Following WWII and throughout much of the Cold War, international relations were largely viewed through the security lens. Scholars continued to neglect the impact of growing economic integration coupled with the increasing role that non-state actors played in international relations (Keohane & Nye, 2004, p. 503). The end of cold war and the collapse of the Soviet Union ushered the beginning of the era of globalization and heightened global interdependence (Spero & Hart, p. 92). These dramatic political changes had profound impact on the international economic system, which led to the shift in the type of governance from collective management by U.S., Soviet Union, and Japan, into more global economic governance that included more new state actors like China, India and Brazil.
However, even with the evolvement of International Political Economy (IPE); Realism, liberalism and Marxism remained three dominant ideologies that form the basis of its current theories, which include: Mercantilist Theory, Hegemonic Stability Theory, Regime Theory, Complex Interdependence, Neo-Liberal Development, Imperialist, and Dependency theory (Gilpin, 2004, p. 419). Economic nationalism, liberalism, and Marxism are mutually exclusive approaches to IPE. They are composed of “different assumptions and reach conflicting conclusions regarding the nature and consequences of a world market economy” (p. 431). Political realism in international relations formed the basis for economic nationalism or mercantilism (p. 432), while Marxism became the precursor for Lenin’s Imperialism, which converted Marxism, from “essentially a theory of domestic economy to a theory of international political relations” (pp. 426-429)
Although Lenin’s Marxism and political realism emphasize the primacy of the state and national security, Marxists believe that the state is “ultimately the servant of the dominant economic class”, while realists believe that the state is an “autonomous entity pursuing national interests that cannot be reduced to particularistic interests of any class” (Gilpin, 2004, p. 432). While political realism favors open competing markets, and liberal governments pursue policies favorable to industrial development, economic nationalism sees relative gain by the state is more important than mutual gains between the state and other states (p. 425)
Marxists believe that economics drives politics, and that political struggle arises from the conflict between different classes in society over the distribution of wealth (Gilpin, 2004, p. 420). Marxism viewed market economy as capitalism (p. 426), which is characterized by private ownership of the means of production (p. 427) driven by the strife for profits and capital accumulation in a competitive market economy. Marxism was built on the rejection of capitalist or liberal economy. It denied the ability of a capitalist economy to balance itself based on the supply and demand laws.
Moreover, Marxists criticized capitalism for its tendency to accumulate capitals by seeking profits without regards to the supply and demand laws, which will eventually slow down investments since returns will diminish (pp. 427-428). Therefore, Marxists argued that capitalism will eventually cause its own destruction through capital accumulation and the decline in the rate of return (profit), something that liberal economists themselves observed and feared (p. 439).
Furthermore, Marxism predicted that wage disparity among domestic classes in once society, and wealth inequality among states, in addition to the fierce competition by capitalist states over markets and capital outlets will cause a revolution replacing capitalism, where wealth trickles down with socialist economic system, where wealth is distributed. However, revolution based on sole economics reasons to restore peace and harmony never occurred (Mansour, MDY discussion post). Marx’s failed prediction of a violent revolution in Western Europe by the masses which would reject the capitalism in favor of socialism and later communism created a dilemma for the advocates of Marxism. Gramscianism attributed the failure to the hegemony of the political, cultural and legal superstructure over the socioeconomic base, which takes place in the form of civil institutions allowing individuals to express themselves and enjoy some autonomy away from the state, and can derail or delay an impending revolution (Cox, 2004, pp. 751-754). While some argue that Soviet-style communism was a deviation from the core beliefs of Marx and that’s why it failed (Economist, 2002, p. 3), others describe this deviation as “reshaping” by these countries like China and Soviet Union to serve their own national interests (Gilpin, 2004, p. 426)
In order to save Marxism and make it relevant; Lenin added political dimension to Marx’s ideology, which then became theory in international relations known as imperialism (Gilpin, 2004, pp. 428-429). Lenin’s added law of unequal development stipulated that capitalism does grow international economy but does not develop evenly. Therefore, he argued that revolution will occur because of political tension either among capitalist states competing for colonies to create economic dependency, or between capitalist states and poor countries fueled by inequality and exploitations (p. 430). Therefore, Marxists believe that since trade and economic interdependence is asymmetric then it can only cause conflict and insecurity. National economic priorities are then supported over economic integration (p. 443)
Contrary to Marxists’ predictions, capitalism was able to reform itself in the form of welfare capitalism which addressed several of Marx’s rightful criticisms. However, Lenin’s law of uneven development remains in force, which continues to raise concerns about the ability of welfare capitalism to survive in none-welfare internationalist capitalist world (Gilpin, 2004, p. 445).
