Why Are Governments and Businesses Crucially Important to a Globalised Society - Literature review Example

REPORT By Name Course Instructor Institution City/State Date Table of Contents REPORT 1 Table of Contents 2 Why are governments and businesses crucially important to a globalised society? 3 Executive Summary 3 Introduction 4 Discussion 4 Globalisation and Political Influence 4 Role Played by Business in Globalised Society 5 Government and Civil Society Impact 7 Corporate Power 9 Neoliberalism Effect 10 Conclusion 11 References 12 Why are governments and businesses crucially important to a globalised society? Executive Summary Globalisation can be described as a complex event that involves different trends and tendencies in the cultural, social and economic spheres. It generates both costs and opportunities; therefore, should not be sanctified or demonised, and cannot be utilised as the scapegoat for various problems that the world is facing today. Interdependence has been driven by four forces: (a) liberalisation of investment and trade; (b) reduced communication costs and technological innovation; (c) global social networks, and (d) entrepreneurship. Both national governments have played an important role in facilitating economic integration and greater interdependence of certain activities by elaborating and espousing market-oriented regulations and policies, both at the local and international levels. The increasing global integration in various economic areas started intensifying when economic liberalisation was supported by governments. Financial deregulation was facilitated has been facilitated by governments and have led to the reduction of traditional barriers to market entry, especially in the financial industry. On the other hand, businesses have continued to exert influence in the global society by engaging in the political process. According to both elite theorists and Marxist, strategic positions in the state are being dominated by the sympathetic elites and business. Elite theorists hold that senior politicians and business leaders occupy similar elite networks that support social privilege and ties in the global society. The purpose of this report is to determine why the governments and businesses are crucially important to a globalised society. Introduction Greater economic liberalisation and technological innovations have enabled entrepreneurs, particularly multinational corporations (MNCs) to capitalise on the more open markets with the purpose of spreading the processes of production across the globe. Given that the economic opportunities have opened up, management, technology and foreign capital can now largely move from the transnational corporations (TNCs) into the host country corporations as well as entrepreneurs. The governments have opened up their national economies; thus, allowing mergers between different MNCs and expansion into different markets. As the economic actors, the TNCs have recently gained an increased economic power level in the globalised society. Certainly, governments and businesses play a crucial role in the globalised society. Discussion Globalisation and Political Influence Globalisation according to Brown et al. (2000, p.6) has increased with changes within the information and transportation technologies, in the international market economy, as well as in international political system. The world started moving towards democracy after the end of the Cold War as well as the Soviet Union collapse. Previous tyrannical regimes that were partly self-sufficient because they acted as allies to either the Soviet bloc or the United States were unexpectedly left vulnerable after the Soviet Union collapsed. The market internationalisation attributed to the free movement of technology and capital in quest of both customers and labour resulted in optimism and new wealth across the globe, but those at the bottom of the social as well as economic ladder were vulnerable to manipulation. Brown et al. (2000, p.6) posit that the rapid movement of information and people in the world has led to a greater economic and political equality and a far-reaching sense of moral, political, and economic interdependence. Such changes have changed balance in the roles played by the government, the businesses, as well as the civil society, in both international political economy and individual countries’ economy. According to Bach and Unruh (2004, p.1), political influence and politics have become a major issue for business managers due to the effects on the competitive context where the implementation of the firm strategy takes place. In the last few decades, the major markets globalisation together with policies intended for reducing the government burden on business, like liberalisation and privatisation, have ironically made the political influence and politics more crucial for business. This is attributed to the fact that the impact of business on the globalised society has led to increased demands from different stakeholders. Therefore, politics provides a platform where different stakeholder demands are eventually settled. Role Played by Business in Globalised Society In the last few decade, business firms as mentioned by Scherer and Palazzo (2011, p.900) have begun engaging in activities, which were regarded traditionally as the main governmental activities. The majority of the multinational corporations are engaging in human rights protection, education, public health as well as social security, especially when operating in countries having failed state agencies. A number of MNCs operating in developing countries are addressing social ills like homelessness, malnutrition, AIDS, as well as illiteracy, are protecting the environment and are engaging in self-regulation with the objective of filling global gaps in the moral orientation and legal regulation. Such activities according to Scherer and Palazzo (2011, p.900), have been criticised by numerous economist since they do not signify the business’ economic role within the globalised society as acknowledged in the theory of the firm. Still, such