The World Has Nothing to Fear from the US Losing Power - Article Example

Part The May 3rd Guardian article en d, “The world has nothing to fear from the US losing power” engages the reader with a current comparison of the United States ceding power to China and what this ultimately means for a previously uni-polar world. Although the article has some powerful strengths, which will be referenced later, the reality of the fact is that it takes a rather fanciful view of the way in which global affairs and international relations will be conducted in the future. Ultimately, the author, Mark Weisbrot, view the reality of the uni-polar world shifting to a truly multi-polar world as advantageous for the economic outlook and levels of freedom that global citizens can come to expect. However, the core assumption that is made is that a multi-polar world can indeed exist at all. The past several decades have noted a relatively quiet period of history in which two major powers co-existed peacefully; albeit with much animosity. Yet, one cannot interpret the lack of conflict between the Soviet Union and the United States as proof that a bi-polar or multi-polar world is inherently more peaceful and/or more equitable for the stakeholders involved. Interestingly, this is very much the assumption that the author in question has taken. The case of a rising Chinese economy points to the reality of a global super-power that is both economically and militarily superior to all others throughout the world. This is a unique situation; as the author notes, the Soviet Union only was able to project 25% parity with the United States at any point during its 70 year existence. Culturally, the article presents a core strength of understanding the United States foreign policy through the lens of history and a shared belief in what Americans refer to as “American Exceptionalism”. Ultimately, the author points to the fact that even as the economic power of the United States begins to wane, at least as compared to China, it continues to hold on to a historical legacy that encourages it to engage with China and seek to contain it. Yet, as the author notes, even though this strategy of foreign policy worked against the Soviet Union, in the face of a declining economy of the United States and burgeoning levels of social welfare and entitlement programs, it is doubtful if the military will have adequate resources to engage the Chinese in an actionable and/or effective way (Weisbrot 1). Moreover, the reader can note a degree of foreign policy bankruptcy; in the fact that the United States response to an economic ally and friendly nation is almost identical to the Truman Doctrine and how the United States sought to constrain and contain the Soviet Union from gaining further friends or expanding elsewhere throughout the globe. Finally, the author points to the fact that even though political economics can lead the reader to assume broad generalizations and gain a faulty frame of reference, the Chinese economy and the means by which it has surpassed the United States economy is mostly measured with respect to a PPP analysis (purchasing power parity). In this way, the current exchange rate between the United States and China equates to 6.3 renminbi to 1 USD. As such, 6.3 renminbi necessarily buys many more goods and services within China as compared to what 1 USD can buy within the United States. Within this form of understanding and measurement, the actual rate and manner through which the Chinese economy has “eclipsed” that of the United States is understood within slightly different and more nuanced terminology (Weisbrot 2). A noted construct that should not be ignored within this economic analysis and foreign policy perspectus has to do with the fact that the “conflict” that is being described between the United States and China is somewhat unlike many of the other conflicts that have thus far taken place within the 20th or 21st century. Even though these nations exhibit different forms of governance, the degree to which China espouses Marxism and the degree to which communism is practiced within the public sphere has decreased so greatly within the past decade that one who visits China would hardly be able to recognize that the nation is not a complete capitalist society. Moreover, the level of trade and cooperation that exists between the United States and China promotes the reader to assume that even though core and inherent levels of distrust exist between the two and both would seek to be the dominant power, it is unlikely that a cataclysmic conflict between these two will take place within the very near future. As a result of this international relations assessment and the economic assessment that Mark Weisbrot provided within the article, it is the interpretation of this author that the case of conflict between China and the United States is far less impactful than one might otherwise assert; at least after considering the unique variables of this situation. Final Exam, Part II 1.  