KDSP Lec7

What is globalisation?
The Incommensurability thesis

References
Globalisation and the Welfare State I

KDSP Week 7
Dr. Albert Varela
University of Leeds
a.varela@leeds.ac.uk
10th March 2017
1 / 36 KDSP Week 7 Globalisation and the Welfare State I

References
Lectures
I. Comparative Social Policy
1 Comparing WS: Traditional
Approaches
2 Comparing WS: Politics
Matters
3 Social democratic WS
4 Conservative WS
5 Liberal WS
6 Southern European WS
II. International SP
7 Globalisation I
8 Globalisation II
9 Politics of welfare
10 Migration & WS
11 SP in Developing Contexts

References
Overview
In this session we will cover the following topics:
1 What is globalisation?
Defining globalisation
Enthusiasts, sceptics, and everything in between
2 The Incommensurability thesis

The economic pathway
The ideational pathway

References

References
Exercise: What does globalisation denote?
Globalisation keywords:
Youve got 3 minutes to come up with five different words that the
idea of globalisation brings to mind.

References
Lets be more systematic...
Globalization can be conceived as a process (or set of

processes) which embodies a transformation in the
spatial organization of social relations and transactions,
expressed in transcontinental or interregional flows and
networks of activity, interaction and power (Held and
Mcgrew, 2001, 329)

References
Transformations explained
The notion of globalisation as a process of transformation can

itself be broken down into 4 axis:
Extensity: across frontiers, regions and continents;
Intensity: growing magnitude of interconnectedness;
Velocity: growing speed in the diffusion of goods, services and
ideas;
Impact: distant events can be significant elsewhere, and local
developments can have notable global consequences.

References
Transformations explained
The notion of globalisation as a process of transformation can

itself be broken down into 4 axis:
Extensity: across frontiers, regions and continents;
Intensity: growing magnitude of interconnectedness;
Velocity: growing speed in the diffusion of goods, services and
ideas;
Impact: distant events can be significant elsewhere, and local
developments can have notable global consequences.
Transformations applied:
Try to describe these global transformations in the following areas:
migration, finance, work, higher education, environment, travel,...

References
Dimensions: Economics
Contemporary patterns of economic globalization have

been strongly associated with a reframing of the
relationship between states and markets. Although the
global economy as a single entity is by no means as
highly integrated as the most robust national economies,
the trends point unambiguously towards intensifying
integration within and across regions. Patterns of
contemporary economic globalization have woven strong
and enduring webs across the worlds major regions such
that their economic fate is intimately connected. (Held
and Mcgrew, 2001)

References
Dimensions: Politics
the stretching of political relations across space and time;

the extension of political power and political activity
across the boundaries of the modern nation-state.
Political decisions in one part of the world can rapidly
acquire worldwide ramifications. (Held et al., 1999, 49)
The state is confronted by an enormous number of

intergovernmental organizations (IGOs), international
agencies and regimes which operate across different
spatial reaches, and by quasi-supranational institutions
like the European Union. Non-state actors . . . also
participate intensively in global politics. (Held et al.,
1999, 50)

References
Dimensions: Culture
Few expressions of globalization are so visible, widespread

and pervasive as the world-wide proliferation of
internationally traded consumer brands, the global
ascendancy of popular cultural icons and artefacts, and
the simultaneous communication of events by satellite
broadcasts to hundreds of millions of people at a time on
all continents. The most public symbols of globalization
consist of Coca-Cola, Madonna and the news on CNN
(Held et al., 1999, 325)

References
Globalisation as an essentially contested concept
Globalisation is a generic term for a rather disparate array

of things and, where it is defined at all, it is understood
in a great variety of ways (Hay and Wincott, 2012, 67)
Different axis around which the debate is structured

Validity: Is globalisation real at all?
Novelty: Is globalisation a new phenomenon?
Values: globalisation is vs should be
Scope: Cross-border vs Planetary
Stage: Property of world system vs tendency
Intension and extension: Precision vs coverage

References
Hyperglobalisers
A number of authors, such as Ohmae (1989) or Mishra (1999)

adopted enthusiastically the new term and would adhere to some
or all of these tenets:
Globalisation defines new epoch of human history.
Nation states are severely weakened by economic globalisation
in particular
Borderless economies undermine stability of markets, yet
governments can do little about it.
New global hegemony is reinforced by large corporations and
international governmental organisations
Welfare states are threatened social dumping likely