According to Gilpin (2004), liberal economy is committed to the open market and the price mechanism (p 421). Its basic premise is that the open market should be governed by rational and maximizing laws that are impersonal and politically neutral; therefore, economics is separate from politics (pp. 422 & 423). In a liberal economy there is no connection between economic growth and political development, although they can be influenced by each other (p. 423) Liberalism entrusted the market to correct and balance itself based on the supply and demand (P. 422). However, liberalism did not rule out government’s intervention to “police and maintain the market system” (p. 421) and impose regulations in case of market failure. However, the fundamental premise of liberalism is that the individual consumer, firm, or household is the basis of society.
Martin Wolf (2003) argued that the market economy rests on valuable moral qualities, which create opportunities for economic prosperity and free and democratic societies. However, opponents consider the social inequality and the self-interest maximizing behavior created and condoned by capitalism the center of their criticism of the market economy.
Wolf saw nothing surprising in self-interest based economic transactions, which he considered an innate human behavior (p. 2). He added that the vast opportunities created by market economy allow people to engage in non-wealth motivated activities like charities and NGOs. Moreover, in a free prosperous society; elected governments can interfere on the behalf of the people to impose regulations against practices by individuals or companies which don’t adhere to the rules of competition or violates environmental standards (p. 4)
Moreover, as Wolf contended, market economy is the foundation for democracy (Wolf, 2003, p. 3), and that all democracies have market economies, although not all market economies are quite yet democratic. John Ikenberry (1999) explained how open markets become a “kind of democratic solvent, dissolving the political supports of autocratic and authoritarian governments”. Ikenberry quoted sociologist Seymour Martin Lipset in 1950s who argued that economic development tend to make education more accessible, which in turn increases the demands for political participation and openness (pp. 3 & 4)
Furthermore, open markets seem to create economic prosperity based on competition among individual businesses, companies and governments to seek self-interest. Naturally, the benefits of competition are not, and should not be, distributed equally. Therefore, knowing the several benefits of the market system; inequality cannot be considered immoral but rather a motivation for better performance and more efficiency (Wolf, p. 3).
Liberal theorists, like Joseph Nye and Robert Keohane (2004), offered a theory of Complex Interdependence as an alternative to explain cooperation and state behavior. They tried to blend the wisdom in both realism and idealism by developing a coherent theoretical framework for the political analysis of interdependence (p. 504). Therefore, liberals argue that global integration and economic interdependence based on mutual benefits of trade will foster peaceful relations among nations, and consequently a liberal international economy will have a moderating influence on international politics (Gilpin, 2004, pp. 423-424).
However, one major criticism to liberalism is its full reliance on the market to correct and balance itself and its basic belief in the rationality of the market in absence of often needed government regulations that ensure market stability. Robert Gilpin described this as unrealistic approach by liberalism (p. 433). Judging liberalism by its results; the current global economic recession is a vivid example of the downsides of unregulated liberal economies.
Economic nationalism’s main objective is industrialization, through which states maintain its autonomy and strength especially its military power. Being based on political realism, economic nationalism believes that the tendency of state to compete among each other for economic resources is inherent in the international system (Gilpin, 2004, p. 425). Because of this competition, economic nationalists consider relative gain to be more important than mutual gain. Therefore, primacy of the state, its national security and military power remain the central idea of economic nationalism (p. 424). According to Gilpin, 2004, political realists believe that the process of uneven growth “generates conflict between rising and declining states as they seek to improve or maintain their relative position in the international political hierarchy” (p. 441). He added that if this conflict is not resolved, it can lead to “hegemonic war”, to decide which state will be dominant in the international hierarchy.
