Economic Interdependence and the Emergence of Globalization - Research Paper Example

Economic Development Globalization is an international phenomenon with far-reaching consequences in the social, political and economic realms. Economic globalization, namely the spread of neoliberalism and capitalist-inspired consumerism as the dominant engine of economic growth, has both supporters and detractors. The world is becoming more and more interdependent and whether you think globalization is a good or bad thing, it is here to stay. Seeking to explore the present international economic situation with an eye to the main theoretical approaches to the globalization phenomenon, different theoretical paradigms will be analyzed. Mexico, a developing country in the Western Hemisphere and member of the North American Free Trade Agreement (NAFTA), will be used as a case study to explore the ramifications of realist-inspired neoliberalism and the effects of globalization on a country in the developing world. Furthermore, the effects of the international economic system will be discussed with reference to China, a formerly socialist state in the processing of liberalizing its economic and opening up to the global economic community. Interdependence and the Emergence of Globalization Globalization, as it exists today, rests largely on the shoulders of neoliberal economics and the global entrenchment of capitalism as the dominant economic system in the world. Inspired by Realist ideological doctrine, neo-liberalism is the belief in laissez-faire economics and its early proponents were Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States in the 1980s. US President Ronald Regan famously remarked "government was not the solution but the problem" (Hobsbawm 1994). Neo-liberals put all of their faith in the distributive capabilities of the invisible hand of the free market, and believe that business was inherently good and that government bad. The government was longer interested in the provision of welfare but existed to stimulate the capitalist economic market. The United States under Ronald Reagan was thus described as the "greatest of the neo-liberal regimes" (Hobsbawm 1994). Accordingly, The essence of neo-liberalism, its pure form, is a more or less thoroughgoing adherence, in rhetoric if not in practice, to the virtues of a market economy, and, by extension, a market-oriented society. While some neo-liberals appear to assume that one can construct any kind of 'society' on any kind of economy, the position taken here is that the economy, the state and civil society are, in fact, inextricably interrelated (Coburn 2000). How did neoliberalism, the dominant political and economic ideology of the West since the Reagan years make inroads around the world and into the formerly Communist countries of Eastern Europe' The Second World, consisting of the global Communist community during the Cold War, was severely undermined by economic and political crises which began in the late 1960s. The result was political and economic disorder. Economic crises undermined the political foundations of states like China and the USSR - particularly after the deaths of men such as Mao & Brezhnev - and the centrally planned economic systems of these countries remained under stress and increasingly precarious. The Soviet world was also not immune to global economic crises as evidenced by effects of the OPEC crisis of 1973. These aftershocks paved the way for perestroika and glasnost in the USSR, the implosion of Yugoslavia and popular Chinese dissent expressed in Tiananmen Square and captured live on camera. The political and economic fragilities of the Second World were exposed following 1968 and slowly led to political decay, leading to the eventual implosion of the Soviet Union. Criticisms of the Globalization Phenomenon What are the criticisms of globalization and how do proponents of globalization respond to these critiques' Critics of globalization argue that this phenomenon is thinly disguised neo-imperialism and actually represents an insidious attempt to spread Westernization and Western concepts of capitalism, exploitation and greed across the globe. Marxists and World Systems theorists would argue that globalization does nothing more than entrench the dominant economic position of the developed countries of the West while perpetuating an unequal global distribution of wealth thus ensuring the continued subservient status of the developing countries of the world, within the current global economic system. Global economic institutions such the World Bank (WB) and the International Monetary Fund (IMF) often bear the brunt when it comes to criticizing the global economic system and the state of global affairs. These organizations are routinely criticized as being anti-democratic, exploitative in nature and often as agents of Western imperialism. Members of the anti-globalization movement represent a backlash against the dominant economic ideologies of our time including capitalism and neoliberalism as the economic order of the day. Proponents of globalization argue for that many criticisms of globalization are unfounded. Accordingly, they point to the fact that there is a wholesale lack of evidence for many of the claims put forth by anti-globalization activists and argues that capitalism and neoliberal economic principles have benefited people all around the world, including those in the so-called Third World. The embrace of capitalist ideals by nearly all of the countries of the former Soviet Block is seen as evidence of the appeal of neoliberalism and capitalist economic principles (Hobsbawm 1994). Case Study: Mexico First and foremost, economic globalization has raised the standard of living in Mexico. This rings true around the world and the benefits of economic liberalization can be found in nearly all countries which have embraced free trade and economic growth. Due to the interconnectedness of global markets today, more people are employed, more money flows between countries and subsequently people's standards of living are being raised. Mexico, a developing country which has embraced economic liberalization and is now a member of NAFTA (the North American Free Trade Agreement), has exhibited recent economic gains since joining this regional trade block. With a population of 108.3 million and a GDP of $839 billion, Mexico has benefited tremendously from economic liberalization and market-oriented growth. In response to its inclusion in NAFTA, employment has risen consistently over the past decade and a half and annual GDP growth over a ten year period from 1997 to 2007, is estimated at 3.7%. This level of steady and consistent growth over a period of 10 years is remarkable for a country which has remained