Zygmunt Bauer’s book Globalization: The Human Consequences outlines the evolution in the human relationship between time, space, and each other. The general argument is that Globalization compresses the time/space relationship so that the cost of mobility approaches negligible proportions, as a result those with capital (the most mobile of variables) become tourists capable of going to any place in almost any amount of time, separating themselves from the numerous vagabonds (those members of the globe without access to investment capital). In Zygmunt’s book, globalization is the great polarizer not the great equalizer.
Bauer suggests that the difference lies in our views of universalization (a term he says predates the use of “globalization”) and globalization. Universalization, the movement and the term, was aimed at creating a universal order of things--reminiscent of the convergence of living standards, laws, and labor practices touted by some of our readings this semester. On the other hand, globalization talks about the global effects (“notoriously unintended and unanticipated”) of this and that variable. One is an active global initiative to make universal order (and thus some social heaven Earth harmony) and the other is a term to describe what is happening on a global scale.
Bauer makes a strong argument for globalization as a polarizer, describing social spaces as being more and more restrictive and the access to those with power as being limited to those on the invitation list.
China's trade statistics
As I mentioned briefly in class today, in case you were wondering about the state of China's trade with other third-world countries, this web page has the newest available statistics for the period of January through October of 2008. I hope the Chinese names for the various countries are not too confusing. Note especially the annual growth rate in bilateral trade in the third column from right:
http://zhs.mofcom.gov.cn/aarticle/Nocategory/200812/20081205966046.html
By the way, the New York Times has a story about "mountain-village" cell phones in China that I mentioned earlier this semester:
http://www.nytimes.com/2009/04/28/technology/28cell.html
http://zhs.mofcom.gov.cn/aarticle/Nocategory/200812/20081205966046.html
By the way, the New York Times has a story about "mountain-village" cell phones in China that I mentioned earlier this semester:
http://www.nytimes.com/2009/04/28/technology/28cell.html
US-China Relations expanded
The United States and China are engaged, quite literally. However, many of the specifics are yet to be decided. The guest list will most likely include the countries of the world and the date will probably be set sometime in the near future. The ceremony still lacks an officiator, decorations or even an agenda, though. And no one is really even sure if the occasion will call for happiness or grief. So don’t get your hopes up for a post-ceremony reception with an open bar and dancing.
One thing is determined, though, and that is the engagement. Journalists, economists and politicians recognize that China and the U.S. will inevitably have to increase their engagement with one another. Mark Landler’s “New York Times” piece, “Chinese Savings Helped Inflate American Bubble,” did a good job in explaining how intertwined China and the U.S. are. And although it was this intertwining that caused much of the financial mess the world is currently in, disengagement is not an option.
The U.S. and China’s complicated relationship will not be easy to work through. Many have commented on what goals and problems should arise between the U.S. and China. Below are a few sources that address what some believe should be the main objectives and concerns of the US and China’s inevitable marriage.
Road Map For U.S.-China Relations
Forbes magazine published a Q&A with John Chen, a chief executive officer at Sybase who helped write a roadmap for the Obama administration on US-China relations. The brief Q&A succinctly addresses how the US and China must interact, and that they must avoid debates and issues caught up in ideology. Chen also spoke on some of the dangers lying on the wayside – how the Beijing has a lot of pressure to keep the China economy from sinking too low, and how countries around the world could be prone to protectionism. It was interesting how Chen noted that although the US and China will still be engaged in trade 10 years from now, China’s economy will probably have shifted to a service-oriented society.
Chen’s commentary made the US and China relations seem very simple. However, China has to balance the demands from home with demands from abroad.
Will the Chinese Communist Party Survive the Crisis?
In MinXin Pei piece, published March 12 in the Foreign Affairs magazine, Pei points out how the slowed economic growth and increasing economic instability threaten the rule of the CCP. Pei says that China has lulled its citizens into political apathy through a booming economy; a faltering economy could stir up dissension in the top ranks of the Chinese government. The government is facing pressure to quell the dissension by depreciating its currency once again and driving down export costs in order to stimulate the economy – exactly what the US does not want, if any balance of trade is to be reached.
While the Chinese are facing pressure at home, the US will likely meet conflict on ideological issues.
The G-2 Mirage
Elizabeth Economy wrote a piece in The Foreign Affairs magazine on how the US and China are incompatible on a number of basic ideological issues. An increase in engagement will necessarily include an increase in the number of disagreements and tension on issues such as human rights, Tibet, political systems and more. Economy argues that because of the basic inconsistencies between Beijing and Washington, increasing the bilateral relationship of the two countries is impossible and is not the solution.
Incompatibility is not necessarily the end-all of US-China relations.
Our Opportunity With China
Elizabeth Economy again wrote, this time with Maurice R. Greenberg Senior Fellow for China Studies Adam Segal, on how the US should take advantage of the political and economic instability in China to deal with some of the ideological differences between the two. It remains a delicate balancing act, though, the US’s own economic stability is tied to China’s stability, making ideological demands at a time such as this could prove disastrous.
After all this talk about the importance and necessity of the US-China relationship, some debate has emerged on whether only the US will have to play the central role with China.
The End of ‘Chimerica’
In his Harvard law blog, Niall Ferguson wrote on how the current world situation could offer alternatives to the US for negotiators with China. Ferguson coined the term “Chimerica” to describe the colossus of a relationship that exists between the US and China. However, in this piece, Ferguson expresses doubt that the US is the only solution to financial mess that so deeply involves China. He notes that the entire western world is involved with heavy trade and borrowing from China. He also notes that the dollar is no longer the only currency choice – the euro has made an appearance in the international economy.
Sources:
Road Map For U.S.-China Relations, John Chen, http://www.forbes.com/2009/03/11/us-china-relations-markets-chen-csis.html
Will the Chinese Communist Party Survive the Crisis?, Minxin Pei, http://www.foreignaffairs.com/articles/64862/minxin-pei/will-the-chinese-communist-party-survive-the-crisis?page=2
The G-2 Mirage, Elizabeth C. Economy and Adam Segal, http://www.foreignaffairs.com/articles/64946/elizabeth-c-economy-and-adam-segal/the-g-2-mirage
Our Opportunity With China, Elizabeth C. Economy and Adam Segal, http://www.cfr.org/publication/10459/our_opportunity_with_china.html
The End of ‘Chimerica’, Niall Ferguson, http://blogs.law.harvard.edu/guorui/2008/09/29/the-end-of-chimerica/
One thing is determined, though, and that is the engagement. Journalists, economists and politicians recognize that China and the U.S. will inevitably have to increase their engagement with one another. Mark Landler’s “New York Times” piece, “Chinese Savings Helped Inflate American Bubble,” did a good job in explaining how intertwined China and the U.S. are. And although it was this intertwining that caused much of the financial mess the world is currently in, disengagement is not an option.
The U.S. and China’s complicated relationship will not be easy to work through. Many have commented on what goals and problems should arise between the U.S. and China. Below are a few sources that address what some believe should be the main objectives and concerns of the US and China’s inevitable marriage.
Road Map For U.S.-China Relations
Forbes magazine published a Q&A with John Chen, a chief executive officer at Sybase who helped write a roadmap for the Obama administration on US-China relations. The brief Q&A succinctly addresses how the US and China must interact, and that they must avoid debates and issues caught up in ideology. Chen also spoke on some of the dangers lying on the wayside – how the Beijing has a lot of pressure to keep the China economy from sinking too low, and how countries around the world could be prone to protectionism. It was interesting how Chen noted that although the US and China will still be engaged in trade 10 years from now, China’s economy will probably have shifted to a service-oriented society.
Chen’s commentary made the US and China relations seem very simple. However, China has to balance the demands from home with demands from abroad.
Will the Chinese Communist Party Survive the Crisis?
In MinXin Pei piece, published March 12 in the Foreign Affairs magazine, Pei points out how the slowed economic growth and increasing economic instability threaten the rule of the CCP. Pei says that China has lulled its citizens into political apathy through a booming economy; a faltering economy could stir up dissension in the top ranks of the Chinese government. The government is facing pressure to quell the dissension by depreciating its currency once again and driving down export costs in order to stimulate the economy – exactly what the US does not want, if any balance of trade is to be reached.
While the Chinese are facing pressure at home, the US will likely meet conflict on ideological issues.
The G-2 Mirage
Elizabeth Economy wrote a piece in The Foreign Affairs magazine on how the US and China are incompatible on a number of basic ideological issues. An increase in engagement will necessarily include an increase in the number of disagreements and tension on issues such as human rights, Tibet, political systems and more. Economy argues that because of the basic inconsistencies between Beijing and Washington, increasing the bilateral relationship of the two countries is impossible and is not the solution.
Incompatibility is not necessarily the end-all of US-China relations.
Our Opportunity With China
Elizabeth Economy again wrote, this time with Maurice R. Greenberg Senior Fellow for China Studies Adam Segal, on how the US should take advantage of the political and economic instability in China to deal with some of the ideological differences between the two. It remains a delicate balancing act, though, the US’s own economic stability is tied to China’s stability, making ideological demands at a time such as this could prove disastrous.
After all this talk about the importance and necessity of the US-China relationship, some debate has emerged on whether only the US will have to play the central role with China.
The End of ‘Chimerica’
In his Harvard law blog, Niall Ferguson wrote on how the current world situation could offer alternatives to the US for negotiators with China. Ferguson coined the term “Chimerica” to describe the colossus of a relationship that exists between the US and China. However, in this piece, Ferguson expresses doubt that the US is the only solution to financial mess that so deeply involves China. He notes that the entire western world is involved with heavy trade and borrowing from China. He also notes that the dollar is no longer the only currency choice – the euro has made an appearance in the international economy.
