Globalisation and the Transition Economies: Russia and China - Essay Example

Globalisation and the Transition Economies: Russia and China China’s rise and Russia’s fall This dissertation will argue that globalization in the contemporary world climate favors China’s model of capitalism over the Russian economic system. The dissertation will focus on the influence of globalization as evidenced in Chinese and Russian modes of economic transition, including privatisation, and evaluate why the Chinese economy has expanded while the Russian economy has faltered. Beginning in the 1980s, the Western world experienced a period of prolonged economic prosperity that was ultimately punctured by the 2008 financial crash. This period of economic affluence was advanced by a new economic model that placed financial markets as a primary mode of concern, and held the adjacent goal of making all citizens financially dependent subjects. This model was a response to the stagflation that underpinned much of the 1970s. Eventually the new model would grant the United States new prosperity and financial ascendency in the designated period. The United States economic prosperity contributed to a major restructuring of the global economy; this restructuring included acceleration of globalization, the introduction of new information technologies, increased deregulation of financial markets, and a general reorganization of the state. While this new economic model proved highly efficacious during the designated period, initial financial indicators were negative. The 1970s exhibited a significant downturn in the American economic structure, with the stagflation that characterized this era continuing well into the 1980s. Still, the 1980s gradually witnessed an upsurge in financial prosperity; notably, after 1986 both employment and inflation in the United States sharply declined. While there was a brief recession in the early 1990s, the country quickly witnessed resurgence with the 1992 economic boom. While this 1990s economic boom was in part attributable to the explosion of Internet based technologies, it’s clear that policy decisions also greatly contributed to this economic upsurge. Of the prominent policies adopted in this era were new doctrines of monetarism and supply-side economics. These policies initially emerged as a response to the previously noted 1970s stagflation, but came to lay the foundation for the 1990s economic boom. If there was a thematic undercurrent in these policy shifts, it was the increasing market deregulation. Susan Strange called this new financial growth model ‘casino capitalism’. It created a rapidly expanding financial sector, which was increasingly separate from the rest of the economy, intensely competitive, fast moving, nimble and innovative, brilliant at calculating margins and exploiting opportunities. While this deregulatory economic environment drove the United States and United Kingdom from economic recession, they also had a correspondingly positive affect on the global economy. This global shift can be articulated in terms of a move from a Keynesian economic structure to a neoliberal model. This neoliberal model, which its tenants of deregulation, created significant economic opportunities for China, Russia, India, Brazil and other rising economic powers. In investigating why globalization favors the Chinese model of capitalism, this dissertation will investigate the following questions: What caused the development for the idea of globalisation; what is globalisation; what is privatisation; what is the difference between privatisation in Eastern Europe, China and Russia; what is the difference of privatisation in China and Russia and what caused such difference? Dissertation Structure: 1. Introduction (1000) 2. Globalisation (2000) 2.1 The Cause of Globalisation 2.1.1 Casino Capitalism 2.2The Globalisation Debate 2.2.1 The hyperglobalist thesis 2.2.2 The sceptical thesis 2.2.3 The transformationalist thesis 3. Transition Economies in Eastern Europe -Privatisation (2000) 3.1 Conceptual Issues of Privatisation in Eastern Europe 3.2 Case studies of Privatisation in Eastern Europe 3.2.1 Privatisation in East Germany 3.2.2 Privatisation in Hungarian 3.2.3 Privatisation in Poland 4. The transition Economies: Russia & China (6000) 4.1 Economic Performance during the Reform Period in China and Russia 4.2 The need for reform of the Chinese and Soviet Systems of political economy 4.3 Reform in China 4.4 Reform in Russia 5. Conclusion (1000) Overview: 1. Introduction 2. Globalisation 2.1 The Cause of Globalisation 2.1.1 Casino Capitalism Susan Strange called this new financial growth model ‘casino capitalism’. It created a rapidly expanding financial sector, which was increasingly separate from the rest of the economy, intensely competitive, fast moving, nimble and innovative, brilliant at calculating margins and exploiting opportunities. 2.2 The Globalisation Debates Globalisation can be articulated as the increasing worldwide interconnectedness of all aspects of contemporary social life, from the cultural to the criminal, the financial to the spiritual. (Held, 1999) 2.2.1 For theorists referred to as hyperglobalizers, globalization can be articulated as an epoch wherein ‘traditional nation-states have become unnatural, even impossible business units in a global economy’ (Ohmae, 1995, p. 5; cf. Wriston, 1992; Guehenno, 1995). From this perspective, both economic and political power have become denationalised to the extent that national states increasingly can be formulated as ‘a transitional mode of organization for managing economic affairs (Ohmae, 1995, p.149). This perspective is all encompassing to the extent that it contends that it reconfigures the ‘framework of human action’ (albrow, 1996, p. 85). 2.2.2 Many arguments that contend globalization is a myth are heavily contingent on a notion of the globalization concept as entirely economistic. These individuals go on to contend that there are many instances where the global market falls short of economic integration, and that the world was even more economically integrated in the late 19th century (hirst, 1997). These perspectives deny notions that the modern nation state has been undermined by economic international or global governance (Krasner, 1993, 1995). Oftentimes it’s argued that globalization, rather than constituting a viable socio-political theory, is instead convenient rationale for the institution of neoliberal economic policies. Theorists, including Weiss, Scharpf and Armingeon, argue that pervasive evidence demonstrates that there is no significant indication of a convergence of macroeconomic and welfare policies across the globe (Weiss, 1998; Scharpf, 1991; Armingeon, 1997). 