The Impact of Multilateralism on the Global Economy - Research Paper Example

Multilateralism and the Global Economy of of Introduction After the collapse of the Soviet Union in 1991, the bipolar global order was suspended in favor of a Capitalist-led unipolar global order (Robbins, 2012). This came after a period of over 40 years where the world was separated between the Communist East and Capitalist World. This led to a bipolar global order where nations in the northern continents aligned themsleves with one of the two global blocs. In the southern continents, the East and West competed for influence and fought many proxy wars. Looking beyond the two World Wars of the 20th Century, it is apparent that the normal method of cooperation between nations in the previous centuries was mainly bilateral in nature. To this end, nations cooperated with each other on the basis of commonalities and common agendas. This included different agreement between just two nations for cooperation. Apart from the Treaty of Westphalia and a few treaties that set the international order, most nations cooperated on a one-on-one basis. Some analysts blame the wars and animosities of the 20th Century on the bilateral relationships that existed between nations in the 19th Century. Popular detentes between Britain, France and Germany on one hand and the military agreements between Germany, Austria and other Central European powers laid the foundations for the First World War (Baines, 2012). However, all these agreements were bilateral rather than multilateral (Baines, 2012). After the Second World War, nations identified that the only way they could end hostilities and wars was to promote cooperation on the state level and focus on improving the quality of life of citizens in these nations (Robbins, 2012). This led to the formation of the United Nations which formed the central organization for the international organization. This led to the framework for different multilateral arrangements like the European Community, The North Atlantic Treaty Organization (NATO) and the Council for Mutual Economic Assistance (Comecon) for the Communist nations. These organizations created a network for multilateral arrangements for various countries to come together, unite and achieve specific goals. The fundamental thesis of this paper is to identify that multilateralism has promoted development in the world and has enhanced peace and prosperity amongst people around the world. To this end, the paper examines multilateralism and its significance to nations around the world today. This paper examines the impact of multilateralism on the global economy. In order to attain this end, the following objectives will be explored: 1. A critical evaluation of the essence of multilateralism in the global political order; 2. An assessment of the benefits of the pursuit of multilateral cooperation within the global political economy; 3. A critical review of the role multilateral arrangements play in promoting and enhancing trade. Theoretical Review There are different facades within which the concept of multilateralism can be viewed. One definition is that it is "an institutionalized collective action by an inclusively determined set of independent states" (Newman et al, 2010: p56). This implies that multilateralism is about a set of nations that come together to take collective action on a set of stated goals and expectations. Multilateralism involves setting a criteria by a set of nations and trying to live by it. All states that qualify to be part of the multilateral agreement and adhere to the codes of conducts can choose to join the bigger group (Newman et al, 2010). Arndt identifies that the main goals of multilateral agreements often falls in one of three headings: political, economic or financial (2012). Politically, a group of nations can come together to form a multilateral organization with the view of working together to attain the best results in consolidating their political ideology and preventing the intrusion of other nations outside the multilateral grouping. Economically, nations could work together to seek some economic ends that might best be attained through cooperation and coordination of affairs in a way that will bring the nations the best results (Arndt, 2012). Financially, nations might come together to set some standards that can enable them to trade, maintain fiscal discipline and attain a standard or expectation that will bring the nations mutual benefits. "The definition that is more consistent with ordinary usage of multilateralism states that it is an institutionalised collective action by an inclusively determined set of independent states. Truly, multilateral organisations are opened to all states meeting specific criteria. The rules of multilateral organisations are publicly known and persists over a substantial period of time" (Keohane, 2006: p1). This definition indicates that multilateralism is about organisations that are set up by agreement between different nations who set criteria and standards for membership. And once a nation fits those criteria, that nation can join the multilateral organisation and attain benefits as it continues to meet its obligations and requirements. There