Is Hazard Transfer an Inevitable Consequence of Globalization - Essay Example

Is Hazard Transfer an Inevitable Consequence of Globalization? Introduction What is “globalization”? In the modern context this concept is often exaggerated and misinterpreted. In 20th century globalization was considered in various contexts and there was a wide range of issues included in the context of globalization. Misinterpretation can be explained by the fact that globalization is not quite relevant to modern economy; formations of regional trade blocs going global are considered more often (e.g. European Union, NAFTA) (Harvey, 2005). Thesis: globalization refers to the modern markets, of both developed and developing countries, which are exposed to external changes, innovations in technologies, implementation of various cultural and social changes etc. Globalization is a background of the modern development in the society in different spheres. Globalization and political economy There is no doubt that there are advantages and disadvantages of the global processes, but in the context of the modern world globalization sets the pace of political, economical and social development. The modern citizens do not have another choice, but only keeping pace with these changing and challenging triggers of modern life development. In the process of globalization, international governments struggle for a control over the international economy, basing on their needs for wealth, which are an integral part of their current struggle for power (Gilpin, 2001). Unlike previous years, modern world accepts geopolitical hegemony (as in case of the United States) and not the priority of autonomous market (as in case of the United States too) (Waltz, 2000, p. 47). Political economy in the context of globalization reflects numerous aspects of political science and international relations: starting from rational individualism to the considerations about politics; it discusses policies in an economic dimension. Therefore from the perspective of political economy, on the background of a process of globalization the changing relationships between political systems and economic forces are considered in the modern researches and studies. A process of integration of national economies into a global one is a sequential process of gradual adaptation and changes of national powers into a complete successful process increasing profits of different countries (Schumacher, 1973). A shift of accents from ‘globalization as an interdependence’ to ‘globalization as gradual balancing of international and domestic politics’ was initiated in 40s of twentieth century (Kapstein, Mastanduno, 1999, p. 163). With the course of time, globalization turned from a forcible process of states’ oppression into liberating trades, financial markets and investments. A distribution of consequences of a process of globalization was the following: from “pressure for the reduction the welfare state in developed countries and for the liberalization of the economy in developing ones” (Langley, 2000, p. 462). It is more pleasant to consider a process of globalization in political economy in the following way: “the rush to free trade and capital market liberalization, the reforms of many welfare states, and the creation of independent central banks globally” (Wangoola, Youngman, 2006, p. 22). From this perspective a process of globalization is considered to be favorable for political economy. A meaningfulness of every state is supported by the relevance of its potential assistance and cooperation with other states. It is a kind of interaction between players in the international arena. In such a way, it is relevant to support and develop a process of globalization on the international level for the countries’ benefits (Croteau, Hoynes, 2003). Political economy should be considered on the background of globalization for the reason that interrelations of countries on micro- and macro levels, which can regulate economic cycles (Langley 2000, p. 470). Currently on the governmental level there is an evident intervention in the economy of every country. An interrelation of politics and economy lead to development of more general ideas, which diminish the role of the state and state’s economy for the sake of economy’s development on the international level (Strange, 1996). Economical development of any state is mainly directed on completion of global goals. It is also interesting to pay attention to the development of global economy. It may be claimed that there is a gradual restoration of global economy of the late nineteenth century. It is an intimidating factor that political conflicts reborn after post-Cold War could negatively influence world’s economy (Helleiner, 1996, p. 19). Another challenge is to decide whether current political alliances and blocs will exist or will they be transformed into new ones. The primary attention should be focused on relationships between the big countries and their influence on the developing countries (Keohane, 2001). A shift of attention paid to developed countries and the most powerful countries from being world leaders to being strong partners is relevant (Dowd, Janssen, 2011). Unfortunately, policies and economies of the developing countries are less considered in comparison with the ones of the developed countries (Klein, 2000). Therefore it is necessary to widen a scope of issues covered by political economy in terms of the process of globalization for development of the multi-sided approach directed on international relationship’s establishment and development. Globalization hazard in economy In the modern context it is appropriate to take into account different aspects of