Bank of America Lawsuit
Bank of America Lawsuit News- 2/7/2012 : The questions at stake are of central importance to the academic disciplines of comparative political science and comparative public policy, but they also touch the heart of modern democratic statehood as it has developed since the Second World War. The territorially based, democratically legitimated state that took on the tasks of welfare provision and provision for macroeconomic stability sees its capabilities potentially eroded—crucial capabilities such as the one for resource extraction to finance the wide-ranging responsibilities which also contribute centrally to its legitimacy. The concept of the “modern” or “Westphalian” state that had been crystallized by scholars such as Max Weber and Otto Hintze in the early twentieth century had emerged (above all in Europe) since the seventeenth century. It conceived of the nation state as “an alliance of the people into a unit capable of action” (Hintze 1970: 485), whose central characteristic was sovereignty, defined by Hintze as “independence.
Much of the public and academic debate around these issues is linked to the term “globalization”. It has undergone an amazing career over the last two decades. There hardly seems to exist a facet of public life that cannot be linked to this term: be it domestic conflicts regarding the need for political reforms and the necessity of redesigning social security systems; structural economic change and the shift of economic power to the emerging economies of South and Southeast Asia; debates about the fairness of global trade or its increasing de-materialization; the threat to cultural diversity presented by global media power and tourism—all that is mentioned in one breath with “globalization”, even if that link is often more one of mashing things together than providing proper explanation.
Globalization, we can conclude, is no clearly defined concept, and, as the aforementioned examples demonstrate, its use in that long debate has varied from concentration on specifically economic phenomena to very general social effects on a global scale. Beyond the very general insight that globalization denotes a continuing process of accelerated and deepened economic, but also general social, interaction on a global scale between formerly politically independent units (from which mutual influence follows), little agreement exists concerning the characteristics of globalization. Whether it constitutes a process of a historically new quality or not; whether states caused it or whether markets are the dominant actors; whether the economic, the social, or the political sphere is the main area of concern; whether it is a development to be applauded or to be contested—all these questions remained unanswered.
Predecessors to this great globalization debate can be found in a number of areas. Sociological theories of differentiation and modernization have argued, starting with Comte and Durkheim in the nineteenth century, that the processes of individualization, secularization, and rationalization would ultimately move societies into a unitary direction; discussions in international relations theory have acknowledged for some time that “interdependence” (Cooper 1968; Keohane and Nye 1977) would bid the model of nation states as key actors in international relations goodbye and that new transnational actors such as multinational corporations would contribute to the creation of “turbulence” (Rosenau 1990); and lastly, scholars in both international.
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Given the multiplicity of inputs that have contributed to it, and the great variety of subjects and intellectual traditions, the diversity of the globalization debate mentioned above becomes perhaps less surprising. It also now becomes clearer why very different associations to this term exist, and that it must seem doubtful whether a common definition of it can ever be agreed on. In the past, a number of attempts have been made to categorize the contributions and thus facilitate a more structured debate. But here again, no general agreement could be found either.
A common thread running through these different classifications, however, is that the main dividing line separating positions is the question whether globalization is perceived as an event that fundamentally alters the conditions states act under or not. It is this question—does globalization diminish the nation state’s capacity to act?—that has been identified as the central focus of the whole debate by a number of authors (Berger 2000: 52; Gourevitch 2002: 313; Zürn 2002: 240) and is thus a consensus that has been emerging in this multifaceted debate in recent years. But whether this capacity to act is indeed under threat (and what consequences this would have for the self-conception of democratic governance) is again contested.
Those who see the state’s capacity to act threatened by globalization emphasize that conditions for economic policy have changed substantially over the course of the last three decades. After the Second World War, controls over movements of currency and goods had allowed the state to siphon off rents from capital owners to finance public and welfare state spending (Scharpf 1996). After the breakdown of the Bretton Woods system of fixed exchange rates and the demise of currency controls, however, states lost command over the setting of domestic interest rates to the international financial markets and had to yield to their “tyranny” (Eichengreen 1997). In the sphere of fiscal policy, the state’s room for manoeuvre was also strongly curtailed, since globalization enforced a shift of taxation from the (highly mobile) factor, capital, to the (less mobile) factor, labour. As a consequence, it was argued, states were faced with the unpalatable choice between either running permanent public deficits or facing a decline in international competitiveness due to excessive labour costs. Deregulation and transnationalization further reduced the capacity for active state policy, and in terms of welfare state measures, globalization would lead to cut-throat competition and a “race to the bottom”. Consequently, authors arguing for this position spoke of the “erosion” of the nation state (Hilpert 1994), its “retreat” (Strange 1996), or even its “end” (Ohmae 1995).
Information from other sources on Bank of America Lawsuit: But in order to analyse globalization beyond the merely descriptive, a theoretical basis is needed from which the relationship between increasing globalization and the effect this has on state capacity can be modelled. Contributions to the debate are often defective in this respect, implicitly making assumptions about theoretical relationships, but not discussing them openly. Basically, two theoretical approaches can be used in this context, both ultimately resting on different strands of economic theory. However, they lead to opposite predictions regarding the reactions of developed industrial societies to the challenges of increasing economic integration. One predicts a trend towards policy convergence, the other a scenario of stable or even increasing diversity of policies. State capacity (understood here mainly as policy self-determination) would be expected to shrink under the former scenario, while it would not be affected in the latter.
According to this, a country will tend to export goods with whose production factor it is relatively abundantly endowed, while it will tend to import such goods whose production factors are relatively scarce at home. The reason is that a relative abundance in capital will cause the capital-abundant country to produce capital-intensive goods more cheaply than a labour-abundant country. Building on this standard economic theory, Ronald Rogowski some time ago developed a political science model to explain the emergence of societal cleavages (Rogowski 1989). Starting from rather simple assumptions about the domestic political process and with the help of the Stolper-Samuelson theorem, Rogowski was able to put forward hypotheses about the effects of increasing economic openness in order to explain the different political developments, coalitions, and cleavages in late nineteenth-century Britain, Germany, and the United States. In work done collaboratively with Jeffry Frieden, Rogowski undertook a—plausible— extension of this model to the process of globalization (Frieden and Rogowski 1996). The authors strove to explain the policy preferences of the relevant domestic actors, the policies carried out, and the development of national political institutions, claiming that the power of an interest group to assert its preferences varies with its mobility—or rather that of its factor of production.
The degree of competition depends on the mobility of all factors of production. But it is not only the extent of taxation that influences yield expectations of capital—labour, social, and environmental regulations also play a part in this competition. Since regulations impose costs, firms will try to minimize such costs. Therefore (and with the same logic as in the case of taxation) equalization will be the result in these areas as well. Which direction this competitive equalization between states will take—a “race to the bottom” with a downward spiral of regulatory intensity and a convergence on the smallest common denominator, or a “race to the top” with escalating regulation as a consequence of competition—depends on a variety of factors and is not relevant in the present context.
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