Political Science Research Paper Sample

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4. Contents INTRODUCTION: .......................................................................................................................... 3 CHALLENGES AND OPPORTUNITIES IN GLOBALIZATION: ............................................... 5 THEORETICAL PERSPECTIVES OF INTERNATIONAL POLITICAL ECONOMY ............... 6 1. MERCANTILISM AND ECONOMIC NATIONALISM ............................................... 6 2. CLASSICAL LIBERALISM AND NEO-LIBERALISM ............................................... 7 3. IMPERIALISM, DEPENDENCY AND NEO-MARXISM ............................................ 8 STRATEGIES TO BALANCE STATE-MARKET TENSION: ...................................................... 8 1. REGIONALIZATION: .................................................................................................... 9 2. MULTILATERALISM ................................................................................................... 9 MEANS TO COPE WITH GLOBALIZATION: .......................................................................... 10 CONCLUSION: ............................................................................................................................ 12

5. INTRODUCTION: Globalization is the phenomenon which connects the entire world, it is however debatable if this is positive for world’s economy or not. Some countries benefit more than others that’s for sure, it provides markets to developed countries for their goods and services and help developing countries in building advanced infrastructure and facilities from foreign investments (Appadurai, 2001). The question is who the beneficiary is and who is being exploited and in developing countries what should be the role of state in guiding the institutes and sectors in the realm of globalization so as to gain maximum from the situation (Appadurai, 2001). When a country becomes the centre of attraction for investors then various challenges arise for the state as well. State has to regulate and monitor market forces to an extent that economy benefits (Appadurai, 2001). Globalization is mainly driven by entrepreneurial spirit, technological breakthrough, trade liberalization and participation on social networks across the globe (Boudreaux, 2008). The deregulation of financial markets actually starts the process of globalization when interest rates control is eased, financial capital is easily raised and available, import tariffs and restrictions are relaxed, businesses are allowed to set up in minimum amount of time and investments in all sectors are welcome even banking (Boudreaux, 2008). The critics of globalization consider it as something blindly followed by everyone but even globalization has to follow some rules and procedures stated by WTO (World Trade Organization).

6. Two factors that have really made the process fast are computers and internet (Boudreaux, 2008). Computer and internet have become household names and technology transfer has become fast as a result of these advancements (Boudreaux, 2008). Companies in different countries can buy equity and ownership and hence go for mergers and acquisitions as a result of liberalization of economies, take example of merger of German automaker company Daimler-Benz with their American counterpart Chrysler. (Alberti) As the globalization has strengthened itself over the years the conflicts among states have been witnessed too. This is because the states think that in the name of globalization the bigger power tends to make the smaller countries their hostage and only exploit them, they ask the developing countries to liberalize their economies through pressurizing them by putting sanctions on their aids and loans, but on the other hand do not open up their economy to that extent for developing countries as they should. This creates hostility and may result in war. Therefore it is also important to discuss and analyze the measures taken by international communities in order to resolve this issue as it is threatening world peace the most. World politics has always seen contentions and hostile takeovers by one country on another because of resources and the struggle to get hold of more markets. Balance of power issues also arise for the same reasons because one giant is threatened by the other on the basis of strength of economy which means greater power in shaping politics. This paper also discusses these forces in the light of globalization and other economic forces.

7. CHALLENGES AND OPPORTUNITIES IN GLOBALIZATION: The impressive deliverable of globalization is that it’s not a zero sum game where one country wins at the expense of another, all the countries involved can benefit from the situation. Some countries benefit more than others (Brown & Labonté, 2011). This has been proved through various researches that internal growth and production leads to economic growth and not balance of trade (Brown & Labonté, 2011). It is worth noting that developed countries have not been as forthcoming as they expect the developing countries to be. They have not lowered their trade barriers in certain sectors like agriculture and textile where developing countries can really make a difference (Brown & Labonté, 2011). Intellectual properties rights and anti dumping policies also tend to discriminate against developing countries (Gerdes, 2006). When developed countries make investments in developing countries by setting up manufacturing facilities and offices they provide employment and open doors to opportunities but since their head offices are in their native countries any restructuring or strategic decision of curtailing leads to layoffs as well and this is where the state should intervene in order to ensure that the negative externalities of globalization should be limited. For example in Pakistan foreign banks were allowed to enter the market but somehow they couldn’t retain their business as a result of which RBS, ABN AMRO, and Barclays all winded up their business either through acquisitions or liquidation (Gerdes, 2006). After that State Bank of Pakistan imposed very strict restrictions on banking sector (Gerdes, 2006). World systems Theory addresses the same issue of state intervention and shaping the market forces (Haugen & Mach, 2010). States and markets are interlinked firstly through international