globalization. Thus, very often the International Monetary Fund is blamed for excessive risks and the root of evil is often associated with "Tequila crisis'' of 1994. The emerging markets of Mexico have been exposed to external risks and there was a drastic financial turmoil. The IMF made an emphasis on investors and it was necessary to take unwarranted risks and it was necessary to invest money in developing countries. IMF critics claim that bailouts allowed leaders from Brazil to Turkey to get rid of necessary reforms and this behavior intensified the coming crisis very much. This is the first argument, which can be interpreted as a "moral hazard". Actually, emerging markets had a perfect opportunity to receive money from newly emerging markets starting from 1995. The Asian crisis of 1997 sharpened the corners and it was very difficult to pacify the coming crisis (Schrire, 2000). There was a rapid growth of investments in 1994. Foreign investors wanted to gain huge benefits and for this purpose they tried investments in different fields, Moreover, such as real estate, service industries and so on. When the crisis struck direct investors suffered great losses. The globalization hazard occurred after 1996 and it was difficult for foreign private investors to occupy emerging markets very soon. Foreign investors are always looking for a new victim to be promoted. In other words, they are interested in potentially advantageous spheres and industries for investments. As a rule, foreign investors have been interested in potential benefits of investments and there was a great interest in sound economical policies. Emerging markets were targeted and there was an essential credit flow in 90s. Nevertheless investors were developing sound policies and emerging markets were the key factor for a potential attention. The permanence of credit flows was very important for the investors (Guillermo). The emerging market-risk cannot be denied too. Sometimes later the moral hazard argument underlined the orthodox commandment ``Thou shall not intervene,'' the main feature of globalization hazard can be market failure (Guillermo). Market failure underlines the conditions, under which government intervention can be considered as a social favor, but also as economic defense. There are many environmental hazards, which can prevent market expansion globally. American investors can sometimes suffer from floods, hurricanes, earthquakes, and tornadoes. For example, a hazardous impact of the environment and an essential impact on economic situation in the country can be experienced too after terrorist attack of September 11th.  Anyway, a great number of newly emergent markets underline the fact that weak governments cannot deal with the external hazards of economy. In case a country has less economic sectors, it is more evident for it which international actions should be made (O’Neill, 2009). In case of official international intervention investment decisions should be made effectively and efficiently. It is evident that there are many multilateral actions (Banerjee, 2002). On the one hand, there is an appropriate action, which should be taken in order to deal with the issues of refinancing. There is an option to initiate either short- or long-term measures. IMF assistance cannot be a universal panacea. The newly occurred market is a hazardous problem. Recently citizens both in developing nations and in America have experienced numerous wastes of time. In a course of time regulations of America were focused on facilitation of globalization processes. In case the governmental regulations of developed nations were focused on health improvement issues. The citizens of developing nations have been often exposed to drastic and dangerous influences, but the citizens of developed nations have been much focused on moral hazards and impacts. Very often the governments have been focused on regulations improvement and management functions of developing countries should have been correlated with the newly introduced changes. This is a rule of a mutual global adaptation for global players. There is a need to take into account interests of different parties involved in the globalization process. Global hazard in modern governments From one perspective, the governments have changed into a huge regulating machine and various backgrounds should be considered. Very often the borders of a global community are blurred. Globalization is a perfect opportunity to unification on different levels (Berberoglu, 2002). Currently economies are integrated and a rapid growth of investments and industrialization takes place. Globalization triggers creative ideas and the governments of different countries have many options to develop their businesses and go global. Max Horkheimer and Antonio Gramsci claim that on the global background it is relevant to talk about “holistic consideration” and consider the modern world as a whole. Gilpin (2001) underlines that very often states struggle for their independence and prosperity. Neoclassic liberal economists consider these processes on the global background. Modern economies are easily transformed, but not very often these changes lead to positive shifts. Globalization can be reached at a regional level (Castells, 1996). For example, there is a rapid expansion and growth of regional trade blocks, such as the European Union, NAFTA and others. This is an example of a global expansion from a local to global level. In these blocks each of the states reflects its ideas on propagating its national interests directed on intensifying of relative power on the international level. For example, a successful influence of globalization can be illustrated by EU