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Dual Transitions

Political Liberalism and Globalization The Only Path to World Tolerance

'Political liberalism' can be defined as a rule of law that recognizes certain individual rights to freedom from government.

Globalization & How to Get There

  1. Import Substitution

  2. Industrial Entrepreneurs

  3. Export promotion policies

  4. Easy period (phase)

  5. Late period (phase)

  6. Critical Stage (phase)

  7. Improving productivity ( Valuable Subsidizer)

  8. Close domestic department.( Devalue the currency)

  9. Problems & Solutions

  10. Ultimate Success

home countrythird world state



Globalization began as a concept when the first homo sapiens -sapiens came up from south Africa into the fertile crescent. In the New Kingdom period of Egypt, the world opened up to them by conquest forcing trade and ideals upon the middle east ( Then called Mesopotamia). Beginning trade opened up by mediators, the Arabs in upper Egypt and lower, what we call today as the Saudi Arabia, took trade from India that was beginning trade with China. By 600 B.C.E. the Chinese had established the silk road, one of the main arteries threw which resulted in trade-ware and knowledge. Anatolians and Phoenicians, both sea faring regions and a mixture of peoples began to spread trade and eventual ideas across the known world. At one point before the Greeks dominated in 300 B.C.E. the Egyptians had universalized their language as dominate in the known world.  During the Hellenizing  Period,  Globalization was again thought up as a world term, but the world word didn't have the term global but world. By the early periods of the Roman Empire the Greek language and culture were being propagated across much of the known world. Alexander the great forced it upon the Middle East and the Egyptians were taken over by the Ptolemy dynasty. The west branched off into its separate political sphere from the Middle East , and China's dynasties began a long trend of insular politics that created two radically separate ideologies. The eastern civilizations went toward centralizing Kingship, and the western civilization began a series of non-centralizing political ideologues: Capitalism, Democracy, Socialism and Communism. From 600-1200 A.D.E. the western world was divided between the kingdoms of the Arabians, and the Middle Ages feudalism of Europe. China kept to its self with a brief interlude of the Mongols who shook up the world making us all realize that we live amongst each other on one planet. Meanwhile, the Europeans expanded to the new world and kicked out the Arab Empire forcing the blockade on trade to the east While England established its paramount world empire, in which the term globalization really took a practical affect in application. For a period of time, the sun never set upon the English Empire. South America, and eventuality North America were colonized while the English forced the opening up of Emperors of China to world trade.  The bitter globalization fight took on a different views with the industrialization, creating three knew radical branches of western politicalism: The New Democracies. Socialism and Communism.


With  the onset of the treaty of Westphalia (October 24, 1648), Nationalism arose along with concepts of globalization. Better understanding a tolerance was put into law for all of Europe to force each region to draw up boundaries in order to place universal ( Continental) laws for future arbitration. Later, Napoleon, then had the thinkers write a fabulous judicial law that is still used in many nations,  as an outline on the world interconnectiveness, today. American and French revolutions, created needs for better laws and courts. These turned into international tribunals and laws which eventually opened up thoughts of a peaceful world eventually through trade and exchange of human ideals - for the betterment of man. Globalization took on a new tone of thought, in the age of Enlightenment, for the western civilization.



By the end of the 19th Century the western world was working on liberalism, one of the newer outcroppings of the new radical branch of western politicalism to export to the world. But, Europe hit a road black that derailed this political science experiment for fifty-years - World War One. After world war one the ggeneral census of all the peoples of the world felt that other countries and cultures could not  trust each other and most countries put up walls cutting off this newer notion of globalization. After World War II, and America thrust into a superpower, America began the arduous plan to globalize the world. To keep the vision going. That, like Disney Land's, major vision, that we all live in a small world, we would all need to cooperate in this new brave world, not only for survival but to some how deal with out differences and problems and try to make the Earth a better place for all the peoples on Earth.