References
The retreat of the state
Today it seems that the heads of governments may be

the last to recognise that they and their ministers have
lost the authority over national societies and economies
that they used to have. . . . [I]mpersonal forces of world
markets . . . are now more powerful than the states to
whom ultimate political authority over society and
economy is supposed to belong. Where states were once
the masters of markets, now it is the markets which, on
many crucial issues, are the masters over the
governments of states. (Strange, 1996, 3-4)

References
Sceptics
Other authors, for instance Hirst and Thompson (1999) or Hay

and Wincott (2012) may be less convinced by the novelty,
dimension and impacts of globalisation:
The intensity of contemporary global interdependence is
considerably exaggerated.
Globalisation is mainly a Global North phenomenon
The architects of globalisation are States themselves, with
policies that have fostered a more open liberal international
economy.
Globalisation has been overplayed internationalisation has
been restricted to main trading blocs
No clear evidence of social dumping

References
What decade is this writer describing?
...things were improving ever more visibly, ever more

rapidly. Forty years of peace had strengthened countries
economic foundations, technology had accelerated the
pace of life, and scientific discoveries had filled the spirit
of that generation with pride. One believed as little in
the prospect of relapsing into barbarity, as is the case in
wars between European peoples, as in ghosts or witches;
they sincerely believed that the borders of differences
between nations would little by little melt into a common
humanity, and that, in this way, peace and security, the
most precious of assets, would be bestowed upon all
mankind.

References
Why do these issues matter to us?
To understand what it is that academics and/or policy makers

disagree upon: is it a discussion about empirics, semantics or
both?
Globalisation is often used as a key element in causal
explanation for a wide range of social change and phenomena.
Lack of precision makes those causal hypotheses unfalsifiable.
Evaluate the extent to which policy makers can use
globalisation as a tool to legitimate decisions (particularly
when those decision directly harm citizens)
Ok. So what is globalisation then?

References
A working definition of globalisation
At its simplest, globalisation refers to the dramatic

increase in the flow of goods, services, economic stocks,
political activity and information between people, firms
and states, over increasingly large distances, during the
past 30 years or so. Such change impacts especially on
the distribution of power, the possibilities for political
association and organisation and on the economic
capacities of states. (Farnsworth, 2004)

References

References
Incommensurability
The welfare state is fundamentally undermined by, and

incompatible with, the processes and developments associated with
globalisation. As countries become more globalised, welfare states
will retrench and converge into a residualist welfare model through
the following pathways:
1 Economic
2 Ideational

References
The Economic logic
Hay and Wincott (2012) summarise the key intuition behind this
logic:
1 The welfare state is a fiscal burden, a cost that firms and
citizens must bear, thereby suppresing profits/investment and
disposable income, a drain on competitiveness and economic
performance.
2 Good economic performance (low inflation growth) in a
tightly integrated world economy must be accompanied by
willingness to dismantle or significantly overhaul or retrench
the welfare state
Let us look at the argument in detail:

References
The assumptions
1 capital is rational, profit maximising and blessed with perfect
information - it can be assumed to invest where it can secure
the greatest net return on investment;
2 Markets for goods, services, and investment are fully
integrated globally. National economies must prove
themselves globally competitive/attractive if economic growth
is to be sustained;
3 Capital is perfectly mobile between national taxation and
regulatory jurisdictions and the cost of exit (or disinvestment)
is negligible;
4 Since the welfare state increases the burden of taxation and
since price is an index of competitiveness, the welfare state is
a drain on both national competitiveness and the profits of
business.
References
The closed economy story...
Under a closed economy capital has no exit option and

therefore the government has significant leeway to levy taxes from
business and spend generously on welfare.
At best, Capital can hoard rather than re-invest their profits, i.e. it
can save and sit on their accumulated wealth.
How does this change under an open economy? To answer this

lets do a quick exercise.

References
Suppose you are the CEO of a corporation in an open

economy
In which country (A, B or C) would you build your new factory?
Variables A B C
Corporate Tax 50% 30% 15%
Union 80% 50% 10%
Minimum Wage Y N N
NI 15% 10% 3%

References
How did you make those decisions?
Did you assume that:

1 Low taxation is preferable to high taxation?
2 Low unionisation rates are preferable to high unionisation
rates?
3 Low non-wage employment costs are preferable to high
non-wage employment costs?
4 No minimum wage is preferable to minimum wage?
Could these assumptions be questioned?

