Globalization - Advantages and Disadvantages - Coursework Example

Does globalization mean the end of the nation state? Table of Contents INTRODUCTION 2 GLOBALIZATION 3 HYPERGLOBALIST 4 SCEPTIC 5 TRANSFORMALIST 7 CONCLUSION 7 REFERENCES 10 Kasper, S. D. (2002) The revival of laissez-faire in American macroeconomic theory: a case study of the pioneers. London, UK: Edward Elgar. 10 Mankiw, N. G. (2008) Principles of Economics. USA: Cengage. 10 INTRODUCTION Globalization is undoubtedly the most powerful force to exist these days in our world. It means different things to different people; some even deny its existence. It has caused wars, peace, excitement, and love not only among the citizens of the nations but on governments as well. In basics there are three ways to look at globalization: left, right and centre, commonly referred to as the hyperglobalist, sceptical and transformalist. At the one extreme are the Hyperglobalist who think of globalization as “This new epoch is characterized by the declining relevance and authority of nation-states, brought about largely through the economic logic of a global market. Economies are becoming “denationalized.””(clg) Basically meaning due to the increase in markets influence on the world’s economical and political scene, and the ever-increasing importance and power of non-governmental organizations, national governments will lose their sovereignty to the process of globalization. On the sceptical side they view globalization as a myth. “The growth of multinational corporations does not mean that nation-states are no longer relevant for governing the flows of economic benefits. Held and his colleagues say that skeptical authors point to the fact that foreign investment flows into the control of a few advanced economies. Multinational corporations are still tied primarily to their home states or regions, and these ties produce benefits for these states or regions.”(clg) Skeptics say that globalization is not a new thing or doesn’t exist, and that the world is returning to imperialism through which the states themselves dominate. In between come the transformalists who believe that globalization has occurred and has changed life power and politics. Lots of stuff has been happening and there is still no clear winner apparent in the future, which they see as very messy. Therefore they see the effects of globalization are great however the outcomes are as yet unclear. To put it into perspective the concept of globalization will be described disregarding one’s view and then deal with the positive impacts on nations states and continue to look at the negative impact on nation states. The on going argument on how globalization is seen to be a destroyer of the nation state will be analyzed in order to come up with a firm conclusion. GLOBALIZATION Globalization is a much discussed term in academic circles, and structurally it refers to the development of global networks and interdependence of economic, political, social, military, scientific and environmental (Steiner, 2006, p.384). Globalization is best understood as a reconfiguration of social geography marked by the growth of trans-planetary and supra-territorial connections between people. Although globalization has made earlier appearances, the trend has unfolded at greater speeds, on greatest scales, to greatest extents and with the greatest impacts since the middle of the twentieth century (Scholte, 2005, p.8). This critical concept in globalization is interconnected with the growth of networks on a global scale and global reach. The growth of multinational corporations like Shell (Shell, 2009), which have many offices around the world, is an example of economic globalization and how its operations and profitability are affected by factors such the political and environmental developments across the globe (Shell, 2009). Also the people working in these facilities are affected by the human resource policies and views of the foreign company; therefore people all around have certain interdependence to each other. In addition to the structural definition of globalization, there have been different perspectives on this phenomenon. The primary reason on why globalization has become a major topic is that people have become aware of what a globalized world has to offer, and the lack of attention in the old days was due to the lack of or yet cost of communication technology back in those days. The revolution in transportation, communication and logistics industry has had a major role in the increased interconnectedness of nations. Another important element is the rise of private actors. Traditionally it was seen that affairs were decided by states acting in concert with one another or in conflict, yet with the current globalization it has been pointed out that private actors such as multinational corporations play a strong political role. HYPERGLOBALIST The advocates of hyperglobalism argue that introduction of liberalization or internationalization has mitigated the political as well as the economic powers of the nation state. Such a move has left all doors barring the free flow of resources between nations ajar, thus creating an additional leeway for various external factors. The liberalization moves are manipulated or rather backed by various international organizations working in the interest of the whole world rather than a handful of nations. Their greater cause often results to an adulteration in the sovereignty of the nation state. The nation states are often compelled to frame policies in the interests of