existence, which is a possible thanks to European governments’ realization that it is more favorable to them to compete more effectively together than separately. Currently a vivid background is a geopolitical hegemony (e.g. America). Governments act today in accordance with the principles: from “globalization as interdependence” to “globalization as gradual balancing of international and domestic politics” (Harvey, 2005). States are gaining power and relations between countries are developing in the following way: from “pressure for the reduction the welfare state in developed countries and for the liberalization of the economy in developing ones” (Langley 2000, p. 462). Smith claims that there is a close relation between technology and development. Technology exerts an incredible influence on the modern society (Steinberg, 2003). Technology and development have been often considered as related issues (Smith, 2009). It is relevant to discuss the issues of globalization in the context of a triple unity: economic growth, social development and technology. These are three basic pillars of the modern society. Theoretically, it is possible to consider the processes and hazards of the modern globalization processes in this context (Sheasley, 2000). Economic growth at the international level is often prevented by numerous factors, such as a lacking of expertise and technological lapse in developing countries. On the basis of two case studies Smith illustrates the processes of inability of a developing country to catch up with the process of technological development. There are such famous case studies as Asian Tigers and Tanzanian telecentre, where one can see that every country has its particular way of development and modernization under conditions of globalization (Kiggundu, 2002). Milner (1998) claims that global changes can be characterized as: “the rush to free trade and capital market liberalization, the reforms of many welfare states, and the creation of independent central banks globally” (Milner, 1998). Modern governments develop their economies to the greatest extent. On the one hand, these various strategies of economic development are favorable for improvement for economic conditions of different countries globally, but on the other hand, a problem of country's dominance occurs (Buck, 1998). The principles of global economy development should be taken into account too. Big countries set the pace of development and small countries should catch up with these rhythms. In previous years the governments were mainly focused on welfare of their nations, economic productivity and development. In previous years the states played a paternalistic function, but nowadays they are on the way of destruction of those conditions, which have been developed earlier (Held and McGrew, 2002). Developed countries are human-like monsters, which are trying to absorb developing countries. People are focused on information and global players are often prevented from their fraudulent actions, because modern citizens have many opportunities to reveal what is really going on. Hazardous Global players In the global market the level of competitiveness is too high. In previous years the government diversified the market and appealed for a wide range of competitors. Currently the government wants to be a competitor on the global arena itself (Blyth&Spruyt, 2003). Unlike developed countries, developing countries suffer from increased taxes and tariffs and it is difficult for them to survive in the global context. The states want to gain huge profits and with this respect they are mainly focused on favorable investments. Why do governments go global, actually? It is possible to give the answer to this question in the following way: “independence of people, ideas, products, and information required to think globally because local solutions may not be possible or efficient. A state’s power to use fiscal and monetary policies effectively is limited due to the ease of financial capital mobility” (Mahboobi, 2001). Global economic policies of countries are developed taking into account their individual interests and needs. Local businesses are dependent on hegemony and do not have enough chances for further development. The governments in the global context are mainly focused on fiscal policy, monetary policy and others disable local and small businesses, because taking control over these small integrative parts of the economy are of crucial importance for them. The countries of East Asia were mainly focused on potential benefits of globalization and they were subjected to numerous reforms. What should be mentioned is the fact that the national stability of any country does not depend on its own, but also on external factors of development. A wide range of economic and social changes in the developing countries is often correlated with global policies. Therefore, we can see a different role of government. There is an evident reduction of resources, and many different regulations and norms are dependent on the government. Global governments perform an instrumentalist role. They can create a favorable atmosphere for investments improvement, trigger the processes of integration and investments, but also remain challenging in the modern global world. Main hazard in global economy can be found in trade suppression and restrictions. The capital can be more dependent on the governments and it is very important to focus on changes of labor, laws and other aspects of human activities (Mansell, 1998). It is evident that modern accents are changed and the modern governments are in constant interaction. The economic interests of the governments are different. It is evident that