Sources:
Road Map For U.S.-China Relations, John Chen, http://www.forbes.com/2009/03/11/us-china-relations-markets-chen-csis.html
Will the Chinese Communist Party Survive the Crisis?, Minxin Pei, http://www.foreignaffairs.com/articles/64862/minxin-pei/will-the-chinese-communist-party-survive-the-crisis?page=2
The G-2 Mirage, Elizabeth C. Economy and Adam Segal, http://www.foreignaffairs.com/articles/64946/elizabeth-c-economy-and-adam-segal/the-g-2-mirage
Our Opportunity With China, Elizabeth C. Economy and Adam Segal, http://www.cfr.org/publication/10459/our_opportunity_with_china.html
The End of ‘Chimerica’, Niall Ferguson, http://blogs.law.harvard.edu/guorui/2008/09/29/the-end-of-chimerica/
The Deterritorialization of Culture
In the Cowen and Barber debate the issue of culture and its relation to place was brought up. Barber discusses this phenomenon in his article Jihad vs. McWorld (Barber). As globalization transfers ideas and culture around the globe, cultures are able to exist in places that they didn’t before. Cultures are therefore no longer bound to any one location, but rather can exist almost anywhere. This has been referred to as the deterritorialization of culture.
One main factor in making the deterritorialization of culture possible is that globalization has gone a long way towards shortening “distance”. Inter-continental communication and travel have become simple and common occurrences. These combined have made distance less important. This phenomenon has had an influence on culture. “Cultural experience is in various ways ‘lifted out’ of its traditional ‘anchoring’ in particular localities….Modern culture is less determined by location because location is increasingly penetrated by ‘distance’” (Cameron & Stein 273). Culture is becoming something that can be partaken of by individuals based solely of their own interest and choice. Individuals do not have to move physically in order to participate.
An article by Tomlinson looks at this change in the nature of culture. He looks at the relationship between both identity and culture and geography. He sees the change in the relationship between these as having important implications for the relationship that people and cultures have with their respective nation states.
Nation states have largely used culture and identity as the main means of connecting their citizens to each other and to the nation state at large. Tomlinson, along with Cameron and Stein, believe that culture’s relationship to nation states and any changes it may have will have large implications. “Since the eighteenth century, national identity has been the most spectacularly successful modern mode of orchestrating belonging” (Cameron & Stein 274). They believe this relationship is changing because of the deterritorialization of culture. As individuals begin to identify themselves and their culture without regard to their location, a large role that nation states play is lost.
It seems that this change in the understanding of culture and its relationship to geography has serious implications not only just for individuals, but also for nation states. Individuals can take part in cultures that exist in multiple locals, and identify themselves more easily with groups that exist on a global scale, as opposed to just a national one. “Political subjects can now experience and express, without contradiction, both attachments to the nation, multi-ethnic allegiances and cosmopolitan sensibilities. The really interesting cultural-political question that emerges is of how nimble and reflexively attuned state apparatuses are capable of becoming in response to these changes” (Cameron & Stein 276).
“If “national” borders coincide largely with the political — less and less with the economic and the cultural, and only partly with the social — boundaries, then the triggers to national identity cannot help but be less frequent over time” and “cannot help but become less important” (Thomlinson 23).
States must realize this change in individuals’ identities and be flexible enough to allow it if they want to be able to related to their citizens in a way that is relative. Nation states no longer play a large role in citizens’ identities and therefore must find other ways to become important to their citizens to maintain their loyalty. “It is possible that national identities may become largely instrumental rather than constitutive, within a broader field of salient identities. Loyalty to a state for what it can do rather than for what and whom it represents is a significantly weaker basis, however, for political authority” (Tomlinson 23). If states were to follow this advice, we could expect to see a rise in the welfare that states provide to their citizens. Individuals with distinct identities that are self-chosen and deterritorialized would find their location important only because of the political system there and the benefits that it affords. Nation states must strive to find some new means of connecting with citizens in order to maintain their cohesiveness and their importance.
Barber, Benjamin R. “Jihad vs. McWorld.” The Atlantic. March 1992. http://www.theatlantic.com/doc/199203/barber
Cameron, David and Janice Gross Stein. “Globalization, Culture and Society: The State As Place Amidst Shifting Spaces.” Canadian Public Policy – Analyse de Politiques, Vol. XXVI Supplement/Numero Special 2. 2000. http://economics.ca/cgi/jab?journal=cpp&view=v26s2/CPPv26s2p015.pdf
Thomlinson, John. “Globalization and Cultural Identity.” The Global Transformations Reader An Introduction to the Globalization Debate. New York: Polity P, 2003. Chapter 23. http://www.polity.co.uk/global/pdf/GTReader2eTomlinson.pdf
One main factor in making the deterritorialization of culture possible is that globalization has gone a long way towards shortening “distance”. Inter-continental communication and travel have become simple and common occurrences. These combined have made distance less important. This phenomenon has had an influence on culture. “Cultural experience is in various ways ‘lifted out’ of its traditional ‘anchoring’ in particular localities….Modern culture is less determined by location because location is increasingly penetrated by ‘distance’” (Cameron & Stein 273). Culture is becoming something that can be partaken of by individuals based solely of their own interest and choice. Individuals do not have to move physically in order to participate.
An article by Tomlinson looks at this change in the nature of culture. He looks at the relationship between both identity and culture and geography. He sees the change in the relationship between these as having important implications for the relationship that people and cultures have with their respective nation states.
Nation states have largely used culture and identity as the main means of connecting their citizens to each other and to the nation state at large. Tomlinson, along with Cameron and Stein, believe that culture’s relationship to nation states and any changes it may have will have large implications. “Since the eighteenth century, national identity has been the most spectacularly successful modern mode of orchestrating belonging” (Cameron & Stein 274). They believe this relationship is changing because of the deterritorialization of culture. As individuals begin to identify themselves and their culture without regard to their location, a large role that nation states play is lost.
It seems that this change in the understanding of culture and its relationship to geography has serious implications not only just for individuals, but also for nation states. Individuals can take part in cultures that exist in multiple locals, and identify themselves more easily with groups that exist on a global scale, as opposed to just a national one. “Political subjects can now experience and express, without contradiction, both attachments to the nation, multi-ethnic allegiances and cosmopolitan sensibilities. The really interesting cultural-political question that emerges is of how nimble and reflexively attuned state apparatuses are capable of becoming in response to these changes” (Cameron & Stein 276).
“If “national” borders coincide largely with the political — less and less with the economic and the cultural, and only partly with the social — boundaries, then the triggers to national identity cannot help but be less frequent over time” and “cannot help but become less important” (Thomlinson 23).
States must realize this change in individuals’ identities and be flexible enough to allow it if they want to be able to related to their citizens in a way that is relative. Nation states no longer play a large role in citizens’ identities and therefore must find other ways to become important to their citizens to maintain their loyalty. “It is possible that national identities may become largely instrumental rather than constitutive, within a broader field of salient identities. Loyalty to a state for what it can do rather than for what and whom it represents is a significantly weaker basis, however, for political authority” (Tomlinson 23). If states were to follow this advice, we could expect to see a rise in the welfare that states provide to their citizens. Individuals with distinct identities that are self-chosen and deterritorialized would find their location important only because of the political system there and the benefits that it affords. Nation states must strive to find some new means of connecting with citizens in order to maintain their cohesiveness and their importance.
Barber, Benjamin R. “Jihad vs. McWorld.” The Atlantic. March 1992. http://www.theatlantic.com/doc/199203/barber
Cameron, David and Janice Gross Stein. “Globalization, Culture and Society: The State As Place Amidst Shifting Spaces.” Canadian Public Policy – Analyse de Politiques, Vol. XXVI Supplement/Numero Special 2. 2000. http://economics.ca/cgi/jab?journal=cpp&view=v26s2/CPPv26s2p015.pdf
Thomlinson, John. “Globalization and Cultural Identity.” The Global Transformations Reader An Introduction to the Globalization Debate. New York: Polity P, 2003. Chapter 23. http://www.polity.co.uk/global/pdf/GTReader2eTomlinson.pdf
Not So Fast: A little more research needed
Christmann and Taylor’s Globalization and the Environment paper explains how globalization positively affects companies’ intention and actual adherence to environmental policies. Christmann and Taylor seem to wrap up their thesis here, assuming that the implementation of an EMS is a goal worthy of itself. However, it seems scholars have yet to resolve the debate over the actual effectiveness of EMS’s. Furthermore, it seems that significant evidence has yet to conclusively prove a positive relationship between EMS and actual, sustained and forward-moving environmental self-regulation. When scholars automatically equate EMS implementation with a truly environmentally aware and conscious company, they do so prematurely. In order to fill this data gap, scholars should conduct thorough, detailed research on the true effectiveness of environmental metastandards, such as the ISO 14000.
Christmann and Taylor address seven hypotheses in their paper, and the data Christmann and Taylor collected support all but one of the hypotheses. The data did not even technically disprove the one hypothesis; the data merely did not show a significant positive coefficient. Such success (soundly proving all but one hypothesis) intimates that globalization, through its encouragement of EMS implementation, aids rather than harms the environment. However, the article admitted that government environmental regulations differed from country to country, meaning that a government regulation might not really be as effective as it could be. Also, the article admitted that companies can sometimes simply pursue EMS certification for the sake of the label and not really for the sake of protecting the environment. “Certification to an international metastandard such as ISO 14001 can be an end in itself, with little commitment to long-term company-wide environmental self regulation.” (Christmann, 454)
In fact, in “Panacea, common sense, or just a label,” authors Rondinelli and Vastag support the theory that EMS’s such as ISO 14000 do not actually guarantee better environmental performance. They examined a plant in South Carolina that had practiced policy through an EMS since 1995, and had eventually formally implemented EMS. The positive results of the implementation of ISO 14000 were confined to either intangible “awareness” results or changes within the dynamic of the company.
