3 Questions in Political Science - Assignment Example

Insert Insert 25 February According to Rodrik, why is national democracy incompatible with deep globalization? Dani Rodrik is oneof the economists that have been advocating for national sovereignty and democracy as opposed to the free trade. His approach involves rehabilitation of the government in the process of advocating for market economy (Rodrik, 83). In addition, this approach claims that national democracy, national sovereignty, and deep global economic integration are usually incompatible. In that sense, he argues that national democracy demands for elimination of transactional cost that various traders and other financiers face in their trading and other dealings. In fact, national democracy is one of the key sources of such transactional cost, since it provides sovereign risk and regulates rules at the border. In addition, national democracy reduces chances of global risks by providing regulations and supervision of financial intermediaries (Rodrik, 212). Therefore, it is important that global federalism be adopted where democratic politics is aligned with global markets. Consequently, it is important that the national state is maintained and the needs of international economy are also catered for. As a result of this, the nation will in most cases pursue the objective of achieving global economic integration before considering other objectives. The national democracy can also be used in order to reduce the goals and visions of the international economic integration and going for limited globalization as was witnessed in post war in Bretton Woods’s regime where there was more capital control and minimal trade liberalization (Rodrik, 102). Although, this system led to failure of the approach given, it is thus important that for more globalization to be achieved, national democracy or national sovereignty must be reduced. Furthermore, this clearly illustrates that national democracy is one of the factors that determine the state and pace of globalization in a country. The potential effect of globalization is the reduction of national democracy, which also reduces global fiscal competition. In that sense, it is important that democracy be provided in a way that promotes civil rights, although this will lead to low economic growth but cause high social stability. In addition, this can help in expanding global civil rights (Rodrik, 110). This also clearly indicates that economics is an important political decision-making processes that requires global order. Furthermore, although globalization is one of the factors for economic growth in both rich and poor countries, it is currently producing a different result in terms of economic growth (Rodrik, 88). These problems of globalization include financial crisis and social instability. Indeed, this calls for more market openings, which are politically and sustainable to all. Poor countries need improved governance while at the same time rich countries need social stability. Besides, markets usually depend on states, hence the need for more national democracy, safety nets, and anti-trust rules to control globalization. Again, deep globalization always works in order to reduce and mitigate national democracy and usually allows the market to work without some restrain. Therefore, national democracy and deep globalization are incompatible; hence, at times, a choice is necessary between national democracy and deep globalization. Despite all these, through Bretton Woods’s agreement, it is also possible to get a balance between national democracy and global markets (Rodrik, 241). Finally, globalization is usually affected by other national democracy factors that are political in nature such as corruption. Again, the rich usually exploit the poor in order to maintain and preserve their status, a situation that makes the poor to become even poorer. In conclusion, according to Rodrik, it is clear that national democracy and deep globalization are incompatible. This is because deep globalization leads to erosion and reduction of national democracy. Therefore, there is need for choice between more sustainable development and more free trade (Rodrik, 82). 2. Compare and contrast the differences between Bretton Woods as the world trade regime in operation before 1972 and the current world trade system governed by the World Trade Organization. After the Second World War, especially around 1972, there was the international monetary system known as the Bretton Woods system that was mainly based on adjustable exchange rates and stable exchange rates. In this era, exchange rates were usually involving devaluations, where individual currencies were not allowed to correct key disequilibria in the balance of payments. Again, Bretton Woods’s system was a way of money management that involved the application of established rules for both commercial and financial relations globally, including world’s major industrial nations (Rodrik, 216). This was one of the first monetary management orders, whose main purpose was to guide and control money matters among various independent global industrial states (Trimble, 1944). The establishment of this system begun in 1944, where 730 delegates from 44 different countries came together at Mount Washington Hotel in Bretton Woods, in United States to discuss about United Nation’s monetary and financial conference. It is this conference where rules and procedures used to regulate international monetary systems were set. Despite its establishment in 1944, it became operational in 1945. Furthermore, this system also involves various central banks of different countries, apart from the U.S, maintaining fixed and stable exchange rates between their currencies and the dollar. As a result, a country that had relatively high currency would sell it in exchange for dollars, thus reducing its value (Quan, and Rafael, 33). Conversely, a country that had low currency would buy its own currency, thus raising its price. Although, this system was relatively good, it ended in 1971 when there was inflation in the U.S and the value of the dollar was diminishing. At the same time, the U.S tried to convince Germany and Japan to appreciate their currencies, but they both refused due to fear of increase in the prices of their goods and services that would automatically affect their exports. As a result, dollar rates fell, leading to the end of Bretton Woods System. In this era and system, various trade agreements recognized the need to balance the existence of global free trade and various government rules and regulations in order to tolerate and satisfy their citizens (Rodrik, 250). Again, this system also put into account moderate and little globalization by including domestic policies such as equity and state welfare. Although the U.S was the center of most powers under this system, it recognized the organizations at the center of economic globalization such as the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade. This system utilized and developed a rule enforcement policy where institutional infrastructure was common to all international economies (Daly, 190). On the other hand, the World Trade Organization (WTO) has initiated a system of deep globalization where domestic priorities are given less consideration compared to global trade and finance. This system includes the integration of world market for goods and capital; currently, all nations are required to follow various market policies such as low corporate taxes, deregulation, reduced union power and very stringent fiscal policies. As a result of this system, prices of some products and services are usually cheaper, since they are imported from countries where there is cheap labor. Again, this system is different from the Bretton Woods system, in that, it does not recognize the U.S as the sole manufacturer (Rodrik, 244). This is because the same products can now be manufactured in other countries. As a result, some workers are affected through dislocation. Tariffs are also self-defeating while social programs and procedures to give proper redistribution and equity are also lacking. This has caused unstable and unequal development among countries. Finally, there is need for establishment of stable markets and financial deregulation in order to solve this problem (Daly, 188). 3. Would you rather be rich in a poor country or poor in a rich country? According to Rodrik, economic globalization and unequal development usually go together. In the global markets, comparative advantage usually works in favor of manufacturing countries. Therefore, it would better to be rich in a poor country than being poor in rich country. This is because if poor countries can arrange their resources well and advocate for government interventions in creation of institutions that promote and enhance economic development, they will have competitive advantage. This is the case that was witnessed in China, Japan and even in Southern Asia (Rodrik, 234). Therefore, being rich in a poor country with good government, which can control market well, is more important than being poor in a rich country. Again, where there is proper business climate and good market regulations that can protect and promote domestic economy, there will be high economic growth due to increased export trade (Rodrik, 121). Furthermore, proper governance and provision of more public space will lead to faster economic development as seen in China today. Therefore, poor countries should promote social justice, basic rights and open global market including protection of both labor and environmental standards. Overall, there is need for national democracy and regulation to promote markets in poor countries. Indeed, good political will is essential in the development of both rich and poor countries (Quan, and Reuveny, 29). Works Cited Daly, Herman E. "Population, Migration, and Globalization." Ecological Economics 59.2 (2006): 187-190. Quan, Li, and Reuveny, Rafael. "Economic Globalization and Democracy: An Empirical Analysis." British Journal of Political Science 33.1 (2003): 29-68. Rodrik, Dani. The Globalization Paradox: Democracy and the Future of the World Economy. (2011): 78-255. Web. 25 February 2014. . Trimble, Phillip R. "Globalization, International Institutions, and the Erosion of National Sovereignty and Democracy." Michigan Law Review 95.6 (1997): 1944. Read More