Essay:Globalisation

Are governments weaker or more empowered by economic globalisation?

Today, governments are less able to dictate and implement economic policy due to the changing nature of the political and economic environment of today. These changes have primarily been caused by these changes: economic interdependence and the international nature of industrial production, and the spread of democratic regimes that foster pluralism and the increasing importance of money politics as a result. However, to be honest such a progression has stopped short of complete business domination, as proven by various incidents that we would examine later on, and as such it is safer within the bounds of the evidence to suggest that the economic role of the state has changed but not completely eliminated. Firstly, the increasingly governments have left them more exposed if not completely liable of capture by business interests, both domestic and foreign. Secondly, the increasingly frequent trend of outsourcing jobs and international nature of the division of labour means that governments and the nations they administer are now more economically sensitive to what happens overseas, and lastly, the intensification of global finance and the tools used to achieve it pose difficulties for central banks and monetary authorities to supervise and regulate the economy. As a result, governments can no longer independently exercise power over their economic functions, but there are various scenarios which still allow it to act autonomously.

Marxism cynicism of globalisation

The traditional Marxist viewpoint insists that business exerts its own power over government by various means, either by influencing the outcomes of democratic politics, with the threat of poor economic performance or by ideological supremacy by using its resources to control the media. (Webster, p. 165) The second one is probably more frequently used as evidence might suggest, as governments seek to retain legitimacy today by guaranteeing economic stability and growth. (Shapiro 1983, pp. 137-8) By having to respond to the interests of business in order to finance tax receipts and foster employment, governments are limited in their choices of economic policy, thus being bound to the state “by a thousand threads” (Lenin).” In advanced industrial nations where democratic pluralism seems to dominate, government are often exposed to lobbying activity by big businesses, as evidenced by the lobbying games by Hong Kong toy manufacturers in Europe reported by Snyder (1999, pp. 346-53). Probably more worrying than the ability of big business to act as an impediment to government economic policy is the existence of corruption. This is especially true of the less developed countries which are unable to resist, especially more so after the debt crises of the 1980s which witnessed the liberalization of developing economies in search of alternative strategies to finance their debt as part of the terms of the credit services extended to them (Strange p. 247-8). While such a form of business power over weaker states might be exemplified by the flouting of international work safety regulations and maybe the existence of a sweatshop or two (Bhagwati), the ‘soft’ power of business of choosing where to invest (ibid.) can sometimes become ‘hard’ power. Coups financed by oil companies (http://www.law.nyu.edu/journals/jilp/issues/36/36_2_3_Dufresne.pdf) and the monopolies and use of force enjoyed by large trading companies of previous centuries like the East India companies of Europe (Held, p. 239, Balaam & Veseth?) and United Fruit Co. in Asia and Latin America respectively demonstrate the more extreme forms of business power exerted by transnational companies over governments (http://www1.tau.ac.il/eial/index2.php?option=com_content&do_pdf=1&id=82).

“Some structuralists would argue that while the game has had not developed to the extent that non-state actors now can hold hostage states’ economic strategies, the ability of states to act autonomously and independently is now being challenged by the increasingly interdependent nature of the global economy. The choices of states are now constrained as a result of the increasingly global or transnational nature of production which implies the globalised division of labour in the production process results in the economic fortunes of one nation being interlinked with another, and henceforth limits on the choice of macroeconomic or foreign trade policies available to state actors by inducing them to pay attention to affairs both domestic and foreign (http://www.bis.org/review/r070306a.pdf). The currency crises of the 1990s in Asia and Latin America demonstrate very well how interdependent nations have become that consequences affecting one country may eventually reverberate in another (Ravenhill pp. 170-2). Gray argues that countries are increasingly involved in a race to the bottom where governments today are increasingly forced to adhere to non-inflationary or tight monetary policies in order to remain attractive to financial markets (p. 79).

Even if governments were able to enact and execute economic policy, some authors argue that what has had happened over the past thirty years has been an utter transformation of the forces of production to the extent that the traditional tools of economic policy are less effective, if not obsolete. Held notes that globalization constrains governments towards running tight monetary policies, as governments seek to use private financing instruments to avoid crowding out domestic spending (p. ?). Inflationary pressure may cause credit ratings to fall, causing economic incertainty (p. ?) while the proliferation of cash flows and assets as well as the intensification of financial openness renders regulation difficult. Friedman (2000) has doubts over whether regulators can effectively monitor and enforce financial policy. In the same vein, Friedman (2000) argues that in the wake of new technologies improving banking services, central banks stand to lose the edge which their policies once enjoyed in affecting interest rates and consumption. In the wake of globalization, the new tools that make it possible also render feasible processes that allow the following to occur: inter-bank clearing mechanisms and the emergence of non-bank credit (such as deposits and accruals made with grocery stores and phone companies). These cause businesses and individuals to bypass the central bank or monetary board of nations and also diminish its ability to affect economic activity by affecting private expenditure and savings.

However, in spite of all of the challenges, there are still some methods by which governments can still obtain support to put forwards their own economic agenda, and these are linked to the plural nature of contemporary government. If, assuming that the plural state represents nothing more than an agglomeration of many interests, then we too have to accept that business interests are only one of a slew of interests competing for political clout. If businesses do compete against each other in real life, then even in democracies too different business interests also compete with each other politically. If political resources are scarce but the competitors many, we can expect state officials may find a means of exerting their own influence as a broker or arbiter over several competing business interests. The high profile competition between the oil companies Chevron Texaco and CNOOC in 2005 for another company, Unocal Corporation, saw CNOOC withdrawing its bid in the face of opposition to the purchase by the Congress.

