Politics of Globalization and National Economy

• Author: Hyeong-ki Kwon
• Published date: 01 December 2012
• DOI: 10.1177/0032329212461128
• Date: 01 December 2012
• Subject Matter: Articles

Politics & Society

40(4) 581 –607

© 2012 SAGE Publications

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DOI: 10.1177/0032329212461128

http://pas.sagepub.com

461128PAS40410.1177/003232

9212461128Politics & SocietyKwon

1Seoul National University, Seoul, Korea

Corresponding Author:

Hyeong-ki Kwon, Associate Professor, Department of Political Science and International Relations, Seoul

National University, Seoul, Korea

Email: kwonhk@snu.ac.kr

Politics of Globalization

and National Economy:

The German Experience

Compared with the

United States

Hyeong-ki Kwon1

Abstract

This paper examines the globalization process of German core export metalworking

industries, to show how the globalization of national corporations has different effects on

domestic economies. Contrary to the prevalent views on the globalization of production,

this paper holds that the outcomes and patterns of globalization vary, due mainly to

the politics of the main actors inside and outside corporations. This paper compares

Germany’s negotiated globalization with U.S. employer unilateralism. In most U.S.

corporations, employers decide how to globalize based on the shor t-term perspective of

shareholder value. By contrast, in Germany, main industrial actors—including employers,

works councils, and trade unions—collectively negotiate how to globalize. In this conflict-

laden process of collective negotiation, German actors have created a political compromise

that combines the upgrading of domestic production with globalizing overseas, whereas

Americans have failed to do so. Furthermore, this paper emphasizes that divergent

patterns of globalization are not predetermined by national institutions. To the contrar y,

the successful outcomes in German globalization come mainly from actors’ proactive

readjustments in their traditional model of industrial relations, creating new practices, such

as active union involvement in company-level bargaining, and the democratic bottom-up

process instead of the traditional top-down process of negotiation.

Keywords

globalization of production, negotiated globalization, Germany, U.S. industrial relations,

co-determination, company-level bargaining

582 Politics & Society 40(4)

Recently, corporations in the advanced capitalist countries have increasingly organized

their production across national borders, as global competition becomes more intense

and as technologies change more rapidly. In order to survive in this competitive climate,

corporations tend to dissolve the existing vertically integrated in-house production,

move parts of production overseas, and recombine various cross-border advantages,

such as low-wage labor, high-tech parts, and easy access to markets. This globalization

of production engenders not just changes in the international division of labor, but it also

dissolves national economic systems. For example, in 2010, German and U.S. automak-

ers produced more cars overseas than at home. Furthermore, as production in Central

and Eastern Europe has been further upgraded and parallel production has been intro-

duced, the global competition of production sites has become fiercer and more direct.1

Reorganization of production across national borders may improve the competi-

tiveness of corporations, but it can cause many changes to the national economy,

including the hollowing-out of domestic manufacturing jobs and the deregulation of

industrial relations. Many scholars as well as the general populace in advanced coun-

tries expect a “race to the bottom” and convergence toward a U.S.-style unregulated

market due to this competition of production sites.2

Are the advanced economies really converging toward the bottom or a U.S.-style

uncoordinated market? If an advanced country like Germany has maintained high

skills and high wages in the process of globalization, how did it accomplish this? By

examining the German pattern of globalized production in the metalworking indus-

tries, particularly the automobile industry, compared with the U.S. pattern, this paper

holds that the globalization of production does not inevitably lead to a hollowing-out

of domestic production or convergence toward a U.S.-style free market. To the con-

trary, the German way of globalization shows an effective alternative that involves

continuously upgrading its domestic production through collective coordination. This

paper holds that the different outcomes of globalization are not predetermined by the

existing institutions, but they have been constituted by different forms of politics

among the main industrial actors. Although existing industrial relations have signifi-

cantly shifted toward decentralization, Germany can continuously upgrade its domes-

tic production through conflict-laden collective negotiations in contrast to the U.S.

pattern of unilateral capital decisions. This paper emphasizes that the globalization is

not a given and singular trend, but it is constituted by the politics of main actors, which

can lead to very different outcomes for domestic economies.

In order to examine the different national patterns of globalization, this paper focuses

on the German metalworking industries, particularly the automobile industry. The met-

alworking industries are the backbone export industries in Germany. Their exports in

2010 reached more than 60 percent of all German exports, or €561.1 billion. Of the

metalworking industries, the automobile industry is the most important not only in its

share of total metal turnover (37 percent), but also in its impact on other industries.3

Furthermore the automobile industry provides an excellent test case of convergence in

the course of globalization because it is one of the most globalized industries.4