2.2.3 Transformationalist theory considers globalization from a converse perspective. The underlining thesis within this perspective is that globalization constitutes the central force that is powering the political, social, and economic reshaping of the modern world (Giddens, 1990; Scholte, 1993; Castells, 1996). The transformationalist perspective further contends that there are specific strategies that are being followed, including the model of the neoliberal minimal state to the models of the development state and the catalytic state. Within this perspective, governments across the globe increasingly have looked internationally as a means of enacting strategic partnerships, as well as a means of enacting international regulatory surface on national agendas. Instead of promoting a one-world government, these strategies have instead altered the nature of state policies. Notably, this does not constitute a reduction of state power, but instead demonstrates that nations are being reconstituted and restructured in response to the growing complexity of processes of governance in a more interconnected world (Rosenau, 1997). 3. Transition Economies in Eastern Europe -Privatisation (2000) 3.1 Privatization in the Western world is understood as the ownership of public equities from private interest holders through public offerings. This is contrasted with state ownership that is a hallmark of socialist economic systems. While basic objectives are the same, such as increasing effectiveness and profitability, the ultimate goal of socialist regimes is to raise revenue for the government. Still, the problems arising for example from the shortage of domestic saving and the deficiencies of the capital markets cast the principal issues in a very different light. The major other components in a reform programme are generally thought to be macroeconomic stabilisation following price liberalisation; opening the economy to foreign trade and competition; and institutional reform, including reform of the legal system and reform to the functioning of the state. 3.2 Case studies of Privatisation in Eastern Europe 3.2.1 One of the seminal examples of privatization has occurred in East Germany, distinguishing this region from the rest of Eastern Europe. This nation witnessed rapid privatization of state-owned enterprises and a dramatic process of deindustrialization. 3.2.2 Of all the former centrally planned economies (CPEs) in the Eastern European region, Hungary’s shift to a market economy is generally regarded as the most successful. It is also one of the longest standing, having begun with the introduction of the New Economic Mechanism (NEM) in 1968. 3.2.3 The principal concern is privatization when defined as the transfer from state to private owners of full ownership rights. In Poland from 1989 to 1993, such a transfer has been a significant, but not yet the dominant, cause of the observed fast increase in the share of the private sector in the GDP. Endogenous growth of the private sector, commercialisation of the co-operative sector, and mass leasing of small businesses have so far been the main causes of the share’s increase. 4. The transition Economies: Russia & China 4.1 Economic Performance during the Reform Period in China and Russia 1976 was a landmark year in terms of Chinese economic change. This year witnessed the death of Mai Zedong and the arrest of the Gang of Four. While important reforms occurred in the immediate aftermath of Zedong’s death, most historians note that the largest changes occurred two years after this time with the Third Plenum of the Eleventh Central Committee of the Chinese Communist Party in December 1978. Conversely, Russia witnessed significant changes with Gorbachev’s election to the position of General Secretary of the Soviet Communist Party in March 1985. In 1986 the policies of perestroika were instituted. These contrasting reform periods produced drastically different results. 4.2 The need for reform of the Chinese and Soviet Systems of political economy There was a small but significant group of critics in both counties who believed that the communist system of political economy only needed small changes to produce greatly improved results. One such thesis was that greater ‘pressure’ of the ‘Andropov’ type would be able to substantially improve the performance of the system. Another perspective was that limited introduction of market forces would be sufficient to improve the performance of the system. Indeed, there still is a remnant of analysts who believe that the Soviet and Chinese path under communism was superior to that under any sort of market system. 4.3 Reform in China Since China launched economic reforms at the end of 1987, market transition has extended over almost 30 years. Indeed, today China has already spent as long a period building a market economy as under Maoist socialism. China’s economy has been transformed by successive waves of economic reform. Over the years the content of the reform process has adapted to new challenges and circumstances, and has been continuously reformulated. There have been failures and reverses on occasion, but what is most remarkable is simply how far China has come toward a market economy and how the reform process has maintained its relevance in the face of economic challenges. By the mid-1990s, China had successfully moved away from the command economy and adopted a functioning market economy. Nevertheless, even today, the process of market transition is China is far from complete. Many of the institutions necessary for a market economy are rudimentary, and further market building and institutionalisation are necessary. The broad issues of transition extend into every aspect of the economy today. 4.4 Reform in Russia Post-Soviet transition in Russia has meant more than political transition in the direction of a democracy; it has also meant the transformation of a state-controlled command economy towards a market-based economic system. Towards the end of the Yeltsin era, when Russia’s economic news was consistently bad, there was much discussion amongst analysts as to the role that Western advisers and international financial institutions had played in Russia’ transition. One view, shared by many in Russia, was that the advice given by Western specialists had been inappropriate. Others argued that the trouble was not the Western advice itself, but the fact that it was not followed, and that despite this the International Monetary Fund kept granting money to shore up a Russia reluctant to undertake the necessary root-and-branch reforms. 5. Conclusion Preliminary Bibliography Andrei Schleife, Daniel Treisman. The economics and politics of transition to an open market economy Brenard Chavance. The transformation of communist systems: Economic reform since 1950 Barry Naghton. The Chinese Economy: transitions and growth David Zweig, Chen Zhimin. China’s Reforms and International Political Economy David Turnock. The East European economy in context: Communism and transition Edwin Bacon, Matthew Wyman. Contemporary Russia Joseph R. Blasi, Maya Kroumova, Douglas Kruse. Kremlin Capitalism Javed Maswood. International Political Economy and Globalisation Peter Nolan. China’s rise, Russia’s fall Robert Went. Globalisation Paul Dragos Aligica, Anthony J. Evans. The neoliberal revolution in Eastern Europe: Economic ideas in the transition from communism Saul Estrin. Privatisation in Central & Eastern Europe Susan Strange. Casino Capitlism Read More