Discuss the role of multinational corporations (MNC) and foreign direct investment (FDI) in the global economy from two different IPE perspectives. In your opinion, which perspective best explains the effects of MNCs and FDI? The ultimate vehicle for globalization is that of multinational corporation. The reason is has to do with the fact that the multinational corporation responsible for providing the foreign direct investment for whatever development for what development might be taking place within a particular nation. As such, the role of the MNC (multinational corporation) on FDI (foreign direct investment) is powerful and helps to categorize the way in which these engagements take place, winners and losers, and the manner through which development within global economics itself is defined. The two perspectives that will briefly be discussed within this response are that of economic nationalism and classical liberalism. Firstly, with regard to classical economic liberalism, it should be understood that FDI is a function of the way in which firms themselves compete for profit and economic advantage; however, by means of contrast and comparison, the nationalist view is one that places the power and interests of the state as paramount (Hamilson, 2009). Furthermore economic nationalist is of the belief that free trade only benefits the most developed nations whereas those that are poorer are taken advantage of. From a cursory review of the information that has thus far been represented, it is the view of this author that even though both perspectives and theories are essential in gaining inference with regard to the way in which global economics work, the role of the MNC on FDI is best explained by the classical liberal perspective. The rational behind this has to do with the fact that it is ultimately the self interested designs of the firm itself that dictate the way that it will integrate with the market and with key geographies within this market (Frontline, 2005). By recognizing the these choices are constrained by self interests and that the MNC behaves on the macro level for the way in which the individual behaves within the micro level, the reader can come to a more appreciative level of understanding concerning how FDI is predicated upon the importance of the actions of the firm (Balaam, 2010). Yet, with all of this being said, it must also be understood that the state/states can have a powerful impact with respect to the way in which FDI is garnered and/or attracted. Even within the classical liberal perspective, the self interested decisions of MNCs are predicated upon overall economic advantage; issues that can be addressed by the state and maneuvered to provide one state or states an advantage over others that do not make definitive attempts to lower tariffs/duties, export restrictions, or other constraints to trade. Effectively, both perspectives accurately help to define FDI; however, it is the belief of this analyst that the classical liberal approach most accurately engages an understanding of the self interest through which FDI is directed and the means by which decisions of integration are made. Balaam, R. (2010). Transnational Corporations,Transnational Corporations.pdf – attached for reference) Hamilson, J. (2009, April 27). Company size: Big is back | The Economist. Retrieved from http://www.economist.com/node/14303582 Frontline (2005, January 8). Is Wal-Mart Good For America? | FRONTLINE | PBS [Video file]. Retrieved from http://www.pbs.org/wgbh/pages/frontline/shows/walmart/view/ 2. Discuss the resistance to establishing a liberal trade regime since the founding of GATT in 1947. What have been the main obstacles to creating a global system of open and free trade? Ultimately, there are many reasons for the resistance to regimes throughout the globe since the formation of GATT in 1947. Perhaps one of the most relevant levels of resistance to free trade is with respect to the belief that free trade ultimately favors only the wealthy developed nations. Pointing to the way in which international institutions that promote free trade demand concessions of poorer nations, individuals that espouse this particular view engage with the understanding that the only that benefit that can be had from free trade is experienced by wealthy or developed nations that have already garnered a degree of wealth and business success as a result of hard economic levels of engagement and/or systems. A further response against establishing free trade has been predicated upon the belief that free trade only allows for super companies to remain viable within the system. Another argument against free trade is contingent upon the belief that free trade allows for supra-governmental forces, large MNCs, to dictate policy and politics to a larger degree and a more influential role than the government within a particular region. As these firms are able to corrupt the power of governance with the large level of financing that they potentially offer, the ability of a group of people to determine their own self interests through a democratic process are inherently reduced. Likewise, free trade detractors point to the belief that only super-companies can compete within a liberal free trade environment; thereby punishing those firms that are not able to reach or maintain a threshold level of financial reserves. From the information that has thus far been presented, the reader might incorrectly assume that the main detractors to free trade are concerned mostly with economic factors. However, one prime argument against free trade has to do with the understanding that free trade undermines unique cultures and creates a level of global dependency that robs a region or people from their identity (McKenzie, 2007). This sociological argument against free trade is perhaps the one argument that has gained the greatest degree of traction over the past several years; at least as compared to the others that have thus far been referenced. Notwithstanding these arguments against free trade, the single largest obstacles that have been evidenced over the past decades in establishing higher levels of free trade have been exhibited on a national level. Ultimately, protectionism and the desire to allow domestic enterprise to remain more competitive as compared to global enterprise has served as the main detrimental force in restricting the growth of free trade throughout the globe. As states desire to retain the economic benefits that industry and development create, the allure of protectionism against lower priced alternatives within the market has greatly reduced the influence that free trade could have otherwise exhibited. Moreover, for the better part of the past century, anti-capitalism, in the form of global communism, was a powerful determinant that restricted free trade. As the Soviet bloc attempted to directly compete with the United States and its allies, the level and extent to which free trade developed throughout much of the world was severely restricted. Reference: McKenzie, R. (2007, March 1). 