underdeveloped relative to its North American counterparts since its creation nearly two centuries ago. Accordingly, as a percentage of its labour force, the average Mexican unemployment rate from 1995 to 2006 stood at a low 2.8%. Compare that with Mexico's neighbor to the south, Columbia which still does not have a free trade agreement with the world's largest economy, the United States, and the results are astounding. Over the same period, Columbia had an average unemployment rate of nearly 15% (The Economist 2009). Case Study: China China is an ancient civilization with a long tradition of dynastic rule and strong leaders. China has been ruled by the Communist Party of China (CCP) since 1949, an avowedly socialist form of government which established the People's Republic of China, and initially viewed capitalism through a skeptic's lens. As a socialist party with communist leanings, successive Chinese governments undertook disastrous social and economic initiatives including Five Year Plans, the failed Great Leap Forward and the violent Cultural Revolution. Despite these early years, China has cautiously embraced economic liberalism and a capitalist economic orientation, albeit with strong authoritarian tendencies. China today has the 4th largest economy in the world behind the United States, Japan and Germany, estimated at $2,645 billion per year. With a population of more than 1.3 billion, China remains a largely rural country with 43% of its labor force employed in agriculture with another 25% in industry and 32% in the service sector. Industry, however, has driven the economic growth of this country which represents 49% of the total $2,645 billion GDP. Accordingly, the average annual growth in China over a ten year period was an astonishing 10.5% (1996-2006). Much of this growth is tied to the global economy and China's role in international economic affairs today (The Economist 2008; Central Intelligence Agency 2009). China and the Global Economy Based upon the principles of economic liberalism but with a strong role for the state, China began with the creation of attractive economic-oriented trade zones to appeal to foreign investors and stimulate national growth. Industrialization and export-oriented development were key to China's development model. Accordingly, this model of growth is a modern attempt at harnessing the forces of global economic capitalism through state-led development. This form of development focuses on macro-economic concerns (raising the Gross Domestic Product, decreasing the national unemployment rate, etc.) by attracting foreign investors and utilizing the resources already available to stimulate growth. While his form of economic development is currently being practiced around the world, it has been particularly successful as a developmental model in the case of China (Lardy 2004; Coburn 2004; Suettinger 2003). Although in East Asia, Taiwan, South Korea, Japan and Hong Kong remain important economic actors, "the most dynamic and rapidly growing economy of the globe after the fall of Soviet communism was that of Communist China, leading Western business-school lectures and the authors of management manuals, a flourishing genre of literature, to scan the teachings of Confucius for the secrets of entrepreneurial success" (Hobsbawm 1994). China has benefited tremendously from increased interdependence and has established a strong manufacturing centre, shifting employment away from traditional manufacturing centers in the West. China remains the major challenge to US economic control as wages continue to remain low in China and Chinese products continue to flood the world's global marketplace. China has remained competitive, commands one of the world's largest economies and has established a working and viable example of authoritarian capitalism. This shifting of global production centers to the East has led hurt traditional manufacturing centers in the West, exemplified by the decay felt by the once-vibrant US automotive hub of Detroit, Michigan (Gat 2007; Lardy 1994). Concluding Remarks Globalization has been propelled by capitalism and the internationalization of the capitalist economic system. The main effect of globalization is the world-wide spread of neoliberalism and the entrenchment of capitalism as the dominant - some would say sole - viable economic system for the world economy. This essay has traced the antecedents to the current wave of globalization and economic development with an emphasis on the Reagan and Thatcherite regimes in America and Britain. Economic realism is the backbone of the current global economic system while Marxism, as a guiding economic force, has been largely discredited as a viable alternative following the collapse of the Soviet Union. Accordingly, neoliberalism was given a huge boost following the collapse of the Berlin Wall and the fall of communism in Eastern Europe in the late 1980s. Entrenched as the dominant economic ideology across the globe, neoliberalism is the underlying force behind the current wave of globalization. Despite numerous detractors on all corners of the globe, globalization remains an important force in modern society and a key component of continued and sustained economic growth on a global scale. Economic globalization is based upon the principles of neoliberalism, free trade and unhindered markets. Mexico, a developing country with strong economic growth over the past decade and a half as well as China with its exemplary growth, exemplify the positive attributes of economic globalization and reinforce the argument that the neoliberalist forces of this phenomenon have on the overall been positive (Harvey 2007). References Central Intelligence Agency 2009, China. Retrieved March 11 2009 from: https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html Clark, GL & WB Kim 1995, Asian NIEs & the Global Economy: Industrial Restructuring & Corporate Strategy in the 1990s, Johns Hopkins University Press, New York. Coburn, D 2000, 'Income inequality, social cohesion and the health status of populations: the role of neo-liberalism', Social Science & Medicine, vol. 51, no. 1, pp. 135-146. Gat, A. 2007, "The Return of Authoritarian Great Powers", Foreign Affairs, July/August. Harvey, D 2007, A Brief History of Neoliberalism, Oxford University Press, London. Hobsbawm, E 1994, Age of Extremes: The Short History of the Twentieth Century: 1914-1991, Abacus, London. Lardy, N.R 1994, China in the World Economy. Washington: Peterson Institute. Strayer, RW, 1998, Why Did the Soviet Union Collapse': Understanding Historical Change, I. E. Sharpe, New York. Suettinger, R 2003, Beyond Tiananmen, Brookings Institute, Washington. The Economist ,2009, Pocket World in Figures, 2009 Edition. London: Profile Books. Read More