References
Suppose you are the CEO of a corporation in an open

economy
In which country (A, B or C) would you build your new factory?
Variables A B C
Corporate Tax 50% 30% 15%
Union 80% 50% 10%
Minimum Wage Y N N
NI 15% 10% 3%
Suppose you are now the government

How would you react to that corporate decision?

References
Adam Smith on capital mobility and taxation (1776)
The proprietor of stock is properly a citizen of the world,

and is not necessarily attached to any particular country.
He would be apt to abandon the country in which he was
exposed to a vexatious inquisition, in order to be assessed
to a burdensome tax, and would remove his stock to
some other country where he could either carry on his
business, or enjoy his fortune more at his ease. By
removing his stock he would put an end to all the
industry which it had maintained in the country which he
left. Stock cultivates land; stock employs labour. A tax
which tended to drive away stock from any particular
country would so far tend to dry up every source of
revenue both to the sovereign and to the society.(Smith,
1976, 848-9)

References
Race to the bottom
Key consequence: The liberalisation of capital flows puts states

directly into competition for investment.
How do states compete? By creating the most profitable
environment through:
Taxes
NI Contributions
LM regulation
Corporate regulation
Curbing trade union power
Subsidies
Public sector contracts

References
Globalization as an idea
The arguments of the economic logic are fundamentally materialist

and presume that policy makers act purely on the basic of
objective reality.
Research by the sceptics camp has sought to demonstrate that
the enthusiasm of the hyperglobalists is misplaced in the hope that
this will reverse the trend misinformed policy-making in the name
of globalisation (Hay and Rosamond, 2002).
But sociologists know that humans (and policy-makers are human)
make decisions based on ideas about the world around (including
globalisation).

References
Globalization as hegemon
Globalisation is not just a phenomenon, it is an ideology that has

become hegemonic, thus constraining what people think and how
people think.
Thus, wheter the hyperglobalist thesis is true or not does not really
matter, as long as policy-makers act as if it were:
Policy-makers acting on the basis of assumptions
consistent with the hyperglobalization thesis may well
serve, in so doing, to bring about outcomes consistent
with that thesis, irrespective of its veracity and, indeed,
irrespective of its perceived veracity. (Hay and
Rosamond, 2002, 148)

References
Globalisation as neoliberal political project
The neoliberal Washington consensus is an array of

market oriented principles designed by the government of
the United States and the international financial
institutions that it largely dominates and implemented by
them in various ways for the more vulnerable societies,
often as stringent structural adjustment programs
(Chomsky, 1999, 19-20)

References
Washington Consensus (Standing, 2002, 26)
Liberalisation of trade and finance

Privatisation
Deregulation
foreign capital liberalisation
Securing property rights
Fiscal discipline
Re-direction of public expenditure
Tax reform
Targeting as opposed to universalism
Flexible labour markets

References
Examples: UK Minister for Energy 1994
We have a pro-business environment that is unequalled in

Europe. [...] [A] commitment to deregulation [...] no
foreign exchange controls [...] access to the rest of
Europe [...] the English language [and] the best available
combination of a skilled a flexible workforce, with lower
production costs than our neighbours [...] Inward
investors also know that they can negotiate single and
non-union agreements with an adaptable workforce that
is ready to learn new skills and willing to work flexible
hours [...] Investors get access to the single European
market without the costs of the Social Charter. [...] The
UK strike rate has been below the EU average for each of
the last nine years. (Tim Eggar, 1994).

References
Examples: PM Tony Blair
The determining context of economic policy is the new

global market. That imposes huge limitations of a
practical nature ... on macroeconomic policies (cited in
Financial Times, 22 May 1995).
If the markets dont like your policies they will punish you.
(Blairs speech to the Economic Club, Chicago, 23rd April
1999)

References
Conclusions
Despite its widespread use and its importance in the social

sciences, the term globalisation remains highly contested
and conceptually problematic.
This weeks computer lab will look at different approaches to
measure globalisation.
The capacity of governments to decide their economic policies
is constrained by the growing mobility of capital. The
competition between states to attract investment allegedly
fosters a race to the bottom.
Objective reality, however, does not alone determine
policy-making. Globalisation can also be understood as an
idea that frames and constrains the interpretation of
reality by policy-makers.