the nations with whom they are related in multilateral trade pacts. There are instances when the national governments have attempted to trail their individual developmental objectives but finally succumbed to the consequences of the same, as the external states decided to ignore them. Examples could be derived from the activities of the British Government during 1976, when the IMF was in the middle of a financial crisis; the examples of the French and Swedish Governments in 1981-82 and 1994 respectively. In those cases, the national governments of the states which chose to disintegrate themselves did so through refusing to extend credit in the international market or to allow capital outflows within the nation. However, the outcome of such a behavior had been a loss of financial confidence of the international players from these nations. The segregated nations had no choice but to submit themselves before the external governments in order to secure their long run future. Thus, there is enough evidence of the fact that globalization has actually resulted to a shift in the political power of the governments of the respective nations (Baker, Gamble & Seawright, 2002, p.408-409). The driving force operating behind the flow of goods and services must be left into the hands of market forces had been introduced in as early as 18th century, when Adam Smith introduced the concept of laissez faire. The notion ruled out any form of government intervention which could hamper the stream of goods and services to flow into the domestic market of any particular nation; this was the only way which could guarantee an optimal degree of social welfare in a perfectly competitive setting. However, as a perfectly competitive state of affairs is something very unrealistic, leaving everything to the market forces might not promise of a social welfare extreme (Kasper, 2002, p.1). But, even if the policy of laissez faire did not harmonize with the real-life turn of states, the reduced role of nation states to optimize social welfare was comprehensible. Later, Ricardian principle of comparative advantage also favored the concept of laissez faire through introducing the theory of comparative advantage. According to the principle, nations must be specialized in the production of a few goods according to the availability of resources in the region. The specialization drive must be guided by the relative cost of factors of production in an area along with other advantages of producing the same. Importance of the specialization measure is not only to make the optimal use of the available resources of production, but to improvise the quality of final goods as well. However, this is clearly an indication of the nation losing its monopoly power as well as its self-sufficiency, which is arguably preferable than compromising upon the quality of goods to be consumed. SCEPTIC There are however, arguments raised by economists who claim that the features of globalization are actually not as splendid as are preached by some hyperglobalists. According to skeptics, the globalization move has been seriously restricted within the perimeters of OECD countries. Moreover, it is also claimed that globalization has lost much of its flavor given the formation of a large number of trade pacts between various regions. The phenomenon of the creation of trade pacts integrating a handful of neighboring nations is often referred to as regionalism, which is a modified way of introducing regional monopoly in a subtle manner. The formation of NAFTA, EURO, ASEAN, etc. has excessively toned down the smooth exchange of goods and services across national boundaries. These regional bodies fuse together different neighboring nations to form a dominion that enjoys a bargaining power over trade deals between regions. Since any particular trade bloc comprises of a few nations only, the interests of each individual one are not hampered completely though the benefits that they enjoy out of such an agreement are great. The drawback of forming such trade blocs are faced by the external nations which have to cross different price hurdles before they are finally allowed to operate within the premises of these regions. Thus, there is enough room for skeptics to argue about the loopholes present in the globalization move. The instance of trade blocs is only an evidence of how globalization could unjustifiably unite the political powers of some nations so as to harm the interests of the others, putting the realized advantages of globalization under question (Michael, n.d., p.8-9). Sometimes, skeptics often question about the benefits of globalization from various economic aspects as well. Hirschman introduced The Infant Industry Argument which favored government protection for newly developed industries against any kind of international competition, so as to protect them from being crashed down by the better quality internationally produced commodities. These firms need protection from the government during their initial stage so that they bloom in due time and nurture them to participate in the world market. Similarly, many-a-times older industries demand protection from their respective governing bodies and insist them to provide a cordial environment to help them adapt with the new market environment. An example could be sought out from the case of US when the national administration imposed import tariffs on steel in 2002, which lasted for 20 months. The purpose of such a measure was to help the indigenous industry remodel its strategies (Mankiw, 2008, p.190). Thus, in