Decisions Shaping the Evolution of the International Political Economy - Case Study Example

Introduction "Arguments about the globalization of economic relations have become commonplace, part of the everyday diet of social science and publicaffairs alike. Typically they are backed by reference to a wide variety of empirical tendencies. These include the growth of multinational and transnational corporations, the expansion of trade and foreign investment, the New International Division of Labour, the enhanced mobility of money capital across international boundaries, intensified international competition with the rise of the Newly Industrializing Countries (NICs), and the globalization of markets for consumer goods" (Cox, 1997, 1). Few global economic ideologies or phenomenon have instigated as much controversy as has globalisation. Proponents perceive of it as a blueprint for the globalisation of capital whose benefits, among others, include the transfer of business interests and foreign direct investment to the Lesser Developed Countries of the South (LDC), thereby propelling their economic development and industrialisation. Opponents, however, are more likely to view globalisation as a nefarious plot for the global promotion of the capitalist interests of multinational/transnational corporations culminating, not only in the increased poverty of LDCs but, in the subjugation of nation-states to multinational corporations. While conceding that both perspectives are exaggerated, the following paper shall, through a review of the definition of economic globalisation and the role of global trade and multinational corporations therein, establish economic globalisation as primarily favouring the capitalist interests of transnational corporations. Globalization, by the very nature of its definition as the globalisation of capital, favours capitalist interests, is founded upon the promotion of free trade and actively promotes the interests of multinational corporations. Indeed, following a definition of globalisation, the forthcoming argument shall illustrate that globalisation does not only favour transnational capital but that its twin engines are international trade and multinational corporate activities. Defining Globalisation Globalization has been defined in a variety of ways, from "deep integration," to the unification of national economies, to the globalization of capital (Dicken, 2002, 253). Of all the various definition forwarded for globalisation the most accurate, and comprehensive, is probably that forwarded by Held and McGrew (2002, 249-250) and which maintains globalisation to be an economic phenomenon whose intent is the globalisation of capital and the imposition of a capitalist economic agenda upon the International Political Economy (IPE). Globalisation, according to the latter definition, is the removal of capital controls to facilitate the unobstructed movement of funds and resources across national borders (Soros, 1998). Such globalization of capital is further significant because it implies reduced control over trade, foreign investment and multinational corporate activities. As stated by the pro-globalization economists, the removal of capital controls implies, "not only an increase in productive capacity but also improvements in methods of production and other innovations; not only an increase in wealth but an increase in freedom" (Soros, 1998). As may be inferred from the presented definitions, economic globalisation is the removal of artificial barriers to trade, involving the imposition of capitalism upon the global political economy and, as such, ultimately serves the interests of multinational corporations through the facilitation of their capacity it engage in trade, as in the unfettered movement of capital goods across national boundaries. Consequent to economic globalisation, and bearing in mind the stated definition, "The modern system of independent nation states and distinct national economies is being replaced by a single transnational political economy. Power and authority are steadily shifting to global institutions and corporations. National governments have seen their sovereignty and control over domestic political and economic affairs rapidly diminish" (Adams, 1991, 1). Trade Beyond being one of the most important rationales for globalization, international trade is inherently geared towards the globalization of capital and the removal of artificial barriers to the movement of capital goods and services across national boundaries. The institution of globalization, the World Trade Organization, focuses primarily on the promotion of trade between nations through the eradication of all artificial barriers to trade. The history of trade indicates that the economic survival of nations is, paradoxically, dependant upon free trade and the imposition of barriers to trade; the history of trade further indicates that globalization is its natural outcome. Nations cannot survive without trade, as argued by comparative advantage theorists (Brawley, 1998, 145). This theory maintains that trade relations are economically beneficial to all parties involved therein, insofar as it provides nations with an access to goods not available in their home markets and extends them the opportunity to expand the parameters of the market for their domestic goods (145). The implication here is that trade furnishes countries with essential goods and services not, otherwise available to them, even as