A second element that preserves government power in the face of globalisation is the pluralist element in them, regardless of whether they are democratic or autocratic, as nobody can ever rule alone by himself or herself. As it will be evidenced from the following, sometimes governments can muster strength and support from the nationalist or populist sentiments of their own electorates or subjects in some cases. These are factors that so far have proven to be tough for theory to assimilate. If such states contain such powerful forces, business interests also have to compete with one another and other national interests as well within the framework of the state for political clout. While this diverges from the topic of economic policy, the coup in Thailand nonetheless illustrates that business power does not guarantee complete control. The perceived money politics within Thaksin Shinawatra’s regime disheartened both the ruling elite and people alike (http://www.aberdeen-asset.com/pdfupload.nsf/4EF24E15B729702D802571EF0035B1A6/$File/thaicoup_sep06.pdf?OpenElement), leading the way to a military coup that had him deposed. ( http://news.bbc.co.uk/2/hi/asia-pacific/5361512.stm) In the same vein, regulation aimed at tightening hedge fund activity in the Netherlands was passed earlier this year, at the instigation of labour unions disgusted at the amount of layoffs caused by British and American hedge funds breaking up Dutch companies (Misra, http://www.issproxy.com/governance/publications/2007archived/084.jsp). Far from being all-powerful and domineering as many commentators on the left would portray capitalists and capital itself, Strange counters by arguing that “Bull-headed disregard for the constraints of politics upon governments or for the social concerns which are the main sources of political legitimacy will do a company no good in negotiations with a host government (p. 249).”

We have thus demonstrated that to a certain extent governments, weakened as they may be still retain some of their powers as important and relevant actors in the world of economic policy. They have had been less able to exert their own independent will as per regards to economic policy due to the fairly recent process of liberalization and open trade that are prerequisites to the globalization process. However as it can be deducted from the cases put forward, any claims that governments are superfluous and politically redundant are very premature if not downright mistaken. Different authors have suggested various new tasks the state has to play, such as in technological development (Freeman, ), acting to protect those disadvantaged by globalisation (Hirst et al. , ) and facilitating trade and lowering transaction costs in the domestic market (Dunning, ). Thus while it appears that governments have delegated their economic functions as producers to the private sector and are less autonomous with regard to economic policy (Strange p. 246), the private sector is still not free to do as it wishes, as the rules promulgated by the state still do apply and as such states and their governments are still potent forces that shape the global economy even as their powers are being curtailed slowly.

George, Susanhttp://www.tni-archives.org/detail_page.phtml?page=archives_george_abuses

Something on the UFC: http://www1.tau.ac.il/eial/index2.php?option=com_content&do_pdf=1&id=82

http://www.bis.org/review/r070306a.pdf

http://web.ebscohost.com/ehost/detail?vid=1&hid=104&sid=d2527523-2d2e-4c5d-86f2-da0d11d9c7bf%40sessionmgr102

BIBLIO

Painter & Pierre 2005, pp. 256-7

Shapiro, H. Svi (1983) Habermas, O’Connor, and Wolfe, and the Crisis of the Welfare-Capitalist State: Conservative Politics and the Roots of Educational Policy in the 1980s, Educational Theory Sumner/Fall 1983, Vol. 33, Nos. 3 & 4

resources to control the media. (Webster, p. 165) The second one is probably more frequently used as evidence might suggest, as governments seek to retain legitimacy today by guaranteeing economic stability and growth. (Habermas….) By having to respond to the interests of business in order to finance tax receipts and foster employment, governments are limited in their choices of economic policy, thus being bound to the state “by a thousand threads” (Lenin).” In advanced industrial nations where democratic pluralism seems to dominate, government are often exposed to lobbying activity by big businesses, as evidenced by the lobbying games by Hong Kong toy manufacturers in Europe reported by Snyder (1999, pp. 346-53). Probably more worrying than the ability of big business to act as an impediment to government economic policy is the existence of corruption. This is especially true of the less developed countries which are unable to resist, especially more so after the debt crises of the 1980s which witnessed the liberalization of developing economies in search of alternative strategies to finance their debt as part of the terms of the credit services extended to them (Strange p. 247-8). While such a form of business power over weaker states might be exemplified by the flouting of international work safety regulations and maybe the existence of a sweatshop or two (Bhagwati), the ‘soft’ power of business of choosing where to invest (ibid.) can sometimes become ‘hard’ power. Coups financed by oil companies (http://www.law.nyu.edu/journals/jilp/issues/36/36_2_3_Dufresne.pdf) and the monopolies and use of force enjoyed by large trading companies of previous centuries like the East India companies of Europe (Held, p. 239, Balaam & Veseth (http://www1.tau.ac.il/eial/index2.php?option=com_content&do_pdf=1&id=82). (http://www.bis.org/review/r070306a.pdf

(Ravenhill pp. 170-2). 

(Gray p. 79).

(Held p. 

Friedman (2000)

(CNOOC bid).

(http://www.aberdeen-asset.com/pdfupload.nsf/4EF24E15B729702D802571EF0035B1A6/$File/thaicoup_sep06.pdf?OpenElement . ( http://news.bbc.co.uk/2/hi/asia-pacific/5361512.stm

(Misra, http://www.issproxy.com/governance/publications/2007archived/084.jsp). 

(Freeman, ), (Hirst et al. , )

(Dunning, ). 

(Strange p. 246),