References
References

References
Farnsworth, K. (2004). Corporate Power and Social Policy in a

Global Economy. Bristol: Policy Press.
Hay, C. and B. Rosamond (2002). Globalization, European
integration and the discursive construction of economic
imperatives. Journal of European Public Policy 9 (2), 147167.
Hay, C. and D. Wincott (2012). The Political Economy of
European Welfare Capitalism. Basingstoke: Palgrave Macmillan.
Held, D. and A. Mcgrew (2001). Globalization. In J. Krieger (Ed.),
The Oxford Companion to Politics of the World, Chapter
Globalizat, pp. 324327. Oxford: Oxford University Press.
Held, D., A. Mcgrew, D. Goldblatt, and J. Perraton (1999). Global
Transformations: Politics, Economics and Culture. Cambridge:
Polity Press.
Hirst, P. and G. Thompson (1999). Globalization in Question (2nd
Editio ed.). Cambridge: Polity Press.
Mishra, R. (1999). Globalization and the Welfare State.
Cheltenham: Edward Elgar.
References
Ohmae, K. (1989). Managing in a borderless world. Harvard

Business Review 67, 152161.
Strange, S. (1996). The Retreat of the State: The Diffusion of
Power in the World Economy. Cambridge: Cambridge University
Press.

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What is globalisation?

The Incommensurability thesis

Globalisation and the Welfare State I

Dr. Albert Varela

10th March 2017

1 / 36 KDSP Week 7 Globalisation and the Welfare State I

2 / 36 KDSP Week 7 Globalisation and the Welfare State I

In this session we will cover the following topics:

2 The Incommensurability thesis

3 / 36 KDSP Week 7 Globalisation and the Welfare State I

4 / 36 KDSP Week 7 Globalisation and the Welfare State I

Exercise: What does globalisation denote?

5 / 36 KDSP Week 7 Globalisation and the Welfare State I

Lets be more systematic...

Globalization can be conceived as a process (or set of

6 / 36 KDSP Week 7 Globalisation and the Welfare State I

The notion of globalisation as a process of transformation can

7 / 36 KDSP Week 7 Globalisation and the Welfare State I

The notion of globalisation as a process of transformation can

8 / 36 KDSP Week 7 Globalisation and the Welfare State I

Contemporary patterns of economic globalization have

9 / 36 KDSP Week 7 Globalisation and the Welfare State I

the stretching of political relations across space and time;

The state is confronted by an enormous number of

10 / 36 KDSP Week 7 Globalisation and the Welfare State I

Few expressions of globalization are so visible, widespread

11 / 36 KDSP Week 7 Globalisation and the Welfare State I

Globalisation as an essentially contested concept

Globalisation is a generic term for a rather disparate array

Different axis around which the debate is structured

12 / 36 KDSP Week 7 Globalisation and the Welfare State I

A number of authors, such as Ohmae (1989) or Mishra (1999)

13 / 36 KDSP Week 7 Globalisation and the Welfare State I

The retreat of the state

Today it seems that the heads of governments may be

14 / 36 KDSP Week 7 Globalisation and the Welfare State I

Other authors, for instance Hirst and Thompson (1999) or Hay

15 / 36 KDSP Week 7 Globalisation and the Welfare State I

What decade is this writer describing?

...things were improving ever more visibly, ever more

16 / 36 KDSP Week 7 Globalisation and the Welfare State I

Why do these issues matter to us?

To understand what it is that academics and/or policy makers

17 / 36 KDSP Week 7 Globalisation and the Welfare State I

A working definition of globalisation

At its simplest, globalisation refers to the dramatic

18 / 36 KDSP Week 7 Globalisation and the Welfare State I

The Incommensurability thesis

19 / 36 KDSP Week 7 Globalisation and the Welfare State I

The welfare state is fundamentally undermined by, and

20 / 36 KDSP Week 7 Globalisation and the Welfare State I

The Economic logic

21 / 36 KDSP Week 7 Globalisation and the Welfare State I

The closed economy story...

Under a closed economy capital has no exit option and

How does this change under an open economy? To answer this

23 / 36 KDSP Week 7 Globalisation and the Welfare State I

Suppose you are the CEO of a corporation in an open

In which country (A, B or C) would you build your new factory?

24 / 36 KDSP Week 7 Globalisation and the Welfare State I

How did you make those decisions?

Did you assume that:

25 / 36 KDSP Week 7 Globalisation and the Welfare State I