Investment in the "global economy" remains a domestic matter:
The fact is, the total amount of the world's capital formation that is generated from foreign direct investment (FDI) has been less than 10% for the last three years for which data are available (2003-2005). In other words, more than 90% of the fixed investment around the world is still domestic. And though merger waves can push the ratio higher, it has never reached 20%.
The benefits that were supposed to accrue from the world being brought closer together under the careful and judicious management of a single hegemon and single hegemonic system have certainly not been guided to the many in those parts of the world that do not participate in the system as active members. Developing nations continue to suffer as the already industrialized take advantage of them, using their people as convenient supplies of labor; populations who, in Marx's thinking, should be ripe for revolution. And indeed, these people are beginning to organize, their discontents spawning terrorism and increasing agitation for reform.
Of course, there are ways of alleviating current tensions, even within an environment of seemingly unstoppable globalization. While Marx recognized the importance of providing for all members of the population equally, he did not foresee that other economic theorists would arrive at a similar idea. Welfare capitalism can be seen as a Liberal political and socio-economic response to the potential horrors of an unrestrained free market economy. Liberals saw the possibility of reform where Marx did not.
Social welfare systems offer the realistic possibility of ameliorating the conditions that unfettered capitalistic expansion produces. The dislocation of labor, the robbing of individuals of their "choice" in employment, and their ability to effectively set wages, can all be addressed through appropriate programs and legislation. As capitalism, in the form of industrial development and exploitation, comes to an area, it tends to alter the local basis of subsistence. Traditional ways of making a living are replaced by new methods, often ones controlled by outside forces. This is especially the case in much of the developing world today. Even that great economic success story, China, owes a considerable part of increased production to its having attracted the manufacturing operations of the United States and other long-developed nations. American manufacturing concerns close their own plants and either open new ones in China or simply make use of pre-existing (or recently created) Chinese facilities. Though advantageous to the owners of the original manufacturer, and also to the proprietors of the new plant, the process comes with high costs for workers at both ends of the equation. American workers not only lose jobs, and the nation the buying power that these lost incomes might have meant, but the United States itself is in some sense diminished on the international stage as it loses control over the forces of industrial production. As Jessica Matthews stated in Foreign Affairs in 1995:
National governments are not simply losing autonomy in a globalizing economy. They are sharing powers - including political, social, and security roles at the core of sovereignty - with businesses, with international organizations, and with a multitude of citizens groups, known as non-governmental organizations... The absolutes of the Westphalian system - territorially fixed states where everything of value lies within some state's borders; a single secular authority governing each territory and representing it outside its borders; and no authority above states - are all dissolving. Increasingly, resources and threats that matter, including money, information, pollution, and popular culture, circulate and shape lives and economics with little regard for political boundaries.
Worker discontent arises more and more from factors beyond governmental control. Globalization makes global problems of what were formerly merely local concerns. Government-sponsored social welfare schemes must adjust to new realities, and take into account new causes for problems that may themselves be long standing but have appeared in guises.
As already stated, globalization produces unwanted effects both at home and abroad. Within the old Westphalian system, a kind of mercantile attitude prevailed in which the benefits that accrued to one country were believed to be largely absolute. Today, the same expansion that puts money in the pockets of investors may very well take jobs away from their fellow citizens and give them to people in India, China, or Central America. Social welfare attempts to adjust for these factors. Under the global system, re-training has become particularly important. As workers are pushed out of their former careers, they must go back to school in order to learn new ones. Universal access to education - especially to higher education - is essential if the global system is to succeed. From the liberal perspective, this means ensuring that workers in developed countries possess the financial means for lifelong education. In developing countries, the answer is making education available so that the citizens of those nations do not remain stuck forever in dead-end, low-paying factory jobs with few or no benefits and deplorable working conditions. Observed Adam Smith more than two centuries ago in his Wealth of Nations,
It is the industry which is carried on for the benefit of the rich and the powerful, that is principally encouraged by our mercantile system. That which is carried on for the benefit of the poor and indigent, is too often, either neglected, or oppressed.
Globalization entails taking account the needs of the poor as well as the rich. In the post-industrial world of the West, "poor" can in fact mean simply those who do not control the great multinational enterprises, NGO's, citizens groups, and so forth, that formulate, or shape, policy. Liberals have long prided themselves on being open to new points-of-view, and feeling a sense of oneness with other human beings. Globalization demands that they re-shape their own beliefs to understand the full of ramifications of the new order that they so commonly endorse. One way in which this can be conducted involves the numerous proposals already being made for the inclusion of workers' rights, environmental, quality control, and other provisions in international commercial treaties. Though politicians tend still to look at these agreements as being in the interests of the home country, even the hegemon, that is, the United States is beginning to understand that ideas created domestically can have repercussions elsewhere. The factory that closes in Ohio becomes a new source of pollution in Mexico. The environmental degradation that occurs because of this factory affects the United States and other nations through aerial contaminants, like carbon dioxide, that may be causing Global Warming. The interconnectivity of men, women, and children, everywhere should be as much a concern of liberals in the United States as is the well-being of their fellow citizens. Indeed, many already think this way, but such examples should only serve to encourage others to realize how truly interrelated are the various socio-economic systems of today's world.
Globalization appears inevitably to be replacing the old system of independent nation states. On an economic level, this means that relations that once appeared to concern only those who resided in a particular place and under a certain jurisdiction, now affect countless others in locations across the planet. Theorists of different backgrounds have wrestled with the dynamics of creating and maintaining a workable world order. Much of the Westphalian system came out of old fashioned, hard-nosed Realist thinking. States, like people, operated for their own selfish interests. Karl Marx and his followers changed this emphasis by drawing attention to the plight of the vast numbers of dispossessed. They reasoned that the continued oppression of the masses through the economic exploitation of the few, would lead inevitably to class warfare. This class warfare, writ large, appears to be with us now on the global stage. Terrorists and other discontents threaten the traditional hegemony of the West and its capitalist free market system. The United States has become overextended, and much of its productive capacity has shifted overseas. A credit crisis threatens, and more and more, America turns to sheer military force as a means of maintaining its power. Yet liberals, or a new version of them, see possibilities in the growing connectivity, and awareness of the interrelatedness of all peoples and activities that is sweeping the world in globalism's wake. They see that the problems that afflict one place can also affect another, and that sometimes people need some help from outside, even from governments other than their own. World organizations can aid in creating a new global community where all work together in the interests of all.
Ghemawat, Pankaj. "Why the World Isn't Flat." Foreign Policy, p.56 (DATE).
Gilpin, Robert. "Three Ideologies of Political Economy." IPE Perspectives, p.427 (DATE).
Lecture 6: "The Liberal Perspective and its Economic Contribution to Strategic Issues," IPE Perspectives, (DATE).
Lynch III, Thomas F. "Foundations of Radicalism." Understanding International Relations: The Values of Alternative Lenses. Kaufman, Parker, Howell, Doty,…