“The primary benefits at Mt Holly seem to be in reinforcing and strengthening good environmental management practices, reviewing and improving management procedures, increasing operation efficiency and effectiveness, and enhancing employee awareness of the environmental impacts of their activities.” (Rondinelli, Conclusion)
It should be noted that the reinforcement of good environmental management practices does not intonate innovation for good environmental management practices. Rondinelli and Vastag concede that their case study examined a company with an already environmentally friendly history.
Even Christmann and Taylor mentioned the fact that companies who have already achieved the ISO 9000 status would find it easier to implement ISO 14000 (Christmann, 449) Perhaps the case is that companies who already have a decent certification for management efficiency are simply trading the lower 9000 label for a fancier 14000 label.
In fact, as Rondinelli and Vastag admit, the ISO 14000 might bring attention to inefficient and wasteful practices within a company, but the EMS allows companies to remain stagnant in their environmental practices. “It does not measure or ensure improved environmental performance, nor does it guarantee that a certified facility will always remain in regulatory compliance.” (Rondinelli, Conclusion)
Another article that examined the effects of EMS implementation likewise emphasized how EMS’s biggest point of impact is on the company’s operational efficiency and effectiveness. In “Assessing the impact of environmental management systems on corporate and environmental performance,” authors Melnyk, Sroufe and Calantone stress the benefits an EMS may have on improving a firm’s operations. mention a formal EMS’s benefits for reducing waste and increased use of environmentally friendly options. (Melnyk, Concluding Comments)
However the article admits that actual environmental data is hard to come by and further research should examine the relationship between EMS’s and actual improvement of the environment. (Melnyk, Abstract)
It seems obvious that EMS’s can help a company pay homage to the environment through a formal signing off on the EMS’s requirements. And although an EMS can bring more environmental awareness and operational efficiency, the EMS in itself does not force the firm to be innovative or forward-thinking in its environmental practices. So before scholars equate EMS’s with improving environmental policies, and before they equate globalization with EMS’s and so with improving environmental policies, further research is required to establish the actual benefits between metastandards and EMS’s and true and practical care for the environment.
Sources:
Christmann, Petra; Taylor, Glen. “Globalization and the Environment: Determinants of Firm Self-Regulation in China”
Rondinelli, Dennis; Vastag, Gyula. “Panacea, common sense, or just a label?: The value of ISO 14001 environmental management systems.” http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V9T-419BG65-5&_user=491431&_coverDate=10%2F31%2F2000&_rdoc=1&_fmt=full&_orig=search&_cdi=5907&_sort=d&_docanchor=&view=c&_acct=C000023838&_version=1&_urlVersion=0&_userid=491431&md5=63670edf231f2e15ca942c159db8dad7#toc16
Melnyk, Steven A.; Sroufe, Robert; Calantone, Roger. “Assessing the impact of environmental management systems on corporate and environmental performance.” http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VB7-47CHCX9-1&_user=491431&_coverDate=05%2F31%2F2003&_rdoc=1&_fmt=full&_orig=search&_cdi=5919&_sort=d&_docanchor=&view=c&_acct=C000023838&_version=1&_urlVersion=0&_userid=491431&md5=8bb897b2e12c47ebc8f43eb49d26fc22#toc23
Christmann and Taylor address seven hypotheses in their paper, and the data Christmann and Taylor collected support all but one of the hypotheses. The data did not even technically disprove the one hypothesis; the data merely did not show a significant positive coefficient. Such success (soundly proving all but one hypothesis) intimates that globalization, through its encouragement of EMS implementation, aids rather than harms the environment. However, the article admitted that government environmental regulations differed from country to country, meaning that a government regulation might not really be as effective as it could be. Also, the article admitted that companies can sometimes simply pursue EMS certification for the sake of the label and not really for the sake of protecting the environment. “Certification to an international metastandard such as ISO 14001 can be an end in itself, with little commitment to long-term company-wide environmental self regulation.” (Christmann, 454)
In fact, in “Panacea, common sense, or just a label,” authors Rondinelli and Vastag support the theory that EMS’s such as ISO 14000 do not actually guarantee better environmental performance. They examined a plant in South Carolina that had practiced policy through an EMS since 1995, and had eventually formally implemented EMS. The positive results of the implementation of ISO 14000 were confined to either intangible “awareness” results or changes within the dynamic of the company.
“The primary benefits at Mt Holly seem to be in reinforcing and strengthening good environmental management practices, reviewing and improving management procedures, increasing operation efficiency and effectiveness, and enhancing employee awareness of the environmental impacts of their activities.” (Rondinelli, Conclusion)
It should be noted that the reinforcement of good environmental management practices does not intonate innovation for good environmental management practices. Rondinelli and Vastag concede that their case study examined a company with an already environmentally friendly history.
Even Christmann and Taylor mentioned the fact that companies who have already achieved the ISO 9000 status would find it easier to implement ISO 14000 (Christmann, 449) Perhaps the case is that companies who already have a decent certification for management efficiency are simply trading the lower 9000 label for a fancier 14000 label.
In fact, as Rondinelli and Vastag admit, the ISO 14000 might bring attention to inefficient and wasteful practices within a company, but the EMS allows companies to remain stagnant in their environmental practices. “It does not measure or ensure improved environmental performance, nor does it guarantee that a certified facility will always remain in regulatory compliance.” (Rondinelli, Conclusion)
Another article that examined the effects of EMS implementation likewise emphasized how EMS’s biggest point of impact is on the company’s operational efficiency and effectiveness. In “Assessing the impact of environmental management systems on corporate and environmental performance,” authors Melnyk, Sroufe and Calantone stress the benefits an EMS may have on improving a firm’s operations. mention a formal EMS’s benefits for reducing waste and increased use of environmentally friendly options. (Melnyk, Concluding Comments)
However the article admits that actual environmental data is hard to come by and further research should examine the relationship between EMS’s and actual improvement of the environment. (Melnyk, Abstract)
It seems obvious that EMS’s can help a company pay homage to the environment through a formal signing off on the EMS’s requirements. And although an EMS can bring more environmental awareness and operational efficiency, the EMS in itself does not force the firm to be innovative or forward-thinking in its environmental practices. So before scholars equate EMS’s with improving environmental policies, and before they equate globalization with EMS’s and so with improving environmental policies, further research is required to establish the actual benefits between metastandards and EMS’s and true and practical care for the environment.
Sources:
Christmann, Petra; Taylor, Glen. “Globalization and the Environment: Determinants of Firm Self-Regulation in China”
Rondinelli, Dennis; Vastag, Gyula. “Panacea, common sense, or just a label?: The value of ISO 14001 environmental management systems.” http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V9T-419BG65-5&_user=491431&_coverDate=10%2F31%2F2000&_rdoc=1&_fmt=full&_orig=search&_cdi=5907&_sort=d&_docanchor=&view=c&_acct=C000023838&_version=1&_urlVersion=0&_userid=491431&md5=63670edf231f2e15ca942c159db8dad7#toc16
Melnyk, Steven A.; Sroufe, Robert; Calantone, Roger. “Assessing the impact of environmental management systems on corporate and environmental performance.” http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VB7-47CHCX9-1&_user=491431&_coverDate=05%2F31%2F2003&_rdoc=1&_fmt=full&_orig=search&_cdi=5919&_sort=d&_docanchor=&view=c&_acct=C000023838&_version=1&_urlVersion=0&_userid=491431&md5=8bb897b2e12c47ebc8f43eb49d26fc22#toc23
Sweatshops: A "Necessary Evil"?
Labor issues are one of the most contentious aspects of globalization, and of these sweatshops are perhaps the most emotionally charged component. In his articles, Kristof discusses the issue of sweatshops and globalization. He takes a view that he predicts will not easily be accepted. He argues that sweatshops should not be seen as completely detrimental to the labor situation of less developed countries (LDCs). Instead he emphasizes the important role that sweatshops sometime play in providing low-cost labor in these areas.
Countries at different stages of economic development and different levels of globalization naturally depend on different economic structures for their success. LDCs are at a disadvantage in the global market. They do not have the human capital to be able to compete in the service industry, so they must instead focus on manufacturing and production. If these countries do not have natural resources to depend on, they must instead look to their labor force to succeed. One of the major hindrances that LDCs face is their lack of infrastructure. By not having the facilities and technology that other countries have, LDCs’ production is not able to be as cost efficient. This means that their products’ prices will be higher, making them not competitive in the global market. In order to make up for the heightened costs, these countries often resort to lowering the amount of money that they spend on labor conditions and the wages that they pay to workers. This is where sweatshops arise.
Those who oppose the existence of sweatshops believe that labor standards should be made and enforced across the board. They believe that by making compliance to these standards required, all countries will be forced to improve their labor conditions. Kristof argues that this is not feasible. The economic disadvantage that LDCs are in precludes them from being able to comply and still be able to be competitive in the global market. The prices of their goods would be much higher than other countries and they would have no business. He instead sees sweatshops and low-cost labor as something of a “necessary evil” that provides the initial economic opportunities that LCDs need to catch up with other countries.
