Globalisation and the End of Social Democracy

By Pierson, Chris | The Australian Journal of Politics and History, December 2001 | Go to article overview

Globalisation and the End of Social Democracy


Pierson, Chris, The Australian Journal of Politics and History


It has become increasingly commonplace to argue that processes of globalisation mean that the "old" ways of doing social democratic politics, above all through a politics of redistribution managed by a centralised state, are no longer viable (and, indeed, upon several accounts, no longer desirable). (2) "Traditional" social democracy is seen to have been based upon the forging of national settlements in which governments used the strength of organised numbers (essentially the powers of trades unions or unions allied to social democratic parties) and state power to tie capital in to arrangements (and costs) which it would otherwise seek to avoid. It is said to have relied upon the existence of partially autonomous national economies (located within a supportive international environment) subject, within limits, to effective government control and the capacity to resource and deliver an extensive system of social protection. Understood in this way, social democracy is seen to be fundamentally challenged by the rise of globalisation. At its simplest, globalisation is seen to increase the porosity of international borders, to heighten the mobility of capital, to disorganise the internal homogeneity of the "labour interest" and thus to disempower the social democratic form of the interventionist state. In this paper, I subject this account to rigorous scrutiny in three key areas -- trade, capital mobility and a changing division of labour.

Trade

World trade in goods has grown almost twice as fast as GDP since 1950. The trade in services also appears to have doubled in the period since figures were first reported in 1980, so that total world trade may now amount to as much as 45% of world GDP. Although much of this trade takes place within the developed world or, even more narrowly, within its three key regional economies, there is some evidence of rising trade between developed and developing economies (although much of this growth has been focussed upon south east Asia). There are also signs of growth in trade in manufactured goods and of increasing intra-industry trading within the developed economies. At the same time, the technologies of transportation and, above all, communication have been transformed and the associated costs have fallen substantially. The costs of computing technology have similarly continued to fall and, within a decade, the internet has emerged as a form of "mass" communication (if still for comparatively few) throughout the developed world. (3) A crucial part in the trade story is taken by the growth in the numbers and influence of Multinational Corporations (MNCs) and rising foreign direct investment (FDI). In 1998, 53,000 MNCs had global sales of $9.5 trillion, accounting for about a quarter of world output and up to 70 per cent of world trade. The hundred largest MNCs had six million employees worldwide and accounted for about 20 per cent of global foreign assets. Alongside this growth in MNCs has gone a rapid rise in Foreign Direct Investment which grew fivefold between 1980 and 1994 to stand at around $250 billion. In the 1980s and 1990s, most developed states have seen an increase in both inward and outward FDI and this has contributed to a growing engagement of national economies with the global order. (4)

This rapid growth in worldwide trade is seen to be crucial in undermining the autonomy of what are no longer truly domestic economies. Although the major developed economies were clearly never autarchic (though some were much more exposed to international trends than others), they are now more than ever involved in trade. Firms must compete in international marketplaces and that means with those rivals who are best able to contain costs in producing goods and services of similar quality. This introduces the favourite political mantra of the 1990s: "competitiveness". In order to survive in a world of increasing trade, nations, their enterprises and their workers (frequently and rather carelessly conflated) must be able to compete. …

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