3 - Market Integration and Domestic Politics

Summary

This chapter begins my empirical analysis of partisan politics in the global economy. I present data on the major independent variables in the study for fourteen countries over the period 1966–1990. The countries are Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Norway, Sweden, the United Kingdom, and the United States. I examine developments with respect to two basic facets of globalization – trade and capital mobility – and two sets of domestic variables – the partisan balance of political power and the structural attributes of national labor market institutions.

My primary objective is to highlight two empirical weaknesses in the conventional wisdom about globalization and domestic politics in the industrial democracies. First, in contrast with the common perception that the globalization process is seamless and pervasive, I demonstrate that there are substantial cross national differences in the integration of the industrial democracies into international markets. Second, with respect to domestic politics, simplistic views about “convergence” belie substantial and enduring cross-national variations in the partisan balance of political power and the structural attributes of labor market institutions. These findings have significant implications for the research strategies that are appropriate for analyzing the interactive effects of globalization and domestic politics on economy policy and performance. Most importantly, it is crucial that the domestic effects of trade and capital mobility are examined separately, rather than assuming they are part of a unified and universal process of globalization.

Section 3.1 begins by discussing how to measure globalization. I settle on two broad and fundamental indicators – exposure to trade as a portion of total economic product and government restrictions on cross-border capital flows.