Does Globalization Truly Undermine National Sovereignty in Economic Policy-Making - Term Paper Example

Introduction Globalization is one of the most potent forces in the current political economy as over the period of time the changes which have taken place as a result of globalization are simply unprecedented. The changes have not taken place only within the sphere of economics but it also produced impacts on the socio-political landscapes of the countries. The socio-political changes have brought in changes to the level where the societies are no longer the same as the changes were so powerful that they changed the very fabric of the society as a whole.(Polanyi,2000). What is however, also important to understand is an argument which emphasis the lack of governmental control due to globalization. It is believed that with the increased globalization, countries often face a loosening of control over the affairs of managing their own economies and as such many developing countries view globalization as a force which is intervening into their domestic affairs. The inability of the domestic institutions to effectively control the political and economic forces in the country therefore necessitate that the countries view this phenomenon as more against their own interests rather than viewing the globalization in its larger perspective. What is also critical is the assumption that with the globalization, the governments will loose the control over the policy making and implementation rights and as such the resulting changes within the society will not only create economic hardships but would also bring in more social and cultural changes which would force the society’s own values and systems out of the proportion. This essay will discuss whether globalization truly undermines the sovereignty of the nations in economic policy making. What is Globalization? Before discussing whether globalization undermines the national sovereignty in economic policy or not, it is important that an attempt must be made to clearly define what globalization is and how it works. It is truly difficult to define what globalization is and under what conditions it can provide desired benefits. Over the period of time, the discipline has evolved into a position where it has integrated many different disciplines and emerged as one of the most talked after multi-disciplinary concept. As such the current state of the concept inculcates into it various theoretical approaches, different disciplines as well as theoretical foundations which are currently behind the emergence of the modern definition of globalization. Globalization has now emerged as a multidisciplinary subject with the roots into politics, economics, and sociology etc. however, globalization is often discussed within the perspectives of the internationalization and as such it refers to the free flow of economic and financial transactions taking place across the borders and without any significant barriers. The internationalization concept therefore also give globalization a very unique dimension where the world is perceived as the one where there are no restrictions and everything freely flows between the borders keeping in view the respective sovereignty of each nation. The notion of internationalization also gave rise to the ideas that the goods and services shall be flowing freely and countries with better competitive advantages shall export to those countries which do not possess competitive advantage in producing those goods and services. Many argue that the internationalization also shall be viewed more within the perspectives of the diplomatic relationships between the countries too as there are almost same philosophical foundations behind having the friendly diplomatic relations than inculcating the ideas of globalization into this whole equation. Within this perspective, the international politics is also viewed as the same process of internalization therefore globalization is viewed nothing more than a modified idea of global politics and international economics.(Scholte,2002). Second and probably most critical and controversial aspect of globalization is the liberalization. Liberalization can include many different concepts such as economic liberalization, financial liberalization as well as political and social liberalization. The concept of liberalization therefore means that the so called self imposed restrictions on different variables whether they belong to socio-economic perspectives or socio-political perspectives. Gradual or wholesale removal of restrictions however gives rise to more controversies as many believe that too much liberalization can lead to the gradual loosening of the society’s own values and systems. This therefore means that the governments may often have to allow external agents to come to their country for their trade purpose and gradually increase their influence in the policy making of their host countries. The notion of liberalization also brings with it the concepts of the neoliberal economic policies and many policy makers as well as economists argue that the globalization shall serve as a tool for imposing and pursuing the neoliberal economic policies.(Scholte,2002). Finally globalization is also viewed within the perspective of the universalization where everything on the face of the earth as considered as one and in order to achieve the better utilization of earth’s resources, those with most competitive advantage shall therefore be fluid enough to exploit the resources of the earth so that they can be utilized in their most efficient manner. The idea here is that the developed countries which have most competitive advantage in terms of technological superiority therefore strive hard to achieve an economic environment where technology can effectively meets with the inefficient utilization of resources so that a better and more prudent utilization of the resources can be achieved. The above variables of globalization therefore indicates that the globalization is really a more diversified concept and need to be viewed from multi perspectives and as such any effort which is aimed at marginalizing the process of globalization to one particular aspect or discipline shall be discouraged. What is however, also critical to note that not all agree with the above ideas as many believe that globalization is a tool for developed countries to exploit the less developing countries so that they can accumulate wealth at the cost of the developing countries. Further, many including Joseph Stieglitz therefore consider globalization a bane rather than a blessing because of the perceived inequalities it creates within the societies so that only those can benefit who have resources to succeed. Political economy of globalization In the last three eras of 20th century, governments of developed countries started to advocate the free market economic policies and strongly argued in favor of trade as well as financial liberalization. This was mostly done due to the fact that the traditional models of economics were not yielding results for them therefore it was decided to make a radical shift into policy frameworks prevailing within developed world.( Goddard, Cronin& Dash,2003). The various concepts of globalization indicate that the returns of the globalization are unequal as it favors few and creates problems for larger masses of the society.