Similar to Marxists, economic nationalism considers global interdependence is asymmetrical, and it constitutes a source of continuous conflicts and insecurity (Gilpin, 2004, p. 426). Nationalist writers emphasize on national self-sufficiency and geographical location rather than economic interdependence, despite of deepening interconnectedness and complexities of global economy. Even among capitalist societies, the advent of national welfare states has accentuated the economic conflicts between domestic and international policies (p. 446).Furthermore, Gilpin warned the future of the open market economy is threatened unless the conflict between domestic autonomy and international norms is resolved. He argued that cooperation among capitalist states and coordination of their domestic policies is required to ensure the integrity of the market and avoid an imminent break down as Lenin predicted (p. 448).
Gilpin argued that although Marxism’s and Realism’s approaches to International Political Economy are evolving national identities and domestic priorities, they differ in their assessment of the motivation for economic dynamics within society and internationally. Marxists believe that classes’ struggle will bring harmony and peace following the inevitable revolution against capitalism, whereas Realists believe that the anarchy of the international system and the self-centered nature of human beings make such struggle unlikely to happen (p. 432). Whether or not economic interdependence leads to political conflicts or harmony remains continuous issue among Marxists, liberals and nationalists (Gilpin, 2004, p. 442)
Among the factors that determine the outcome economic interdependence among competing welfare capitalist states is the existence of absence of a hegemonic liberal power that can establish and manage the international trading system (Gilpin, 2004, p. 443). Robert Ethane in 2004 argued that cooperation is not antithetical of hegemony; on the contrary, hegemony depends on certain kind of asymmetrical cooperation, which successful hegemon support and maintain. (Keohane, p. 489). As Robert Gilpin in 2004 indicated, when the domination of this power waned and they are challenged by rising powers, trade conflict increases (p. 443).
Therefore, the theory of hegemony stability stipulated that for a liberal economy to develop and stabilize it requires a hegemonic power, however, its mere existence is not dependant on the presence of absence of this power (Gilpin, 2004, p. 477). Gilpin argued that for a hegemon to be able to lead and manage global economy, its power must be considered legitimate by the rest of the world (p. 478). The hegemon must also be able to impose order and prevent cheating, free riding and exploitation by some states over others, enforce the rules of liberal economy, and encourage others to share the costs of maintaining the system (p. 479)
Meanwhile, the same dominant power that hegemon relies on to induce order in the global economy can also be exploited to manipulate the system and interrupt international trade and finance. Moreover, trade conflicts could arise when a declining hegemon engages in protectionist behavior through subsidies and other trade barriers to shield domestic market from global competition, according to Gilpin (p. 443). He also added that declining rate of economic growth, as it is the case of the U.S., intensifies international trade competition. Another reason for developed countries to use protectionist measures and subsidies is to undermine other countries’ comparative advantage in one particular sector. For example, many developing countries, especially in the Sub-Saharan Africa, have comparative advantage over the U.S and other developed countries in the agricultural products mainly because of the abundant natural resources and cheap labor. Therefore, the U.S. farm subsidies and agricultural trade barriers by rich countries remain one most complicated issues undermining global trade.
Fareed Zakaria, 2008, explains eloquently that the real challenge for the future of American power is not its own decline but rather the rise of the rest. Zakaria predicts the power of the U.S. will ultimately be balanced by new rising nations and that the U.S. will face a choice of whether it stabilizes the world order by accepting a world with a diversity of voices and viewpoints. Or it can watch the world it helped to build over last 60 years to be slowly torn apart by greater nationalism, diffusion, and disintegration. Unlike the downfall of the British superpower trigged by its economic failures, the largest challenges facing the U.S. and seem to be undermining its hegemony are political rather than economic. Zakaria explains that although the economic problems in the U.S. today are real, but different policies can quickly put the economy back on track, however, the U.S. political system is dysfunctional and unable to make simple reforms that can secure the country’s future. He argues that Washington seems largely unaware of the new world rising around it and shows few signs of being able to reorient its policies for the new age.
