New Challenges of Economic Governance Problmes of Globalism 6th Lecture

1. New Challenges of Economic GovernanceProblmes of Globalism6th Lecture Dr. habil. Maria Bordas Professor Corvinus University of Budapest Faculty of Public Administration Department of Public Administration

2. Development of Globalism After the 2nd World War -Europe 1945. Bretton Woods – Stability of the financial market: integration of the currency-system based on gold -Financial support for the reconstruction in Western Europe -Liberalization of the world trade market (GAAT) -Nationalization in the public sector and the business sphere -Welafe state: full employment, education, housing, health, social allocations for the poor

3. New International Institutions • World Bank - Financed by the member states: new market Activity: -Finances projects based on economic policy -Consultancy -Technological and managerial knowledge IMF (International Monetary Fund) Activity: -Supervises fiscal and monetary policy -Gives credit based on financial plan, contract -Expert

4. Critics of the World Bank and the IMF From the 1970-s New areas:developing countries New policy: to create market economy based on the principles of the developed western countries –neoliberal economi policy Critics: • Support or credit based on conditions • Strictly controls projects • Does not fit the traditions or the economy of the country • Does ot serve national economic interest, but the multinational enterprises – market mechanisms • Decreases welfare – encourages privatization • Against environment protection

5. New International Economic Processes Effects of the neoliberal economiy policy of the World Bank and the IMF • Promoted international capital to be invested without limitation • Decreased wages in the developed countries: strikes, competition with the developing countries Development of the electronics and infomatics • Financial transactions and establishment of the firms beame easy: increasing proportion of the international investments and financila market • Concentration in the world market: monopoly position of the multinational enterprises

6. Features of Globalism The aim: influence on the national economies • Business principles: maximum profit • The least sate intervention in the economy • Radical decrease of the welfare state Interest of the national economy: • Economic development • Fair redistribution • Welfare instituions • Environment protection

7. Results of the Globalism Countries become vulnerable to the multinational enterprises • Limited political power: influence on the political parties, parliament, government in an informal way • Limited economic governance: -Multinational enterprises can easy go to other countries - lower costs: wages, tax allowances, state subsidies -Producing processes are divided in more countries -Competition among the countries for the international capital

8. Effects of Globalism Disadvatageous situation of the countries: • Taxes are paid in the home countries • More support than income • Profit increased 100%, wages 5 % • Worse competiveness: domestic firms pay more tax (bunkruptcy) • Unemployment: if the multinational enterprises withdraw • Monopoly positions in the market: agains the customer interest • Worse environment: the governments are weak to force multinational enterprises to keep legal rules • Bad choices: high prices – adaptation – loosing power of economic governance - uncontrolled multinational enterprises – worse welfare

9. Globalism in Hungary Privatization: • At the beginning of the 1990-s: state-owned business enterprises for the international firms. • Reason - privatization policy: quickly by all means. • From 1995: infrastructure services: - concession - energy sector was sold • From 2002: national product firms – privatization is unlimited Critics: • Strategic national property was lost – influence of the national capital (e.g. energy prices – highways) • Socialist-liberal governments served and protected globalism