definition-and-criticism/ Washington Consensus – Definition and Criticism].” Economics Help, 22 Dec. 2017.</ref>  

#Low government borrowing. Avoidance of large fiscal deficits relative to GDP;

#Redirection of public spending from subsidies (“especially indiscriminate subsidies”) toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;

The way trade liberalization is going to deepen during the stage of the second globalization is not through multilateral trade liberalisation. It's not mostly through multilateral trade liberalization, but through the new regionalism with the spread of preferential trade agreements, just as the customs union was set up in Western Europe in 1957.

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This chart shows the evolution of trade agreement in the world. It is possible to see the tremendous spike in the number of such agreements from 1991 onwards. This is the kind of thing that the GATT and later on the WTO were sets up to prevent. That's the key thing.

Let start with competition to attract capital. The abandonment of input substitution industrialisation meant that the source of industrial investment for developing countries now become the world market and no longer the domestic economy. The developing countries have to compete now to attract capital just as they used to compete in the gold standard era, and in the classical era to attract capital.

From the point of view of international investors, BITs are the functional equivalent of colonialism.<ref> Vandevelde, Kenneth J., A Brief History of International Investment Agreements. U.C. Davis Journal of International Law & Policy, Vol. 12, No. 1, p. 157, 2005; Thomas Jefferson School of Law Research Paper No. 1478757. Available at SSRN: https://ssrn.com/abstract=1478757</ref> It is not to say that the system is neocolonial, it is just as colonialism in the past was there to safeguard the property rights of investors from the advanced world. Today, bilateral investment treaties play the same role.<ref>Mahnaz Malik. 2008. [https://www.iisd.org/pdf/2008/dci_recent_dev_bits.pdf Recent Developments in Regional and Bilateral Investment Treaties]. International Institute for Sustainable Development</ref>

=Annexes=

*Christian Milelli. [https://halshs.archives-ouvertes.fr/halshs-00139467/document The surge of Preferential Trade Agreements across Asia: What is at stake?]. Journalof International Logistics and Trade, 2005, 3 (2), pp.45-58.

*Ministère de l’Économie, des Finances et de l’Industrie. [https://tresor.economie.gouv.fr/Articles/8d57c9da-3265-4cba-bbd3-38400c1216e2/files/28f8c9a8-7d26-46bc-8de6-db789430edf5 Learning from the first globalisation (1870-1914)]. TRÉSOR-ECONOMICS No. 93 – October 2011.

*Milner, Helen V. [https://press.princeton.edu/books/paperback/9780691010748/resisting-protectionism Resisting Protectionism: Global Industries and the Politics of International Trade]. Princeton University Press, 1988.

*MOORE, Rickie. The Commonwealth as an instrument of globalization In: Le modèle économique anglo-saxon à l’épreuve de la globalisation [online]. Paris: Presses Sorbonne Nouvelle, 1996 (generated 18 mars 2020). Available on the Internet: <http://books.openedition.org/psn/5389>. ISBN: 9782878549010.