One study I found compared the wages of workers in apparel sweatshops with the average wages in the country and found them to be close to, and sometimes even more than, average (Powell and Skarbek). Even though sweatshops may be paying wages much less than what would be paid at similar factories in other countries, the wages are about or better than normal for that country. This means that sweatshops actually provide jobs with decent wages for the individuals in the countries in which they operate. They argue that, “even where earnings are less than 100 percent of average wages, as long as workers voluntarily choose to work at the sweatshop, it makes the individual worker better off.” Sweatshops provide workers with a job, albeit a low-wage job. If workers are willing to work for the wages, then these jobs provide them with an opportunity to improve their economic situation.
Hellmer’s article points out that while under free market conditions this argument makes sense, this is not always the case. Sometimes governments actively oppress their citizens and artificially decrease wages. In instances like this, for example Burma, sweatshops should be opposed.
For LDCs to succeed, they must start to develop economically. Sweatshops and low-cost labor tend to be the only way they have to do so. Hopefully, after LDCs start to improve their economic situation wages which naturally begin to rise. But by artificially raising wages, their economic development might actually be stunted.
Hellmer, Ellennita Muetze. “Establishing Government Accountabiliy in the Anti-sweatshop Campaign: Toward a Logical, Activist Approach to Improving the Working Conditions of the Poor”. Journal of Libertarian Studies, vol. 19, no. 3 (summer 2005): 33-47. http://mises.org/journals/jls/19_3/19_3_2.pdf
Kristof, Nicholas D. “Where Sweatshops are a Dream”. The New York Times. Jan 14, 2009. http://www.nytimes.com/2009/01/15/opinion/15kristof.html?_r=1
Kristof, Nicholas D. “My Sweatshop Column”. The New York Times. Jan 14, 2009. http://kristof.blogs.nytimes.com/2009/01/14/my-sweatshop-column/?ref=opinion
Powell, Benjamin and David Skarbek. “Sweatshops and Third World Living Standards: Are the Jobs Worth the Sweat?”. Journal of Labor Research, 2006, vol. 27, issue 2, pages 263-274. http://www.independent.org/publications/working_papers/article.asp?id=1369
Globalization and Fiscal Transfers
The discussion about the effect of globalization on fiscal transfers is a part of a larger debate focusing on economic globalization’s effect on domestic fiscal policy. Of the theories surrounding the debate, our author suggests they can be divided into two types: political and non-political. From what I’ve read, it seems that the political arguments tend to support compensation theory, which says government strives to compensate the losers of economic integration (or globalization, market liberalization, trade openness, etc) while many from the economic side seem to support the efficiency hypothesis which describes how government face pressure to reduce taxes and retain mobile capital.
The problem with this division of political (compensation) and economic (efficiency) is that often the two are interacting so that many scholars are finding it difficult to support one or the other hypothesis. The following are some are papers I’ve found that seem to reoccur when reading about this debate.
Garrett, Geoffrey “Globalization and Government Spending Around the World”, Studies in Comparative International Development, Winter 2001, Vol. 35, pp. 3-29
In this article, Geoffrey Garrett seeks to compare the “two major contending perspectives” on integration: compensation and efficiency. Garrett examines government spending in 100 countries from 1970-1995 and finds that high levels of trade “are associated to high levels of government spending”, but in places where trade grew quickly, government spending lagged behind. This suggests that efficiency constraints associated with fast trade growth seemed to outweigh the political pressure for compensation generated by the inequalities usually associated with trade. For this reason, Garrett asserts that globalization (market integration--discussed here as a measure of trade as a percentage of GDP) should be measured in changes rather than levels (see Rodrik), as a large change may indicate fast trade growth and therefore be subject to less political demands for compensation.
Kaufman, Robert, “Globalization, Domestic Politics, and Social Spending in Latin America: A Time-Series Cross-Section Analysis 197397”, World Politics 53 July 2001, pp. 553-87
Kaufman finds that trade integration reduces pensions and other fiscal transfers, and capital account liberalization (freer flow of capital both in and out of the country) also compounds the negative effects of trade integration. As economies and capital markets become more closely linked and capital becomes more mobile, governments can face credible pressure from businesses threatening to liquidate assets and move production. The study also finds however that integration in capital markets “does appear to encourage increases (or discourage decreases)” in health and education spending, presumably as a way to meet labor quality requirements of investors.
Rodrik, Dani, “Trade, Social Insurance, and the Limits to Globalization”, National Bureau of Economic Research, Working paper 5905, 1997 (2001)
Rodrik uses a cross-section analysis to explain the relationship between the degree of openness and the size of government. He finds that high levels of openness are strongly associated with larger governments. The argument states that as trade increases as a proportion of GDP, risk or economic uncertainty also rises. In response to the increased exposure to external risk, governments come under pressure to increase fiscal transfers thereby expanding government and creating the welfare state; however, Rodrick also asserts that underneath the constraints of providing more compensation in face of more risk exposure, governments are forced to raise taxes on labor and lower taxes on capital (see Shulze).
Schulze, Gunther, “Globalisation of the Economy and the Nation State”, The World Economy 22, No. 3, 1999, pp. 295-353
Schulze makes a strong argument against the overstatement of economic globalization’s effect on domestic fiscal policy by stating that the although the corporate income tax rate has converged across countries (consistent with theory), it still only constitutes a small percentage of the tax base in comparison to income and value added taxes. From this standpoint, the extent of economic integration should have less effect on domestic policy toward social programs than one might think since income and value added taxes are significantly less mobile.
The problem with this division of political (compensation) and economic (efficiency) is that often the two are interacting so that many scholars are finding it difficult to support one or the other hypothesis. The following are some are papers I’ve found that seem to reoccur when reading about this debate.
Garrett, Geoffrey “Globalization and Government Spending Around the World”, Studies in Comparative International Development, Winter 2001, Vol. 35, pp. 3-29
In this article, Geoffrey Garrett seeks to compare the “two major contending perspectives” on integration: compensation and efficiency. Garrett examines government spending in 100 countries from 1970-1995 and finds that high levels of trade “are associated to high levels of government spending”, but in places where trade grew quickly, government spending lagged behind. This suggests that efficiency constraints associated with fast trade growth seemed to outweigh the political pressure for compensation generated by the inequalities usually associated with trade. For this reason, Garrett asserts that globalization (market integration--discussed here as a measure of trade as a percentage of GDP) should be measured in changes rather than levels (see Rodrik), as a large change may indicate fast trade growth and therefore be subject to less political demands for compensation.
Kaufman, Robert, “Globalization, Domestic Politics, and Social Spending in Latin America: A Time-Series Cross-Section Analysis 197397”, World Politics 53 July 2001, pp. 553-87
Kaufman finds that trade integration reduces pensions and other fiscal transfers, and capital account liberalization (freer flow of capital both in and out of the country) also compounds the negative effects of trade integration. As economies and capital markets become more closely linked and capital becomes more mobile, governments can face credible pressure from businesses threatening to liquidate assets and move production. The study also finds however that integration in capital markets “does appear to encourage increases (or discourage decreases)” in health and education spending, presumably as a way to meet labor quality requirements of investors.
Rodrik, Dani, “Trade, Social Insurance, and the Limits to Globalization”, National Bureau of Economic Research, Working paper 5905, 1997 (2001)
Rodrik uses a cross-section analysis to explain the relationship between the degree of openness and the size of government. He finds that high levels of openness are strongly associated with larger governments. The argument states that as trade increases as a proportion of GDP, risk or economic uncertainty also rises. In response to the increased exposure to external risk, governments come under pressure to increase fiscal transfers thereby expanding government and creating the welfare state; however, Rodrick also asserts that underneath the constraints of providing more compensation in face of more risk exposure, governments are forced to raise taxes on labor and lower taxes on capital (see Shulze).
Schulze, Gunther, “Globalisation of the Economy and the Nation State”, The World Economy 22, No. 3, 1999, pp. 295-353
Schulze makes a strong argument against the overstatement of economic globalization’s effect on domestic fiscal policy by stating that the although the corporate income tax rate has converged across countries (consistent with theory), it still only constitutes a small percentage of the tax base in comparison to income and value added taxes. From this standpoint, the extent of economic integration should have less effect on domestic policy toward social programs than one might think since income and value added taxes are significantly less mobile.
Avoiding the Fall
Globalization, despite its many benefits and opportunities, also provides many economic and social holes any country taking advantage of globalization can fall into. If a country does not safely guard itself against the sometimes-unwise demands of a citizenship negatively affected by globalization, the country could experience a financial crisis similar to that of the 1997 Asian financial crisis.
A country opening its markets and liberalizing its trade system may experience growth and development. However, the country will also experience change in a more negative sense in its economic and social sectors. Although the country’s economy will grow overall, the growth will be uneven and leave some sections of the economy and population much wealthier, while other sections of the economy and population are left disproportionately poorer. (Ha, 786) The disproportion and uncertainty of economic growth leads to social, in addition to economic, instability. Ha notes, “…scholars have found that labor market volatility and insecurity have risen in industrial economies, especially in the 1990’s.” (Ha, 787) And as referenced by Ha, workers in the US economy felt more insecure in their jobs than a decade before. (Ha, 787)
In order to compensate for the negative effects of globalization, states often feel pressure to protect their domestic market against the international market. “To mitigate the backlashes and help maintain public support for opening markets further, governments come under pressure to compensate those who have been harmed by globalization.” (Ha, 787) States might compensate citizens by increasing basic welfare benefits, but can also implement economic strategies that protect domestic markets. In an extreme form, states can threaten to pull out from all international alliances. Pat Buchanan ran for president in 1996 on the platform that the US should pull out of all global institutions, such as NAFTA and even the WTO.
