The International Political Economy: the International Monetary Fund - Research Paper Example

 Abstract: Evidently the concept of Free Trade has yield enormously to the advanced world of science and technology. Social scientists and other scholars view it in a positive vision while another sect of social thinker regard it as an intrusion of Capitalism on the bosom of socialism that renders first priority to equality, justice and welfare, Marxism for instance. However, Free Trade has been a general recognition of the era. This investigative paper finds the facts and assesses the validity of the newest economic emergence. Order#: 171210 Deadline: 2007-05-18 22:22 Style: APA Language Style: English UK Pages: 6 Sources: 6 Writer ID: 6746 INTRODUCTION: The word Free Trade implies an unrestricted business opportunities across the globe. It further denotes the idea of widen international prospective of trade and commerce in an age of globalization. It is in fact a market model in which trade in goods and services between or within countries flows unhindered by government-imposed restrictions. Restrictions to trade include taxes and other legislation including tariffs and levies. There is, nevertheless a massive social benefits of such deals despite the other allegations claiming that free trade increases the gap between rich and poor. Therefore Free trade is opposed by many political lobbyists: environmentalists, human rights advocates, peace advocates, nearly all labor organizations, some nationalists, Communists, agricultural interests, and anti-globalization campaigners. Governments often call managed international trade agreements "Free Trade", and although this is not really free trade, such treaties may result in Fair Trade. Free trade is a term in economics and government that includes trading of goods without taxes, including tariffs or other trade barriers such quotas on imports or subsidies for producers. It refers trade in services without taxes or other trade barriers with adequate advantage in factors of production and their proliferation. The word Free suggests free access to markets and free access to market information to distort markets through government-imposed monopoly or oligopoly power. It has a wide potentiality of the free movement of labor and capitals between and within countries. FREE TRADE: A BLOOM OF THE CIVILISATION To comprehend the ultimate benefits of the historic gift Free Trade we need to analyze the word “Globalization”. Globalization of the economy depends on the role of human migration, international trade, movement of capital, and integration of financial markets. The International Monetary Fund notes the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions, free international capital flows, and more rapid and widespread diffusion of technology. Thus, globalization refers to increasing global connectivity, integration and interdependence in the economic, social, technological, cultural, political, and ecological spheres. Globalization is an umbrella term and is perhaps best understood as a unitary process inclusive of many sub-processes that are increasingly binding people and the biosphere more tightly into one global system. FREE TRADE IN THE PERSPECTIVE OF NEO LIBERALISM Neoliberalism refers to an intellectual and political movement that espouses economic liberalism as a means of promoting economic development and securing political liberty. The movement is sometimes described as an effort to revert to the economic policies of 19th century classical liberalism Imperial evidences suggest that it is historically-specific emergence of economic influence among economic scholars and policy-makers during the 1970s through 1990s. In many respects, the term is used to denote a group of neoclassical-influenced economic theories, libertarian political philosophies, and political rhetoric that portrayed government control over the economy as inefficient, corrupt or otherwise undesirable. On the other hand neoliberilism is not a unified economic theory or political philosophy -- it is a label denoting an apparent shift in social-scientific and political sentiments that manifested themselves in theories and political platforms supporting a reform of largely centralized postwar economic institutions in favor of decentralized ones. It helped the economists, scholars and even businessmen to bind in an integral unity of profitability. Arguments of this sort gained a great attention after the collapse of Soviet in the early-1990s. MARXISM AND FREE TRADE The prime satisfaction of beliefs among Marxists are the degree to which they are committed to a workers' revolution as the means of achieving human emancipation and enlightenment, and the actual mechanism through which such a revolution might occur and succeed. Criticisms of Marxism have come from the political Left as well as the political Right. Democratic socialists and social democrats reject the idea that socialism can be accomplished only through class conflict and violent revolution. Some thinkers have rejected the fundamentals of Marxist theory, such as historical materialism and the labour theory of value. Some contemporary supporters of Marxism argue that many aspects of Marxist thought are viable, but that the corpus also fails to deal effectively with certain aspects of economic, political or social theory. NEOMARXISM IMPACT ON FREE TRADE Neo-Marxism was a 20th century school that harkened back to the early writings of Marx before the influence of Engel which focused on dialectical idealism rather than dialectical materialism, and thus rejected the perceived economic determinism of the late Marx, focusing instead on a non-physical, psychological revolution. It also put more of an emphasis on the evils of global capitalism. Many prominent