To conclude, Realism, liberalism and Marxism’s approach to international political economy is based on different assumptions and reach different conclusions. Political realism formed the basis of economic nationalism or mercantilism whereas Marxism became the precursor of Lenin’s imperialism and dependency theory. Liberals believe economy should be free from the influence and interests of politics, while Lenin’s Marxism and political realism emphasize the primacy of the state and national security and. Marxists believe that economics drives politics. Marx’s failed prediction of a violent revolution in Western Europe by the masses which would reject the capitalism in favor of socialism and later communism created a dilemma for the advocates of Marxism. Contrary to Marxists’ predictions, capitalism was able to reform itself in the form of welfare capitalism which addressed several of Marx’s rightful criticisms. However, Lenin’s law of uneven development remains in force, which continues to raise concerns about the ability of welfare capitalism to survive in none-welfare internationalist capitalist world. However, the future of the open market economy is threatened unless the conflict between domestic autonomy and international norms is resolved. He argued that cooperation among capitalist states and coordination of their domestic policies is required to ensure the integrity of the market and avoid an imminent break down as Lenin predicted. Whether or not economic interdependence leads to political conflicts or harmony remains continuous issue among Marxists, liberals and nationalists. Among the factors that determine the outcome economic interdependence among competing welfare capitalist states is the existence of absence of a hegemonic liberal power that can establish and manage the international trading system. Meanwhile, the same dominant power that hegemon relies on to induce order in the global economy can also be exploited to manipulate the system and interrupt international trade and finance.
References
Cox, R. W. (2004). Social forces, states and world orders: Beyond international relations theory. In D.J. Kauffman, J.M. Parker, P.V. Howell & G.R. Doty (Eds.), Understanding international
relations: The value of alternative lenses (5th ed., pp.751 -784). Boston: McGraw Hill
Ikenberry, G. (1999, Spring99). Why Export Democracy?. Wilson Quarterly, 23(2), 56.
J. E. Spero & J. A. Hart (2002). Politics of International Economic Relations, 6th ed. New York:
Wadsworth Publishing Company
Keohane, R. O. (2004). Cooperation and international regimes. In D.J. Kauffman, J.M.
Parker, P.V. Howell & G.R. Doty (Eds.), Understanding international relations: The
value of alternative lenses (5th ed., pp.489 -500). Boston: McGraw Hill
Keohane, R. O. & Nye, J. S. (2004). Complex interdependence. In D.J. Kauffman, J.M.
Parker, P.V. Howell & G.R. Doty (Eds.), Understanding international relations: The
value of alternative lenses (5th ed., pp.503-518). Boston: McGraw Hill.
Lynch III, T. F. (2004). Foundations of radicalism. In D.J. Kauffman, J.M. Parker,
P.V. Howell & G.R. Doty (Eds.), Understanding international relations: The
value of alternative lenses (5th ed., pp.535-551). Boston: McGraw Hill
Mansour, A. G. (2009, January 24). Formal discussion post, MDY
Marx after communism (2002, December). Economist, 365 (8304), pp. 17-19.
Wolf, M. (2003, September/October). The morality of the market. Foreign Policy, (138), pp. 47-50.
Zakaria, F. (2008, May). The future of American power. Foreign Affairs, 87(3), pp. 18-43.