So for countries balancing globalization and liberalized trade with an increasing wealth gap and the public’s feeling of job insecurity, the state must increase welfare benefits, from job loss compensation to tariffs to protect the domestic market. “Societies are asked to embrace change and dislocation in international liberalization, but the state promises to cushion those effects through domestic, economic and social policies.” (Ha, 804)
But such policy, although helpful in quelling the discontented masses, can ultimately prove to be the downfall of a nation’s economy. In order to guard against the foolishness of artificially sheltering the home market from the international, states should foster and encourage a liberal, diverse system of democracy. Japan greatly benefited from a global, liberal market in the 80’s and early 90’s. However, Japan’s policies of opening its international economy while closing its domestic economy to globalization at least partially resulted in the 1997 financial crisis. (Pempel, 35) “The model that led to success also built in many important but less than fully examined elements that subsequently led to (Japan’s) eventual stagnation.” (Pempel, 36)
Ha intimates that countries today lean towards using the same policy Japan used – policy that takes advantage of the globalized international market, while also closing and sheltering its home market through implementing all manner of protectionist policies. Ha says, though, that countries with a more diverse “veto player” population have a more difficult time changing policy in reaction to the pressure of globalization. “Although globalization pressures states to change welfare expenditures, the state’s ability to do so decreases as the number of and ideological distance among veto players needed to change the status quo increases.” (Ha, 804)
It should be noted that each of the major East Asian economies involved in the financial crisis lacked political diversity. Each one had a state-guided economic plan, and each had dominant political parties. Following Ha’s logic, and the logic of several other scholars Ha cites, if the East Asian countries had had a more diverse veto player pool, the welfare policies used to cater to domestic sectors would have been fewer. And thus, the policies that eventually led to the East Asian financial crisis might have been avoided.
In the face of the ever-increasing pressure for countries to liberalize internationally and then to protect domestically, states should note the importance of balancing growth in the global economy with stability in the domestic. “What is needed instead – for the sake of America and the sake of the world – is…a new formula for combining the twin desires of international and domestic stability.” (Ruggie, 94) And one of the best ways to ensure a balance between the “twin desires” is to allow and encourage a variety of veto players.
Sources:
Ha, Eunyoong, 2008
Ruggie, John Gerard, “Embedded Liberalism Compromise,” http://books.google.com/books?hl=en&lr=&id=oIZmBH9X2VUC&oi=fnd&pg=PA79&dq=liberalism+compromise&ots=7SwT0p3VmC&sig=qiXHT6uGMWkiNjiffIzVNZl4cDA#PPA94,M1
Pempel, T.J., “Revisiting the Japanese Economic Model”
A country opening its markets and liberalizing its trade system may experience growth and development. However, the country will also experience change in a more negative sense in its economic and social sectors. Although the country’s economy will grow overall, the growth will be uneven and leave some sections of the economy and population much wealthier, while other sections of the economy and population are left disproportionately poorer. (Ha, 786) The disproportion and uncertainty of economic growth leads to social, in addition to economic, instability. Ha notes, “…scholars have found that labor market volatility and insecurity have risen in industrial economies, especially in the 1990’s.” (Ha, 787) And as referenced by Ha, workers in the US economy felt more insecure in their jobs than a decade before. (Ha, 787)
In order to compensate for the negative effects of globalization, states often feel pressure to protect their domestic market against the international market. “To mitigate the backlashes and help maintain public support for opening markets further, governments come under pressure to compensate those who have been harmed by globalization.” (Ha, 787) States might compensate citizens by increasing basic welfare benefits, but can also implement economic strategies that protect domestic markets. In an extreme form, states can threaten to pull out from all international alliances. Pat Buchanan ran for president in 1996 on the platform that the US should pull out of all global institutions, such as NAFTA and even the WTO.
So for countries balancing globalization and liberalized trade with an increasing wealth gap and the public’s feeling of job insecurity, the state must increase welfare benefits, from job loss compensation to tariffs to protect the domestic market. “Societies are asked to embrace change and dislocation in international liberalization, but the state promises to cushion those effects through domestic, economic and social policies.” (Ha, 804)
But such policy, although helpful in quelling the discontented masses, can ultimately prove to be the downfall of a nation’s economy. In order to guard against the foolishness of artificially sheltering the home market from the international, states should foster and encourage a liberal, diverse system of democracy. Japan greatly benefited from a global, liberal market in the 80’s and early 90’s. However, Japan’s policies of opening its international economy while closing its domestic economy to globalization at least partially resulted in the 1997 financial crisis. (Pempel, 35) “The model that led to success also built in many important but less than fully examined elements that subsequently led to (Japan’s) eventual stagnation.” (Pempel, 36)
Ha intimates that countries today lean towards using the same policy Japan used – policy that takes advantage of the globalized international market, while also closing and sheltering its home market through implementing all manner of protectionist policies. Ha says, though, that countries with a more diverse “veto player” population have a more difficult time changing policy in reaction to the pressure of globalization. “Although globalization pressures states to change welfare expenditures, the state’s ability to do so decreases as the number of and ideological distance among veto players needed to change the status quo increases.” (Ha, 804)
It should be noted that each of the major East Asian economies involved in the financial crisis lacked political diversity. Each one had a state-guided economic plan, and each had dominant political parties. Following Ha’s logic, and the logic of several other scholars Ha cites, if the East Asian countries had had a more diverse veto player pool, the welfare policies used to cater to domestic sectors would have been fewer. And thus, the policies that eventually led to the East Asian financial crisis might have been avoided.
In the face of the ever-increasing pressure for countries to liberalize internationally and then to protect domestically, states should note the importance of balancing growth in the global economy with stability in the domestic. “What is needed instead – for the sake of America and the sake of the world – is…a new formula for combining the twin desires of international and domestic stability.” (Ruggie, 94) And one of the best ways to ensure a balance between the “twin desires” is to allow and encourage a variety of veto players.
Sources:
Ha, Eunyoong, 2008
Ruggie, John Gerard, “Embedded Liberalism Compromise,” http://books.google.com/books?hl=en&lr=&id=oIZmBH9X2VUC&oi=fnd&pg=PA79&dq=liberalism+compromise&ots=7SwT0p3VmC&sig=qiXHT6uGMWkiNjiffIzVNZl4cDA#PPA94,M1
Pempel, T.J., “Revisiting the Japanese Economic Model”
Open Minds, Open Markets: Neoliberalism or (Neo)liberalism
The discussion on globalization and education spending as viewed through the Hecock analysis of Mexico seems to become an analysis of democratic qualities and there relation to market forces: the outspoken teacher’s unions responding to low wages or leaders soliciting electoral approval by increasing social spending--the presence of either phenomenon requiring the competition and transparency of democracy. The other variables included economic indicators like GDP growth and FDI per capita, two things related to trade liberalization and economic globalization. In looking for related literature, I tried to focus on “globalization” and “education spending”. The findings seem mostly related to the effect of IGO policy and domestic response; however, looking for neoliberalism and education provides a more dynamic look at the effects discussed in Hecock.
Nooruddin, Irfan; “The Politics of Hard Choices: IMF Programs and Government Spending”, International Organization vol. 60, Fall 2006 pp. 1001-1033
In concluding Hecock says that the left-wing union had a strong positive impact on increasing government investment in education, whereas the presence of a governor ideologically supportive of education spending had a weak positive relationship. Nooruddin looks at the relationship between IMF programs and domestic governance. He shows that IMF loan reduction programs actually cause governments to reduce social spending, and counterintuitively the effect is larger in democratic countries than in nondemocratic ones. He argues that democracies “decrease spending on those programs with the least organized interests”. In the cases of developing countries, social services are often in this category.
(If developing democracies spending less on education and opening markets for international services (i.e. GATS), would that allow international education companies to fill the gap? If so, would private education be filling gaps or making them? )
Hill, Dave; Global Neoliberalism and Education and its Consequences, Routledge New York, NY, 2009.
Hecock’s research did not take into consideration the individual cost of education past the point of government funding. If economic globalization pressures for privatization of education as is argued in Dave Hill’s Global Neoliberalism and Education and its Consequences, then the role of government investment becomes increasingly negligible (or the most important depending on your view). These works link economic globalization wrapped in a political policy of democracy, opening and reform that causes gaps in access to quality, affordable education.
The book goes into great detail about the many aspects of new trends in the privatization of education: the effect of profit motive on higher education; the multifaceted effect of GATS on the developing countries; and the World Bank discourse on education and its implications on education policy.
Nooruddin, Irfan; “The Politics of Hard Choices: IMF Programs and Government Spending”, International Organization vol. 60, Fall 2006 pp. 1001-1033
In concluding Hecock says that the left-wing union had a strong positive impact on increasing government investment in education, whereas the presence of a governor ideologically supportive of education spending had a weak positive relationship. Nooruddin looks at the relationship between IMF programs and domestic governance. He shows that IMF loan reduction programs actually cause governments to reduce social spending, and counterintuitively the effect is larger in democratic countries than in nondemocratic ones. He argues that democracies “decrease spending on those programs with the least organized interests”. In the cases of developing countries, social services are often in this category.
(If developing democracies spending less on education and opening markets for international services (i.e. GATS), would that allow international education companies to fill the gap? If so, would private education be filling gaps or making them? )
Hill, Dave; Global Neoliberalism and Education and its Consequences, Routledge New York, NY, 2009.
Hecock’s research did not take into consideration the individual cost of education past the point of government funding. If economic globalization pressures for privatization of education as is argued in Dave Hill’s Global Neoliberalism and Education and its Consequences, then the role of government investment becomes increasingly negligible (or the most important depending on your view). These works link economic globalization wrapped in a political policy of democracy, opening and reform that causes gaps in access to quality, affordable education.
The book goes into great detail about the many aspects of new trends in the privatization of education: the effect of profit motive on higher education; the multifaceted effect of GATS on the developing countries; and the World Bank discourse on education and its implications on education policy.
