Varieties of globalization and the trade regime This section of the chapter draws on the concepts of “embedded liberalism” and “varieties of capitalism” to develop a new framework titled “varieties of globalization” that may help us understand global trade negotiations. During the post-war era many countries deployed a variant of what John Ruggie (1983) called “embedded liberalism” – global trade and investment liberalization “embedded” within national-level institutional frameworks to promote domestic economic growth and financial stability. As is the case in the industrialized world, where there are numerous “varieties” of industrial capitalism, there have been varying regimes of embeddedness across the developing world as well. The key difference between embedded liberalism in the industrialized countries and in the developing world is that, in the industrialized north, the interest was to maintain a high level of industrialization and stability,
whereas, in the developing world, the goal was to obtain a satisfactory standard of living and stability for their populations. As countries seek to re-embed markets in the twenty-first century, these different goals persist. Such goals translate into different sets of interests and negotiation stances in trade politics. Similar to the experiences of industrialized countries, embedded liberalism lost momentum in the developing world beginning in the 1980s (moreso in Latin American than in East Asia). For close to two decades the “Washington Consensus” approach characterized much of developing country economic policy – an approach that stresses the liberalization of trade and investment alongside the general reduction of the role of the state in economic affairs. Though many nations still espouse the Washington Consensus approach, some nations such as Brazil, South Africa, India, China, Malaysia and others began to re-embed markets with state activity to diversify economies and reach global markets with the goal of raising living standards. These nations represent a variety of globalization that has not received much attention in academic and policy circles. Indeed, some treatments of China and Brazil attribute the growth of those nations to “globalizing”, although both nations have done so with a mix of industrial policy and state-facilitated macro-management for development. There is an enormous literature in political economy circles known as the “varieties of capitalism” literature. The originators of this body of work, Peter Hall and David Soskice (2001), focused mainly on the West and keenly categorized industrial capitalism as having “liberal market economies” that are more market-based (U.S., U.K.) and “coordinated market economies” where the state plays a stronger role in coordinating markets activity (Scandanavia, Germany, Japan). The core of the “varieties of capitalism” literature is largely focused on varieties of industrial capitalism in the West. However, a related discourse has been occurring among political economists of economic development, albeit under a different guise (standout exceptions are Schneider, 2009 and Breslin, 2007). In the 1980s and the 1990s there was significant attention paid by political economists on the role of the state in economic development (the classic summary volume is Woo-Cumings, 1999). This literature, which focused on East Asian nations beginning with Japan, as well some Latin American nations (especially Brazil and Mexico to the 1980s), suggested that:
In states that were late to industrialize, the state itself led the industrialization drive, that is, it took on developmental functions. These two differing orientations toward private economic activities, the regulatory orientation and the developmental orientation, produced two different kinds of business-government relationships. The United States is a good example of a state in which the regulatory orientation predominates, whereas Japan is a good example of a state in which the developmental orientation predominates. A regulatory, or market-rational, state concerns itself with the forms and procedures – the rules, if you will – of economic competition, but it does not concern itself with substantive matters.