Hyper Globalization - Research Paper Example

Hyper Globalization Rodrik is a proponent of globalization and says that it is an important facet in enhancing the global economy. However, he is against hyper globalization which advocates the removal of national and local policies that impede the operation of free trade. According to historian unregulated global economy is unstable and susceptible to market bubbles and eventual collapse. In ideal nations, the state have antitrust law that guide and control the business world and, therefore, states plays a crucial role in controlling international trade. This Rodrik says is an unconventional matrix in a hyper globalization. Hyper globalization does not function with national legislation, but eradicate them and allow free capital market. According to Rodrik it is impossible to have a situation where globalization flourishes while democracy and sovereignty succeed. Rodrik argues that where globalization flourishes, national policies are weak and where state democracy is strong globalization has no root in that country. Rodrik says that the choice is what is necessary for nations to choose either to succeed in the global integration or national interest. However, he argues a balance can be achieved like the Bretton Woods convention agreement. Rodrik Dani presents the Argentina scenario to argue that globalization and national politics are incompatible. Argentina economy collapsed after managing to pass the Convertibility Law which ensured that monetary mismanagement was checked to avoid loss of government fund. However, the law created unfavorable exchange rates that made investor turn down any investment opportunity in the country. The lawmaker had made it a political ideology to control the exchange rate and thus the ideas got support from every quarter of the nation. Nevertheless, the country bumped itself into the reality of the global economy. The advent of GATT and World Trade Organization brought an era that championed the benefit of globalization. These bodies strategized the functioning of the global market by drawing up laws that would check and improve trade between nations. According to Rodrik, the agreement of Bretton Woods, GATT and WTO refuted the national laws to accommodate free trade. The developed countries supported the idea of globalization and helped establish international financial institutions like the International Monetary Fund, World Bank and general Agreement on tariffs and Trade (GATT). These institution initiated hyper globalization, but with the subordination of national policies. The global integration became comparative and required countries practice market fundamental strategies like establishment of strong fiscal policy, diminution, corporate taxes and deregulation. Therefore, the establishment of these measures ensures that democracy and sovereignty have to weaken to accommodate global market (Rodrik). Globalization dictates that the market of all nations is open to the flow of commodities from other nations (Rodrik). Therefore, due to the availability of a variety of goods to choose from the customer are able to get value for their money. Globalization results to decreased prices of goods and services because countries can import labor and raw material from the cheapest suppliers in the world. Nevertheless, the citizen of a country faces stiff competition for jobs as company outsource cheap labor and disregard expensive work force in its country. These phenomenon shows that globalization works against the national interest in all sectors (Rodrik). Rodrik says that economic globalization favors manufacturing than agricultural producing countries. Moreover, the integration in the financial market and the resultant financial crisis shows how national policies are incompatible with globalization. The U.S thought that if it could deregulate its financial sector it would create a stable capital market. However, its national policies ended up creating a financial crisis that affected the banking system in the world. A case example of the introduction of tariff or regulations in the country serves to protect the domestic industries from international completion. Moreover, some regulations are established to prevent dumping of goods that are not necessary for improving the well being of the country. These measures increase the international cost of borrowing and lending and discourages international trade. However, they are established to serve public goods and improve the nation’s prosperity. Therefore, as Rodrik says hyper globalization is incompatible with the national interest and the two cannot function to maximize each other. According to Rodrik, proponent of globalization argues that the benefit of free trade supersedes national interest. Nations are thus encouraged to embrace globalization to promote their economy in a bigger market economy. However, different countries have different level of production and developing nations are disadvantaged at the expense of developed countries. It is comparative for developing the nation to protect their economics from exploitation and unfair trade practices. This brings out the core of incompatibility of hyper globalization and national interest. The Bretton Wood came about after crisis between domestic needs and the global economy. According to Keynes, whenever there was a clash between global issues and domestic needs the domestic’s needs came first than the global economic needs. To address this issue Keyne, White and other agreed to establish a system that would check the international system of the global market. They formed the system and called it the Bretton Woods. The Britton Wood system established two financial institutions namely, the World Bank and the International Monetary Fund (Rodrik). The Britton Wood advocated international trade