Financial Globalization, Democratic Deficit, and Recurrent Crises in Emerging Markets - Research Paper Example

Introduction In the recent years, globalization has emerged as major socio-political and economic process that has ushered in new era of interdependency of states and blurred national boundaries. The advancing technology has been one of the most influential factors to redefine communication and process of development (Guttal, 2007: p.525). It has hugely facilitated movement of goods, services and human capital across the geographical area. The emigration and immigration of people across the globe has provided people with wide scope of personal and professional growth. Most importantly, it has provided businesses with huge opportunities to expand globally and brought in new order that relies on universal values, promotes equity amongst people cutting across race, culture, color and nationality. Thus, globalization per se, is vital ingredient of development that is distinct in its economic integration of resources, transforming social values and shifting power dynamics across nations. 2. What is globalization? Brawley (200, p.21) asserts that globalization is driven by technology that accelerates integration of economic forces vis-a-vis market, firm, production and national financial system on a global scale with wider ramifications on the socio-political dynamics of nations across globe. The multi-dimensional aspects of globalization emphasize new business imperatives that promote significant shift in division of labor and acts as catalyst for new socio-political order. Guttal (2007, p. 524) rightly argues that neo liberal policies facilitate process of globalization and various factors like fiscal reforms, liberalization of trade, convergence of knowledge and technology etc., undertaken on national level encourage creation and distribution of wealth across larger area of political economy. Globalization therefore leads to new global economy and development where benefits cascade down to more people in the world. 3. Why globalization? Change is inherent part of development and process of globalization emerged gradually from the fundamental compulsions to infuse financial aids to poverty stricken nations, who were stripped of their wealth by the colonial rulers by the wealthy nations. But the aids were conditional to local reforms and economic liberalization that attracted foreign businesses (Schaeffer, p.8). This gradually led to globalization where emigration and immigration of people was seen as important part of growth, creating not only wealth but also influencing the socio-economic and political transformation of states. Today, it is intrinsically linked to development and serves as a major tool to advance and promote the interests of people from diverse background across the globe. Hence, it has emerged as hugely crucial process that impacts growth of individuals, business and nations and promotes creation of wealth leading to development. 4. Government controls and Global compulsions In the current environment of globalization and highly competitive business, inter-dependency of resources has compelled nations initiate reforms and economic liberalization for attracting foreign investment. Economy today, is market driven that has necessitated opening of domestic market for global businesses. The major stumbling blocks to globalization processes are: taxations, currency fluctuation, inflation, government laws, restriction in trade, exit policies, ownership etc. Deregulation of control therefore, becomes essential for creating facilitating environment for foreign business. The national policies and legal parameters therefore emerge as vital ingredients that promote trust amongst foreign business and domestic actors thereby creating conducive environment for business with diverse consequences for people in different setting (Shaeffer, p.11). The government initiatives in liberalizing economic policies that give incentives to FDI and welcome privatization greatly attract foreign businesses. At the same time, government control helps to reduce risk and misuse of power by the big corporate bodies and business. Thus, political, legal, social and technological environment greatly expedite international business vis-a-vis FDI, cross border mergers, export and import of goods and services, bilateral trade relations etc. But it also emphasizes state’s power and their understanding of mutual interests and environmental paradigms. Indeed, their dynamic policies and evolving mechanism to overcome political conflicts are critical inputs that are designed to speed up process of globalization for developmental outcome (Brawley, p.30). Moreover, in order to expand across globe, resources like capital, people, knowledge, produce become crucial factors that are exploited by external agencies (). As such, fair play and misuse of power by financially strong multinationals and foreign businesses becomes important issues within the broader realm of globalization. The role of international tribunals and international agencies like WTO, GATT, IMF etc. therefore are hugely important to prepare guidelines and create better conditions for promoting trust amongst the various stakeholders of international businesses. 