Page 197 - Global Political Economy_Understanding The International Economic Order

CHA PTER S EVEN
nation of national differences; the negotiations between Japan and
the United States over the Structural Impediments Initiative (SII) in
the late 1980s is a prime example. Both methods of accommodation
are slow, and the latter can be very confrontational. Still a third way
to deal with national differences is by application of the principle of
mutual recognition, in which nations agree to honor one another’s
economic and business practices. Indeed, mutual recognition has been
central within the movement toward European and, to a lesser extent,
North American regionalism.
Convergence
According to neoclassical convergence theory, economic interdepen-
dence will ultimately lead to a convergence in economic performance
among national economies as rates of economic growth, productivity
levels, and national incomes move toward one another. Many writers
even argue that economic globalization necessarily forces convergence
of the structural features of an economy and of private economic
practices and that, therefore, national differences will disappear.
These persons argue that intensification of global economic competi-
tion, expansion of trade and foreign direct investment, and interpene-
tration of national societies necessitate that societies adopt similar
domestic institutions and economic practices. As other countries close
the economic and technological gapwith the more developed econo-
mies, the role of the market will become more central in each econ-
omy; then the policy prescriptions of neoclassical economics—eco-
nomic openness, noninterventionism, and the like—will increasingly
guide the economic activities of that society. Many American econo-
mists and public officials argue that the superior performance of the
American economy in the 1990s and the weaknesses of the once-
envied Japanese and other Pacific Asian economies have made the
American economy and the free market the model for the world.
Some observers even proclaim that the convergence process leads the
world toward individualism and political democracy.
The neoclassical position assumes that national variations in eco-
nomic performance are a function either of a catching-up process or
of a country’s failure to manage its economy according to the policy
prescriptions of neoclassical economics. In this view, the outstanding
economic success of Japan and the East Asian Newly Industrializing
Countries (NICs) was caused by their having had the advantage of
backwardness and their ability to apply the experience and technol-
ogy of the more advanced economies when they mobilized national
resources to expedite economic growth. Then, as countries develop,
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