activities prove that corporations are increasingly involved in producing global goods and that business has started assuming the state-like role. A number of companies are fulfilling the functions of implementing, enabling and protecting citizenship rights, which originally were the sole responsibility of the government together with its agencies. However, such corporate activities are happening in countries where the state system has failed (Scherer & Palazzo, 2011, p.901). Revolutionary technological changes offer mechanisms that drive the international business growth. As indicated by Geiersbach (2010, p.120), the intensifying competition at both international and domestic levels are forcing business organisations to look for new opportunities beyond their domestic markets. This has been achieved by the progressive removal of trade barriers while capital movements have facilitated greater flows of foreign direct investment, imports and exports. The MNCs have become key agents for coordinating the international economy since offer the capability needed to deliver new products and services and create innovations. Furthermore, newly-industrialising countries are progressively gaining economic strength, which as a consequently offers an extra stimulus to the international business activities. Government and Civil Society Impact As pointed out by Hamanaka (2014, p.3), the most powerful government can easily influence the globalised society since they assume the ostensible ‘structural leadership’ that focuses on the material resources. Although other factors like knowledge are considered to be power source, exercising power rooted in non-material resources is unclear. The governments can set a favourable agenda as well as create convenient rules for business operations. Furthermore, the states that are more powerful can boost their influence through asymmetric and prestige economic interdependence with other states. The International labour Organisation (ILO) is seen as an influential agency owing to its valuable imprint on labour and social policy. Thanks to ILO efforts, the world has become a better place. Some decades ago, the organisation had failed to act towards the challenges of structural adjustment and labour market flexibility. Furthermore, the organisation failed to offer a rational solution to the inequalities and insecurities attributed to globalisation (Standing, 2008, p.308). In her article, Mosley (2005, p.257) argues against the argument that competitive pressures attributed to economic openness make countries to pursue the same set of social and economic policies. She maintains that the role played by domestic institutions in mediating global economy pressures is important since these institutions are normally resilient while facing such pressures. Given that the preferences, regulation and taxation of the firms and citizens are completely different over those of public services, governments play an important role in enabling the citizens and firms to locate their preferences’ best matches. Besides that, economic openness increases the demands of citizens for intervention in the public sector, as a way of rewarding electorates for economic volatility that have been induced externally. While globalisation intensifies, demands for government intervention are increasing. According to Kuye et al. (2013, p.233), the business, civil society as well as government institutions are these days involved in the diagnosing and finding solutions to various societal problems. Furthermore, the fall of Soviet Union, the end of the cold war, globalisation, the revolution of information technology and the world politics division have all created the need to re-evaluate the business society. In the globalised society, the face of business is continually changing, extraordinarily diverse, and highly dynamic. More importantly, the institutions of the civil society, business, and government have been structured around diverse concerns and interests: The civil society institutions focus on preserving the manifestation of core community beliefs and values; the government institutions focus on creating as well as marinating order and the public goods distribution; and the business institutions place emphasis on efficiently producing goods and services. The contemporary sustainable development is a matter of generating a suitable mix of private sector and government actions with the objective of maximising welfare. Specifically, it is concerned with forming an enabling environment that has a robust regulatory framework for mobilising development resources. According to OECD (2013, p.20), business and citizens’ trust towards government is important for the efficient and effective policy making. Investment on trust according to OECD (2013, p.20) must be seen as a central and new approach to reinforcing social cohesion and reinstating economic growth in case of a global crisis. Corporate Power In their study, Brinkman and Brinkman (2002, p.749) opposed the unmitigated corporate power which is utilised for profits maximisation devoid of social responsibility. They referred this as a cultural lag, which involves the aspect of nonmaterial culture that advance and accelerates swiftly as compared to other forms of nonmaterial culture that reside in the governance capacity. This cultural lag can be overcome if the global economies together with the nation-states are controlled. The world is globally integrated; therefore, needs stronger governance so as to maintain the global market competition advantages as well as change the globalisation forces in order to support human advance. Farnsworth and Holden (2006, p.476) maintain that the business the business plays a crucial role in the globalised society through engaging in the political process on two fronts. First, business dominates the state strategic positions and can access senior civil servants. Therefore, the state normally consults with the business regarding various issues such as competitiveness, productivity and trading policy. Second, the ability of business to access the state