8. trade and means of production, secondly states compete with each other for capital, investments and market for their goods and services, thirdly the form of state-market interaction is transmitted to other countries (Haugen & Mach, 2010), through the organization who participate in globalization for example when Unilever and P&G go to any country they bring their work culture and ethics with them and also their means of doing business and since these are giant corporations they start shaping the laws of country according to their own interests. (Riain) THEORETICAL PERSPECTIVES OF INTERNATIONAL POLITICAL ECONOMY Following are the theories related to international political economy which explains the different schools of thoughts related to how economies should be run and how should the state intervene and how much should be left on market forces (Haugen & Mach, 2010). These theories are important to understand because they act as guiding principles in shaping the foreign policies of various countries. (Falkner, 2011) 1. MERCANTILISM AND ECONOMIC NATIONALISM Originated in sixteenth century Mercantilism still governs the foreign policies of nations (Martens, Akin, Maud & Mohsin, 2010). Under this school of thought the state is considered to exercise more power over the market in case of international anarchy and in this pursuit of security the state will be able to maximize its wealth (Martens, Akin, Maud & Mohsin, 2010). Just as money is important to power, power is to money and according to mercantilists as the state will accumulate wealth it will gain power, classic example of it is US and UK they rule the world (Martens, Akin, Maud & Mohsin, 2010), have veto power and share so many privileges

10. because of the size of their economy. Money and wealth can go hand in hand and both can be acquired simultaneously in the long run but may be for the short term state has to let go of money in order to secure itself from external threats that exist as a result of international anarchy (Martens, Akin, Maud & Mohsin, 2010). This theory also believes the international economics to be the zero sum game in which different economies compete and win or lose (Martens, Akin, Maud & Mohsin, 2010). 2. CLASSICAL LIBERALISM AND NEO-LIBERALISM This was given birth to in Western world in nineteenth century. Liberalism supports and advocates the market mechanism and least state intervention. Adam Smith’s work is mostly a criticism to mercantilism (Martens, Akin, Maud & Mohsin, 2010). Liberalism supports individualism and pursuit of individual interests above all and it is considered to be economically beneficial as a person or state will be free to pursue the policies which are benefitting them the most (Miller, 2007). Market is the centre of this theory as market is the place where economic interests are met in the most optimized manner (Miller, 2007). Therefore states should allocate considerable amount of attention and resources in developing market mechanisms. Governments are considered to be a hindrance in achieving economic growth and prosperity and therefore their roles should be limited in determining market rules and regulations. Liberals are also very progressive in their thoughts and beliefs (Miller, 2007). The critics of this theory put forward a main point that free trade that liberalism stands for actually is a disguise for rich countries to exploit the poor countries and it safeguards the interests of only developed nations (Nederveen Pieterse, 2012). Secondly despite the free trade

11. mechanism in place the World War II could not be prevented, therefore it is worth noting that liberalism and free trade alone cannot guarantee world peace (Nederveen Pieterse, 2012). 3. IMPERIALISM, DEPENDENCY AND NEO-MARXISM At the end of World War II international socialists, economists and scientists started thinking about expansion to third world countries and economic stability in them (Raschke, 2011). Third world or underdeveloped countries are marked by two main features: one is dependency on agriculture and second is small industrial sector (Raschke, 2011). This is what creates dependency on other nations in order to fulfill the needs of their nation as they themselves are incapable of doing so. Neo Marxism views imperialism as responsible for dependency and under development of certain states as rich and developed countries sell their goods at higher value in these states. Take the example of British colonialism in India; they were following their imperialistic interests by selling their goods in India. (Keet, 2002) STRATEGIES TO BALANCE STATE-MARKET TENSION: The rightist and leftist have always been in conflict with each other when defining the role of state and market with rightist believing that markets should be given central position with maximum powers to operate freely as state can be oppressive and therefore hurt the market sentiments, on the other hand leftist view the market as pitiless in distribution of wealth and tend to create gaps between the rich and poor. Let us examine the strategies that are advised by world economists in order to reduce tension between state and market:

