Origins and consequences of economic globalization: moving beyond a flawed orthodoxy
| Date | 01 June 2021 |
| DOI | 10.1177/1354066120983423 |
| Published date | 01 June 2021 |
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JR
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https://doi.org/10.1177/1354066120983423
European Journal of
International Relations
2021, Vol. 27(2) 428 –449
© The Author(s) 2021
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DOI: 10.1177/1354066120983423
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Origins and consequences
of economic globalization:
moving beyond a flawed
orthodoxy
Syed Javed Maswood
The American University in Cairo, Egypt
Abstract
Contemporary economic globalization is typically seen as a product of both trade and
economic liberalization after the Second World War and of technological advances that
have made it possible to overcome coordination and management of geographically
dispersed production units. Trade liberalization and technological advances were certainly
important variables, but I argue that it was neo-protectionist American policies of the
early 1980s that provided the initial catalyst for globally networked production processes.
American protectionism encouraged Japanese investment in the United States that allowed
US car manufacturers to learn the essentials of network manufacturing as practiced by
Japanese transplants in the United States. In the next stage of global network manufacturing,
liberal trade played a much more pivotal role because the global supply chains could not
obviously be maintained without liberal trade. In this paper, I also discuss the likelihood of
a reversal and suggest that globalization is unlikely to reversed in a significant way. Liberal
trade is essential to the integrity of global supply chain networks, but these new production
processes have themselves created a firewall against future systemic protectionism.
Keywords
globalization, neo-protectionism, political economy, economic interdependence,
foreign direct investments, global networks
Introduction
Supply chain networks have become a ubiquitous feature of manufacturing activities.
These are also causally associated with accelerating the pace of economic globalization.
With advances in communications technology and relatively unimpeded trade, firms can
Corresponding author:
Syed Javed Maswood, The American University in Cairo, New Cairo Campus, New Cairo 11835, Egypt.
Email: javedmaswood@aucegypt.edu
983423EJT0010.1177/1354066120983423European Journal of International RelationsMaswood
research-article2021
Article
Maswood 429
choose to produce either in-house, or based on a network of external suppliers. Most
supply chain networks are established by end-producers such as General Motors and
Ford, or by large retailers such as Walmart and Tesco. These networks integrate not just
suppliers and the end-users but also a number of intermediaries such as logistics service
providers. An advantage of network production and outsourcing, as opposed to in-house
manufacture, is lower production cost that flows through to enhanced cost competitive-
ness for the end-producer and retailer. According to Mahutga (2012), many firms have
either relocated some manufacturing to cheaper production platforms or integrated inde-
pendent producers in developing countries that had the basic manufacturing know how
to become part of a global supply chain. Apart from cost advantages, a devolved, but
integrated supply chain can also benefit an end-user if suppliers possess some firm-spe-
cific proprietorial technological advantages. While supply chain activities have prolifer-
ated, their origins can be traced to national, and later to a global spread of production
networks in the automotive sector in the 1980s. The central focus of this paper are the
originating conditions for network production that, in turn, have propelled contemporary
economic globalization and altered the dynamics of international trade.
The literature on supply chain activity emphasizes how these have both reorganized
production and enhanced trade dependence. Gereffi et al. (2005: 80) expressed this dual-
ity in terms of a “disintegration of production” and an “integration of trade.” This disinte-
gration of production is typically explained as a logical by-product of postwar economic
liberalism and advances in communications and transportation technologies. In this paper,
however, I reject the orthodoxy and argue, instead, that it was not liberalization, but rather
forces unleashed by American neo-protectionism in the early 1980s that led to disinte-
grated, but networked manufacturing. I will show that globally devolved and networked
manufacturing can be traced to the Japanese response to US neo-protectionist policies.
Japanese manufacturers responded to market access restrictions in the United States by
investing in foreign manufacturing and, in the process, transferred their production tech-
nologies to the West. This allowed Western competitors to learn and adopt network manu-
facturing that, over time, led to the spread of global production networks (GPNs).
The orthodox explanation for economic globalization privileges trade liberalization
after the Second World War as they key independent variable. This enabled international
trade to expand at a rate faster than global economic growth and as trade integration deep-
ened, analysts traced a path that led from liberal trade to interdependence between coun-
tries, and finally to contemporary economic globalization. This suggested a singular linear
process from trade liberalization to economic globalization. In this formulation, late 20th
century became the second period of globalization, after an earlier period of liberal trade
and “globalization” in the late 19th century. Most analysts have tended to assume a basic
equivalence between the two periods, each being triggered by economic and trade liber-
alization. Hirst and Thompson (1996), Rodrik (1997: 7), Keohane and Nye (2000), and
Gilpin (2000) are all representative of a general consensus that contemporary globaliza-
tion originated in trade liberalization and is a re-creation of 19th-century globalization.
Keohane and Nye (2000: 7) go so far as to suggest that there has never been anything but
globalization, at times thick, other times thin, resulting from trade liberalization and pro-
tectionism, respectively. Technological advances, too, are acknowledged as important
contributing factors and Lester Thurow (cited in Pickel, 2005: 5), for example, suggests
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