are numerous examples of multilateral organisations around the world today. Politically, the North Atlantic Treaty Organization (NATO) and the Arab League. Economically, examples include the World Trade Organisation and the European Union. Financially, multilateral organisations include the World Bank, International Monetary Fund and others. Regional multilateral organisations include the Association of South East Asian Nations and the African Union. The essence of multilateralism hinghes on three main pointers (Wilkinson, 2013). First of all, multilateralism seeks to enable nations to join forces to attain better results in specifc areas of their operations and affairs. In other words, multilateralism seeks to help nations to attain focus on some specific objectives and goals. These are goals that nations will not normally be able to attain if they act alone as individual entities. Secondly, multilateralism can enable nations to solve specific propblems that cannot be solved by one nation (Wilkinson, 2013). This is because there are some issues and problems that can simply be dealt with if nations act as a group, rather than a single unit. Hence, multilateralism enables states to deal with such problems to a high degree. Also, multilateralism enables nations to seek a given interest through the formation of a bureauctratic organisation that deals with the nations needs (Wilkinson, 2013). In other words, the formation of a multilateral organisation enables states to create an entity or authority that will deal with specific issues and problems in a unique and independent way or manner. This helps the nations to attain their results and deal with issues of significance. Crossley argues that nations that are at their weakest are nations that are not democratic (2010). These are often considered as failed states and most of them are isolated. However, strong states have democratic structures and the strongest authorities in the world are democratic nations that come together to form multilateral pacts (Crossley, 2010). These cooperations are strongest and they work together to attain the best results for all the nations within the group and helps to deal with problems and issues in a more influential way and manner. Background of Multilateral Agreements in the International Political Economy Multilateralism was not common in the 19th Century. Nations formed bilateral relations, mainly for political reasons in order to protect their economic and colonial interests (Baines, 2012). These bilateral relations created detentes which set the stage for the First World War and then the Second World War. However, during the Second World War, there was the need for nations to unite in multilateral agreements to defeat a bigger evil - the Nazi German military and the Japanese military. [A thorough analysis of the root of multilateralism is presented in Appendix 1 below which is not part of the paper but a demonstration of critical analysis of the history multilateralism]. After the victory over Nazi Germany, Stalin mobilized troops from the Western front to the Russian far east to help in th effort against Japan. Stalin diplomatically ended the non-aggression pact with the Japanese and sought to negotiate a Japanese surrender with the Allies, but within this time, the Americans introduced the atomic bomb and this induced an earlier Japanese surrender than expected. America quickly took Japan and sought to rebuild Japan under a Capitalist model. Britain also sought to consolidate French and British territories in the territories east of India to bring back colonial structures. Stalin was able to make gains in the Russian mainland and recapture territories he had ceded to the Japanese in the neutrality pact. From the quick movement of America and Britain in Asia, Stalin also moved to consolidate his position. He supported the Chinese Communist party in their fight against the Kuomintang regime which was supported by the West. The Korean Communist party was also given aid and support by Stalin to entrench their position. Thus, in the period between 1945 when the World War ended and 1950, Stalin sought to spread Marxism throughout south-east Asia by supporting guerilla movements in the region. Although Stalin remained in power, the United States and the United Kingdom got new leaders. These leaders came up with different arrangements that reflected their existing systems and processes. However, by 1949, the Chinese Communist Party, under the support of Stalin took over power and drove the Kuomintang government to the island of Taiwan. Although the United States and the Western powers continued to host the Kuomintang government on the UN Security Council where China was a permanent member, Chinas de facto leadership reverted to the Communist Party. This led to the cultural revolution which changed China significantly. Harry Truman responded with the Truman doctrine which led to a new global order that involved the attempt to contain the spread of Communism around the world. The West sought to use the International Bank for Reconstruction and Development to provide American loans to nations in Western Europe and allied nations around the world. The United States strengthened the governments