International Relations Theory and Global Economy - Essay Example

International Relations Theory and Global Economy International relations theory configures how nations and individuals relate internationally. It explains the source of the relations, outcome and consequences as well as stating the terms and conditions to apply1. International relationship covers outside country’s boarders and may be due to different issues. History explains the past views and events on politics, and political science gives the root to history to be created. This is to mean that they are related, and no one can exist without the other. This article covers an overview of the global economy as an international issue, and how it relates to international relations theory. Global economy is the combination of all the economies of the world’s countries. The valuation of the world economy can be arrived at by representing it in a certain currency like the US dollars. Each country experiences a trade cycle where the rate of growth of expenditure, incomes and production changes over a period of time2. The duration and effects of these cycles are dynamic simply because the structure of the economy is developing. This may be caused by theoretical relationships between different variables, for example, unemployment and inflation which might have changed. This poses many challenges to policy makers as they try to control the economy and meet their objectives. Taking the economic growth of a country, for example the U.K., and analyzing how it has been for the past years, it is possible to know that the country has experienced many shortcomings to date. Notably, the UK has experienced recession and boom periods in the process of its economic development. Just to highlight some key areas contributing to the growth of the U.K economy, one is strong consumption. Consumer spending has contributed positively and has had positive effects to the economy like, absorbing some of the weaknesses of the export and investment sectors. However, this has not come so easily because it has its limitations, which include increased debts and increase in rentals. Low investment in capital equipment has also led to growth in the economy as some of these major investments were left to the private sector to cover3. Growth of the economy globally has main stages like the economic boom. A boom is a situation that occurs when gross domestic product grows faster than the trend growth rate. At this period, aggregate demand is high, and businesses increase production and employment. Due to high demand, prices may also increase which translates to cost push and inflation in demand. Demand for imports increases because of high marginal propensity of importation among customers. Revenues from tax increase as more people are in employment and earning, hence, they spend more money. In addition, company realizes high profits as production increases, thus, increasing sales due to high demand in turn leading to high investment. Labor is used exhaustively at minimal costs, that is, no extra labor is needed. The other economic cycle is the economic recession which is a decrease in national output4. Every aspect of the economy is restrained to its maximum. This is a period where the economy is operating below its breakeven point. As the negative part of the economy, it can lead to increased unemployment, low income per head, international insecurity as many become jobless increased bad debts and the end result of all this is conflicts. The table below gives an illustration of the economic growth of the UK and inflation rate in the country for the past few years; Resource: http://www.economicshelp.org/images/macro-graphs/econ-growth-inflation-dec-2011png.jpg Further still, global economy has attracted the centre stage in international politics of late. Politicians cannot do without bringing the issue of economic growth and fall to the world as they try to appeal to the world to consider them in election to top seats. They lay down structured policies on how they are going to deal with the monster without inflicting so much on the developing countries. Political scenes and events have mostly contributed to deterioration of global economy as history states. Consequences of political disagreements have led to poor international relations and, thus, fluctuation of the global economy5. No matter how vocal politicians can be during their policy spell out, what they say literally is not always reflected in their actions. International political scene has so much been abused by politicians for their own benefit, and this has painted a poor image to the world. To conclude relating global economy and international relations, it is clear that policies on how to stabilize the economy have been the major talk point in politics. Powers like America are assumed to be the control powers of globalization, and this brings close international relations with the other nations. Globalization leads to pressures being exerted to the developing nations by the developed ones due to financial constraints and this may lead to relations among those nations to deteriorate. Being one of the main components of global economy and also a unifying factor internationally, trade has its main challenges. If the economy is operating below par, many nations tend to shy away from trade until recovery and boom session. Some economists believe that international trade has not done any favor to developing nations in terms of economic and financial sectors. They argue that trade has been of benefit to the developed nations. The main challenges to the growth of the industry sector of the developing and the less developed nations are government protection, liberalization of trade policies, globalization and reduction of tariffs6. Many infant industries have closed down as many of the trade policies only favor the developed industries. The governments have also failed to reduce imports and promote export of the locally manufactured items. Also, many investors in the less developed and developing nations tend to shy away from taking loans due to stringent and complicated borrowing conditions, high rates of borrowing and lack of financial advice from experts. Political influence and power play a key role in international trade. History explains well how super powers have been so much influential in international trade, thus, reaping much of the benefits. The graph below illustrates the real industrial production and the predicted one up to now in the world: Resource: http://www.vantageeconomics.com/thevantagetimes-blog/wp-content/uploads/2011/11/Industrial-Production-OTY-Changes.jpg It is through trade that many nations get foreign exchange and also what they cannot be able to produce locally. Political scientists have a worry as to whether they will vanish in the darkness if globalization proves to be without limits and yet they are the key to curbing the effects of fluctuating economy. Political competition meant that development and expansion of trade institutions lagged behind, and there was limitation of economic cooperation institutions. Political distance is notably one of the main influences on the structure and scale of international trade7. This is the closeness of countries in terms of politics and security, that is, do they have common features in those fields. For instance, in the case of China and Taiwan, there has been a political distance in the two nations for long, and the economic relationship had declined. Low resistance to movement of goods and capital indicates high trade performance8. Many diplomatic talks have been held by political leaders of the two nations to calm the political tensions which had surfaced in some of the disputed areas in China. This ended up yielding fruits, and there was a backdrop of the political tensions and economic relationship picked up again. Contrary, while adverse politics have impacted negatively on the economic relationships of other countries, the dominance of politics in the market of Japan and China has led to progression of their economic relationship. For any international relations to exist, key issues must be addressed perfectly by all the parties involved. International politics have been of major interest to many nations because they try to focus on those main issues affecting the people. Massive changes in political institutions, especially towards democracy and advocacy for free trade has seen great development in trade. If the case of Obama is considered, economy and nuclear proliferation were the main issues of the campaign. The United States is considered one of the world superpowers who have exploited the other nations for their own growth over the past years9. The campaigns attracted the whole world because what was being talked about inflicted directly on the people in the world. Since the global economy is fluctuating gradually, many were keen to note out the ways through which the president is going to deal with the economy to boost it. Economy was the major point of campaign which carried much weight. The US has taken advantage of the political unrest in many nations and setting in policies that are centered. Many of their products have been trading mostly globally as opposed to products of other nations. Generally, multilateral institutions are very important in reducing economic and political distance between trading partners. Although political relations have an effect on economic relations, their effect is not so much significant across the many majority of trading partners, majorly for export activities although minor so for import activities. Politics majorly affects trade at the margins beyond the markets where governments have discretion in economic decision making not subject to international rules10. The state of the economy is the key determinant of whether a nation will continue having good trading relations with another or not and this results to the good relationship between the two nations at the end. The major area of relation between politics and economy today is in international investment rather than through international trade. The state of the Foreign Direct Investment, with its extended time between order and delivery, commitments in political setting within a boarder and the absence of a worldwide regime that hinders political behavior towards outside investors might seem to account for these differences between trade and investment relations11. Foreign Direct Investment is currently a very reliable element shaping international economic integration. However, due to the recent teaming up of China and other fast growing economies to the industrial country investors abroad, and the political constraints associated with the rise of Chinese investment abroad, international merging of what is now one of the widest economies in the world could be complicated12. East Asian economies resist less to trade than European Union, North American and South Asian countries in relation to both inter and intra- regional trade. This seems to progress positively with the present situation as trade is being carried out almost without any political influence from any source unlike in Europe or North America. The step by step elimination of politics in global economy is rewarding since it is promoting fair and equal trade, full representation and participation in world issues affecting economy and the realization of the need for full utilization of the available and local economic resources for profit maximization13. The main issue of concern, however, remains to be whether the regional and international investment regime will be given protection against political influence in the coming stages of regional and international economic integration. Now it is clear that political influence is now shifting from trade to investment matters. This is a clear suggestion that it is so difficult to separate politics from global economy, no matter the efforts. Positive political influence is what remains for many to preach for although not easy to achieve but through advocating for rapid diplomatic relations, all can be a success at the end. International relations may be strengthened only when there is sound international politics, no international conflicts and there is a booming global economy and all this calls for sacrifice and denial by all nations. Bibliography Arifeen, M. “Global economy at risk”. Pakistan & Gulf Economist, 31(27), (2012): 24-26. http://search.proquest.com/docview/1025754741?accountid=35812 Dunne, Timothy. International relations theories: discipline and diversity. Oxford [u.a.]: Oxford Univ. Press, 2007. DeMartino, George F. Global Economy, Global Justice: Theoretical Objections and Policy Alternatives to Neoliberalism, Review of Radical Political Economics, June 2003 vol. 35 no. 2 201-204. Weber, Cynthia. International Relations Theory: A Critical Introduction. London: Routledge, 2013. Wiederhold, Brenda K. "PTSD threatens global economies." Cyberpsychology, Behavior And Social Networking 13, no. 1 (2010): 1-2. MEDLINE with Full Text, EBSCOhost (Accessed February 15, 2013). Read More