the international governments depend on the international agenda. A mass liquidation of enterprises and changes of small businesses are evident in the international agenda. The main hazard in economic context of the developing countries is inability of small businesses to perform at the global level. It is possible to illustrate external pressure of global players on small businesses in the following way: "taxes are the main source of revenue for the government, but it creates direct costs for the taxpayers, indirect costs by causing economic distortion that alters relative prices, and creates administrative costs for compliance (collecting) and enforcement” (Biersteker, 1998). Finances of developing countries are correlated with numerous risks and small businesses are often n danger. It is relevant for developing countries governments to develop local resources and to oppose to taxes (Mitchell, 2010). Individual concerns of the governments set the pace for a challenging development of the countries in the global context. It is better to develop a better quality of life, education etc in developing countries and improve financial conditions of the states. Globalization can be considered as a great integrative context for the governmental interests' promotion and improvement of the countries' welfare. The governments are challenged with innovative developments and regulatory bodies' creation is one of the most important issues on the global arena. New global players and new global hazards On the example of Malaysia and India it is possible to illustrate the way global pace of development can shift the accents in the development of a particular country. In the context of global business modern global players have experienced many challenges and modern researchers and scientists think about relevant strategies to analyze a particular influence of globalization on the country's development. There is a changed relation between India and Malaysia in the global context. Faizal Yahya in the article “Challenges of Globalization: Malaysia and India Engagement” considers international relations development between these two countries. ASEAN region introduces essential changes in the modern business world. Malaysia coordinates the process of India’s integration into the ASEAN region. India is a perfect innovative background for trade relations development globally. Modern global players can behave like monsters and it is necessary to give birth to a huge monster, which can eat smaller ones. Earlier it was considered that China was a great rival globally, but positioning India and underlining its potential dominance over America can be another hazard of globalization. Malaysia is the largest trading partner in ASEAN and it is an optional country, which can challenge the global world too. The Islamic identity of Malaysia cannot be denied and it is a hazardous and challenging summon to the global society. A dramatic background of global players can lead to a serious impact on the global society as a whole. On the one hand, the global partners with a deep and profound cultural and historical background should be supported and promoted as a global zest, but on the other hand, this type of international relations can be challenging for the Western world with more pragmatic views. Aspirations of the Eastern global players can be challenged with their desire to preserve their Islamic identity. On the other hand, huge financial profits of the ASEAN region cannot be denied, because there is a triple growth of their financial welfare: from US$3.5 billion in 1994 to US$15 billion in 2004 (Faizal, 2005). Modern global society is on the way of so-called "Look East" policy. There are many both internal and external challenges. India is mainly focused on trade ties diversification with the ASEAN region. In the military context India and other countries from ASEAN region wanted to become serious rivals for China (Helleiner, 1996). India is focused on choosing the line of the least resistance and starting investments of money in profitable projects. Malaysia is one of the most desirable investment chosen countries and huge profits gained in this country cannot be denied. Modern investors are interested in the industry of palm oil production in Malaysia and manufacturing industry of India is another sphere of interest for the investors. Modern investors are looking for both technological and creative potential of a chosen country for investments. Thus, Kuala Lumpur International Airport in Malaysia and Petronas Twin Tower in Kuala Lumpur are impressive for the modern tourists and thus they are beneficial for the modern investors. It should be mentioned that both Malaysia and India can experience serious conflicts, but in spite of a complex background the investors are focused on financial gains and profits. Conclusion Global players set the pace of development and the modern governments are responsible for self-developed policies. In order to prevent a hazard of globalization, it is relevant to focus on the governmental safety and the small businesses, as well as developing countries, should be protected. In the political, economical and social contexts globalization sets unseen traps and the modern states cannot always identify them on-time. That is why different strategies of global development and changes should be developed in the modern global context to keep up with this changing background. Globalization challenges occur when the state does not follow international norms and regulations. It is very important to establish effective international institutions and improve growth of developing countries. 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