of pro-Capitalist nations. Meanwhile, the Soviet Union reacted in a similar manner to protect their satellite states in Eastern Europe and Asia. A few confrontations ensued in Korea and Vietnam. However, in most cases, these were contained. And the East and the West maintained a cold composure towards each other. The East-West Cold War & Multilateralism Two things occurred in the Second World War that gave the impetus for global multilateralism in the international political economy. The first was the existence of Weapons of Mass Destruction and the second was the need to promote human rights (Watson, 2010). After the United States used the atomic bomb, the Soviet Union created a similar bomb a few years later. And there was a need for nations to protect who had access to such dangerous and deadly weapons. Secondly, the slaughter of over six million Jews meant there was the need for an organisation to be formed to protect human beings and vulnerable populations. This led to the creation of the United Nations to act as a system for addressing issues and setting an international law framework. The United Nations created a moderation point that enabled nations to deal with issues and problems as and when they came up. In the Western sphere of the Cold War, the focus moved to the need to protect vulnerable populations and also create systems that ensured the optimum prosperity of people within nations, rather than governments. Thus, democracy gained roots in the West and more and more people got more attention and support from international politicla economy. Thus, the West led the formation of the International Monetary Fund which sought to ensure that governments spent for their people and encouraged their people to attain the best in everything (Robbins, 2010). This was the impetus for the international global order. This international political economy that formed the impetus for multilateralism was initially in the form of a system of providing reconstruction to war-ravaged populations around the world. Thus, the West and the Soviet Union in the East provided resources to allied governments and nations. This included loans, grants and other elements that created a system for interactions and transactions. The Third World and Multilateralism As pointed earlier, the developed nations, mainly in the northern continents came under contention during the post-World War II era. This involved the various states in Europe and North America. Some selected states in Asia and Latin America had the right structures that made them independent enough to take sides directly in the cold war. However, for most states, the first aspect of the new world order after the Second World War was decolonization. They therefore broke away from colonial rule and ended up joining the United Nations right from the onset with little or no infrastructure, save for the infrastructure left by the colonial and occupying powers. These new nations mainly in Africa, Asia and Latin America had limited resources and were not originally part of th lands contested in the Cold War. They came under the shadow of the United States and Soviet Union who sought to opportunistically gain influence in various nations in these countries. These Nations, who became known as Third World nations had severe developmental challenges and it was not profitable to bring them on board in of the two sides due to geographical and economic reasons. Thus, most of them oscillated from East to West with changes in governments. Thus, the superpowers used their influence opportunistically and try to deal with people as and when there was a chance to benefit from these powers. Due to this, such nations were fundamentally not part of the agreements and arrangements of these leading nations of the Cold War. They were therefore exploited by the various powers who used their influence to take advantage of nations based on their allegiances and connections. Benefits of the Pursuit of Multilateral Cooperation There are numerous benefits and advantages of multilateral cooperation. Podliska (2010) identifies that there is reciprocity in multilateralism. This is because nations that are part of such arrangements try to do things for each other and help each other. Therefore member states are able to deal with things and handle issues and matters with the view that there will be reciprocity in tehir affairs. Reciprocity leads to burden sharing and nations are able to share their burdens and issues and come up with the best solutions to problems. This way, nations lighten their burdens and share their strengths to balance their weaknesses in order to attain better benefits in the international political economy. Multilateralism also provides a high degree of legitimacy to nations and states in their actions (Podliska, 2010). This is because if a state acts unilaterally, the legitimacy of their actions can be questioned by various nations in the international community. However, a united voice and a united effort is often considered to be something that is logical and such an effort is considered to be much more acceptable than a unilateral effort. A multilateral association of nations is seen as a progressive order and there is a framework