Globalisation and International Political Economy - Coursework Example

Globalisation and International Political Economy 7 March Introduction Over the last half century, globalization has intensified economic interdependence among the globe’s key nations radically. For example, economic policies of major foreign nations have bigger influence on the American economy, as of today, than in earlier decades, and it can be a basis of grave global political conflict in coming days. There has been belligerent domestic political deliberation over international economic policies due to Globalization. How governments accomplish their financial and trade regimes jointly, or fail to do so, which impacts the development of the global economy, economic performance of nations, and welfare of their people, and international politics more generally (Jean-Yves & Loic 13). This research essay will analyse in detail how globalisation has impacted international political economy by establishing nations’ state with particular emphasis on its direct impact on global wealth and power. The Meaning of Globalisation As per Joseph Stiglitz, economic globalisation is one where there is a closer integration of nations and peoples of the globe which has been materialised by enormous minimisation of costs of communications and transportation, and due to the collapsing of artificial obstacles to the easy flows of services, products, knowledge, capital and free movement of people without border restrictions (Jean-Yves & Loic 13). As per Thomas Friedman, globalisation is the unstoppable integration of transport, communication systems and markets to a magnitude never observed earlier – in a manner that is facilitating the nations , corporations and individuals to reach out around the globe in a speedier , farther , cheaper and deeper way than ever before. Thus, globalisation refers to the process of free movement of people without any visa requirements across borders, mainly through tourism and employment, the ever increasing day-to-day usage of products sourced around the globe, especially in emerging nations, the transformations in corporate strategies footed upon the global presence of the companies, and their probable effect on employment opportunities and the fast global blow-out of an originally localised crisis (Jean-Yves & Loic 13). Globalisation refers to the all those processes by which people around the globe are assimilated into a global society (Sørensen 454). As per Bob Jessop, economic globalisation refers to the process of internationalisation of national economic spaces mainly through extraversion and penetration and through the establishing of economic relationships and expanding of international regimes thereby covering economically associated issues (Sørensen 457). The process of economic globalisation includes the establishment of global and regional regimes, by breaking down the trade impediments both for products and services and helps the people to freely travel or settle in any parts of the globe and internationalisation of manufacturing processes (Sørensen 457). Thus, globalisation corrodes the authority of the states as many of the original domains of the nation-state power are now apportioned with the international or regional authorities and as per retreat scholars, this would definitely result in a true global economy (Sørensen 455). As per some scholars who are having state-centric view that the globalisation tendencies have been bewildered with technological advancements and developments and that the world is equally internationalised, but not technologically intertwined during the First World War (Sørensen 453). “The Significance of Nation-State’ A sovereign nation-state is one with territorial frontiers, with a national economy, together with a national polity and includes a national community of subjects or citizens (Sørensen 452). The above definition will help to comprehend the impact of closer economic tie-ups for sovereign states and the phases of economic globalisation that they have to witness. However, economists like Benedict Anderson and Max Weber have extended more descriptive theories for the concept of nation-state. Nation-states have been divided into three diverse clusters such as a) advanced nationalized states, b) feeble post-colonial states and c) developing or modernising states. Thus, the course processes of economic globalisation may have varied effects and demonstration in each of these types of states (Sørensen 452). European states have realised the main advantages of economic transformation and globalisation and they have established the Coal and Steel Community as early as in 1951. Now, they have established a cooperation and union among all the EU states, and this has been accomplished through the creation of European Union, which is famously known as EU. Thus, the notion of post-modern states is closely associated to the concept of globalisation. Nonetheless, the cultural, political and economic forces can change the