such cases, the nation state has no choice but to become partial towards its domestic industries. A second argument is The Unfair competition argument that supports a nation to choose against globalization when discrepancies prevail in the trade policies of other nations or potential trade partners. These discrepancies might be the outcomes of various laws and regulations existing in the national environments. A third argument speaks about Protection-as-a-bargaining-chip. Sometimes, there arise cases when the national authorities who otherwise support free trade, are found to be supporting some amount of trade restrictions in the form of import tariffs and quotas. They claim such measures could help them to win a bargaining power over their trade partners who themselves have imposed trade restrictions on goods being imported from the former nation (Mankiw, 2008, p.191). TRANSFORMALIST Transformalists are posited between the hyperglobalists and the skeptics in their views about globalization. They argue it to be a process redefining the political as well as economic features of a nation state. Transformalists believe that the states can no longer view themselves as the ultimate power to decide the policies as well as the proceedings in their respective sovereigns; a large part of their actions must be devoted to the interests of their external trade partners too. But, unlike the skeptics, they support the benefits that globalization has brought up with it, like those of a betterment in the consumption basket and prices of final goods set at competitive levels (Haines, 2002, p.4). CONCLUSION There had been many arguments favoring or fighting the features of globalization. Globalization implies an exchange of goods and services between regions irrespective of their national boundaries. Globalization implies withdrawal of any restrictions barring the free flow of commodities, so that there no longer remain any tariffs and quotas constraining imports and exports of goods and services. Many economists have favored globalization on grounds of attaining maximum social welfare not only for the nation, but simultaneously for the world as well. There had been arguments favoring globalization right when Adam Smith proposed the notion of laissez faire which spoke about free market forces and argued against any kind of government intervention guiding the stream or rather the flow of goods and services. In latter phases too, Ricardian principle favored free flow of goods and services between nations on grounds of comparative advantage, i.e., specialization in the production of any particular commodity. But, the governments of various nations had expressed their concern every now and then to the increased withdrawal in the trade restrictions, since they have been simultaneously barring these nations from employing their autonomous powers from over the nations. In other words, there had been concerns growing among the national governments about their loss of sovereignty and their surrendering to some external international body entrusted to look after the smooth proceedings in the international trade arena. The nations often find it difficult to compromise with their internal policies while framing policies meant to be in the interests of some external bodies. For example, now-a-days when the government of any nation aims to attract foreign direct investment within its premises, it must bring some benefits into the package; these benefits might be in the form of subsidies or tax rebates. But, the government often feels an urge to impose high taxes on the yields of these FDI’s through claiming friendly business environment. However, there are no ways of implementing such measures, firstly because the government of the concerned nation is aware of the fact that the lower the benefits it offers, the lower are the chances of attracting FDI inflows. Secondly, there are certain paradigms that the external bodies choose for the betterment of the world trade situation and every member of such bodies must coordinate with them for long run benefits or rather to avoid punishments in the long run. The above topic was mainly focused around the subject dealing with the impact of globalization on the nation states. It could be concluded that the nation states have rather benefited from such a metamorphosis, in the sense that there had been fast economic developments. However, at the same time it must be mentioned that the nations had to choose to compromise on their sovereignty or autonomy in framing their domestic policies in their own interests. Thus, it had not been a completely optimal change. REFERENCES Baker, D. Gamble, A. & Seawright, D. (2002) “Sovereign nations and global markets: Modern British Conservatism and hyperglobalism”, British Journal of Politics and International Relations, Vol. 4(3). Available at (Accessed: June 10, 2010). Haines, F. (July, 2002) “Regulatory Character and Regulatory Reform: Exploring the nexus between globalization and safety standards”, Working Paper 4, National Research Centre for OHS Regulation. Available at (Accessed: June 10, 2010). Kasper, S. D. (2002) The revival of laissez-faire in American macroeconomic theory: a case study of the pioneers. London, UK: Edward Elgar. Mankiw, N. G. (2008) Principles of Economics. USA: Cengage. Michael, B. (n.d.) “Theorising the Politics of Globalization: A Critique of Held et al.’s “Transformationalism””, Journal of Economic and Social Research 4(2). Available at < http://www.fatihun.edu.tr/~jesr/Globalisation.pdf> (Accessed: June 10, 2010). Read More