The Major plan was to help out the slower developing countries, while redistributing the smaller percentage of wealthy regions in the world into the hands of the many. Of course, like everything never done before the world hit snags. This was not a surprise. For when England began the Industrial Revolution, they didn't know what to expect. After, greater Europe was able to study the English pit-falls on industrialization, they could better see the patterns and make the appropriate adjustments.


What America began to do and eventually other states in our world was to invest into these slower developing countries and show them how to industrialize. Although, many thought some of this sinister, a complicated situation to fund these programs came with a price to these developing nations -  they  had to have benefits for the countries to host these 'dual-transition' businesses.

 Dual Transitions Developing the Third World

Export-oriented Growth and the Politics of Reforms.

Poor country economy relies on the sale of raw materials. They then are the wealthy, but few families in number who have all the money in a third world. The rest are farmers and peasants. The next step is to open up opportunities for the already rich to bring in employment and jobs for its peoples.


For the world to become a level playing field one must tackle the full political spectrum of political Science. The three main branches must be in balance. But to achieve any type of advancement, intellectual thinkers, including Karl Marx,  understood that the economic side of the three major branches, Social ( Individual), Institutions ( Government) and economy ( economics), had to be accomplished. Even though Marx thought capitalism was absolute evil, he understood this in theory,  and promoted this level ( capitalism phase)  as a must pass reality to achieve the final destination  - the perfect society ( He called this communism). Although many still disagreed and found major flaws in his system, the third world understood that to come out of feudalism and backwardness they must encounter this so-called-evil. It was out of necessity. These states, regions or countries were stuck between a rock and a hard place.  So America and other countries went about with a plan called Dual transition.


Import Substitution


First world countries began to use a concept that worked to bring these non-industrial states out of the dark ages, so - to - speak. This plan and implements system is called Import substitution. Feudalism was where regional authoritarian regimes ruled while keeping their subjects subjugated. This worked for a while, until it became necessary to change or die. This, for South America came at a turning point in the 1950s. Most of the world was forging ahead at a furious pace and they were still back in the middle ages using wooden plows for agriculture, all the while a population boom on the earth dictated to all peoples to achieve a greater technology to sustain life. In essence, South America had to either change or face distinction.


Along with internal political wars ( Frequent political changes, policy redefinitions and unsustained economic growth) , came the first world nations with solutions - but at a price. This was called the dual transition. Its plan was for foreigners to set up industry into a backward nation ( state) and i9n so doing help them economically, which according to the new resolved theories, turn into fledgling democracies.


Import substitution  - How it works


Foreigners invest in industry in a chosen country ( third world). Some have heard the term slave labor before. These foreign companies invest in autonomous entities in a state ( Allowed by the governments) to start the industrialization ball rolling. Deals are struck essentially with autonomous entities. The industry makes the product for both the domestic and international sectors, while the foreign company receives some of the profits by selling the product at inflated prices to first world countries. The substitution is the home countries creates jobs for its citizens, trains citizens in new fields of industrialization, makes domestic products for its citizens, and the state makes some money ( by taxes paid by the industry); while the foreign business cooperation benefits from a share of the product for profit. The foreign company invests the capital to build the plant in the host country then receive a share of the goods or product, made at cheaper prices then their own domestic market wage and then selling the cheaply made good or product n a fist world nation at the going inflated price. Both systems benefit out of this deal and this is called the industrial entrepreneurs stage.


Industrial entrepreneurs stage after the inception, completing and some operating time with successful output finally comes into contact with the states official governors whom, then make further decisions that affect the future of these businesses. The entrepreneur, will be the homes country citizen who invests his or her capital, time and land to start up this operation. This, at first is autonomous, because the state doesn't want the liability if the initial stages break down in agreement. This way the state of the home country doesn't get stiffed financially. What autonomous measures does is it  creates wealthy home (state) citizens who then become a concern to the government because they become fabulously wealthy and are seen as a cash cow to the state. This is the first and usually the hardest hurdle in success for the long run of the state.


After this agreement by the state to allow the autonomous business person to take the ultimate risk, and success has played its hand, the home country begins to think about self-sufficiency. They then, after learning all aspects of this particular industry, build and run their won models. This is the first stage of the states involvement and some variables play heavily into their failure or good-will with success.