for the organisation of interstate activities to foster stability of the global order (Jordan et al, 2012). This is because where nations are doing things, they are likely to go for the best and most efficient option. Hence, multilateralism promotes the efficient use of resources and the enhancement of a given act sanctioned by a group of nations. Multilateralism provides an avenue for the regulation of the behaviour of member states (Jordan et al, 2012). This is because there are rules and regulations that guide the conduct of member nations. And if they come together under the same banner, nations are likely to obey these rules and work according to the rules to attain an expected or required end. Stewart-Patrick and Shepard (2012) argue that multilateralism promotes an opportunity for nations to attain economies of scale in the international political economy. This is because a group of nations acting together as one are likely to have a stronger bargaining power and a bargaining system that enables them to gain more through their collective bargaining strength. Entities like the European Union is able to argue for better arrangements and better services through their association. This is because they are stronger in making demands and requirements upon various collectivised arrangements. Additionally, decisions made by multilateral entities are likely to be more thoroughly examined and analysed than decisions made unilaterally (Stewart-Patrick and Shepard, 2012). This is because there are numerous actors and stakeholders who take part in the decision-making process. Hence, they are able to attain better results and argue in a better way and better manner in a multilateral framework. Demerits of Multilateralism and Challenges faced by Disadvantaged Nations Lessons from the Communist East indicates that in a situation where a nation finds itself in a multilateral arrangement that is problematic, it will stand to go through a lot of problems and troubles due to the collectivisation of the negative impacts of the other nations. Communist East Germany sought to run a planned economic model and this involved a system where nations sought to maintain a strong state-owned and state-run system that was meant to provide equal and fair distribution of wealth (Newman, 2009). The whole Communist model led to so much inefficiency and corruption that there was an overall collapse of the Communist model by the late 1980s. Hence, the nations that were part of the multilateral system had to suffer disproportionately for the activities and plan of the Soviet Union. Most analysts put the blame for the collapse of the Communist East on the Soviet decision to invade Afghanistan which created severe economic and financial problems that was felt throughout Eastern Europe like East Germany that had no appetite for foreign war. This indicates that multilateralism could yoke a nation with other unproductive nations that will have severe consequences for the nations within it. Nations like Morocco have had issues with the Arab League. Other nations like Greece has had popular demonstrations against the European Union. This indicates that where there are multilateral arrangements, it could come out terrible and wrongly for nations that might not want to be part of the overall framework. Also, multilateralism creates a system of groupthink, particularly in areas of declaring war and identifying common enemies. There have been many nations that have had to promote antagonism against others because they were parts of groups like NATO and had to follow dominant nations to do things that contravene their fundamental constitutions. Another aspects that depicts the negativity of multilateralism involves the position of third world countries, known as nations in the southern continents. Most multilateral arrangements are fundamentally meant to promote the interests of nations in the northern continents (Chania and Matthes, 2010). This is because the multilateral associations were originally formed by nations in the richer northern continents (Green and Bates, 2010). Hence, the interest of the third world nations are not factored in as a primary part of the arrangements. Thus, nations in the third world have a considerably lower bargaining power in such arrangements and in such multilateral processes (Newman, 2009). The third world generally lack infrastructure and the level of expertise to make meaningful contributions in global multilateral arrangements (Alexandroff, 2001). Hence, they are often left out plans that are made exclusively for the interest of the developed nations (Alexandroff, 2001). This leads to major problems and issues that affects the third world more than the developed world. Thus, the multilateral arrangements are often seen as initiatives from the developed world that are meant to be self-serving only for the developed world. Role of Multilateral Cooperation in International Trade The General Agreement on Trade and Tariff was put together because the nations that emerged out of the Second World War believed that competition in trade was the cause of large-scale wars like the World Wars (Green and Bates, 2010). This is because trade leads to unfair competition and this leads to