Lheem, Han Gyu and Sujian Guo. “Political Economy of FDI and Economic Growth in China: A Longitudinal Test at Provincial Level.” Journal of Chinese Political Science. Vol. 9, No. 1, Spring 2004. http://bss.sfsu.edu/sguo/My%20articles/FDI%20in%20China_2004.pdf
Directorate for Financial, Fiscal and Enterprise Affairs. “Main Determinants and Impacts of Foreign Direct Investment on China’s Economy.” Working Papers on International Investment. Number 2000/4. December 2000. http://www.oecd.org/dataoecd/57/23/1922648.pdf
Tang, Sumei; E. A. Selvanathan; and S. Selvanathan. “Foreign Direct Investment, Domestic Investment, and Economic Growth in China: A Time Series Analysis.” UNU-WIDER. February 2008. Research Paper No. 2008/19. http://www.wider.unu.edu/publications/working-papers/research-papers/2008/en_GB/rp2008-19/
This paper looks at data on FDI in China from 1995-2000. It suggests that the positive relationship between FDI and economic growth may not be FDI driven. Instead, it suggests that it may be growth-driven; FDI may be attracted to countries that have high levels of economic growth. The paper sites Malaysia and Thailand as examples of this. It also suggests that China presents and example of a two-way causal relationship between FDI and economic growth. The differences in economic performance related to FDI from region to region are also pointed out. The relatively large amount of growth on China’s coastland is given explanation by the open-door policy, geographic situation, and Special Economic Zones there. The findings of the paper show that human capital did not have influence on the flow of FDI. It also finds that FDI distribution is affected by different factors on the regional and national level. The paper points out that the relationship between FDI and domestic savings has yet to be explained.
Directorate for Financial, Fiscal and Enterprise Affairs. “Main Determinants and Impacts of Foreign Direct Investment on China’s Economy.” Working Papers on International Investment. Number 2000/4. December 2000. http://www.oecd.org/dataoecd/57/23/1922648.pdf
This paper looks at FDI in China between 1979 and 1999. From 1992-1999 FDI was the main source of capital inflows. A vast amount of FDI went to southern and eastern China, though more moved toward central China over time. Most of FDI went gone into manufacturing and real estate. FDI also played a large role in stimulating industrialization in China. The research found that while FDI helped with China’s export market, in 2003 it was more domestic-oriented than export-oriented. It thus played a large role in decreasing China’s need for imports.
Tang, Sumei; E. A. Selvanathan; and S. Selvanathan. “Foreign Direct Investment, Domestic Investment, and Economic Growth in China: A Time Series Analysis.” UNU-WIDER. February 2008. Research Paper No. 2008/19. http://www.wider.unu.edu/publications/working-papers/research-papers/2008/en_GB/rp2008-19/
This paper looks at economic growth in China from 1978-2003. It attempts to determine the relationship that FDI has had with China’s economic growth. The findings suggest that while FDI has certainly played a role in China’s economic growth, the role played by domestic investment has been larger. But it also finds that FDI has complementary effects on domestic investment, while domestic investment and GDP do not seem to have much affect on FDI. FDI, therefore, has been an important means of spurring on the economic growth of the country.
A World of Countries Only?
In his article, Waltz presents the two different views on the motivating and directing forces behind globalization. He argues that instead of being market-driven like Friedman holds, globalization is being led by, and will continue to be led by, states and their politics. While I found Waltz’s argument to be very persuasive, I felt like an important aspect of the current global state of affairs was missing. Waltz seemed to view the world as composed of individual, though interconnected, states and them alone. Not mentioned in his article were international groups, such as terrorist organizations. I would argue that groups like these will play a large part in influencing the direction that globalization will take as they will almost certainly influence both the politics and economics of countries.
Because terrorist groups are often multi-national, they could not truly be considered to be part of individual nation-states. They must therefore be seen as international, or global, groups. This is why I think that they should be considered in the discussion of globalization. While some terrorist groups have links to certain state and national governments, many (like Al Qaeda) do not. These groups may work with governments at certain points, but they remain separate entities. The goals of these terrorist groups are usually driven by ideologies, though they may have some political and economic goals as well. They do not fit nicely into the scheme that Waltz presents in his article. They lie outside the realm of nation-states and yet have a large effect on them.
Globalization in the past has paved the way for terrorists to be able to have the global influence that they do now. As transport costs have decreased, they have been able to travel easier and cheaper. The decrease in communication costs and the increase in communication technologies have made it easier for them to get in contact with each other and plan globally. The opening of national borders has allowed for them to travel internationally with less effort.
Terrorist groups’ aims are often ideological. Their enemies may be certain political groups, or they may be racial groups or religious groups. They may target the governments of countries in order to attack, symbolically or literally, the groups that they are against. The attacks that they carry out will certainly affect the countries in which they occur. They will have physical, emotional, political, and economic impact on these countries. Because of the interconnectedness of countries as a result of recent globalization, this will impact other countries as well. Economic systems around the world can be affected by an attack in one country. Countries’ relations with one another can also be affected. The existence of members of a terrorist group in one country can affect not only that individual country’s domestic policies, but also other countries’ policies towards that country. This will can affect global relations.
For example, the 9/11 terrorist attacks on the United States had a global impact. The United States’ economy suffered afterwards. This was felt to some extent by other countries that do business with the United States. The United States government felt the need to go after the terrorist group behind the attacks. This led to the war in Afghanistan and was also influential in leading to the war in Iraq. Obviously, Al Qaeda’s terrorist attack in the United States caused an international political issue. The United States also took measures to improve security and tighten its national borders in the wake of attacks. This also had an impact on international politics. I feel it can therefore be argued that groups like Al Qaeda at least have the potential to be international and global forces and influence the future of globalization.
I think that by not mentioning international terrorist groups in his article, Waltz missed an important component in the process of globalization. He did not take into account groups that are outside the borders of countries and yet have an impact on them, both politically and economically.
Because terrorist groups are often multi-national, they could not truly be considered to be part of individual nation-states. They must therefore be seen as international, or global, groups. This is why I think that they should be considered in the discussion of globalization. While some terrorist groups have links to certain state and national governments, many (like Al Qaeda) do not. These groups may work with governments at certain points, but they remain separate entities. The goals of these terrorist groups are usually driven by ideologies, though they may have some political and economic goals as well. They do not fit nicely into the scheme that Waltz presents in his article. They lie outside the realm of nation-states and yet have a large effect on them.
Globalization in the past has paved the way for terrorists to be able to have the global influence that they do now. As transport costs have decreased, they have been able to travel easier and cheaper. The decrease in communication costs and the increase in communication technologies have made it easier for them to get in contact with each other and plan globally. The opening of national borders has allowed for them to travel internationally with less effort.
Terrorist groups’ aims are often ideological. Their enemies may be certain political groups, or they may be racial groups or religious groups. They may target the governments of countries in order to attack, symbolically or literally, the groups that they are against. The attacks that they carry out will certainly affect the countries in which they occur. They will have physical, emotional, political, and economic impact on these countries. Because of the interconnectedness of countries as a result of recent globalization, this will impact other countries as well. Economic systems around the world can be affected by an attack in one country. Countries’ relations with one another can also be affected. The existence of members of a terrorist group in one country can affect not only that individual country’s domestic policies, but also other countries’ policies towards that country. This will can affect global relations.
For example, the 9/11 terrorist attacks on the United States had a global impact. The United States’ economy suffered afterwards. This was felt to some extent by other countries that do business with the United States. The United States government felt the need to go after the terrorist group behind the attacks. This led to the war in Afghanistan and was also influential in leading to the war in Iraq. Obviously, Al Qaeda’s terrorist attack in the United States caused an international political issue. The United States also took measures to improve security and tighten its national borders in the wake of attacks. This also had an impact on international politics. I feel it can therefore be argued that groups like Al Qaeda at least have the potential to be international and global forces and influence the future of globalization.
I think that by not mentioning international terrorist groups in his article, Waltz missed an important component in the process of globalization. He did not take into account groups that are outside the borders of countries and yet have an impact on them, both politically and economically.
Fleshing Out Bhagwati or Taming the Dreaded Annotated Bibliography
Despite its length of 27 pages, Bhagwati’s rant against anti-globalizationers did little to convince me that the arguments hurled against the modern wave of globalization are indeed, as Bhagwati said, “little more than rubbish.” (Bhagwati, 5) Bhagwati frequently referred to the other chapters in his book. I am sure he more fully and seriously deals with the allegations made against globalization in those subsequent chapters. However, his general introduction on the sentiments and possible reasoning of globalization opponents did not convert me to a hard-core globalization proponent. His near-derogatory language in fact made me all the more curious as to what opponents of globalization had to say. So, I located a few articles from both sides of the globalization debate that went into a little more detail on a few of the issues Bhagwati brought up.
After reading the articles I can see some of Bhagwati’s points more clearly. However, at least two of the articles I found bring up a very interesting point that Bhagwati failed to deal with in his anti-anti-globalization rant.
The Upside to Resisting Globalization, The New York Times, Feb. 6, 2009, Floyd Norris
Bhagwati makes a point to say that globalization does not equal complete economic liberalization. He says, “Indeed, (globalization opponents) assume that if one is for free trade, one must be for free direct investment, for free capital flows, for free immigration, for free love, for free everything else!” (Bhagwati, 8) Bhagwati claims, though, that this assumption is wholly incorrect. Globalization does not necessarily mean no restrictions or boundaries. In fact, Bhagwati says that globalization requires a balance, which implies regulation.
