Globalization and the Decline of the State - Essay Example

Globalization and the Decline of the The Positive and Negative Impacts of Free Trade on Developing s 1 Free Trade: Free trade, additionally called laissez-faire, is an approach by which an administration does not victimize imports or meddles with fares by applying taxes (to imports) or subsidies (to fares). A free-trade strategy may not always mean that a nation relinquishes all control and assessment of imports and fares. The hypothetical case for free trade is dependent upon Adam Smiths contention that the division of work around nations prompts specialization, more stupendous effectiveness, and higher total processing. From the perspective of a solitary nation there may be useful preferences in trade confinement, especially if the nation is the primary purchaser or vender of a product. In practice, then again, the assurance of nearby businesses may demonstrate to be favorable just to a little minority of the populace, and it could be disadvantageous to the rest. Since the mid-twentieth century, countries have progressively lessened tax boundaries and coin confinements on global trade. Different boundaries, notwithstanding, that may be just as successful in ruining trade incorporate import standards, expenses, and differing method for financing local commercial ventures. (Editors; Brittanica, 2014) 1.2 Impact of Free Trade: Most economists consider Free Trade to lead to a growth in the economy through a better allocation of local resources. Any restrictions on Imports generally create a bias that is not favorable to Exports either. This happens due to rise in the price of imported goods relative to the exported goods. (Aggio & Tussie, n,d p. 91). If this is corrected, it will result in resources being shifted from the manufacturing of the substitutes that could be imported to the manufacturing of goods that can be exported. (Aggio & Tussie, n,d). It shall lead o growth in the near future as the State will alter its allocation of domestic resources more efficiently and competitively. However, this process is not easy, nor is it cheap. This process will create adjustment costs which may outweigh the comparative advantages in the short to medium term. (Aggio & Tussie, n,d) 1.2 (1) Advantages of Free Trade: i. Increase in production: Free trade lets countries concentrate in manufacturing goods in which they have an advantage. With these advantages of specialization, production is more efficient and hence larger with economies of scale. It also leads to lower Average and Marginal Costs due to the markets now available to a producer has increased internationally, with more supply and a cut in costs, he is expected to supply (Produce) more, and his business becomes more profitable as well. (Edge, 1999).. An estimated 25 percent of all manufacturing jobs are supported by exports. (USTR, 2013). ii. Benefits to consumers: Probably the biggest beneficiaries of free trade are the consumers. Owing to influx of international goods in the economy, customers have a wider variety of goods and services available to them. This also leads to price or tariff cuts owing to an increasing competition. (Edge, 1999) iii. Employment: With an increase in production, the job market opens up, companies look to hire more. Moreover, with foreign companies looking to set up base in the domestic markets internationally, there is a strong requirement of Human Resources to serve these MNCs. Every billion dollars of goods and services exports supported nearly an estimated 5,600 jobs in 2013. Every billion dollars of goods exports supported more than 5,400 jobs in 2013. Every billion dollars of services exports supported more than 5,900 jobs in 2013. (USTR, 2013), US jobs supported by goods exports pay 13-18 percent more than the US national average. (USTR, 2013) 1.2 (2) Disadvantages of Free Trade: i. Adverse Working Conditions: In third world countries or underdeveloped economies, producers look to cut costs by taking advantage of labor. Sweat shops and Child Labor can be directly traced to Globalization where producers create such problems to keep low costs. (Chmielewski, n.d) ii. Damage to Environment: Some Companies try to increase the fertility of land by using too many fertilizers and pesticides which has an adverse affect on the environment. WTO has been heavily criticized for allowing exports of commodities produced at the cost of the environment. “The extent to which environmental standards should be considered in free trade is an ongoing debate within the WTO.” (Chmielewski, n.d) iii. Unemployment: Although Free Trade I known to increase employment, it can also create unemployment in the country of the MNC. In order to exploit low cost destinations abroad, some MNCs choose to downsize in its country of origin which leads to unemployment. (Chmielewski, n.d) The Council on Foreign Relations (CFR), believes that while free trade create jobs and other improvements to the US Economy, it comes with a price, by making its local producers vulnerable to competition. According to Edward Alden, a senior fellow at CFR, “wages have not kept pace with productivity of labor, and income inequality has increased--trends hastened to some extent by free trade”. (Chmielewski, n.d) Iran versus Non-Democratic China & Mexico: Can Iran transition to a Democracy? The Government in Iran can draw parallels with the once Non Democratic and Closed Economies of Mexico and China. However, what distinguishes Iran is probably its Islamic Component. Iran is home to 98% Muslim population. (Kesselman et al, 2013). Though Iran’s government structure is similar to that of pre globalization Mexico and China, the president of Iran is chosen