tensions between nations which causes wars. Thus, the elements of global cooperations that were meant to facilitate international trade in the international political economy icnluded a sequence of: 1. International money exchange systems; 2. International financial regulatory systems; 3. Developmental agreements and 4. Agreements on trade and investment (Van Dijk and Cideri, 2012). The international monetary system came into being when the United States met it allies at the Bretton-Woods Summit before the end of the Second World War. This was to use the US Dollar as the standard for international trade instead of gold and the British Pound. This created some degree of global harmonisation and international trade consistency. After that, there were regulatory systems that ensured that nations public spending was covered and tied to the worth of their currency and the prices of goods and services. This created a system of international financial regulations that guided nations and communities around the world. Also, there were multilateral agreements like the International Monetary Funds system that enabled nations to borrow money in the international political economy to cover their financial crisis and debts. This led to the promotion of efficiency in members of these agreements and provided the basis for an objective acceptance into the global order. This laid the foundation and created the impetus for the formulation of agreements on trade and investments that was meant to enable funds to be moved across borders for fair trade and the promotion of international trade and order. Multilateralism in international trade and international finance supports Ricardos theory of competitive advantage (Niewenhuys et al, 2012). Thi sis because it enables a nation to focus on what it is best at, produce it and provide it for consumption in a network of multilateral nations that are signatories to a given trade pact. Multilateralism also develops international commercial law and international commercial systems (Kerr and Gainsford, 2007). Foreign trade increases development and enhances nations and their economies (Jain et al 2012). Even in the developing world where foreign multilateral trade is seen to be detrimental, there are a lot of advantages like flow of international trade, improved technology and enhancement of research and development through multilateralism (Tronchetti, 2012). Also, multilateralism creates a larger markets thank any bilateral agreement (Jawara and Kwa, 2009). This is because there is too much administrative work to be done in bilateral arrangements and this could prove to be problematic for nations and states. Conclusion The research identifies that multilateralism evolved as an antidote to large scale wars and other forms of animosity which could be detrimental to human rights. The research identifies that multilateral arrangmenets are the best methods and systems through which nations can work together to achieve results and build stronger economies. Although some nations are disadvantaged, there could be other ways and means through which such nations could improve their systems through multilateralism. And from the collapse of the Communist East, it is apparent that multilateral arrangements could be detrimental if not well planned. But if it is well done, it could lead to many advantages and development especially where there is democracy and freedom of choice. References Adhikari, R. and Athukorala, P. C. (2012) Developing Countries and the World Trade Systems Surrey: Edward Elgar Publishing. Alexandroff, A. S. (2012) Can the World be Governed? Possibilities for Effective Multilateralism Waterhove, ON: Wilfried Laurier University Press. Arndt, M. (2012) Indias Foreign Policy and Regional Multilateralism New York: Palgrave Macmillan. Baines, H. (2012) Modern History London: Pearson. Chania, G. and Matthes, J. (2010) Multilateralism or Regionalism Brussells: CEPS Crossley, N. (2010) Multilateralism Versus Unilateralism New York: Peter Lang. Green, M. J. and Bates, G. (2010) Asias New Multilateralism New York: Columbia University Press. Jain, T. R., Khanna, O. P. and Sen, V. (2012) Development and Communal Economics in International Trade New Delhi: FK Publishers. Jawara, F. and Kwa, A. (2009) Behind the Scenes of the World Trade Organization New York: Zed Books. Jones, K. A. (2010) Whos Afraid of the WTO? Oxford: Oxford University Press. Jordan, A. A., Taylor, W. J., Masse, M. J. and Nielsen, S. C. (2012) American National Security Baltimore, Maryland: Johns Hopkins University Press. Keohane, R. O. (2006) "The Contingent Legitimacy of Multilateralism" GARNET (Working Paper No 09/06). Kerr, W. A. and Gainsford, J. D. (2007) Handbook of International Trade Policy Surrey: Edward Elgar Publishing. Newman, E. (2009) A Crisis of Global INstitutions: Multilateralism and International Security London: Routledge. Newman, E., Thakur, R. and Triman, J. (2010) Multilateralism Under Challenge New York: Academic Foundation Nieuwenhuys, E. C., Brus, M. and Brus, M. M. T. A. (2012) Multilateral Regulation of Investment Amsterdam: Kluwer Law International Podliska, B. F. (2010) Acting Alone: A Scientific Study of American Hegemony New York: Lexington