One of the key factors in self sufficiency is after the state builds its own industry,  upon the model of the entrepreneur's model, they still need a market to sell the products and goods. Because the entrepreneur only has to pay taxes (At the onset)  and that is all the involvement with the state he or she has to accommodate, the only sector left for the state-run industry to utilize is the domestic sector.  There are two key reasons why this is so. First, the home country has no history of all the procedures and problems that arise in export navigation and also, they have no markets because they are filled already internationally and blocked by long established globalists (First world countries). This doesn't mean that they cannot market their wares to other countries, but the restrictions in the first world markets, for relative beginners,  have been regulated by many international organizations, like the World Trade Organization WTO and a few other large conglomerates. They will have to prove stabilizing producers watched for even decades before allowed in to these exclusive clubs as they are called.


When this road block in which all new industrializing states must take as a permissible entry into the global market the states begins the choice of playing with their hands into the cookie jar or leaving cookies where they are in hopes that when the kids come home from work they will enjoy the fruits of their labor and form a happy countenance to work another day.


 The state puts its hands into the pot, and this brings up a plethora of concerns. First, if the state begins to regulate the autonomous entity, they run a fear that the foreign company will pull out or not promote anymore economic reforms into this country. In addition, foreigners have to begin to work out payment plans to pay-off corrupt officials to keep their operations in tact. When the  home country's government places its hands into the cookie jar and begins to enact pay-offs, legislation, threats from letting this autonomous entity profit from the foreign investors this brings up major logistic issues to progress of the third world state that is trying to move up in the world. What happens when the economic windfall occurs?


The initial setting up the investment, building the factory, teaching the people and creating the goods and products with the initial selling is called the easy phase. Favorable international markets are opened up by the trusting corporations. They are from the fist world nations.  The late phase 9 or hard phase)  is what happens after the benefits are seen working and the state becomes jealous or has a crisis and a cash cow sits within their boarders ( of the state) - will they put their hands in the cookie jar. The answer is they have too so some degree- but to what degree depends on the ultimate state of affairs. Here are some examples at what happens at this stage. These are called variables:


  1. The Government can close the door on foreign competition into whom comes into the country to start up more industries, including the initial company. International demand falls off. Other countries place import restrictions, called protectionism.

  2. When the industry or industries begin to show economic profits, in the forms of success, new tax bases, and domestic products the next stage is domestic export policies.

  3. Easy and late phases of import-substitution creates two distinct economic sectors with different economic conditions for internationalization - sector corporatism. a. long term goals ( out of states jurisdiction) b. State regulated corporations.

  4. Failed Embededness - business men/women are jealous others whom get special treatment in sectored corporatism.

  5. Import - Intensity: most governments since World War II had no concern with improving states, such as Brazil's terms of trade. This affected their (many nations can be of example here)  main export such as coffee which stagnated. To sustain itself, Brazil ran balance of payment deficits, which resulted in rising inflation.

  6. Brazil's ( or other nations) rising inflation, and producing other economic difficulties merged with with critical injunctions of populist policies.

The major theme here is once a large or a portion ( segment) of the society begins to be employed all the other people want to work also. Social breakdowns from impatience can result in a reverse of the capitalist, dual process that will lead to democracy as happened in Brazil in the 1970s. During 1974, the oil crunch hurt the export industries hard and upstart countries like Brazil felt the crunch the most. Political instability because of this created an over through of the fledgling democratic undercutting policies that were forming, back into an authoritarian regime. Under the authoritarian regime, came further problems of stealing allot from the cookie jar and thus damaging the delicate transition flow of capital and employment to further progress and economic stability. In essence, corrupt leaders bullied the cash cows. This is the fundamentals in politics that is called the critical period. In times of troubles does one ( the home countries government)  keep its hands permanently out of the publics cookie jar?


Critical phase, comes after the hard phase and is seen in two stages - the corruption stage then balancing out into the solution and back on track phase. (The reestablishment of trust trust of the foreign entity).