Floyd Norris takes the sentiment that globalization requires a largely open market and uses the open market allegation against globalization. Norris writes, “(The current, global economic) crisis has shown the Achilles' heel of a globalized financial system to be a lack of high-quality, and consistent, regulation to prevent overconfident bankers from taking irresponsible risks.”
Bhagwati would claim that Norris is jumping to conclusions and unfairly equating globalization with a completely unrestricted market. In actuality, Bhagwati and Norris are claiming the same things, yet from different angles. Norris would claim India as a more closed, less globalized economy, while Bhagwati, I would venture to claim, would merely claim that India had done globalization the right way by balancing trade and capital flows enough to grow its economy and interact with the world but also to protect itself from the whims of the international market. They both see the same economic situation in India, but they both have different names for it – correctly practiced globalization and correctly practiced anti-globalization.
Terrorism and Globalization, The Nation, Nov. 21, 2001, Doug Henwood
Henwood brings up what I see as the most interesting claim against globalization. Henwood states that many opponents of globalization draw a pretty direct connection between globalization and its effects and the growth in frequency and severity in terrorism around the world. Although Henwood questions the direct correlation between globalization and terrorism, the article brings out the claim of anti-globalizationers that globalization has a big hand in the promulgation of growing terrorist networks.
Globalization, Foreign Policy, March/April 2009 Issue 171, Moises Naim
Bhagwati does not address the terrorism allegation as a claim of globalization’s opponents at all in his introduction. However, as brought up in Henwood’s article in The Nation, and also as addressed in Naim’s pro-globalization article in Foreign Policy, proponents and opponents of globalization must deal with the recent growth of international terrorism. Naim says, “But we now live in an age where a large and growing number of actors empowered by globalization have the potential to cause large scale damage and substantial loss of human life.” (Naim, 4)
Aside from the terrorism issue, Naim fleshes out several points made by Bhagwati. He explicitly deals with the claim that globalization is merely a continuing relic from the past. In agreement with Bhagwait, Naim says, “…the current wave of globalization has many unprecedented characteristics.” (Naim, 2) On pages 3 and 4, Naim also backs up Bhagwati by explaining how globalization does not necessarily favor the rich or the American. He brings up many good examples of countries who have latched onto the wave, such as China and India, and have benefited greatly, just as America has, from globalization.
Redoing Globalization, The Nation, Jan. 12, 2009, Sherle Schwenninger
One of Bhagwati’s first points was that globalization does not equate a completely free international market. When he wrote on the East Asian financial crisis in 1998, he did not attribute the crisis to a failed globalized economy, but rather to an “asymmetry between free trade and free capital flows.” (Bhagwati, 8) Schwenninger keeps the globalization faith and advocates that President Barack Obama, in dealing with the current economic crisis, devise an international, cooperative plan for recovery.
Schwenninger differs with Bhagwati, though, in that he openly calls the failures that led to the current crisis, a failure of globalization. He says, “…the economic crisis is not just the result of unscrupulous mortgage lenders and unregulated investment bankers on Wall Street but of the globalization of finance and trade…” (Schwenninger, 1)
In order to fix the global financial crisis, the Obama presidency must attend to the global balance of trade between nations.
“Because the incoming Obama administration faces a crisis of global proportions, a recovery program will have to be global in scope and it will have to correct the huge imbalances globalization created,” he said. (Schwenninger, 2)
Sources:
The Upside to Resisting Globalization
http://0-www.lexisnexis.com.umiss.lib.olemiss.edu/us/lnacademic/search/homesubmitForm.do
Terrorism and Globalization
http://www.thenation.com/doc/20011203/henwood20011121
Globalization
Search “Globalization” on Ole Miss Library’s database for Articles and Databases
Redoing Globalization
Search “Redoing Globalization” on Ole Miss Library’s database for Articles and Databases
After reading the articles I can see some of Bhagwati’s points more clearly. However, at least two of the articles I found bring up a very interesting point that Bhagwati failed to deal with in his anti-anti-globalization rant.
The Upside to Resisting Globalization, The New York Times, Feb. 6, 2009, Floyd Norris
Bhagwati makes a point to say that globalization does not equal complete economic liberalization. He says, “Indeed, (globalization opponents) assume that if one is for free trade, one must be for free direct investment, for free capital flows, for free immigration, for free love, for free everything else!” (Bhagwati, 8) Bhagwati claims, though, that this assumption is wholly incorrect. Globalization does not necessarily mean no restrictions or boundaries. In fact, Bhagwati says that globalization requires a balance, which implies regulation.
Floyd Norris takes the sentiment that globalization requires a largely open market and uses the open market allegation against globalization. Norris writes, “(The current, global economic) crisis has shown the Achilles' heel of a globalized financial system to be a lack of high-quality, and consistent, regulation to prevent overconfident bankers from taking irresponsible risks.”
Bhagwati would claim that Norris is jumping to conclusions and unfairly equating globalization with a completely unrestricted market. In actuality, Bhagwati and Norris are claiming the same things, yet from different angles. Norris would claim India as a more closed, less globalized economy, while Bhagwati, I would venture to claim, would merely claim that India had done globalization the right way by balancing trade and capital flows enough to grow its economy and interact with the world but also to protect itself from the whims of the international market. They both see the same economic situation in India, but they both have different names for it – correctly practiced globalization and correctly practiced anti-globalization.
Terrorism and Globalization, The Nation, Nov. 21, 2001, Doug Henwood
Henwood brings up what I see as the most interesting claim against globalization. Henwood states that many opponents of globalization draw a pretty direct connection between globalization and its effects and the growth in frequency and severity in terrorism around the world. Although Henwood questions the direct correlation between globalization and terrorism, the article brings out the claim of anti-globalizationers that globalization has a big hand in the promulgation of growing terrorist networks.
Globalization, Foreign Policy, March/April 2009 Issue 171, Moises Naim
Bhagwati does not address the terrorism allegation as a claim of globalization’s opponents at all in his introduction. However, as brought up in Henwood’s article in The Nation, and also as addressed in Naim’s pro-globalization article in Foreign Policy, proponents and opponents of globalization must deal with the recent growth of international terrorism. Naim says, “But we now live in an age where a large and growing number of actors empowered by globalization have the potential to cause large scale damage and substantial loss of human life.” (Naim, 4)
Aside from the terrorism issue, Naim fleshes out several points made by Bhagwati. He explicitly deals with the claim that globalization is merely a continuing relic from the past. In agreement with Bhagwait, Naim says, “…the current wave of globalization has many unprecedented characteristics.” (Naim, 2) On pages 3 and 4, Naim also backs up Bhagwati by explaining how globalization does not necessarily favor the rich or the American. He brings up many good examples of countries who have latched onto the wave, such as China and India, and have benefited greatly, just as America has, from globalization.
Redoing Globalization, The Nation, Jan. 12, 2009, Sherle Schwenninger
One of Bhagwati’s first points was that globalization does not equate a completely free international market. When he wrote on the East Asian financial crisis in 1998, he did not attribute the crisis to a failed globalized economy, but rather to an “asymmetry between free trade and free capital flows.” (Bhagwati, 8) Schwenninger keeps the globalization faith and advocates that President Barack Obama, in dealing with the current economic crisis, devise an international, cooperative plan for recovery.
Schwenninger differs with Bhagwati, though, in that he openly calls the failures that led to the current crisis, a failure of globalization. He says, “…the economic crisis is not just the result of unscrupulous mortgage lenders and unregulated investment bankers on Wall Street but of the globalization of finance and trade…” (Schwenninger, 1)
In order to fix the global financial crisis, the Obama presidency must attend to the global balance of trade between nations.
“Because the incoming Obama administration faces a crisis of global proportions, a recovery program will have to be global in scope and it will have to correct the huge imbalances globalization created,” he said. (Schwenninger, 2)
Sources:
The Upside to Resisting Globalization
http://0-www.lexisnexis.com.umiss.lib.olemiss.edu/us/lnacademic/search/homesubmitForm.do
Terrorism and Globalization
http://www.thenation.com/doc/20011203/henwood20011121
Globalization
Search “Globalization” on Ole Miss Library’s database for Articles and Databases
Redoing Globalization
Search “Redoing Globalization” on Ole Miss Library’s database for Articles and Databases
Midterm
Economic globalization has occurred in different stages over time, integrating trans-ecological and trans-national markets through various advances in communication and manufacturing technology, the use of energy and transportation methods. Even changes in public policy can effect the speed, depth, or even stability of economic integration. Economic globalization in East Asia at the most basic level has improved the standard of living in those countries wishing to integrate and compete in global markets. More importantly, economic globalization has increased both regional and global political participation and also decreased the likelihood of political disagreements becoming physical conflicts.
The first phase of economic globalization is the integration of markets by reducing barriers to allow a freer flow of labor, goods, and capital. Many East Asian countries pursued the “Japanese Model of Development” by focusing on export-driven, state-led growth with relatively high amounts of foreign direct investment or loans. This basic model was used and adapted by South Korea, Taiwan, Singapore, and later China all with their own successes and setbacks; however, the general trend is obvious. “In 1960, Japan and the rest of Asia accounted for about 5 percent of world GNP compared with 37 percent for North America. By the early 1990s, they accounted for roughly 30 percent of world GNP, about the same share as North America and Western Europe.” (Pempel, 31) It is undisputed that East Asia has provided some of the most dynamic markets for investment in the last few decades. This growth has spurred investments in social capital, specifically developments in education and healthcare, to be more competitive in a global market. In addition, East Asian countries are increasingly more connected through the Internet and other forms of telecommunication, because of infrastructure investments and business friendly political environments.