Books. Robbins, D. (2012) World History after 1945 Oxford: Oxford University Press. Stewart-Patrick, J. and Shepard, N. (2012) Multilateralism and US Foreign Policy Boulder, CO: Lynne Rienner Publishing. Tronchetti, F. (2012) The Exploration of Natural Resources Amsterdam: Martinus Nijhoff. Van Dijk, M. P. and Cideri, S. (2012) Multilateralism V Regionalism London: Routledge. Wilkinson, R. (2013) Multilateralism and the World Trade Organisation London: Routledge. Watson, J. (2010) World History Since 1945 London: Sweet and Maxwell Appendix In investigating the history of contemporary multilateralism, there is the need to mention the Munich Conference of 1938 which was the immediate identifiable cause of the Second World War. In the First World War, Britain and France got major gains and expanded their colonial influence. Both Britain and France had individual agreements with the monarchy of Russia during the First World War, howeve, the monarchy was overthrown and later replaced by the Soviet Union which was against all treaties signed by the monarchy (Baines, 2012). Thus, it can be argued that the bilateral relations between Britain and France was the strongest in the interwar period. After World War I, Britain and France divided up Europe and imposed huge and crippling reparations on Germany whilst the German monarchy that caused the First World War was enjoying a comfortable exile in the Netherlands (Watson, 2010). The anger and resentment of the German people to the new global order after the First World War (Great War is it was then called) led to the growth of the influence of the Nazi party. Due to the growing military and political influence of the Nazi party, Britain and France feared reprisals so they organised the Munich Conference in 1938 appease Germany. The bilateral agreements between Britain and France was in threat and they wanted to maintain some degree of balance in Europe via the League of Nations. Therefore they made some concessions to Nazi Germany. However, Germany sought to expand its influence. Meanwhile, the United States at that time was not invited to the Munich Conference of 1938 because USA was on a path of isolationism and the American people were avoiding war and they did not want to be part of the problems in Europe. The Soviet Union was not invited to the Munich Conference due to the mutual distrust of the Soviet Union and Lenins plans to spread Marxism and Communism to the nations around the world (Robbins, 2012). Thus, the invitation and involvement of the Soviet Union in the League of Nations formed after the First World War was not very well structured and somewhat in bad faith. The Soviet Union was therefore not very much involved in European and global affairs at that time. Nations in the period had various bilateral systems and processes. So the major powers at that time formed various agreements and processes. The only attempts towards multilateralism in the interwar period was the League of Nations which came with so much distrust and was influenced by the interests of the leading colonial powers of that era, Britain and France (Baines, 2010). Most nations had various bilateral pacts. As of January 1939, Germany and Soviet Union had an non-aggression pact. The Soviet Union and Japan had a similar pact when war broke out to enable Stalin to avoid tensions with Japan during the war. However, in late 1939, Germany invaded Poland against the agreements of the Munich conference and World War II began. The Soviet Union was somewhat neutral and was obviously going to fight on the side of Germany. However, when Hitler disregarded the non-aggression pact and invaded the Soviet Union in 1941, it was apparent that the Soviet Union was going to enter the war on the side of Germanys enemies - the Allies. Later on, the United States entered the Second World War and the Communist foe was roped into a marriage of convience for the sake of the Second World War. The Western allies, mainly Britain and the United States had to deal cautiously with the Soviet Union. This is because the Soviets had the will and the capacity to inflict the necessary losses on the Nazi military. Thus, Winston Churchill and President Roosevelt partook in summits involving the Soviet leader, Josef Stalin (Watson, 2010). Meanwhile, in the early 1940s when Britain, America and the Soviet Union were in talks, Britian and the United States had secretly formed plans to modify the global order. They had discussions and summits in which the Soviet Union was not invited adn this led to the creation of the Bretton Woods systems nad many other systems that was meant to lead a Capitalist world to a new global order or system. The summits between the United States and Britan and the Soviet Union led to major concessions to the Soviets and the Western leaders. However, there were some areas that the summits were not clear. Particularly, in the Pacific region and south-east Asia. There were no clear pronouncements over how to invade Japan and divide up Korea, China and other territories controlled by the Imperial Japanese military. Stalin, who had a non-aggression pact with the Japanese only agreed to enter the war against Japan "a few months" after Germany was defeated (Watson, 2010). Read More