advanced capitalists’ nations to post-modern states from that of modern states (Sørensen 459). If a state has a centralised system of democratic government, constitutional independence, a population living in a territory exchanging historical and cultural ties and which has a separated national economy which can be defined as a modern state (Sørensen 455). The so-called modern states have initiated a transformation process into post-modern states, which demonstrate more global traits of multi-stage governance, a less coherent population with a share of population treating themselves as global citizens instead of considering them to particular nationhood, and a section of the population becoming more nationalistic as a reactive movement. Thus, the economy of such state turns to be much less self-supported due to the “deep assimilation’ of the companies and a lion’s share of economic activity deep-rooted in in global networks (Sørensen 455). Does Globalisation enhance productivity? BBC World Service carried over a research study in 2008 and made a survey among 34,000 individuals from 34 nations on what globalisation meant to them. The outcomes mirrored a generalised discontent. In 22 nations, the preponderances of interviewees replied that globalisation process was occurring so rapidly. Majority of them wished to have a slowdown instead of put a full stop to the movement. About 33% respondents from the nations, especially from India, China, Australia, UAE, Canada, and Russia observed that globalisation did bring many developments as compared to the earlier economic scenarios. In 33% of the remaining nations which include the Philippines, the Italy, USA, Indonesia and Portugal, on the contrary, were of the view that situation was deteriorating. However, only in seven nations (USA, Australia, UAE, Ghana, China, Canada and Nigeria) respondents were of the view that the ongoing process of globalisation as transparent and fine-tuned (Jean-Yves & Loic 15). How globalisation can transform the emerging economies can be understood from the following companies which were known only in their home nation one decade ago now is regarded as a well-known brand outside their home nation. Haier – a Chinese based company established in 1984 is the manufacturer of freezers, air-conditioners, wine cellars, vacuum cleaners and washing machines. Thanks to the globalisation, Haier now operates in more than 100 nations around the globe, employing about 70000 employees and reporting global revenues of $32.1 billion in 2014. Arcelikas - a Turkey based company established in 1955 is a famous manufacturer of durable consumer products. As of now , it is having employees of more than 25,000 , having manufacturing facilities in five nations such as Romania ,Turkey , China , Russia and South Africa and is having marketing and sales departments all over the globe and having more than 10 brands. In 2013, it reported $34,809 million and the only Turkish company appearing in the Fortune’s Top 500 global company list. Tetley Tea – a South-African based giant is owned since 2000 by the Indian business giant TATA. This South- Asian giant is appearing constantly in news when it took over the famous car manufacturer Jaguar in 2008 and Anglo-Dutch Steelworks Company CORUS in 2007. Samsung – South Korea’s GDP was less than Sub-Saharan African nations in 1960s but in 2010, one of its jewels Samsung became the second largest manufacturer of mobile phones as compared to their US competitors namely Motorola and Apple as it posted net sales of $268.8 million in 2013 alone. Lukoil – A Russian oil giant who has now built-up international distribution network at par with MNC oil companies such as Total, Exxon and Shell. Now, it has countrywide presence in Romania, Belgium and USA (Jean-Yves & Loic 15). Globalisation helped to outsource the services and production from low-cost nations. Majority of the Information Technology companies around the world have opened their subsidiaries in India and having business associates in India and regularly outsourcing the services to India. (Frieden and Lake 5). Further, the majority of the automobile manufacturers have shifted their manufacturing operations to China as they find it very competitive in China and India. Further, it is noticed that globalisation has enhanced the competitiveness of the businesses. For instance, in 1992, Boeing needed 45 days to assemble an aircraft. In 2005, this was reduced to just 8 days. This is possible for Boeing, mainly due to the factor that it has outsourced its production needs to various suppliers around the world such as India, Australia and Spain, etc. Due to globalisation, the global supply chain not only reduced production lead times but also reduced the lead time needed for research & development purposes (Jean-Yves & Loic 45). . Role of GATT & WTO in Globalisation GATT and WTO have played an important role in the globalisation process as they removed barriers to international trade replacing high tariffs with the