1.3 - Comparative Advantage [Video file]. Retrieved from https://www.youtube.com/watch?v=aLe_LF622JI 3. Discuss the positive and negative effects of the “globalization of finance” in the international economy. As with any economic inquiry, there are benefits and drawbacks to the globalization of finance. Firstly, with respect to the benefits, it can definitively be noted that the ability to diversity risks for the investor in an economically globalized financial world increases the utility of this investor and provides unique opportunities and a level of safety/surety that might not otherwise be exhibited. Likewise, on the macro level, it can be understood that the increasing level of globalized financial markets has created a system whereby deeper financial integration creates market stability. This drives down costs and allows for more effective and realistic planning; both for the individual and the corporation (Freedman, 1979). Furthermore, the globalization of finance has created a unique situation in which increased competitiveness exists for allocation and acquisition of capital. As even a rudimentary level of economic analysis indicates, increased levels of competition within the markets, brought specifically by the globalization of finance, allows for more affordable rates and greater efficiency. This in turn allows for more rapid development and growth; as compared to a smaller more national or regional model of financial development that would be reliant upon unique political dynamics as a means of accruing financing for a specific project or goal. Ultimately, the situation that has been described is one that allows for the individual as well as the firm to accelerate the speed at which finance is opened; thereby having a drastically positive impact upon the rate and speed of business development throughout the globe (Chomsky, 2007). Yet another benefit that is related to increasing levels of financial globalization is with respect to the transparency standards that globalized finance must abide by. As compared to other alternatives, the consumer has more utility in a situation in which the financial services industry is well regulated, transparent and easily navigated. Yet, just as has been alluded to within the introduction, there are down sides to the realm of the globalization of finance. As a direct result of increasing levels of interconnectivity within the markets, the risks of a problem impacting upon other markets, and by extension the remainder of the financial services realm, is maximized as a result of this level of global proliferation. As can distinctly be seen with regard to the 2007/2008 economic meltdown, this interconnectivity caused the crisis to spread rapidly and impact upon the entire globe; plunging it into a period of economic malaise that even the global economic leaders are struggling to dig themselves out from underneath (Greenspan, 2008) As a direct result of this, the financial globalization that has been witnessed in recent years serves as something of a double edged sword; able to benefit the consumer and the individual firm by promoting a level of competition and interconnectedness. Yet, at the very same time, these level of interconnectedness has served to be a powerful catalyst for one of the worst economic downturns since the Great Depression. As international efforts continue to be made as a means of drying up liquidity or increasing it, the utility of the individual small business or private citizen is directly impacted (Stiglitz, 2003). References: Stiglitz, J. (2003). The Promise of Global Institutions. Globalization and Its Discontents. (Norton, 2003).The Promise of Global Institutions.pdf Greenspan, A. (2008, January 2). Greenspan on Schumpeters "Creative Destruction" [Video file]. Retrieved from https://www.youtube.com/watch?v=CVALfc-nayY Freedman, M. (1979, July 15). Milton Friedman - Greed [Video file]. Retrieved from https://www.youtube.com/watch?v=RWsx1X8PV_A&feature=player_embeddedAnti globalization: Chomsky Chomsky, N. (2007, November 27). What Is Globalization? - Noam Chomsky [Video file]. Retrieved from https://www.youtube.com/watch?v=RdYwAXZh0ME&feature=player_embedded 4. Outline the different perspectives in development theory concerning the role of states vs. markets in promoting economic development. Development theory, just as with any other approach to IPE, engenders a great many different competing viewpoints. As a function of analyzing these viewpoints and discussing them to a further degree, the following analysis will consider modernization theory, structuralist theory, dependency theory, basic needs theory, and neo liberalist theory in order to better define and understand the differentials in development theory; specifically relating to the role of the states vs. the markets in promoting economic development. Through a discussion of