332 CHAPTER NiNE ■ InternatIonal Po lItI cal economy
barriers, as many U.S. firms did in the 1960s when they established manufacturing
facilities in Eu rope to circumvent the external barriers of the newly established Eu ro
pean Economic Community. They may seek to reduce transportation costs by moving
facilities closer to consumer markets. Some MNCs are able to obtain incentives such
as tax advantages or labor concessions from host governments; these incentives can cut
production costs and increase profitability. Others go abroad so they can meet the com
petition and the customers, capitalize on cheaper labor markets (e.g., Chinese firms
moving production to Vietnam or Laos), or obtain the ser vices of foreign technical per
sonnel (e.g., computer firms in India). Th ese reasons are based in economics, but ratio
nales based on the po liti cal policies of the host state may also play a role. MNCs may
move abroad to circumvent tough governmental regulations at home, such as banking
rules, currency restrictions, or environmental regulations. In the pro cess, MNCs become
not only economic organ izations but also po liti cal ones, potentially influencing the pol
icies of both home and host governments.
Some liberal economists go further than extolling the economic benefits of liberal
ism or the virtues of MNCs. They see a positive relationship between the international
liberal economy and peace. We saw one aspect of this view in our discussion of the demo
cratic peace in Chapter 5. Norman Angell, recipient of the 1933 Nobel Peace Prize,
argued in favor of stimulating free trade among liberal cap i tal ist states, in the belief
that enhanced trade would be in the economic self interest of all states. But, more than
that, Angell argued that national differences would vanish with the formation of an
international market. Interdependence would lead to economic well being and eventu
ally to world peace; war would become an anachronism.^5 Although not all liberals
agree with this formulation, economic liberalism does suggest specific economic poli
cies (open markets, free trade, free flow of goods and ser vices). Liberals also posit that
government’s role should be as limited as pos si ble, merely protecting property rights
and providing a functioning legal system. Under this formulation, liberals view inter
national competition as healthy and desirable, with the potential to lead to more peace
ful interactions.
economic regionalization
Despite the efforts of the World Trade Or ga ni za tion and multinational corporations
to support internationalization or globalization of economic life, economic regional
ization has seen a resurgence. Since the 1990s, more regional economic arrangements
have been negotiated, and those already operational have been strengthened. What is
the relationship between globalization and regionalism? Is regionalism another step
toward enhanced globalization, or is regionalism really an obstacle to globalization?