Economic and Social Progress: International Management - Essay Example

1. Free market economies stimulate greater economic growth, whereas directed economies stifle growth. Discuss. A consensus has developed amongeconomists and observers of the global economic landscape about the principle that countries with the most economic freedom experience the highest rates of economic growth (331). There is no question that the incredible growth that has characterized the global economy these recent decades has been due to the free market economic model. This is an indispensable element of capitalism, which is the prevailing system in the West and in most economies. According to Charles Keagley, economic prosperity expanded for the eleventh growth year when, at the start of 23007, of 157 economies, 20 were free, 52 mostly free, 73 mostly unfree, and 12 repressed (331). The importance of the free market system to capitalism is its ability to generate growth and innovation. This is demonstrated in an important consequence of the free market system, which is globalization. The more a state is open to the model, to economic freedom in their respective markets, the more economic prosperity is generated. Free market economies provide the most conducive environment for foreign investment and trade. In addition to this, states with free market tend to be less corrupt than an authoritarian state mainly because they are more politically free, having a democratic system that is characterized by civil and legal ways for resolving conflicts Keagley 332). Indeed, in the analysis of the experiences of state-controlled economies, there is the prominence of political economic repression characterized by the stifling of civil liberties and the violation of individual human rights. The beauty of the free market model is illustrated in the case of China. Through the years, China has implemented economic reforms that saw its economy shift from a heavy-handed control of the central government towards the free market system, greatly contributing to its rapid economic growth. The Chinese economic reform underwent three stages – building an economic system with the planned economy as the main body and a limited introduction of market adjustment in 1980; implementing the planned commercial economy in 1984; and establishing the socialist market economy in 1993 (Monson and Duval 2005, 78). What is apparent here is that for a communist country, the economic reform initiative was leading towards an open and liberal economy. China today is further pursuing the continuing decentralization of management, privatization of ownership and the marketization of resource distribution. There are, however, economic scholars that would disagree with the theory that the free market system stifles growth. The point here is that there is empirical evidence that attribute growth in a state-controlled economy especially, if it is focused on this area. We have the South Korean experience as an example. During the Japanese colonization, Korea underwent rapid economic reform. Japan transformed an ineffective monarchy into a modern, disciplined system that finally allowed for the generation economic growth. “The colonial state,” wrote Kohli, “intervened heavily, facilitating considerable new economic activity” (122). Another economic breakthrough emerged when Park came to power. Park recreated the Japanese model and engineered a growth-oriented alliance of state and capital, recorporatized labor and used economic nationalism to exhort the entire society into the service of economic advancement (Kohli, 123). 2. What are the economic and political arguments for regional economic integration? Given these arguments, why dont we see more substantial examples of integration in the world economy? According to Tony Heron, the nature and character of the current economic regionalism suggests that it is a complex and multi-dimensional phenomenon that defies many of the theoretical categories that traditional discourses have devised in order to account fore regional integration (33). This school of thought emerges amid that regionalism is increasingly becoming adopted as part of the world order as a response to the consequences of globalization and the reconfiguration of state-society relations entailed in the process. This is the reason why economic regionalism is motivated by political as much as economic arguments. Economic Argument Using the examples of the European Union (EU), the North American Free Trade Association (NAFTA) and the Association of South East Asian Nations (ASEAN), it is easy to determine that the economic motivation behind the cooperation into the regional trading blocs is economic efficiency. Here, the system becomes a way of reducing duplication and achieving efficiencies of scale. In addition to this, regional trade agreements also becomes economically practical in the context of international trade because of geographical distance (hence, the transportation cost in trading), shared culture, shared language, like-minded policies, among other similar variables. Finally, there is the reason of, creating a critical mass for new public and economic policy initiatives that are possible within the context of the regional population and in competition with other trading blocs or countries with humungous population and economic capability in the landscape of the increasing integration of the global market. According to the Inter-American Development Bank, there is substantial evidence that successful countries deploy policies that can proactively harness the forces of globalization for economic growth and development (1). Political Motivations One of the political frameworks, that addresses why regionalism occurs is the neofunctionalism theory that assumes