12. 1. REGIONALIZATION: Regionalization is basically globalization but with respect to the region in which the country exists. The North American Free Trade Agreement (NAFTA) is a treaty signed by three countries: United States, Canada, and Mexico and it is a classic example of regionalization, in order to avoid conflicts and tensions between state and international markets where one state might think that it has been exploited, this agreement was signed. It encompasses tariff elimination, license relaxation and non tariff measures in order to control trade. Now the technical and non trade measures have taken toll on the process of regionalization, sometimes the technical standards and other stringent policies make countries to shift their preference altogether. Custom unions are a part of regionalization, Caribbean Community, Central American Common Market and Mercosur are examples of these unions formed in Latin part of America. These unions ensure a uniform structure of trade among the participating countries. Foreign direct investments can be majorly done through regionalization and it has been observed that it takes place when a country expands its market or becomes part of some regional group. (Beyond Borders: The New Regionalism in Latin America, 2002) 2. MULTILATERALISM General Agreement of Tariffs and Trade (GATT) and WTO are examples of this arrangement. Two major developments shaping the force of multilateral systems includes multi polarity in which many states are now playing major role and dominating the world unlike before when only two three states tend to dictate trade terms for rest of the world. Earlier UN did not give speaking rights to EU but as the economies grew they also started asking rights to take decisive role in major matters and since then the forum has been opened for many states and regions.

13. Multilateral systems have also been utilized to protect intellectual rights and property. Services that were excluded in regionalization were also made part of multi lateral systems. This means opening up sectors like banking, finance, communication and transport to other countries. This has helped in reducing the tension between state and market through creating acceptability and close relations among nations. Lastly the states created rules to guide the activities and operations of multinationals in their respective countries under multilateral agreements. This reduced the complexities manifold and state can now govern the foreign companies and have nothing to fear about the results. These systems help in reducing the conflict situations by guiding the states in how to treat each other and what restrictions they can impose and what they cannot. There are criticisms to this strategy as well, it is not as equality and fair distribution supporter as it is thought to be, world’s greatest player demolished the rules by invading Iraq. MEANS TO COPE WITH GLOBALIZATION: When globalization hit the world and entered the developing countries, every other country tried to benefit from it through focusing on exports and made it their vision for future development plans (Reese, 2010). Financial crisis of 2008 taught the nations that world cannot be that open to exports and economy should not be heavily reliant on it especially when many countries are trying to develop it simultaneously (Reese, 2010). For example Pakistan, India and Bangladesh all are competing for textile export and as a result of which they have to slash down their prices and reduce their profit margins in order to be competitive (Reese, 2010). Therefore the first strategy for developing countries in midst of globalization is to rely on internal demand. Therefore it is important to analyze if there is enough potential in the markets to sustain the

14. demand and growth. Earlier this idea was mocked due to the low purchasing power parity of developed countries (Reese, 2010). However the recent growth in developing countries and the rise in middle clas (STEGER & WILSON, 2012) s have silenced the critics. Secondly what the government in developing countries should do is to develop market forces in order to ensure smooth flow of co ordination and information among government, market and institutions ("Measuring Globalization", 2001). The government should take measure to improve the organizational capacity of entrepreneurs. This is done through making sure corruption is no longer present in institutions which would hinder the performance of entrepreneurs also in order to make the operations seamless and hitch free they must implement policies which are business friendly rather than imposing strict measures and controls which are unnecessary and increase the time period for entrepreneurs (STEGER & WILSON, 2012). Another important strategy is to privatize certain sectors in order to make the markets competitive and not trying to control whole market. Private sector participation brings economic growth and development to the country and reduces the state responsibility to provide employment and livelihood to its citizens ("Measuring Globalization", 2001), but it is also important to mention that not all the sectors and development projects should be given to private sector as this signals that the government is weak and cannot handle anything on its own. (Shantayanan Devarajan, 2012) Initially in order to allow the local industries to develop and grow strict import controls have to be in place otherwise the local manufacturers are not given fair chance and opportunity to grow. But these controls should only be imposed in early stages of development (Martens, Akin, Maud

