Globalization and Economic Policy Control - Term Paper Example

Q Globalization and Economic Policy Control Introduction Globalization is considered as one of the strongest forces of change in the world as over the period of time, it has made many changes into the very social fabric of the society. The results which globalization has brought in are really unprecedented as the impact has not only are related with the economics but also with the socio-political aspects too. The socio-political changes are also so strong that the society is no longer considered as the same which our forefathers witnessed and as such these changes have made gradual changes into the societal values as well as norms.(Polanyi,2000). There are two different issues regarding the role of globalization as many argue that the governments, due to globalization, have lost their control over their own sovereignty. On the other hand, it is said that the due to globalization, the world as a whole, benefit from the globalization. It is often argued that with the increased globalization, governments often lose control over their own economic affairs and as such many developing countries consider globalization as a force which is in direct contravention of their sovereignty and control over their own domestic affairs. Due to globalization, domestic institutions gradually lose control over the economic policy making as global organizations largely influence their decision making process and the resulting changes would bring in more economic hardship rather than economic affluence for the country. Many developing countries also fear that the resulting changes would create such socio-cultural changes that the society will no longer remain within it traditional attire and foreign ideas and values will start to dominate the society. However, on the other hand, results also indicate that third world countries often benefit from globalization due to sheer transfer of technology, capital as well as knowledge. The resulting changes not only bring prosperity but also economic growth as well as a more secure future of the nation. This question will discuss whether globalization limits the capability of domestic governments to lose control over their economic policy or not? What is Globalization? 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 gives globalization a 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). 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 because 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 a 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 necessitates that the countries increasingly view globalization as a 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 goods and services in this global economy are slightly higher than it was earlier and as such only financial capital has 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. 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 persuant to 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). 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 has 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 to make amendments into their policies so that the international organizations don’t turn their backs on them. These policy concessions, therefore, clearly depict 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. 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 globalize 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 these markets by 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. Q#4 “Free trade is the best way to reduce global poverty.” Discuss. Free trade is considered as one of the most important economic concepts of the modern world as many economists are of the view that removing trade barriers would not only increase the economic growth, but it will also bring in new and more positive changes within the socio-economic variables of the different countries. However, there is a much criticism of the free trade because of the role of powerful governments as well as large multinational corporations, which are continued to dominate the policy making. The current global financial meltdown clearly indicates as to how the free trade can result into external economic shocks and create poverty. The trade linkages which have been developed over the period of time due to free trade therefore, have greater correlation impact on the world economy of any external economic shocks. The argument that free trade is the best way to reduce the global poverty is therefore, flawed because of the underlying greed and over-ambitiousness involved in the free trade itself. Further, developing countries are net exporters of the raw materials and developed countries are net exporters of the capital as well as technology therefore due to greater technological advantage, benefits of value addition, mostly go to the developed world therefore developing countries become worse off from the international free trade. (Cooper, 2004). Q#5 how would Marxist economics explain the current economic crisis? Current economic conditions of the world are clearly indicating towards the need of having a greater role by the government in controlling the affairs of the economy. The policies of free trade have potentially failed to restrict such a large scale failure of world’s financial system as well as economy because of the inappropriate role of government. Marxist economics can be one of the answers to the current crisis because it advocates the greater role of central authority to control and regulate the economy. However, many critics consider even Marxist economics as inadequate because they do not consider this crisis as the crisis of capitalism but rather interventionalism as government failed to properly define its role and influence in regulating the markets. (Carden, 2009). The economy which was encountered by Marx is not fundamentally the same as there have been great changes over the period of time and focus has been shifting from manual labor to knowledge labor as the world entered into post modernism. The current economic conditions, therefore, may not be entirely defined by Marxist economics. Bibliography 1. Carden, A. (2009, May 7). We Dont Need Marx to Face This Global Economic Crisis . Retrieved May 26, 2009, from Foreignpolicy.com: http://www.independent.org/newsroom/article.asp?id=2501 2. Cooper, W. H. (2004). Free Trade Agreements. In A. S. Miller, Free trade (p. 1). New York: Nova Publishers,. 3. Scholte, J (2002) What Is Globalization? The Definitional Issue – Again. CSGR Working Paper. 109 (02) 1-34 4. Gupta, S (1997). The Political Economy of Globalization. New York: Springer,. 3. 5. Prempeh, Osei Kwadwo (2004) Anti-Globalization Forces, the Politics of Resistance, and Africa: Promises and Perils- Journal of Black Studies 34 (02) 580-598. 6. Polanyi, Karl (2002). The Great Transformation. New York : Beacon Press 7. Goddard, Cronin and Dash (2003). International Political Economy: State-Market Relations in a Changing Global Order. New York. Lynne Rienner Pub. Read More