that supranationality or the integration of states into one economic and political body, is the only method available to states in order to secure maximum welfare and the development of functional spillover, the strengthening of common interests, and the subnational and supranational group dynamics (Mattli 9). In addition to this, there is also the common belief that regional integration is a result of the bargains made by political leaders that created converging preferences. The regional economic integration, as previously stated, is largely a consequence of globalization – the increasing integration of world economy. However, this does not mean that it helps, foster or encourage the incidence of such phenomenon. As a matter fact, it appears that these regional trade agreements are established as a reaction to it, a way to cope with globalization’s adverse effects and address increased and at times unfair competition and unequal economic power and influence in the global market. A specific example of this is the concept of alienation. In some countries, there is a growing notion the global economy is systematically tipped in favor of the interest of the West. As such, regionalism could even contribute to the stalled integration of the global economy and reinforce the mergence of multilateralism in global trade. 3. Do you think governments should consider human rights when granting preferential trading rights to countries? What are the arguments for and against taking such a position? International trade can be used to advance a state’s economic and political objectives by granting preferential rights to countries. For instance, in May 2000, President Bill Clinton signed into law the African Growth and Opportunity Act which aims to offer trade incentives and preference to African countries that would build free markets and open their economies as well as pass the requirement such as the improved human rights record. In addition to issues of ethics and morality, Henry Frundt, provided the rationale for linking trade and human/labor rights. To quote: Unfairly low standards are inconsistent with stable economic growth in the developing nations. It stressed that the denial of worker rights in these countries tends to perpetuate poverty, to limit the benefits of economic development, while also being a powerful inducement for capital flight and overseas production of industries (66). The US legislation that mandates giving preferential trade with countries upholding human rights is founded on the idea that human rights are universal and that all governments are required to respect basic human rights, which include workers’ rights, irrespective of social systems or stage of economic development (Frundt 66). While the policy of giving preferential rights by the United States and the World Trade Organization to countries good human rights record is ideally well-founded based on ethical and moral reasons, such policy has been assailed by some sectors and developing countries. The main reason for this is that the US and other industrialized countries could further gain advantage in the global market by using the human rights issue to protect their own trading interests. For instance, in textile trade, developed countries have been emboldened under WTO to use unilateral actions against the countries which are not compliant with their trading interests. With the human rights issue, the US and other developed countries could impose quotas and protect their domestic industries and, hence, gain unfair advantage in global trade. There is also a hint of hypocrisy here and double standard on the part of the US, for instance. According to Gupta and Gupta: Many American companies have shifted their factories to remote areas in Mexico, Indonesia, and some other countries. Children are employed in these factories in large numbers and they have to work for more than 12 hours… A study conducted by Rugar University has revealed that 290,200 child workers are sweating in shopping malls, factories and farms in the United States (682). In conclusion, using human rights in giving preferential trade with other countries is ideally a good policy because it would force countries to reduce the incidence of human rights violation, benefiting people from harsh treatment and unfair labor practices. However, such policy becomes a bone of contention and discord in global trade when used unfairly in order to gain advantage. The case cited about the American double-standard is a case in point. It seems that leaving this kind of policy in the hands of individual countries is not the best approach to enforce the objective of reducing human rights violation through trade preference. The WTO, as a global body, can implement, regulate and penalize countries instead of encouraging unilateral policies from countries. I think this will assure more fairness and cooperation from many countries. References Frundt, Henry. Trade conditions and labor rights: U.S. initiatives, Dominican and Central American responses. University Press of Florida, 1998. Heron, Tony. The new political economy of United States-Caribbean relations: the apparel industry and the politics of NAFTA parity. Ashgate Publishing, Ltd, 2004. Inter-American Development Bank. Economic and social progress in Latin America : 2002 report. Inter-American Development Bank, 2002. Kegley, Charles. World Politics: Trend and Transformation. Cengage Learning, 2007. Kohli, Atul. State-directed development: political power and industrialization in the global periphery. Cambridge University Press, 2004. Mattli, Walter. The logic of regional integration: Europe and beyond. Cambridge University Press, 1999. Monson, K. and Duval, A. Autonomous Urbanism. Princeton Architectural Press, 2005. Read More