it creates a market for their domestically-produced goods and resources, thereby providing them with the financial requirements for survival. As survival may depend on trade, nations and peoples have always engaged in this activity with, or without globalization. Both imperialism and globalization, however, entered into the equation because, while national economic survival may have largely depended on international trade, for many nations it further depended on the imposition of restrictions of trade (Brawley, 1998, 153). Such restrictions, primarily aiming towards the exclusion of such foreign goods from national markets as had the potential to compete with domestic goods, limited the capitalist expansion ambitions of industrialized nations. Protectionism, even though it played a vital role in the protection of domestic producers and infant industries in LDCs, limited the growth and expansionist potentials of the industrialized economies of the North. Consequently, and as Adams (1991, 15) asserts, globalization entered into the trade equation. Globalization and trade, as in the movement of capital across national boundaries, are intimately connected. Kiley (2004), a World Bank economist, defines trade as an intrinsically expansionist enterprise whose driving rationale is the removal of any and all restrictions to the maximization of market-size. Increase in the parameters of the market for goods implies the multiplication of profits while decrease in market size, through the imposition of restrictions on transnational trade, limits profits and constrains the potential for capital accumulation (Kiley, 2004). Restrictions on trade, therefore, pose as barriers to the North's capitalist expansion and capital accumulation endeavours, with the only solution to the aforementioned lying in the removal of any and all artificial barriers to trade, culminating in the creation of a single global marketplace. Globalisation, ultimately defined as the removal of transnational trade restrictions, was the North's response to the defined problem. An analysis of the above-stated in relation to the question posed, leads to an affirmation of the asserted. Globalization incontrovertibly favours the interests of transnational capital insofar as its primary contribution to the global economy was the removal of artificial barriers to the movement of transnational capital across borders, through the medium of trade. It is within this context that trade emerges as one of the engines of globalisation. The other engine is the primary instrument of transnational trade and transnational capitalist investments: the multinational corporation. Multinational Corporations Few can dispute the role which transnational corporations have played, and continue to play, in the propagation and proliferation of globalisation. By their very definition, sat least according to Dicken (2002, 254-55), transnational corporations are capital globalisers. They globalise capital and impose liberal economic systems upon host economies through the perpetual transnational flow of capital in which they engage (Dicken, 2002, 254-55). A fuller comprehension of the veracity of the stated is dependant upon an understanding of precisely what the transnational, or multinational corporate entity is. As defined by Todaro (1997, 534): "An MNC is most simply defined as a corporation or enterprise that conducts and controls productive activities in more than one country. These huge firms, mostly from North America, Europe and Japan presents a unique opportunity and a host of serious problems for the many developing countries in which they operate" (Todaro, 1997, 534). A number of important points may be inferred from the above-quoted definition: Multinational corporations are engines of globalisation because they represent the capitalist interests of the North in the South; Multinational corporations, being the by-products of capitalism and the purveyors of global capitalist monopoly, are informed by capitalist-based corporate policies. Their very operation is informed by liberal economic precepts. The implication here is that irrespective of the structure of their host economy, they maintain their capitalist, liberal economic ideology and impose the aforementioned upon their host economies. Multinational companies may have the power to impose specific economic and political policies on the underdeveloped countries. Proceeding from the above stated, the ways and means by which multinational corporations function to impose capitalist systems upon non-capitalist host economies, thereby paving the way for and promoting globalisation, is further clarified by Todaro (1997, 539). As he explains, MNCs inject foreign capital into capital-poor economies, even as they function to simultaneously "lower domestic savings and investment rates through exclusive production agreements with host governments" (Todaro, 1997, 539). They impose their economic terms on the host governments, receiving exclusive rights to certain productions and attractive tax concessions. They conduct business in underdeveloped countries but as foreign firms which operate under different investment rules than the national companies, leading to unfair competition within the host economies. This leads to a widening of the gap between the North and the South as MNCs do not "reinvest" their profits but transfer them to the North (Todaro, 1997, 539). Multinational corporations, therefore, are instruments for the