moderate tariffs, removal of restraints of trades like awarding the most favourable nation treatment (non-discrimination), imposing import restrictions, encouraging flow of foreign direct investments because of which many multi-national companies had initiated their operations in the least and underdeveloped nations (Frieden and Lake 7). GATT and WTO helped the MNC to transfer the technology, to create employment opportunities to the locals, and has helped the host nations to advance economically. As of now, there are 160 member nations in WTO, and it also stresses about the national treatment by the member nations which means to treat both locals and foreigners equally. WTO is more concerned with freer trade among member nations gradually especially through negotiation, by having predictability mainly through transparency and binding rules, promoting a fair competition among member nations and by encouraging economic and development reform. Further, member nations can make complaints against other member nations who infringe WTO regulations through its dispute -resolution mechanisms. As per WTO report (2014), the aggregate of merchandise exports by 160 member nations of WTO in 2013 was amounted to US$ 17.8 trillion. “Economic Growth and Globalisation” Globalisation has made the countries to be more ‘open’ and this can be demonstrated by the following illustrations. “Exports as a % of GD” In 1950s In 2003 Mexico 3.5% 26.3% Germany 6.2% 31.3% U.S.A 1960 2007 “Exports as a % of GDP” 4.9% 9.3% “Imports as a % of GDP” 4.4% 14.4% With the help of above statistics, we can understand that nations have become increasingly reliant on foreign markets for their growth in the domestic market both for exports and imports (Frieden and Lake 45). “Part Played by MNCs in Globalisation” Due to liberalisation of trade, multinational companies have expanded their business operations throughout the world. Further , there is also a new type of MNC known as Original Equipment Manufacturers (OEMs) which is also known as all-in-one integrator as they offer integrated or even complete solutions to MNCs willing to externalise some of their business operations. For example, Fujitsu-Siemens or HP no longer manufactures or assembles their PCs or laptops directly, but it is being outsourced from Taiwanese companies. Foxconn is an OEM company which employs more than 200000 people internationally, which manufactures products for third parties. Further, it also develops the customer’s products, and it is owning more than 15000 patents. Thus, by availing the services from OEMs, HP or Fujitsu-Siemen is only just adding their label to the plastic castings to the products outsourced from the OEMs (Jean-Yves & Loic 44). Thanks to globalisation , as McDonalds’ is now functioning in more than 118 nations, and its international operations comprise about 66% of its sales, and its 42% sales are emerging from EU. As of 28 December, 2014, it had 21,878 stores both in USA and outside USA, and it operates in 73 nations. Citi group which is engaged in banking, and financial service business is operating in more than 100 nations. Almost 99% of Nike’s brand apparels is produced outside the USA in 35 different nations and more than 50% of its revenues are coming from outside US. Further, globalisation facilitates the corporations to expand and diversify their business through acquisitions and mergers. For instance, ACER, Taiwan based company acquired Gateway, which is the U.S. based PC maker and due to that, ACER became now the third- largest PC maker in the world trailing Dell and HP. Why Globalisation is such a contested topic? After decolonisation, the post-colonial states were experienced corrupt and inefficient regimes with low magnitude of state legitimacy and an alienated population (Sørensen 460). Majority of these states have been designated by the United Nation (UN) as the Least-Developed Nations (LDC). These LDC states are having economic structure and for their survival, these nations are depending upon the economic aid from developed economies. Unfortunately, globalisation does not bring a uniform growth throughout the globe as anticipated and these LDC nations are not witnessing the same phase of economic growth as witnessed by developed nations in their process of globalisation. These LDC nations are not able to penetrate into the world market with the same passion as that of post-modern states or vie in the international economic competition on the analogues terms (Sørensen 461). The combination of the modern state, the feeble post-colonial state and the post-modern state can be called as the modernising states. It may be noted that these nations are witnessing a general process of change though it is not probable to rank them along a transition axis. The BRIC –nations (Brazil, Russia, India and China) are the most conspicuous illustrations of modernising nations (Sørensen 462). Each of the BRIC nations has traits of corruption and feeble government structures but at the same time, they