Neo-Marxists such as Marcus were sociologists and psychologists. Neo-Marxism comes under the broader heading of New Left thinking. Neo-Marxism is also used frequently to describe the opposition to inequalities experienced by Lesser Developed Countries in the New Economic International Order. In a sociological sense, neo-Marxism adds a broader understanding of social inequality, such as status and power. ENVIRONMENTALIST: SUSTAINABLE DEVELOPMENT Environmentalism is a concern for the preservation, restoration, or improvement of the natural environment, such as the conservation of natural resources, prevention of pollution, and certain land use actions. It often supports the struggles of indigenous peoples against the spread of globalization to their way of life, which is seen as less harmful to the environment. The term “environmentalism” is associated with other modern terms such as greening, environmental management, resource efficiency and waste minimization, and environmental responsibility, ethics and justice. Shawn Westcott of Pittsburgh coined the term Fiscal Environmentalism in 2006.With help from Environmental Policy expert, Alexander Lackner, the definition evolved to derive more useful business and environmental applicability. WTO: A MONUMENTAL SUPPORT FOR FREE TRADE The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. HISTORY OF TRADE: THE FINDING OF THE RESEARCH Trade originated with the start of communication in prehistoric times. Trading was the main facility of prehistoric people, who bartered goods and services from each other when there was no such thing as the modern day currency. Peter Watson dates the history of long-distance commerce from circa 150,000 years ago.Vasco da Gama restarted the European Spice trade in 1498. Prior to his sailing around Africa. The spice trade was of major economic importance and helped spur the Age of Exploration. Spices brought to Europe from distant lands were some of the most valuable commodities for their weight, sometimes rivaling gold. In the 16th century, Holland was the centre of free trade, imposing no exchange controls, and advocating the free movement of goods.Trade in the East Indies was dominated by Portugal in the 16th century, the Netherlands in the 17th century, and the British in the 18th century. Adam Smith published the paper An Inquiry into the Nature and Causes of the Wealth of Nations17 76 that criticized Mercantilism and argued that economic specialization could benefit nations just as much as firms. Since the division of labor was restricted by the size of the market, he said that countries having access to larger markets would be able to divide labor more efficiently and thereby become more productive. Smith said that he considered all rational import and export controls "dupery", which hurt the trading nation at the expense of specific industries. In 1799, the Dutch East India Company, formerly the world's largest company, became bankrupt, partly due to the rise of competitive free trade. David Ricardo, James Mill and Robert Torrens showed that free trade might benefit the industrially weak as well as the strong, in the famous theory of comparative advantage 1817. In Principles of Political Economy and Taxation Ricardo advanced the doctrine still considered the most counterintuitive in economics-“When an inefficient producer sends the merchandise it produces best to a country able to produce it more efficiently, both countries benefit.” The ascendancy of free trade was primarily based on national advantage in the mid 19th century. John Stuart Mill proved that a country with monopoly pricing power on the international market could manipulate the terms of trade through maintaining tariffs, and that the response to this might be reciprocity in trade policy. This was taken as evidence against the universal doctrine of free trade, as it was believed that more of the economic surplus of trade would accrue to a country following reciprocal, rather than completely free, trade policies. The Great Depression was a major economic recession that ran from 1929 to the late 1930s. During this period, there was a great drop in trade and other economic indicators. The lack of free trade was considered by many as a principal cause of the depression. Only during the World War II the recession ended in United States. Also during the war, 44 countries signed the Breton Woods Agreement, intended to prevent national trade barriers, to avoid depressions. It set up rules and institutions to regulate the international political economy: the International Monetary Fund and the International Bank for Reconstruction and Development later divided into the World Bank and Bank for International Settlements. These organizations became operational in 1946 after enough countries ratified the agreement. Twenty three countries agreed to the General Agreement on Tariffs and Trade to promote free trade 1947. Courtesy: 1. Fuller, Dan; Geide-Stevenson (Fall 2003). "Consensus Among Economists: Revisited". Journal of Economic Review 34 (4): 369-387.  2. Friedman, Milton. "The Case for Free Trade". Hoover Digest 1997.  3. Whaples, Robert (2006). The Economists' Voice.  4. Shariff,Ismail. GLOBAL ECONOMIC INTEGRATION: PROSPECTS AND PROBLEMS. From An International Journal of Development Economics. Development Review, Vol1, No.2 (2003): p. 163-178 5. Levitt, Theodore. Globalization of markets, Harvard Business Review, 1983 6. Stipo, Francesco. World Federalist Manifesto. Guide to Political Globalization, ISBN 978-0-9794679-2-9. 7. Liberalism, Marxism and The State, by Ralph Raico 8. Reynolds, Andy. A Brief History of Environmentalism; 2006. 9. Weisbrot, Mark (2005). Trade - What Are the Gains and Who Gets Them, Center for Economic and Policy Research Economics Seminar Series. Read More