Sunday, January 25, 2009
Monday, January 5, 2009
International system and global integration
Global integration and globalization can be considered two synonymous terms. In his article “States of discord” Thomas Friedman, 2002, defined globalization as “the integration of everything with everything else”. He added that “a more complete definition is that globalization is the integration of markets, finance, and technology in a way that shrinks the world from a size medium to a size small” (p. 64). Therefore, global integration or globalization describes a complex level of interconnectedness among countries, companies and even individuals and groups across the globe (Friedman, 2005, p. 2). It mainly involves aspects of economic, financial and trade relations, as well as the flow of ideas, technology, people and forms of governing. Moreover, Friedman called globalization “flattening of the world”, where the competition field is being leveled and the barriers of geography and distances are becoming increasingly irrelevant, and access to technology is becoming more readily available (p. 3).
Patrick Mendis in 2005 argued that no single theory perfectly captures the complexities of dynamic processes of globalization. However, he stated that there are three broad forces drive globalization and make the world a rapidly shrinking global village, and hence created and enabled global integration:
1-The rapidly changing Information Revolution driven largely by multinational corporations facilitated by open government economic policies and competitive business strategies
2-The spread of democratic values after the collapse of the former Soviet Union, which is reaching out to individuals in the form of freedom of religion and expression. Mendis then explained how that the footprints of globalization are less distinct in the autocratic and religious states of the ME than the free and open economies of East Asia. (p. 3)
3-Liberal economic and trade policies advocated by the WTO, IMF, and World bank, and benefited an unprecedented number of countries, rich and poor alike, which are seeing their overall economic performance boosted by strong export growth” (Naim, 2007, p. 96).
According to the A.T Kearny/Foreign Policy annual Globalization Index, the level at which any country is described as globally integrated is measured based on four different parameters of which include economic integration, technological connectivity, political engagement and personal contact (The global top 20, 2006, p. 75). For example, in the 1990s economies of several countries like China, India, Russia, Eastern Europe, Latin and Central Asia became integrated into the global economy (Friedman, 2005, p. 4) and their rank in the 2000s’ globalization index subsequently rose (The global top 20, pp. 76-78)
However, the same forces of globalization have downsides, which have shown to impede or slow down global integration. Naim Moises, 2003, listed five forms of trade that have been booming because of globalization, which include drugs, arms, intellectual property, people, and money (p. 28). Criminal networks have been freed from the geographic constraints of the state borders and their illegal markets have expanded. The same governments’ policies such as privatization, decentralization and deregulation, which were aimed at enhancing free trade and capital market, have also made fighting criminal networks more difficult (p. 30). Furthermore, Moises argued that “the fundamental changes that have given the five wars new intensity over the last decade are likely to persist” (p. 34), which can undermine further global integration.
Inequality and wage disparity is another major flaw in the global economy that can threaten further integration. Not only that low wages can undermine the quality of life for workers in developing countries but also it threatens workers in rich countries by having their jobs outsourced resulting in favoring protectionism over integration (Economist, 2007, pp. 1-2). Moreover, deepening global integration is considered threat to national sovereignty and the ability of governments to stay in control of its decision making process concerning economic policies (Ghemawat, 2007, p. 60)
Throughout the international monetary system’s history, states were both impeding and enabling factors behind global integration. When U.S assumed the leadership of the Bretton Woods’ system throughout the 1950s, it succeeded to rebuild European and Japanese economies. By the 1960, and due to the decline in the U.S. economy, the U.S. could no longer manage the system alone, and was obliged to join in collective management. (Spero & Hart, pp. 14-20). The new monetary system which began during the period of interdependence (1971-1989) and enlarged during the era of globalization (1989—present) is too complex to be managed by single dominant country, as the US role during the Bretton Woods System, or collectively managed by few key traditional actors such as the U.S, EU and Japan.
However, unlike the Bretton Woods’ system where dominant states have helped growing world economy, the collective management and global governance systems have witnessed growing regionalism in addition to tension between developed and developing nations, which can impede global integration. As Abdelal & Segal in 2007 pointed out, new barriers in the form of increasing governments’ control and ownership over economic assets have weakened the institutional foundations of globalization in the past few years, therefore, “the idea of unrestrained globalization will wane in force” (p. 2 & 6). Domestic politicization of trade matters in the U.S. and throughout the world has been an important constraint on globalization and trade order
Barriers to trade and agricultural subsidies imposed mainly by rich countries have been a major obstacle impeding global integration. According to Griswold et al (2006), rich countries agricultural trade barriers and subsidies remain “the single greatest obstacle to a comprehensive World Trade Organization agreement on trade liberalization”.