in-flow and out-flow of capital across national boundaries but, more importantly, at least according to some economists, they function to transform LDCs into consumer, as opposed to producer-markets, further weakening them vis--vis the North and, thereby, pave the way, not just for globalisation but for the deepening of globalisation (Todaro, 1997, 539-540; Glass et al., 1997, 140-141). Multinational corporations promote globalisation in two ways. In the first place, they function as the medium through which the North penetrates the South and, gradually imposes capitalist liberal economic systems on non-capitalist markets. In the second place and as argued by Glass et. al. (2000, 140-41), multinational firms create a system of "linkages" (Glass et al., 2001, 140-141). The linkage theory maintains that, on the transnational level, multinational firms create a chain of communications and dictatorial relationships between the multinationals, which function to reinforce their collective economic power and undermine the sovereignty of their host nation-states (142-143). Expanding upon the linkage theory, Deborah L. Swenson (2001) contends that the linkages which multinational corporations create effectively function to determine the volume of trade between nations: "the intensity of trade between nations may depend on linkages that have been established by managerial connections, immigration or other type of trader exchange" (Swenson, 2001, 101). The linkages between multinationals and their international management structure is an important determinant of the volume of trade between nations, is the medium of foreign direct investment or transnational capital investment and, as such are the purveyors of globalisation. Multinational corporations, as may be inferred from the preceding argument and the facts cited therein, are incontrovertibly important globalisers. Robert E. Lipsey concurs, arguing that multinational corporations are the most important aspect of globalization, having globalised both capital and labour in defiance of national borders (Lipsey, 2001, 3-5). They are, by definition, transnational capital investors, importers and exporters and, as such, not only major plays in the globalised economy but instigators of globalisation itself. The fact that multinational corporations are important globalisers and, indeed, one of the two engines of globalisation furnishes immediate justification for the claim that globalisation favours powerful transnational capital. Powerful transnational capital, whose primary ambassadors are transnational/multinational corporations, played a definitive role in shaping the parameters and defining the objectives of globalisation, subsequent to which, they acted to motivate the spread of globalisation across the world. The implication here is that multinational corporations, through WTO, created the global economic conditions which best served their interests, with those interests best being served through the removal of restrictions upon the transnational movement of capital, the facilitation of transnational capital investment and the liberalisation of national economies, complete with the removal of the state from the economy. These are the conditions which best address the interests of multinationals and these are the economic principles upon which globalisation is founded. Conclusion Irrespective of whether or not it functions to the benefit or impediment of the South's bid for economic development, globalisation favours the interests of powerful transnational capital. This is evident from its definition as the globalisation of capital and the creation of a single global economy which uniformly operates according to liberal economic and market precepts, thereby facilitating the flow of transnational capital across borders. Globalisation, as emphasised in the stated definition, serves the interests of transnational capital as represented by multinational corporations and trade. Besides its very parameters and framework having been actively shaped and designed by the ambassadors of transnational capital (multinationals and trade) interests, globalisation is founded upon the belief that capital should be footloose and homeless; that capital need rationally follow economic and market opportunities, unobstructed. Globalisation has provided capital with that option and has, effectively, removed artificial restrictions to the flow of transnational capital across the world. It is, thus, that globalisation favours the interests of powerful transnational capital, embodied in trade and MNCs and, indeed, was shaped by both of the stated. Bibliography Adams, F. et. al. (1999) Globalization and the developed world: An introduction.' In Globalization and the Dilemmas of the State in the South, Eds., Francis Adams, Satya Dev Gupta and, Kidane Mengisteab. London: MacMillian Press. Brawley, M. R. (1998) Turning Points: Decisions Shaping the Evolution of the International Political Economy. Canada: Broadview Press, Ltd. Dicken, P. (2002) A new Geo-Economy,' in The Global Transformation Reader. eds., David Held and Anthony McGrew. Cambridge: Polity Press. Glass, E. J. et. al. (2001) "Linkages, multinationals and industrial development." In Multinational Firms and Impact on Employment, Trade and Technology: New Perspectives for A New Century. Eds., Robert E. Lipsey and Jean-Louis Mucchielli. London: Routledge. Held, D. and McGrew, A. 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