Government Business Relations - Essay Example

Government Business Relations and Section # of INTRODUCTION: Globalization is a phenomenon which is applicable worldwide as the name itself states- its ‘global’, therefore it has been attributed various connotations, both negative and positive; those who believe in economic unity and integration beyond the geographically demarcated boundaries of the state advocate it greatly, whereas people falling in the segment of the society which believes in social cohesion and have an anti-capitalist stance usually tend to negate this inevitable phenomenon which has penetrated into the roots of the society. This paper focuses on the link between the concept of globalization and the nation-state; more specifically it tends to answer a major question of whether the role of the Government becomes increasingly important or otherwise in an era of globalization. Initially the term globalization would be defined with regards to the intricate meaning attached to it along with the critiques of it being negative or positive and the factors which contribute to increasing this phenomenon, then the paper proceeds to incorporate the impact of globalization on the state, furthermore this study would explore the methods which are available to redesign the role of the state in order to overcome the challenges launched by globalization on the cohesiveness of the state (Bertucci and Alberti, 2003, Page 1-26). All these sub topics are cardinal to the study of globalization; therefore each would be elaborated in detail along with examples from different parts of the world. DEFINING GLOBALIZATION In literal terminology, Globalization or Globalisation pertains to the description of a process as a result of which the economies, the societies and cultures of nations throughout the world have been integrated into a web of interdependencies, due to the overarching power of the technological progress in areas of communication, transport and trade. It is often used only to describe the specific concept of ‘economic globalization’ which relates to the involvement of national economies into the international arena, through the tools of trade, FDI (foreign direct investment), capital inflows and outflows, net migration, and the massive spread of technology (Invest Words, 2010). Globalization has its pros and disadvantages; it presents various opportunities to people to benefit from while at the same time it has certain costs associated with it, thus reflecting both aspects of the concept. Factors behind Globalization The major attribute of globalization is the increased level of interdependence between nations across the globe. The determinants at work which promote this interdependence are as follows (Bertucci and Alberti, 2003, Page 1): Technological progress and innovation and the massive reduction in the costs of communication. Enhanced level of business activities; entrepreneurships Free trade promotion and the freedom to make investments The promotion of world social networks. GLOBALIZATION AND THE STATE The involvement of the nation state and the government is very much crucial to the expansion of the interdependence factors within a nation and its links with nations around the globe. The state plays a very cardinal role in the overall development of the concept of globalization; it has served as the pivotal body which has promoted interdependence and integration of economies for certain activities, both at the domestic and international level, since it has the authority to implement policies which are liberating, thus the enactment of market oriented policies by the State has led to the increase in the level of globalization. Therefore, when many governments made a move towards supporting and promoting economic liberalism in 1980s, it led to drastic uplift in the level of globalization prevalent in the world. The role has been advanced when any states included the clauses which deregulated the financial sector, and which removed the state control over the foreign exchange and thus gave a boost to free trade. Financial deregulation has successfully led to the removal of capital controls, thus allowing capital and investment to move freely, it furthermore includes the extrication of interest rates from any sort of control and regulations, and the barriers which hindered entrance into many banking and various other financial services has also given globalization a boost (Cable. V, 1995, Page 3). The conscious efforts made by the state are also obvious in the eight continuous negotiating rounds of the General Agreement on Trade and Tariffs (GATT), which upheld the free trade principle by encouraging the removal of protectionist measures, these eight successive sessions were completed by 1995 and then the World Trade Organization (WTO) came into existence. This body has been responsible lately for the massive removal of trade barriers in trading of goods, and not only this, WTO has also managed to liberalize the capital and service flow system, making it easier for people around the globe to trade in invisible products (services) and also to move around their investments to wherever there is more benefit, thus promoting competition on a global level as foreign companies come in to compete at domestic levels. The WTO has also revised policies which pertain to the rules and regulations regarding market access, such as subsidies and tax relief and Intellectual Property Rights (IPR) (Bertucci and Alberti, 2003, Page 2). It is often claimed that state governments have no role in promoting