In the era of interdependence, developments in domestic politics conflicted with international trade managements and undermined the GATT agreements shifting the world economy towards protectionism (Spero & Hart, pp. 73-74). Protectionist nations usually restrict free trade to balance market objectives with social ones (Vogel, 2000, p. 1). Moreover, nations tend to restrict free trade when it begins to lose its competitiveness in world economy. In this case, all nations-whether developed, less developed or developing-become under increased protectionist pressures to maintain its competitive edge and protect its domestic products against foreign competitors (Spero & Hart, p. 75)
States can also change the shape of global integration or globalization. According to the 2004 National Intelligence Council’s 2020 Project “Mapping the global future”, new states and emerging economies are likely to give globalization a much more a non Western face by the year 2020, partly due to the current growing influence of China and India over the world economy, and the boom in the information technology. Rising Asia will the use the power of its fastest-growing consumer markets to set the rules for world economy, attracts innovative technology and become hotbed for jobs outsourcing from Western countries. Transnational corporations and NGOs will be major non-state actors in world political economy
Among other factors that can impede global integration is regionalism. As Spero & Hart indicated that the power shift within the industrialized nations, which began to take place in 1957 when six European countries united to form the European Economic Community (EEC), and the European Union (EU) in 1986, has now evolved into an economic integration that included around 380 million consumers by the 2000, creating a significant economic powerhouse balancing that of the U.S. (pp. 6-9). Similar but smaller regional aggregations were forming in Latin America and Asia. They added that the resulting tension between the benefits of globalization and the threat to national sovereignty emerged as a central theme of the current globalization (p. 10)
Institutions and regimes enable global integration. The two main International Financial Institutions (IFIs), the World Bank and the International Monetary Fund (IMF) were created in 1944 as part of the Bretton Woods system to achieve financial stability and security in the international monetary system in the postwar era (Spero & Hart, p. 13). Since its inception in 1995 as part of the Uruguay Round negotiations, the World Trade Organization (WTO) has been globalization’s rule-making and governing regime, with free trade becoming the organizing principle of global trading system (Baker & Mander, 2005, p. 251). The WTO is concerned with creating agreements that regulate global trade, enforces these agreements through its Dispute Trade Settlement System and it promotes future trade negotiations (p. 251). However, opponents of the IFIs like Jeffery Sachs (2004) argued that these institutions prioritizes the interests of rich countries ahead of the interests of the mostly developing nations which utilize the services of these institutions to finance developmental projects essential for their economic growth and stability. Moreover, lack of international coordination of domestic fiscal and monetary policy remained one major factor that is undermining the performance of the IFIs (Spero & Hart, pp. 38 & 39)
To conclude, global integration can be further enabled by more cooperation among states and none-state actors, enhancing free trade and incorporating emerging economies and different cultures into global economy. States, Multinational Corporations and International Financial Institutions play an essential role in bolstering global integration. Growing regionalism can impede global integration in absence of adequate cooperation. Other factors that can impede global integration include protectionism, global terrorism, and conflicts among civilizations. Addressing these issues underline the importance of cooperation, which can be managed through international regimes and institutions.
References
Abdelal, R., & Segal, A. (2007, January). Has globalization passed its peak?. Foreign Affairs, 86(1), pp. 103-114.
Barker, D., Mander, J. (2000, Fall). The WTO and invisible governments. Peace review, 12 (2), pp. 251-255.
Economist (2007, January). Rich man, poor man. Economist, 382 (8512), pp15-16.
Friedman,T., & Kaplan, R. (2002, March/April). States of discord. Foreign Policy, pp. 64-70.
Friedman, T. (2005, April). It's a Flat World, After All. New York Times Magazine, pp. 32-37.