institutions is a crucial determinant of the level that the policy outcomes are shaped by the business preferences (Farnsworth & Holden, 2006, p.476). The survival and stability of the capitalist system according to Bell (1997, p.363) relies on its capability to vigorous capital accumulation through technological progress and economic expansion. Importantly, the vigorous capital accumulation allows the increasing revenues to coexist with the increasing standards of living for large percentage of the population in the long-run. Still, neoliberalism seems not to encourage vigorous capital accumulation within the modern-day capitalism. In case, neoliberalism reign continues to dominate the policy and ideology stance, then the world capitalism will possibly experience instability, stagnation, and social breakdown in the future. Neoliberalism Effect Kotz (2002, p.76) opines that globalisation has generated a world capitalism which is similar to the U.S. robber barons. When the system lacked clear rules, big corporations battled one another. Akin to robber barons in the U.S., the modern-day large corporations are seeking freedom from political restraints and burdens which confronting each other in the global markets. This depicts the rise and domination of neoliberalism attributes to the reformed world capitalism competitive structure that led to globalisation process. While the influence of neoliberalism increased in the 1970s, Kotz (2002, p.76) asserts that it became the propelling force of the process of globalisation. NGOs are playing an important role in the globalised society: serve as the legitimate actors in most of the policy decisions (stakeholders), offers benefits to the society (stakegivers), and sometimes withhold benefits (staketakers). As suggested by Doh and Teegen (2003, p.565), the obsolescing bargain model needs some modification because it is dyadic (the nation state and the multinational enterprise). Although previous works as cited by Doh and Teegen (2003, p.565) have been adding the MNEs into the model, a triangle of one MNE and two governments as well as numerous firms and governments are yet to be done. Without a doubt, the civil society organisations influence the institutional context wherein they operate; this context also defines the multinational firms’ choice sets when investing in the host governments. According to Allard and Martinez (2008, p.2), the institutional environment offers the framework wherein the NGO operates; however, the NGO may create informal norms and formal rules of its own which consequently influence other actors within the society. Conclusion In conclusion, this report has determined why the governments and businesses are crucially important to a globalised society. As mentioned in the report, it is irrefutable that the business’ competitive playing field has been extended by globalisation; thus, offering new challenges at domestic markets and new opportunities in the global markets. The report has provided substantial evidence showing how governments play a crucial role in the globalised society in terms of policies and regulations. On the hand, business is engaging more and more to the political processes at the international and local level. The business are playing important role in the globalised society such as serving the role of government in a failed state. Still, the business is expected to take cues for social action that are publicly desired, which can be achieved by abiding by the government regulation, public policies, as well as nation’s laws; instead of depending on the social conscience of the business leaders. As pointed out in the report, globalisation has influenced the way business organisations operate in the global markets. In order to survive in the modern-day business world, companies have been forced to expand to foreign markets. Still, the business environments at the global level demand rapid response and flexibility. References Allard, G. & Martinez, C.A., 2008. The Influence Of Government Policy And NGOs On Capturing Private Investment. Working Paper. Madrid: OECD OECD Global Forum on International Investment. Bach, D. & Unruh, G.C., 2004. Business-Government Relations In A Global Economy: Broadening The Conceptual Map. Working Paper. Madrid: Instituto de Empresa Business School. Bell, S., 1997. Globalisation, Neoliberalism and the Transformation of the Australian State. Australian Journal of Political Science, vol. 32, no. 3, p.345± 367. Brinkman, R.L. & Brinkman, J.E., 2002. Corporate power and the globalization process. International Journal of Social Economics, vol. 29, no. 9, pp.730-52. Brown, D., Khagram, S., Moore, M.H. & Frumkin, P., 2000. Globalization, NGOs and Multi-Sectoral Relations. Working Paper. Cambridge, MA: The Hauser Center for Nonprofit Organizations Harvard University. Doh, J.P. & Teegen, H., 2003. Globalization and NGOs: Transforming Business, Government, and Society. Journal of International Business Studies, vol. 35, pp.564–66. Farnsworth, K. & Holden, C., 2006. The Business-Social Policy Nexus: Corporate Power and Corporate Inputs into Social Policy. Journal of Social Policy, vol. 35, no. 3, pp.473–94. Geiersbach, N., 2010. The Impact Of International Business On The Global Economy. Business Intelligence Journal, vol. 3, no. 2, pp.119-29. Hamanaka, S., 2014. Trans-Pacific Partnership versus Comprehensive Economic Partnership: Control of Membership and Agenda Setting. Working Paper. Mandaluyong: Asian Development Bank. Kotz, D.M., 2002. Globalization and Neoliberalism. Rethinking Marxism, vol. 12, no. 2, pp.64-79. Kuye, O.L., Ogundele, O.J.K. & Alaneme, G.C., 2013. Strategic Roles of Business, Government and Society: The Nigerian Situation. International Journal of Business and Social Science, vol. 4, no. 12, pp.233-43. Mosley, L., 2005. Globalisation and the State: Still. New Political Economy, vol. 10, no. 3, pp.355-62. OECD, 2013. Trust in government, policy effectiveness and the governance agenda. Government at a Glance 2013, pp.19-37. Scherer, A.G. & Palazzo, G., 2011. 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