May & Nölke: Capitalism in Large Emerging Economies and the New Global Trade Order

From the Introduction:

Large emerging economies have increased their share of the global economy quite substantially over the last decades. Whereas discussions regarding the international political economy previously were focused on the US, EU and Japan, today this focus would be difficult to uphold anymore. In particular China, India and Brazil easily surpassed the established economies in terms of GDP growth, trade growth and industry value added growth during the last 30 years.

Although these figures fluctuate quite substantially on a yearly basis, there are no sound reasons to assume that this long-term tendency is likely to reverse any time soon. Correspondingly, countries such as Brazil, China and India increasingly have to be counted as heavyweights regarding the future of the global economy. Moreover, the large emerging markets recently have begun to organize themselves, in order to coordinate their activities regarding the global economic order. Examples for this coordination include the institutionalized cooperation between India, Brazil and South Africa (IBSA), the BASIC alliance (also including China), or the BRICS grouping, additionally comprising of Russia. In the long term, we thus may assume that we do not only witness a shift in economic importance in favor of large emerging economies, but also a conscious effort by the latter in order to influence global economic rules.

The likely consequences of the rise of the large emerging economies for the global economic order have been discussed widely during recent years (e.g., Cooper et al. 2007; Hurrell 2006; Subacchi 2008). However, the large emerging markets so far have focused on getting a seat at the table (e.g. larger voting rights in the Bretton Woods-institutions, participation in the Basle Committee), and have only just begun to outline their demands regarding specific policies. Thus, on the substance of this new global economic order, many of the existing accounts are either heavily speculative or, in contrast, purely descriptive and thus unable to make any substantial statement regarding the likely future course of events.

In order to overcome this state of affairs, our approach is based on the assumption that we need to develop clear analytical perspectives on the behavior of large emerging economies regarding the global economic order, if we want to surpass a state of discussion that is overly descriptive and/or speculative. The specific perspective that we are developing in this contribution is a “second image” one, in the terminology of Waltz (2001), i.e. we are highlighting the importance of domestic economic structures for the explanation of global economic policies. In contrast to liberal theories of international relations (Moravcsik 1997, Schirm 2012), however, we do not focus on the interactions between domestic societal interest groups and governments, but rather study the broad capitalist structures that have evolved in large emerging markets. The reason is twofold: On the one side, we are interested in the long-term evolution of emerging markets’ positions on the global economic order, a research interest that does not lend itself well to the demarcation of the issue-specific preferences of particular interest groups in individual countries, the usual approach of these liberal theories. On the other side, we are deeply skeptical regarding the application of conventional liberal-pluralist models of democratic policy-making to countries such as China, but also Brazil and India. Instead, we assume – in a more historical-institutionalist perspective – that the type of capitalism dominating in the large emerging economies will also determine their long-term preferences regarding the global economic order, i.e. they will want to make sure that global economic rules do not inhibit the functioning of their domestic economic order (Fioretos 2011). More specifically, we are situating our analysis in the approach of critical institutionalism within comparative capitalism (May and Nölke 2013), i.e. we are comparing national capitalist institutions from a perspective that is highlighting the historical evolution of specific forms of capitalism, based on their mode of integration into the global political economy and on domestic class struggles. Form this perspective, we are arguing that there are important commonalities between the national varieties of capitalism that have developed in the large emerging markets, and that this new type of capitalism is an important determinant of the future global economic order.

Available for download here.