these factors and a cursory overview of all of these theories, it is the hope of this author that the reader will be able to gain a more informed understanding with respect to how these theories relate to and incorporate state vs. market engagement as a means of furthering economic development throughout the globe. Firstly, modernization quite obviously promotes modernization as a means of engaging progress throughout society. By focusing upon obstacles to development, this particular theory most effectively targets the manner through which governmental stakeholders can seek to streamline the approach of a particular region/state as a means of engendering a higher degree of investment and economic development in the future. Similarly, structuralism focuses upon the structural limitations that a particular region/state may have that could be constraining economic development. As a means of this, structural theory is almost entirely contingent upon the policy prescriptions that can be engaged by a government as a means of ameliorating these constraints. By means of contrast and comparison, dependency theory is a more market oriented approach in that it relies upon a level of external linkages and engagement as maeans of dragging an economy forward and promoting development with the rest of the outside world. However, rather than serving as a market only approach, it must be understood that dependency theory asserts that the current flow of capital between rich and poor countries creates limitations to the dependency theorist with respect to the rate of growth that can be experienced throughout the globe and the structured approach that this growth might take. As an approach sponsored by the International Labour Movement, the basic needs theory of development asserts that core human needs are ultimately serve as the core structural limitations for the way in which economic development can take place. As such, providing for these needs and addressing social problems falls upon the government and asserts that government engagement in the process is absolutely necessary in order to make development more equitable and fare. Finally, neo-liberalist theory argues that government intervention ultimately ends in deadweight loss and the free market should be allowed to dictate and direct economic development in each and every situation. Within such an approach, the role of legislation to protect or otherwise develop national mechanisms through which trade can be defined and constrained is fundamentally opposed by the neo-liberalist approach. Not surprisingly, this approach draws its greatest inspiration from founding economists such as Adam Smith and others that promoted unrestrained capitalism as the true answer to economic development throughout the world. Reference Provide ISBN # for this reference as I see the attachment but cannot accurately site it without the ISBN# of the book. 5. Describe the current (post Bretton Woods) international monetary system (or “non-system” according to Gilpin). What are the strengths and weaknesses of this system? Designed as a means of providing the United States a strategic advantage in terms of economics and providing a stable basis for global economic growth, the Breton Woods system is oftentimes referred to as one of the primary and most important financial decisions that has been made over the past hundred years. Yet, as the world continued to develop, economies rose and fell, and the dissolution of the largest Empire on eearth took place, the relevance of the Bretton Woods system has been questioned by many. Ultimately, scholars within the current era point to the fact that the current system is not a system at all; rather it is merely the complete absence of a system. In terms of a current definition of this post-Bretton Woods System, it can be defined by the continued resiliency and strength of the United States dollar alongside a basket of other global currencies that both compete with and are ultimately pegged to the United States dollar. From an analysis and understanding of this incestuous relationship, the reader can appreciate the ultimate strength of the system continues to be rooted in the fact that the United States dollar provides a level of stability to a system that would otherwise be uni-polar and unevenly dominated. On the flip side, the weakness of the system is that it is still defined by the dollar and the way in which the global currencies that are dependent upon the resilience of this single currency find themselves enslaved to the swings in domestic policy and resource scarcity that impacts upon the valuation of the United States petro dollar. In effect, the situation that has been defined is one in which the dollar continues to dominate global currency and exchange; and a series of secondary currencies continue to compete for a presence within the system. As has been denoted at multiple stages throughout this essay, the continued power of the United States is intimately tied to the ability of the dollar to continue its reign as the global currency of exchange. However, with challengers such as China and other BRICS (to include Brazil, Russia, India and South Africa), it is doubtful that this continued dominance can be exhibited indefinitely. Moreover, as long as Europe is able to continue to survive the hardships of integration that it has thus far been faced with, it is possible for a resurgent Euro to challenge the post-Bretton Woods System and culminate in a global financial dynamic that is no longer defined by the United States dollar or by the way in which trade is based upon dollars and not other currencies. Read More