Assess the arguments for and against globalization

The increasing integration of global goods and services markets has provided a platform upon which Multi-National Corporations (MNC’s) have enjoyed exponential growth. It is today arguable that MNC’s, under the umbrella of globalization, have acquired more financial and political strength than many of the world’s governments. As Mann states; international “financial integration has undermined governments’ capacity for independent action, leaving them at the mercy of chaotic money markets and wealthy international investors.” The rise of corporate influence over government has resulted in, what many say, is a ‘disintegration of the Nation-State’ as we know it. The legal doctrine of Sovereignty, which affirms that “states have supreme authority to govern their internal affairs and manage their foreign relations with other states and IGO’s”, has been ignored by MNC’s whose foreign capital governments of underdeveloped countries have come to depend on. However, some argue that this is not an effect of corporate influence but of states choice to “shrink their own power by creating supernatural institutions such as the United Nations, World Trade Organization and World Bank…which have created their own cadres of civil servants unaccountable to any single state”. However superfluous such institutions may seem, the ‘relaxed nationalism’ and international acceptance, which the contemporary trend of globalization has brought, may only be administered by such international bodies. If Sovereignty is failing, maybe it means that nation-states can no longer act with complete ignorance for the world around them. Is this not a positive?  

Critics of globalization would suggest that it is not. Such an argument is largely based on the premise that in the place of sovereignty we have the imposition of intrinsically American views and culture. Left-wing critics view the imposition US centric ideals and current Capitalist social order as drivers of global inequality. Countries that can afford the latest technology are enjoying rapid growth, while the less-developed poorer countries, such as much of Africa and the Middle East, who can not afford the technology, are left lagging behind creating a ‘digital divide’ between wealthy East and impoverished West. This can be seen in appendix 4 which uses the example of internet usage.

 As it is often criticized, opportunities of globalization are unequal, and that “even though some nations are willing to engage in international trade and accept foreign direct investment, little such trade and investment may emerge for them, whereas the opposite may be so for other nations. Such a dichotomy will add to income inequality between nations.” Without meaning to repeat what Aristotle has already said 2000 years ago, wealthy nations do what they want while poor nations do what they must. Has the whole process of globalization been constructed and imposed by the world’s economic and political leader the USA? Or have we arrived at this current state through a natural economic process?  

The globalization of international financial markets or ‘Capital Account Liberalization’ (CAL) as it is known, is the process by which the world’s financial markets have been de-regulated allowing the unrestricted international mobility of financial resources. Supporters of the liberalized financial markets, such as Adam Smith (the ‘father’ of economics), believe that a ‘free market’ is essentially a better platform for economic growth and prosperity. They believe that CAL leads to increased investment and therefore expansion. Critics of this theory believe that empirical evidence suggests otherwise, purporting that most foreign investment is injected into the wealthier nations while under-developed nations, that desperately need capital injections, are ignored. The experiences of China during the late 80’s and 90’s showed that a closed capital account could sustain rapid economic growth (as seen in appendix 3) which provided empirical evidence to in favor of ‘free-market’ critics.

      Advocates of globalization also argue that CAL results in a more efficient allocation of world savings and a rationalization of capital flows, redirecting capital streams from the capital rich to the capital poor countries. As we have already discussed, rationalized capital flows seems to be a liberal ideal mistaken as reality as 85% of FDI and 95% of portfolio and other investment in 1997 went to just 20 countries with a large number of developing countries missing out. Mann refers to this as an “inequality of opportunity”. Such inequality refers to the way in which liberal provocateurs assume that CAL provides an equal playing field for both developed and undeveloped nations. Developed countries such as the United States reserve the power to selectively choose and reject sources of foreign capital which best suit their domestic economic conditions, while the less developed nations of the world accept whatever is presented to them without consideration of the discontents that it may impose on long-term economic growth and stability for that nation.

         

As this essay has so far manifest, for every argument favoring globalization there is an equal one opposing it. This makes it almost impossible to therefore draw any conclusion from this very topical debate. However this is not to say that there are no fallacies in the arguments presented. As we have examined, globalization antagonists primarily argue that foreign direct investment is concentrated on the few richer countries, neglecting the poorer countries and leaving them lagging behind in a digital and economic divide. Additionally, critics of globalization argue that FDI, cushioned by the liberalization of capital markets, has resulted in corporate abuse and an attempted Americanization of the world, but more so of less-developed countries. On the one hand they purport that Capital resources are the means by which third world can grow, and on the other hand they suggest that the key sources of foreign Capital (i.e. coming from the US) is decaying under-developed economies promoting inequality and poverty. Is this not a contradiction? It is argued that US culture is being imposed on the world through companies such as McDonald’s fast-food chain which can be found in almost every major city in the world. However, these critics have never turned their mind to the fact that you can also find a Chinese take-away shop in most capital cities of the world. This is somewhat contrary to the various criticisms discussed as China is considered to be one of the least financially liberalized countries in the world and still their cultural presence can be felt throughout the globe today. How do we explain that?  

Bibliography

• Barret-Lennard B. Anti-Globalization, Beach Box Books: Victoria Australia 2001.

• Griffith-Jones, S and Bhatacharya, A. (ed.) Developing countries and the Global Financial System Commonwealth Secretariat London 2001.

• Kegley C W. and Wittkopf E R. World Politics: Trend and Transformation, Thomson Learning USA, 2003.

• Mann S, Economics, Business Ethics and Law, Lawbook Co Sydney, 2003.

• Mittelman J. H. and Othman N. (ed.)  Capturing Globalization, Routledge London 2001.

• Moosa I A. International Finance, McGraw-Hill Australia 2005.

• Stiglitz J. Globalization and it’s discontents, Penguin Group USA 2002.

• Tisdell, C and Kumar S. R. (ed.) Economic Globalization: Social Conflicts, Labour and Environmental Issues, Edgar Elgar Publishing USA, 2004.

Journals, Reports, Periodicals/Other

• Ishaq A. On the global digital divide, Finance and Development: a quarterly magazine of the IMF, Vol. 38 No. 3 2001.

       

• Nalson I. International Finance, Lecture 1, University of Western Sydney 2005, p. 19.

• Prasad E (ed.), China’s Growth and Integration into the world economy, International Monetary Fund Washington DC, 2004

• World Investment Report 1992, Transnational Corporations as engines of growth, (United Nations Publication, Sales No. E.92.II.19)

Web Sites

Appendices

• Appendix One and Two:

• World Investment Report 1992, Transnational Corporations as engines of growth, (United Nations Publication, Sales No. E.92.II.19)

• Appendix Three: 

• Ishaq A. On the global digital divide, Finance and Development: a quarterly magazine of the IMF, Vol. 38 No. 3 2001.

       

and

• Kegley C W. and Wittkopf E R. World Politics: Trend and Transformation, Thomson Learning USA, 2003.

• Appendix Four:

• Prasad E (ed.), China’s Growth and Integration into the world economy, International Monetary Fund Washington DC, 2004

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