globalization, but according to Bertucci and Alberti, it is the policies created and enacted by the individual governments of all nations around the world which promotes globalization, since the policies made by these small governments tend to set the stage for global market forces to operate. This is a part of economic globalization which is in the hands of the state policies (Göksel, 2004, 3). WHICH STATES SET THE RULES? The fundamental question in the whole globalization debate pertains to the dilemma that which countries are the rule makers? Whom do these rules tend to favor? And whether it is possible for small nations to leave an impact on the policies in the international arena? It must however be accepted that all countries in the world are not on the same economic, political and social footing, therefore, there are some countries which are handicapped by their circumstances and thus do not enjoy as much leverage as their richer and stronger counterparts in the agendas at the international political level, and as a consequence of this situation of the imbalance of power, the policies reflect the legislations and decisions of the most influential nations of the world rather than the developed ones. These rules do not necessarily favor the developing nations and thus deepen the power and economic disparity which prevails. As stated in the Bangkok Declaration of 2000 (United Nations Conference on Trade and Development, 2000). “Globalization can be a powerful and dynamic force for growth and development. If it is properly managed, the foundations for enduring and equitable growth at the international level can be laid. For that, it is essential to persevere in the search for consensual solutions through open and direct dialogue that takes account of the fundamental interests of all” REDESIGNING THE ROLE OF STATE The fundamental role of the state government, as conventionally recognized, has evolved overtime, and in modern times, states do not only have to cater for the domestic market, but also requires a higher level of skills, on the grounds of both- quantity and quality. The change directs towards a change in the concentration of the state policies, and initiates a move from the hands-on management work and the direct production of goods and services to a more radical, expanded and strategically planned system. It should include policies which promote globalization to the extent that they do not undermine the domestic or local market, or this would lead to the competition favoring the alien forces, resulting in the demand for domestic goods reducing and that of foreign goods hiking, leading to an outflow of foreign exchange, and a depreciation in the exchange rate for the country, thus showing that the trading system is extremely vulnerable to policies of protectionism, but when implemented strategically by the state, these policies can prove beneficial to protect the domestic industry as well as international trade (Bhagwati, 2000, Page xiii). CONCLUSION In light of the entire argument presented in the body of this paper, it can be stated that the State plays an eminent role in the era of globalization, as opposed to the diametrically opposite opinion that it plays a minimal role since globalization tends to undermine the nation state. However, it must not be ignored that the policies, rules and regulations enacted by the state government are the determinants of the consequences which follow, therefore it depends on the stance of the state, if it adapts policies which are market oriented than the globalization would sink in deeply into a country, while if the state upholds crude protectionist policies than the effects of globalization would be hampered to an extent, but then the country would be the center of retaliation in the international arena, therefore the State must make policies with deliberate consideration and diligent efforts, after strategically considering all sides of the argument, because if it does not, then the it would either move into extreme globalization and overthrow the authority of the state (Susan Strange, 1997, 365-369; Susan Strange,1999, 345-354), or the country would not be able to benefit from the international market’s competitive advantages. References Bertucci. G and Alberti. A (2003) ‘Globalization and the Role of the State: Challenges and Perspectives,’ in Reinventing Government for the Twenty-First Century; State Capacity in a Globalizing Society. D.A. Rondinelli and S. Cheema, Bloomfield, Kumarian Press, 17-33. Bhagwati. J N (2000) Protectionism. 8th Edition. United States of America. MIT press Cable. V (1995) ‘What Future for the State’ in Daedalus. London. Pinter Publishers. Goksel. N K (2004) Globalization and the State. Perceptions, 9, 1-12. Accessed from http://www.sam.gov.tr/perceptions/Volume9/March-May2004/1Nil%C3%BCferKaracasulu.pdf Invest Words (2010) Globalization. Accessed 21st September 2010 from http://www.investorwords.com/2182/globalization.html Susan Strange (1997) ‘The Erosion of the State’. Current History, 96, 613, 365-369 Susan Strange (1999) ‘The Westfailure System’. Review of International Studies, 25, 3, 345-354. United Nations Conference on Trade and Development (2000). ‘Tenth session, Bangkok Declaration, Global Dialogue and Dynamic Engagement’ in Bertucci. G and Alberti. A (2003) ‘Globalization and the Role of the State: Challenges and Perspectives,’ in Reinventing Government for the Twenty-First Century; State Capacity in a Globalizing Society. D.A. Rondinelli and S. Cheema, Bloomfield, Kumarian Press, 17-33. Read More