also have magnitudes of effective national governments. BRIC nations on the economic side have three-state types’ features. Though, the China has attained the fast economic development in the past twenty-five years with a mean growth rate of in excess of 9% per annum, but, this has only resulted in the minimal increase in the mean standard of living but mostly it has enhanced the gap of inequality level (Sørensen 463). It is to be noted that China is being regarded as the most significant economies of the world due to its fast economic achievement , but the economic globalisation has been accomplished with major devastation of environment and with no eagerness to upkeep the international human rights requirements which has resulted in the high level of social unrest(Sørensen 463). Many anti-globalists are of the view that the globalisation process does offer only disadvantages like the shifting of manufacturing to low-cost nations like China and India and witnessed the loss of control over chains of economic levers, etc. Detroit city in USA is the best example for this as all automobile industries located earlier, had shifted their manufacturing operations to India and China and hence, the Detroit municipality announced bankruptcy recently. Globalisation also brings with it some inherent risks such as loss due to fluctuations in exchange rates, international competition, failure of the business due to cultural variances, political risk associated with foreign governments and differences in economic scenarios. As per OECD (2008), globalisation appears to upsurge disparities in job quality, particularly in OECD nations, which impacted on some classes of employees, especially low-skilled employees who may be also likely to be concentrated in some regions. Due to relocation and subcontracting activities by U.S. based companies, between 2001 and 2006, the real weekly wages of average US workers’ wages declined by 4% in spite of reported productivity gain at 15%. Real wages were stagnated in Japan and Germany. Since from 1980s, the aggregate of share of income from labour in OECD nations have declined significantly where in 2006, the share of income by companies increased more than 15% of the GDP of the 7 most advanced industrialised nations, as contrasted with 13% in 1980s. It is alleged that due to globalisation, the job quality has deteriorated in OECD nations in less-competitive sectors (Jean-Yves & Loic 98). It is alleged that globalisation increased the CO2 emissions which resulted in the increase in global warming. Due to increased transportation activities, Green House Gas emission (GHG) increased due to aviation by 86% as it is responsible for releasing about 4 to 9% of aggregate GHG emission into the atmosphere as of date. Further, increased transportation activities through road and sea has also resulted in the increase of GHG emissions around the world. Industries around the world are also responsible for releasing GHG emissions into the earth’s atmosphere, and U.S.A is being responsible for 20% of global GHG emissions. In China, there is being a steep increase in the number of transportation of fleets and due to industrialisation and urbanisation, it is now the globe’s largest GHG emitter superseding the USA. Globalisation has increased deforestation as forests’ lands are being converted to agricultural and industrial purposes. This has also resulted in the higher GHG emissions into the atmosphere resulting in enhancing global warming (Jean-Yves & Loic 114). Conclusion Thanks to globalisation as the aggregate of merchandise exports by 160 member nations of WTO in 2013 was amounted to US$ 17.8 trillion. Due to liberalisation of trade, multinational companies have expanded their business operations throughout the world. Globalisation has facilitated the corporations to expand and diversify their business through acquisitions and mergers. Unfortunately, globalisation does not bring a uniform growth throughout the globe as anticipated. Anti-globalists are of the view that though globalisation has brought economic growth but it does not improve standard of living to all the sects of people uniformly. Globalisation also brings with it some inherent risks such as loss due to fluctuations in exchange rates, international competition, failure of the business due to cultural variances, political risk associated with foreign governments and differences in economic scenarios. Thus, the world community should address the negative sides of globalisation such as global warming and deforestation due to GHG emission to save the mother earth from the impacts global warming. Works Cited Frieden, J.A. and Lake, D.A. International Political Economy: Perspectives on Global Power and Wealth. Belmont: Thomson Wadsworth, 2000. Jean-Yves, H & Loic, V.OECD Insights Economic Globalisation Origins and Consequences. Manila: OECD Publications, 2013. Sorensen, G. Globalization and the Nation-state in Caramani, D. Comparative Politics Oxford: OUP, 2011.pp. Read More