5. International business and market Palmisano (2006, p.128,129 ) believes that globalization was precipitated by the advent of technology, reduced barrier in trade and investment across national borders and changing dynamics of marketing and production paradigms. Technology provided businesses with cost effective ways to reduce cost of production and logistics to increase revenue. Thus production sites were shifted to places where cheap labor was easily available. The emerging economies like India and China became new destination for production and serve global market rather than remain confined to local markets. A new political economy was introduced that increasingly relied on inter-dependency of nations. Wolf (2004, Chapter 11: p.225) says that while multinational companies were powerful financial entities but economic integration within globalization was hugely pertinent factor that helped curtail their monopoly by promoting highly competitive market. As independent sovereign nations, their decision to global trading and business are motivated by the broader welfare of its people and socio-economic growth of the nation. This is vital aspect that not only governs their foreign policies and economic liberalization but also serve as incentive for leveraging their internal resources for higher productive outcome. Brown (2007, p.51) says that dialectic nature of globalization processes are critical issues that need to address the adverse consequences of globalization. This would help to increase the interconnectivity of resource and promote higher productive outcome. Most importantly, as Wolf (2004, Chapter 11: p.233) says that opportunities exist in poor countries also but the positive outcome globalization depends on individual nations as to how they allow external agencies to exploit their resources securely like Hong Kong. One of the most important issues that have come out is the social responsibilities of international businesses and corporates. Globalization has considerably impacted expansion of business over larger geographical area and endowed international businesses with corporate citizenship that is distinct in its global values. Klaus (2008, p.112) argues that role of international business as corporate citizen goes beyond the concept of corporate social responsibility or corporate philanthropy. But it encompasses proactive participation in the development of the community within which it operates and works towards global challenges that impact everyone. Thus sustainable development, including environment, socially relevant issues etc. become key areas of focus within the broader framework of its corporate goals. 6. New socio-economic order and political economy Globalization is facilitated not only by the need to expand business but it is also intrinsically linked to socio-economic development of countries at large. The new order and political economy based on economic integration and social transformation of states is the key outcome of globalization. Brown (2007, p.45) contends that globalization is primarily a network of people, culture, nations, government and businesses that thrive on interconnectivity of resources. It supports democratic values and relies on economic liberalization, sharing of resources and mutual cooperation amongst the states. The constructive ideological transformation highlights empowerment of people and evolves as vital agent of change that proactively supports emerging socio-political and economic dynamics. Indeed, globalization is accompanied by market economy that has widely distributed resources which considerably raises standard of living for people across the globe (Wolf, Chapter 3: p.33). Alper and Onis (2003, p.5) believes that emerging market are at risk as well as in a position to benefit from the financial globalization which mainly focuses on the exploitation of economic units. The financial benefits are more in strong democracies as they economic environment is supported by political stability and economic liberation that relies on decision making based on informed choices. Cohen (2007, Chapter 7: p.166) says that globalization is illusionary and does not keep its promise vis-a-vis equity and fair distribution of wealth. But as Alper and Onis (2005, p.6) assert weak democracy are not able to capitalize on the benefits of globalization due to volatility and deficit economy. But Palmisano (2006, p.132) asserts that globally integrated enterprises hugely facilitate vast financial benefits to both developed and developing economies especially when they are backed by sound economic policies and liberalization. In globalization, interdependency of economic units becomes major tools for fostering constructive relationship amongst the nations. The trade negotiation promotes equity and at the same time, bilateral treaties, trade, protocols etc. help maintain their national identity. Furthermore, the changing pattern of social equation and diversity is hallmark of globalization. The international business therefore incorporates global values when it expands across nations and acts as local company and caters to local demands to gain credibility. Cohen (2007, Chapter 6: p.133) argues that cultural imperatives are strongly influenced by innovation and help survive civilization through thick and thin. Therefore, cultural understanding is vital element that is inherently exploited within the process of globalization. It has also made people more tolerant and in fact, cultural paradigms in the age of globalization have become important factors that are increasingly being targeted to gain market. 