liberalization to boost the world commerce, but allowed the government to address social, political and economic problems within their territories. On the other hand, World Trade organization came about eight years after the collapse of the Bretton Woods system. WTO was formed in 1995 after years of consultation and negotiation. The WTO ushered a new form of globalization with the embracement of financial globalization in 1990s. World Trade Organization reversed the Britton Woods ideas of allowing the national government to pursue national interest in the expense of globalization. WTO made sure that international trade was above national interest and democracy. They advocated worldwide integration for market of commodities, but not for labor. Therefore, WTO suppressed domestic agenda for international integration. Globalization under WTO became essential and required all countries to pursue a common agenda of strong fiscal policy, reduced Union power, deregulation and squat corporate taxes. Unlike the Britton Wood, WTO advanced on the challenges that affected the multinational operations. It created laws that removed shortcomings of international integration under Britton wood system. WTO introduced new rules regulating nations conform domestic laws such as copyrights, business ethics and patents to those of the rich nations. The Domestic health regulations were also harmonized, and government’s subsidies were put on the check by the WTO body. These measures were not advocated in the Britton Wood system because it gave more power to domestic laws than the international regulations (Rodrik). World Trade Organization established a dispute resolution appellate court that bound all nations to abide its decision. The Britton Wood had no such powerful institution to resolve international conflict emanating from international free trade. Esserman and Howse argued that nowhere has international dispute resolution been forcefully effective as in the World Trade Organization. The court is an inherent in the thrust of hyper globalization. The Britton Wood system relied mostly on consensus through respect of liberalism and compromise. The Britton Wood system had trivial integration, but the WTO has unfathomable incorporation measures. This is evident in the integration of domestic policies to international regulations. This has helped the W T O to control the international market to enforce free trade. The Britton Wood had no effect on domestic policy even if they contravened the multilateral conventions. Therefore, under the Briton Wood system the transaction cost was high compared to the WTO where international rules have become domestic rules (Rodrik). The Britton Wood system relied on a fixed exchange rate (Rodrik). During the Britton Wood system, governments did not have a measure to effect market disequilibrium and how such situation could be resolved. Moreover, currency was backed by a commodity in terms of gold and silver (Rodrik). Nations were not allowed to change their exchange rate even in a situation of disequilibrium. However, the WTO introduced the financial, fiscal policy under floating exchange rate. Unlike the Britton Wood, currency under floating system relied on confidence rather than commodities. The floating exchange brought an era of economic crisis, but has been checked by formation of anti inflationary bodies, the Central bank to correspond to reliance on currency confidence. The floating exchange rate has enabled the expansion of free trade in almost every nation, in the globe. The Britton Wood system was a success, but suffered an inventible blow by allowing one country to anchor its performance. The currency was underpinned in the United State dollar, and individual nation were to provide enough currency according to each nation gold reserves. Nevertheless, after the U.S went to war in Vietnam and enforced social program in the 1960s it was attacked by other member for erring in the rules of engagement. Capital was not mobile, and the countries looked for better methods to caution them inefficiency of one nation. The demise of the Britton wood gave rise to World Trade Organization, which supported capital mobility. Rich nations have all that a person could envy, good infrastructure, availability of jobs, better health services and social programs to caution for the poorest of all. On the other hand, poor nation have none established infrastructure and even the service and manufacturing industries are in dire need of improvement. Therefore, being a rich person in a poor country amount living in worse condition than the poor in a rich nation. I would rather be poor in a rich country because the income disparities are different between rich nation and poor nation. The rich nations have all the benefit that cannot be found in a poor country. For example, the health care system in a poor nation are wanting and no matter how wealthy a person may be he is deemed to poor services than cannot compare to a poor person in a rich nation. Moreover, a poor person in a developed country earns more than a rich person in a poor country. The economic growth level in the developed nation has a wide gap to that of poor nations. The gap between the developed world and the developing has grown from 2:1 on the beginning of the Industrial revolution to 20:1 in recent times. The global economy has diverged, and there have none countries except China that has tried in closing the gap among the rich and the poor. Therefore, the issue of globalization and hyper globalization can be said it functions to benefit the developed more than the developing countries. History shows better what globalization has done to the poor nation. Work Cited Rodrik, Dani. The Globalization Paradox: Why Global Markets, States, and Democracy Can't Coexist. 2011. London. Oxford University Press. Read More