When the cookie jar is breached by the state officials, albeit for greed or for social stability, the phase is usually concrete. That is states have rarely, if any at the large scale, been exceedingly successful at stopping crime and corruption in a free market society. That means and was the case for a period in South America where every state went through a stage ( After the first levels of Import Substitution) or waves of severe repressive policies, and carried out many changes in economic reforms. Many backward causing large readjustments in currency that were not all caused by the world's crises. Many were caused by extreme corruption, as noted here, and others were caused by bad management of the central-core run economic planners in the authoritarian regimes. This could have been solved by allowing the autonomous entrepreneurs to run the marketplace. However, like all the time, a government feels that it can make better decisions with your money then you can. So they took the profit out from the entrepreneurs who gave up working hard and either abandoned or pay-off the corrupt officials making significant less of a profit for themselves in turn, causing them to not feel accountable to the public whom ultimately looses out in the long run. These policies actually make the society take backward steps from liberalism. In hindsight it is easy to see the bad central economic decisions played out by the authoritarian regimes and how this heavily affected their progress and ultimately collapsed their economies, but in the meanwhile, under these critical times things look blurry for the state and the outside countries corporations have to politically stay-out of touch in the policy making decisions under strict international guidelines ( laws). All the corporations can do is to hope for the best, which isn't always the case.

When the government puts its hands into the cookie jar, even though they have tools, wherewithal, and money to make their own cookies , then missing cookies that should have gone to accountable good - will of the people- creates a fall back from progression toward liberal-freedom of economic stability.

Improving productivity ( Valuable Subsidizer)

After the authoritarian regime is dealt with the home country want to pay down the debt and get back into the good graces under the watchful eyes of the globalist trade organizations. Then they try to figure ways to work hand in hand with the new industrialized sectors of their economy. If they can strike a balance for the benefits and to reestablish trust with their citizenry the country often follows a Improving productivity program. Now that the state builds its own industries and the foreigners have been, for the most part, taken out of the picture, then began to subsidize their industries. This is a program where they government pays these companies the share of profit lose it will lose by dropping its export prices in the global marketplace. The government sees this as better then not selling anything at all because they taxes created from the sales ultimately pay-off debt for the home country. Once the debt begins to be played-off the trust of the foreigner corporations see this as good will and begin to come back to do more business with the home country. This is often a slow and portative assessment period but if all runs well the corporations flood back into the home country.

Close domestic department. ( Devalue the currency)

Splitting of the economy from what goes out and what stays in shapes these phases. These are phases that get the economy on the right global track because inflation is always a happenstance when new money that is created by capitalism/industries takes over a once backward nation. After corruption, sometimes the International Monetary Fund IMF, a world bank, bails a country out. For example, a $42 billion IMF bailout was awarded to reformist, Fernando Henrique Cardoso in 1998. Another way of warding off further debt and paying down the debt is closing domestic markets to outsiders. The other way is seen in maintaining  competitiveness with other  economies where devaluations have already taken place. This is a very traditional economic response to a crisis of competitive devaluations. Many other countries devalue their money to compete in a global market, This puts added pressure on newer economy world players in that to stay competitive they must devalue their money. The home country sees there money as overvalued. Trade surplus plays a leading role in this evaluation within this global liberal capitalism.

If country X devalues and it competes in the same markets as country Y, then country Y will be forced to devalue.

When investors sees the currency devalued they lose money in their investments and credibility hurts the home country. Again, a balance of competition and credibility play a huge physiological role in global economics. If a country doesn't devalue its currency and rides out the inflation storm they retain confidence in foreign investment. Countries that see that they have no more need in asking for global corporations to invest to kick start their capitalism usually will think about devaluing their currency. Goal seen by the foreigners is long-term, stable value currency. They can trust this investment.

Once a country establishes trust and a working history of successful economics in this dual transition period they are ready for the next level and usually have come out of third world status, closer to a full equal player in global first world societies.

CIAO : Columbia International Affairs

Working Papers:

ISN : International Relations and Security Network ( No escape link at cite must re-enter new URL. 12.10.04)

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