(Gupta,1997). The integration of the economy with the politics necessitate that the countries increasingly view globalization as process of political economy also as the implications of globalization have the consequences which can easily be considered as political in nature. The process of globalization often brings with it different changes which are either harmful for a particular society or helpful for it. Some studies however indicate that the overall flow of good and services in this global economy is slightly higher than it was earlier and as such only financial capital have moved across possibly in a bid to spot the arbitrage opportunities to earn higher returns. The arguments like this weaken the overall argument that the globalization is beneficial to the economy therefore is relatively arbitrary and considering the side effects of globalization, it is now considered more as a negative phenomenon rather than a positive force. The liberalization of trade as well as financial markets have put the firms in a position where they can lobby in government for gaining advantages which can provide them easy access to the international markets. However, it has been strongly advocated that the theoretical benefits of globalization and its actual benefits are far apart from each other and as such the difference between the two creates the potential for conflicts. Since globalization’s benefits are already variable therefore coupled with these differences, the overall face of globalization, especially in developing countries is painted as one that of the negative force. Further, it is also argued that the globalization has resulted into the gradual vanishing of the traditional values of the society and as such the resulting changes which are appearing in different societies as a result of globalization are therefore largely viewed as snatching the rights from the people. It is therefore argued that the effort shall be made to bring back the lost values of the individual societies so that the globalization as a force is presented in more positive manner.(Prempeh,2004). The link between the globalization and the political economy is deeply rooted into the assumption that there is a change in the relationship between the government and the economy as the new changes which have taken place over the period of time have redefined the relationship between political systems as well as the different economic systems. This changing relationship therefore put the globalization within the perspectives of the international political economy what is however; also critical regarding this relationship is the fact that it gave rise to the transnationalism as well as economic interdependence with each other. This interdependence though considered as a qualitative affect of the globalization, creates strong policy debates of whether the forces of globalization gradually reduce the sovereign rights of the governments over their own economic policies and whether given this economic interdependence, countries will come forward to bail out each other from crisis? Sovereignty and globalization As discussed above that the globalization also creates internationalization therefore there occurs a free flow of goods and services across the borders. This also means that the governments have to accommodate those organizations which bring in capital into the country. Capital inflow also requires that the governments must provide the concessions to the multinational organizations through either tariff reductions or providing them tax free zones. The emergence of export processing zones clearly depicts an example of how the government of developing countries have to provide concessions to the international organizations in order to pursue export led growth strategies as well as availing the opportunity of creating jobs for the masses. This however, also means that the governments shall have make amendments into their policies so that the international organizations don’t turn their backs on them. These policy concessions therefore clearly depicts how the sovereignty of the countries can be compromised in terms of making indigenous economic policies which are directed at improving the conditions of the masses rather than providing policy concessions to global organizations. An important aspect of the process of globalization is also a fact that it advocates the free flow of goods and services and many agreements such as GATT, NAFTA, and WTO have been made in order to ensure the free flow of goods and services across the countries. However, it is also argued that such agreements often do not prove beneficial to the developing countries because developed countries enjoy extensive competitive advantage and often get the lion’s share in the free trade agreements. Since developing countries are often raw material suppliers therefore they have to pay high when the same raw materials are re-exported to them by making value addition. This situation can very well be described from a quote of an unknown economist which said that developing countries export potatoes and import chips. This is the situation in which globalization has placed many countries into because of structural deficiencies of these developing countries. Some empirical studies also indicated that globalization do not have any significant impacts on the welfare states and as such pursuing globalization policies either warrant changes in the policies of the welfare or abolishing globalization as a positive force for change.(Brady , Beckfield & Kaiser,2005). This argument also indicates that the globalization does not contribute towards the welfare effects on the states despite loosing control over the economic policy making. Significant other evidence also indicates that the large multinational corporations often take the benefits of such liberalization by manipulating the market forces within these developing countries. The example of NIKE’s contract factories clearly indicate that how globalization forces are re-shaping the world’s working standards as well as forcing the governments not take any corrective measures against such organization. The above discussion clearly indicates that the forces of globalization often put a big question mark over the ability of the governments to remain sovereign in their economic policy decision making. Conclusion Globalization is a very strong force and has brought about many changes into the different societies across the world. The socio-political as well as economical changes that been resulted due to the dominant role of globalization however, in practical reality, these changes are considered as limiting the individual rights of the different societies. It has been argued that the most powerful nations often manipulate such forces in their own favor to a level where they even put the sovereignty of the countries at the risk. The trade and financial liberalization resulted into free flow of goods and services however, with it opportunities and threats were mutually transferred too as those at the receiving ends of globalized forces suffered so that those who are in power can benefit. The globalization creates explicit as well as implicit pressures on the governments to make their economic policies in such ways that they truly benefit the large multinational organizations which enter into these markets in the name of globalization. The example of Shell and its political role in Nigeria clearly outlines as to how the forces of globalization can really force governments to decide against its own interests. References 1. Scholte, J (2002) What Is Globalization? The Definitional Issue – Again. CSGR Working Paper. 109 (02) 1-34 2. Gupta, S (1997). The Political Economy of Globalization. New York: Springer,. 3. 3. Prempeh, Osei Kwadwo (2004) Anti-Globalization Forces, the Politics of Resistance, and Africa: Promises and Perils- Journal of Black Studies 34 (02) 580-598. 4. Brady, David, Kaiser, Martin Seelieb & Beckfield, Jason (2005) Economic globalization and the Welfare State in affluent democracies, 1975 -2001- American Sociological Review. 70(6) 921-948. 5. Polanyi, Karl (2002). The Great Transformation. New York : Beacon Press 6. Goddard, Cronin and Dash (2003). International Political Economy: State-Market Relations in a Changing Global Order. New York. Lynne Rienner Pub. Read More