7. Technology and advantages of interconnectedness Klaus (2008, p.109) affirms that technology has given huge thrust to the process of globalization. The business operations supported by constantly innovating technology transform not only business outcome but help create new dynamics of social equation that is more adaptable to change (Cohen, 2007, Chapter 6: p.131). Moreover, it also promotes an integrated approach within and across the national dimension to forge new identities of corporate citizenship that incorporates global values. Wolf (2004, Chapter 11, p.223) say that globalization has created a highly competitive business environment where corporations can only compete on market imperatives and not on monopoly of goods and services. The biggest contribution of technology has been its mechanism of information flow which has revolutionized communication. The new age communication has helped exploit new opportunities for capital accumulation and enhanced equity through secular distribution of wealth and resources. The interconnectedness as fostered by technology has brought together people and countries and transformed the dynamics of international political economy. The information technology has, in fact emerged as most powerful factor that controls market mechanism as it has significantly reduced national boundaries (Cohen, 2007, Chapter 7, p.163). Most pertinently, the connectivity aspect of globalization has wide ranging implications for nations, especially as diversity of resources, including human capital and goods can be easily transported and used across the globe. 8. The dissenting elements and threat to globalization Globalization has significantly influenced developmental processes and has help deliver immense economic and social benefits to societies across the globe. But the advantages of globalization have also brought in sharp focus the adverse ramifications like deteriorating impact on environment, exploitation of poor nations etc. Gutton (2007, p.529) says that globalization is not always integrated economy that promotes free movement of capital and goods, the same is not true of human capital. Moreover, economic liberalization is often accompanied by privatization which leads to higher rate of unemployment. The hegemony of rich nations like America is important example that can thwart the wider welfare of the needy (Wolf, 2004, Chapter 1:p5). The civil society and action groups have therefore emerged as major dissenters that oppose globalization because of its cascading negative impact on environment and socially relevant issues like promoting self-reliance amongst the poor nations where multinationals supposedly exploit natural resources for their own vested interests. Wolf further states that anti-globalization organization or civil societies are idealistic with broader goal (2004, Chapter 1, p.7). Their major aim is to create greater awareness of social issues that impact human life. 9. Conclusion The constantly evolving technology has massive impact on all aspects of human life and has emerged as major propellant of globalization process. Indeed, the myriad drivers of globalization influence growth parameters of societies cutting across national interests and converging knowledge, national borders and people. Indeed, the wider ramifications of globalization are distinct in their interconnectedness of resources. It is fundamentally based on interdependence of capital, goods and services, including human capital that endorses global cultures and values. Hence, it can be concluded that globalization redefines power structure to create new social order based on interconnectivity of resources. (words: 2046) Reference Alber, C Emre and Onis, Ziya. (May-June 2003). Financial Globalization, Democratic Deficit, and Recurrent Crises in Emerging Markets. Emerging Market Finance and Trade, 39(3), 5-26. Brawley, Mark R. (2008) The Politics of Globalization:  Gaining Perspective, Assessing Consequences. Toronto: University of Toronto Press. Brown, Garrett Wallace. (2007). Globalization is What We Make of it: Contemporary Globalization Theory and Future Construction of Global Interconnection. Political Studies Review, 42-53. Cohen, Daniel. (2007). Chapter 6: The Empire Etcetera. Globalization and its Enemies, California: MIT Press. Cohen, Daniel. (2007). Chapter 7: AIDS and Debts. Globalization and its Enemies, California: MIT Press. Guttal, Shalmli. (August 2007) Globalization, Development in Practice, 17(4,5), 523-531. Kalus, (2008). Global Corporate citizenship: Working with Governments and Civil Societies. Foreign Affairs, 87(1), 107-118. Palmisano, Samuel J. (May-June 2006) The Globally Integrated Enterprise: Beyond Multinational. Foreign Affairs, 85(3), 127-136. Schaeffer, Robert K. () Understanding Globalization: The Social Consequences of Political, Social and Environmental Change. Wolf, Martin. (2004) Chapter 1: Enter ‘New Millennium Collectivists’. Why Globalization Works, New Haven, CT: Yale University Press. Wolf, Martin. (2004) Chapter 3: Market, Democracy and Peace. Why Globalization Works, New Haven, CT: Yale University Press. Wolf, Martin. (2004) Chapter 11: Cowed by Corporations. Why Globalization Works, New Haven, CT: Yale University Press. Read More