Ghemawat, P. (2007, March). Why the world isn’t flat. Foreign Policy, 159, pp. 54-60.
Griswold, D., Slivinski, S., & Preble, C., (2006, February). 6 Reasons to kill farm subsidies and trade barriers, Reason (9) 36, pp. 42-49).
E. Spero & J. A. Hart (2002). Politics of International Economic Relations, 6th ed. New York:
Wadsworth Publishing Company
Mendis, P. (2005, fall). Americanization of globalization. Public Manager, 34 (3), pp. 3-8.
Naím, M. (2007, Sep/Oct). The free trade paradox. Foreign Policy, 162, pp. 96-95.
Naim, M. (2003, January). The five wars of globalization. Foreign Policy, 134 (28), pp. 28-38.
Report of the National Intelligence Council’s 2020 Project. Read “The Contradictions of
Globalization.”, pp. 27-45
The Global Top 20. (2005, May). Foreign Policy, 148, pp. 74-81.
Vogel, D. (2000, June). The wrong whipping boy. The American prospect 11(14), pp. 15-17.
Patrick Mendis in 2005 argued that no single theory perfectly captures the complexities of dynamic processes of globalization. However, he stated that there are three broad forces drive globalization and make the world a rapidly shrinking global village, and hence created and enabled global integration:
1-The rapidly changing Information Revolution driven largely by multinational corporations facilitated by open government economic policies and competitive business strategies
2-The spread of democratic values after the collapse of the former Soviet Union, which is reaching out to individuals in the form of freedom of religion and expression. Mendis then explained how that the footprints of globalization are less distinct in the autocratic and religious states of the ME than the free and open economies of East Asia. (p. 3)
3-Liberal economic and trade policies advocated by the WTO, IMF, and World bank, and benefited an unprecedented number of countries, rich and poor alike, which are seeing their overall economic performance boosted by strong export growth” (Naim, 2007, p. 96).
According to the A.T Kearny/Foreign Policy annual Globalization Index, the level at which any country is described as globally integrated is measured based on four different parameters of which include economic integration, technological connectivity, political engagement and personal contact (The global top 20, 2006, p. 75). For example, in the 1990s economies of several countries like China, India, Russia, Eastern Europe, Latin and Central Asia became integrated into the global economy (Friedman, 2005, p. 4) and their rank in the 2000s’ globalization index subsequently rose (The global top 20, pp. 76-78)
However, the same forces of globalization have downsides, which have shown to impede or slow down global integration. Naim Moises, 2003, listed five forms of trade that have been booming because of globalization, which include drugs, arms, intellectual property, people, and money (p. 28). Criminal networks have been freed from the geographic constraints of the state borders and their illegal markets have expanded. The same governments’ policies such as privatization, decentralization and deregulation, which were aimed at enhancing free trade and capital market, have also made fighting criminal networks more difficult (p. 30). Furthermore, Moises argued that “the fundamental changes that have given the five wars new intensity over the last decade are likely to persist” (p. 34), which can undermine further global integration.
Inequality and wage disparity is another major flaw in the global economy that can threaten further integration. Not only that low wages can undermine the quality of life for workers in developing countries but also it threatens workers in rich countries by having their jobs outsourced resulting in favoring protectionism over integration (Economist, 2007, pp. 1-2). Moreover, deepening global integration is considered threat to national sovereignty and the ability of governments to stay in control of its decision making process concerning economic policies (Ghemawat, 2007, p. 60)
Throughout the international monetary system’s history, states were both impeding and enabling factors behind global integration. When U.S assumed the leadership of the Bretton Woods’ system throughout the 1950s, it succeeded to rebuild European and Japanese economies. By the 1960, and due to the decline in the U.S. economy, the U.S. could no longer manage the system alone, and was obliged to join in collective management. (Spero & Hart, pp. 14-20). The new monetary system which began during the period of interdependence (1971-1989) and enlarged during the era of globalization (1989—present) is too complex to be managed by single dominant country, as the US role during the Bretton Woods System, or collectively managed by few key traditional actors such as the U.S, EU and Japan.