by its citizens. Its 290 seat unicameral administrative extension is chosen by the general people. (Kesselman et al, 2013 p.609); and the General Assembly is also chosen by the people of Iran. (Kesselman et al, 2013 p. 601). Considering that all subjects of Iran over the age of 18, both male and female, have the right to vote (Kesselman et al, 2013 p. 599), it is quite baffling how any individual who really takes the time to study Iran with a bit of social relativity can put forth the expression that it is not a law based Islamic state. China and Mexico, then again, have seen clearing political structural changes, built transcendently in light of materialistic political and budgetary strife, all around the decades of universal entrepreneurial unions and advancements from industrialism to advanced capital globalization. During the 1950s, the Peoples Republic of China " took decisive steps towards socialism" (Kesselman et al, 2013 p. 629)and "private property was very nearly totally wiped out through the takeover of industry by the legislature and the collectivization of farming" (Kesselman et al, 2013 p. 629). Under the dictator period under Mao Zedong, China directed different political changes, for example, the Great Leap Forward and the Great Proletarian Cultural Revolution in endeavors to industrialize the state under Communism, and on occasion unleashed abusive government break downs under Zedong, for example, the obliteration of "countless historical monuments and cultural artifacts because they were symbols of China’s imperial past" (Kesselman et al, 2013 p.629) and striking any political rivals "thought to be guilty of betraying his version of communist ideology, known as Mao Zedong Though" (Kesselman et al, 2013, 629). Obviously, throughout this time of closed business sector dictatorship, western industrialist faultfinders sorted China and Communism as insidious, yet today is presented with easier import levies to numerous entrepreneur states. This strategy, once utilized against China and the Soviet Union, today is being utilized against Iran. After Maos death in 1976, Xiaopings initiative introduced a period where “state control of the economy was significantly reduced" (Kesselman et al, 2013, p. 630) Mexicos tyrant period brought on comparable outcomes, yet processed various brutal and tumultuous changes all around the states legislature structure. Mexico fiddled in majority rules system right off the bat after the stronghold of "the Mexican Constitution of 1917" (Kesselman et al, 2013, p. 441), however debasement was a consistent issue in reinforcing an aggregate Mexican government in spite of "vast new amounts of oil were discovered in the Gulf of Mexico" (Kesselman et al, 2013, p.442) throughout the 1970s. Under the presidencies of "Miguel de la Madrid (1982–1988) and Carlos Salinas (1988–1994)" (Kesselman et al, 2013, p.442), changes were established to "limit the government’s role in the economy and to reduce barriers to international trade" (Kesselman, 2013, p.442), and the joining of NAFTA under Salinas started an early deregulation process which might be ready for worldwide capital abuse. (Kesselman et al, 2013). Iran has additionally seen political changes, for example, the White Revolution, which endeavored “to promote economic development and such social reform as extending the vote to women" (Kesselman et al, 2013, p. 584), yet the most critical Iranian government reconstruction was not dependent upon matters in profit making or political strife. The Islamic Revolution of 1979 changed the Iranian state into an Islamic state and “a new constitution was drawn up in late 1979 by the Assembly of Experts" (Kesselman et al, 2013, p.587) which coordinated the principals of Islam into the state structure (Kesselman et al, 2013). To conclude,, it creates the impression that Islam is more democratic now that China or Mexico have ever been, perhaps even the United States. A state is not undemocratic on the grounds that they pick not to have a McDonalds or Walmart on every piece. A Research conducted by Porat et al (2012) (Lauder School of Government), they concluded that: “Within Iranian society, alongside conservative values, there is strong support for pro-liberal values. In comparison to 62 countries surveyed by WVS and the ESS, Iranian societys potential to foster liberal democracy was found to be higher than Arab countries, such as Egypt, Morocco and Jordan, Asian countries, such as South Korea, India and Thailand and European countries, such as Russia, Ukraine and Romania. Furthermore, an abnormal gap was found between the societal potential for liberal democracy and the actual level of democracy.” (Porat et al, 2012) References: Aggio & Tussie. (n,d). Economic and social impacts of trade liberalization. Country Case Studies , 89-100. Chmielewski, T. (n.d). Negative Effects of Free Trade. Retrieved March 31, 2014, from Chron: http://smallbusiness.chron.com/negative-effects-trade-5221.html Edge, K. (1999). Free trade and protection: advantages and disadvantages of free trade. Retrieved March 31, 2014, from Charles Sturt University: http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html Editors; Brittanica. (2014). Free Trade. Retrieved March 31, 2014, from Encyclopædia Britannica, Inc: http://www.britannica.com/EBchecked/topic/218403/free-trade Kesselman et al. (2013). Introduction to Comparative Politics 6th Edition. Boston: Wadsworth. Porat et al. (2012). Can Iran turn into a Liberal Democracy? Herzliya: Lauder School of Government. USTR. (2013). Benefits of Trade. Retrieved March 31, 2014, from Office of the United States Trade Representatives (USTR): http://www.ustr.gov/about-us/benefits-trade Read More