15. & Mohsin, 2010). As so as the economy moves to growth stage these controls should be removed in order to make the market competitive. Otherwise the local producers don’t develop efficient systems and start to slack in their performance (Martens, Akin, Maud & Mohsin, 2010). Their systems are not updated and advanced, they don’t invest in research and development as much as they should and they start charging higher prices for inferior quality goods because they have support of government who would not allow foreign players to enter the domestic market. (Mayer, 2013) CONCLUSION: In developing countries the role of state is very critical as market forces are not developed to that extent. The classic example is that of Myanmar where the state controlled everything and did not trade with any country the result was after 23 years of suppression, nothing was developed in the country. Majority of the people were below poverty line and none of the institutions were in place. There was immense international pressure on them to liberalize their economy and they did so in 2014. Now look at them, most of the companies have declared them as the sleeping giant and next big thing, telecommunication companies are viewing that region in order to grow as that’s the country where nothing is developed and every company will have a chance to increase its sales there with the growing middle class and increasing demand of people in order to change their life style. Developing countries therefore need to realize their importance and play in the world politics accordingly. It is also a question asked by many that if democracy is better for developing countries or dictatorship and it has been observed that initially when a country is developing then

16. it needs a form of government where decision process is fast and coherent which democracy fails to provide, one of the biggest pitfall of democracy is that it doesn’t provide quick decision making avenues. Take the example of Singapore, China and other successful countries which were once developing and came below poverty line have successfully managed to change their status quo and deliver growth rates above 7% for many consecutive years. Even the developed countries now look up to them as a symbol of inspiration and seek their support in various matters. These countries initially have dictatorship and same leadership for ten or more years, the same leadership helped in quick decision making and these decisions remained intact for a reasonable period of time till the results could be seen. The biggest advantage of democracy is also its biggest pitfall, the government changes after every five years and so and the new government takes pride in reversing every step that previous government has taken to improve the conditions of the country and hence again the situation comes to zero. References Alberti, G. B. Globalization and the Role of the State:Challenges and Perspectives. Appadurai, A. (2001). Globalization. Durham, NC: Duke University Press. Boudreaux, D. (2008). Globalization. Westport, Conn.: Greenwood Press. Brown, G., & Labonté, R. (2011). Globalization and its methodological discontents: Contextualizing globalization through the study of HIV/AIDS. Globalization And Health, 7(1), 29. http://dx.doi.org/10.1186/1744-8603-7-29

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18. Nederveen Pieterse, J. (2012). Periodizing Globalization: Histories of Globalization. New Global Studies, 6(2). http://dx.doi.org/10.1515/1940-0004.1174 Raschke, C. (2011). Globalization and Theology. Religion Compass, 5(11), 638-645. http:// dx.doi.org/10.1111/j.1749-8171.2011.00319.x Reese, S. (2010). Journalism and Globalization. Sociology Compass, 4(6), 344-353. http:// dx.doi.org/10.1111/j.1751-9020.2010.00282.x Riain, S. Ó. (n.d.). States and Markets in an Era of Globalization. Annual Review of Sociology . Shantayanan Devarajan, R. K. (2012). The Evolution of Development Strategy As Balancing Market and Government Failure. World bAnk Sjursen, K. (2000). Globalization. Bronx, N.Y.: H.W. Wilson Co. STEGER, M., & WILSON, E. (2012). Anti-Globalization or Alter-Globalization? Mapping the Political Ideology of the Global Justice Movement1. International Studies Quarterly, 56(3), 439-454. http://dx.doi.org/10.1111/j.1468-2478.2012.00740.x