However, unlike the Bretton Woods’ system where dominant states have helped growing world economy, the collective management and global governance systems have witnessed growing regionalism in addition to tension between developed and developing nations, which can impede global integration. As Abdelal & Segal in 2007 pointed out, new barriers in the form of increasing governments’ control and ownership over economic assets have weakened the institutional foundations of globalization in the past few years, therefore, “the idea of unrestrained globalization will wane in force” (p. 2 & 6). Domestic politicization of trade matters in the U.S. and throughout the world has been an important constraint on globalization and trade order
Barriers to trade and agricultural subsidies imposed mainly by rich countries have been a major obstacle impeding global integration. According to Griswold et al (2006), rich countries agricultural trade barriers and subsidies remain “the single greatest obstacle to a comprehensive World Trade Organization agreement on trade liberalization”.
In the era of interdependence, developments in domestic politics conflicted with international trade managements and undermined the GATT agreements shifting the world economy towards protectionism (Spero & Hart, pp. 73-74). Protectionist nations usually restrict free trade to balance market objectives with social ones (Vogel, 2000, p. 1). Moreover, nations tend to restrict free trade when it begins to lose its competitiveness in world economy. In this case, all nations-whether developed, less developed or developing-become under increased protectionist pressures to maintain its competitive edge and protect its domestic products against foreign competitors (Spero & Hart, p. 75)
States can also change the shape of global integration or globalization. According to the 2004 National Intelligence Council’s 2020 Project “Mapping the global future”, new states and emerging economies are likely to give globalization a much more a non Western face by the year 2020, partly due to the current growing influence of China and India over the world economy, and the boom in the information technology. Rising Asia will the use the power of its fastest-growing consumer markets to set the rules for world economy, attracts innovative technology and become hotbed for jobs outsourcing from Western countries. Transnational corporations and NGOs will be major non-state actors in world political economy
Among other factors that can impede global integration is regionalism. As Spero & Hart indicated that the power shift within the industrialized nations, which began to take place in 1957 when six European countries united to form the European Economic Community (EEC), and the European Union (EU) in 1986, has now evolved into an economic integration that included around 380 million consumers by the 2000, creating a significant economic powerhouse balancing that of the U.S. (pp. 6-9). Similar but smaller regional aggregations were forming in Latin America and Asia. They added that the resulting tension between the benefits of globalization and the threat to national sovereignty emerged as a central theme of the current globalization (p. 10)
Institutions and regimes enable global integration. The two main International Financial Institutions (IFIs), the World Bank and the International Monetary Fund (IMF) were created in 1944 as part of the Bretton Woods system to achieve financial stability and security in the international monetary system in the postwar era (Spero & Hart, p. 13). Since its inception in 1995 as part of the Uruguay Round negotiations, the World Trade Organization (WTO) has been globalization’s rule-making and governing regime, with free trade becoming the organizing principle of global trading system (Baker & Mander, 2005, p. 251). The WTO is concerned with creating agreements that regulate global trade, enforces these agreements through its Dispute Trade Settlement System and it promotes future trade negotiations (p. 251). However, opponents of the IFIs like Jeffery Sachs (2004) argued that these institutions prioritizes the interests of rich countries ahead of the interests of the mostly developing nations which utilize the services of these institutions to finance developmental projects essential for their economic growth and stability. Moreover, lack of international coordination of domestic fiscal and monetary policy remained one major factor that is undermining the performance of the IFIs (Spero & Hart, pp. 38 & 39)
To conclude, global integration can be further enabled by more cooperation among states and none-state actors, enhancing free trade and incorporating emerging economies and different cultures into global economy. States, Multinational Corporations and International Financial Institutions play an essential role in bolstering global integration. Growing regionalism can impede global integration in absence of adequate cooperation. Other factors that can impede global integration include protectionism, global terrorism, and conflicts among civilizations. Addressing these issues underline the importance of cooperation, which can be managed through international regimes and institutions.
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