Edited by Alan M. Rugman and Gavin Boyd
Chapter 10: Globalization and economic integration: implications for microeconomic policy in the USA and Europe
Paul Brenton INTRODUCTION At the start of the 21st century the rules-based international trading system is under threat. While economists have tended to become even more convinced of the benefits of trade, adding dynamic effects in terms of higher investment and growth, to the static efficiency gains identified by Smith and Ricardo, there has arisen a ‘large category of actors, groups and individuals who look increasingly negatively at globalisation and who firmly believe that it leads to increases in inequality’ (Higgott 2000). Economists typically gloss over the distributional consequences of global economic integration, concentrating on the overall increases in income.1 However, political scientists stress that addressing inequality both within and between nations is necessary to preserve the legitimacy of, and broad support for, the current system. In this perception a system which perpetuates substantial inequality is unstable. The aim of this chapter is not to address the issue of global governance directly but rather to consider the international economic environment in which discussions concerning the appropriate level and type of global governance will take place. Specifically we consider the extent to which globalization is likely to undermine the scope for independent national economic policy-making and in particular in the EU and the US. To what extent will governments be able to address the domestic implications of globalization using the traditional policies currently at their disposal? Will they be able to continue to effectively separate domestic policy issues arising from globalization from the international policy response? Most attention within the debate...
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