Because East Asian countries have acquired a larger share of world economic output through regional and international economic integration, there has become a need for regional and international political integration to dispute trade issues. The creation of international government organizations, such as the Association of South East Asian Nations (ASEAN) or Asia-Pacific Economic Cooperation (APEC), has helped to increase economic integration as well as regional political participation and debate on issues like the environment, corporate governance, and terrorism (APEC, 2007). Not only does this economic integration help to resolve trade issues, but also often helps to smooth political relations between governments. Sino-Japanese relations have improved as the two have provided each other with healthy markets for trade and investment. The same can be seen in the case of China and Taiwan. Taiwan, Hong Kong, Macao invested billions in mainland China during its economic reforms (Huang, 2003). Although political threats between China and Taiwan were heated during the 1990s, in the last year Beijing and Taipai have agreed to open direct flights between the mainland and China to convenience business travelers-- a major regional, political development with an economic connection.
The economic and political integration of East Asia is an asset in that it not only helps to improve the living standard and economic wealth of people the region but also increases their political cooperation and participation in world affairs. It also reduces the likelihood that East Asian countries will result to physical conflict to resolve political or economic disputes. With the existence of various regional and international organizations for economic cooperation, East Asian countries have a way to unite over similar political, economic or social issues and discuss them internally and with other regional powers such as the European Union or North America.
The first phase of economic globalization is the integration of markets by reducing barriers to allow a freer flow of labor, goods, and capital. Many East Asian countries pursued the “Japanese Model of Development” by focusing on export-driven, state-led growth with relatively high amounts of foreign direct investment or loans. This basic model was used and adapted by South Korea, Taiwan, Singapore, and later China all with their own successes and setbacks; however, the general trend is obvious. “In 1960, Japan and the rest of Asia accounted for about 5 percent of world GNP compared with 37 percent for North America. By the early 1990s, they accounted for roughly 30 percent of world GNP, about the same share as North America and Western Europe.” (Pempel, 31) It is undisputed that East Asia has provided some of the most dynamic markets for investment in the last few decades. This growth has spurred investments in social capital, specifically developments in education and healthcare, to be more competitive in a global market. In addition, East Asian countries are increasingly more connected through the Internet and other forms of telecommunication, because of infrastructure investments and business friendly political environments.
Because East Asian countries have acquired a larger share of world economic output through regional and international economic integration, there has become a need for regional and international political integration to dispute trade issues. The creation of international government organizations, such as the Association of South East Asian Nations (ASEAN) or Asia-Pacific Economic Cooperation (APEC), has helped to increase economic integration as well as regional political participation and debate on issues like the environment, corporate governance, and terrorism (APEC, 2007). Not only does this economic integration help to resolve trade issues, but also often helps to smooth political relations between governments. Sino-Japanese relations have improved as the two have provided each other with healthy markets for trade and investment. The same can be seen in the case of China and Taiwan. Taiwan, Hong Kong, Macao invested billions in mainland China during its economic reforms (Huang, 2003). Although political threats between China and Taiwan were heated during the 1990s, in the last year Beijing and Taipai have agreed to open direct flights between the mainland and China to convenience business travelers-- a major regional, political development with an economic connection.
The economic and political integration of East Asia is an asset in that it not only helps to improve the living standard and economic wealth of people the region but also increases their political cooperation and participation in world affairs. It also reduces the likelihood that East Asian countries will result to physical conflict to resolve political or economic disputes. With the existence of various regional and international organizations for economic cooperation, East Asian countries have a way to unite over similar political, economic or social issues and discuss them internally and with other regional powers such as the European Union or North America.
Mid-term
East Asia, as with most other regions of the world, has greatly benefited from the transformations brought on by globalization. As summarized in the World Bank’s report on Transport Costs and Specialization, there have been two main waves of globalization. “The first wave of globalization was characterized by ‘conventional,’ inter-industry trade that exploited differences in natural endowments, the second by a ‘new international trade’ driven by economies of scale and product differentiation.” Because of their location and resources, countries in East Asia have been able to capitalize on both waves of globalization. Countries in East Asia are now legitimate players on the world’s market and economic stage. However, because East Asia has ridden the waves of globalization thus far, East Asia will soon have to navigate through the rocks that come with an ever-changing global market.
One of the biggest globalization benefits for East Asia has been transportation, or as Thomas Friedman might put it, a flattening of the world. East Asia originally was quite isolated from the rest of the globe. One reason was simply because East Asia refused to open up to trade, but another was that East Asia was just so far removed from other possible traders. With breakthroughs in transportation, though, the foreign goods and extra services of East Asia became feasible products for international trade. The World Bank states, “In East Asia, as the costs of transporting goods by sea and air fell, the production of manufactured goods spread from Japan to neighboring economies such as Hong Kong, China; the Republic of Korea; and Taiwan, China.” As noted in Phillip Hookon Park’s analysis of the South Korean and Taiwanese economies, newly industrialized economies in East Asia all shared the common characteristic of being export-driven markets. East Asia offered many goods that were not available elsewhere on the globe. And because of the East Asian NIE’s focus on exports, the East Asian countries reaped huge benefits from the globalization of transportation.
Another aspect closely related to the globalization of transportation is the globalization of communication. Just as innovation for transportation helped break down barriers of distance, communication helped break down a whole other set of barriers. Traders did not have to worry about wasting time on communication with countries on the opposite side of the globe. Also, innovations such as the Internet made it much easier for firms and companies separated by large distances to find and coordinate with each other. Furthermore, because companies could more easily find each other and work together, the trade of intermediate goods, rather than primary or final goods, became economically feasible and efficient.
The city of Dongguan in China is a prime example of a city that takes advantage of the global market for intermediate goods. The World Bank report for Scale Economies and Agglomeration states that Dongguan manufactures about 95 percent of the parts needed to make a personal computer. The report also states that Dongguan’s factories produce as much as 40 percent of the world’s supply for some products. Without the flattening of global transportation or communication, no company would be able to tap into the resources available in East Asia.
The example of Dongguan leads into an aspect of the second wave of globalization that East Asia has particularly benefited from. The World Bank report on Transport Costs and Specialization states that the second wave of globalization is driven by economies of scale. Because of East Asia’s, particularly China’s huge resources in the area of huge and cheap labor resources, East Asia has been able to develop economies of scale and offer more goods at lower rates. Dongguan, once again, is a prime example of an economy of scale.
However, problems have arisen alongside some of these benefits. Although there are several, several factors that contributed to the East Asian financial crisis of 1997, many reports seems to indicate that because the East Asian countries focused far too much on exports and catering to a world market, rather than their own domestic markets, many East Asian markets were so vulnerable to the shifts in the global economic climate and policy changes towards East Asia that when those global factors did change, the East Asia economy crumbled.
Here is where East Asia can yet again benefit from the effects of globalization, though. The first wave of globalization broke down distance barriers, but the second wave no longer has to deal with distance. Distance has become negligible, but innovation, face-to-face communication, agglomeration and intra-industry trade have all become sorely important. The World Bank report on Scale Economies and Agglomeration details the evolution of developing cities in a country. When a city becomes large, it is noted for its diversification of firms and companies, mostly in the service area. The most notable thing about this is that all these firms, and likewise all the people needed to work for them, must all live within that city, within that country. When the firms and companies and workers are within the city, they contribute to the city’s and the country’s domestic market. Phillip Hookon Park pointed out that one of the differences between the economies of South Korea and Taiwan, was that Taiwan was very much concerned with the stability of its own monetary system and economy.
So East Asia has benefited greatly from globalization in the past, and although the global market is changing, East Asia can still find ways to take advantage of globalization. Indeed, East Asia will have to face a changing world market since transportation costs are no longer as low as before. But this should be done easily if East Asia continues to take advantage of the broken-down barriers and continues to fortify and strengthen their own domestic markets.
One of the biggest globalization benefits for East Asia has been transportation, or as Thomas Friedman might put it, a flattening of the world. East Asia originally was quite isolated from the rest of the globe. One reason was simply because East Asia refused to open up to trade, but another was that East Asia was just so far removed from other possible traders. With breakthroughs in transportation, though, the foreign goods and extra services of East Asia became feasible products for international trade. The World Bank states, “In East Asia, as the costs of transporting goods by sea and air fell, the production of manufactured goods spread from Japan to neighboring economies such as Hong Kong, China; the Republic of Korea; and Taiwan, China.” As noted in Phillip Hookon Park’s analysis of the South Korean and Taiwanese economies, newly industrialized economies in East Asia all shared the common characteristic of being export-driven markets. East Asia offered many goods that were not available elsewhere on the globe. And because of the East Asian NIE’s focus on exports, the East Asian countries reaped huge benefits from the globalization of transportation.
Another aspect closely related to the globalization of transportation is the globalization of communication. Just as innovation for transportation helped break down barriers of distance, communication helped break down a whole other set of barriers. Traders did not have to worry about wasting time on communication with countries on the opposite side of the globe. Also, innovations such as the Internet made it much easier for firms and companies separated by large distances to find and coordinate with each other. Furthermore, because companies could more easily find each other and work together, the trade of intermediate goods, rather than primary or final goods, became economically feasible and efficient.
The city of Dongguan in China is a prime example of a city that takes advantage of the global market for intermediate goods. The World Bank report for Scale Economies and Agglomeration states that Dongguan manufactures about 95 percent of the parts needed to make a personal computer. The report also states that Dongguan’s factories produce as much as 40 percent of the world’s supply for some products. Without the flattening of global transportation or communication, no company would be able to tap into the resources available in East Asia.
The example of Dongguan leads into an aspect of the second wave of globalization that East Asia has particularly benefited from. The World Bank report on Transport Costs and Specialization states that the second wave of globalization is driven by economies of scale. Because of East Asia’s, particularly China’s huge resources in the area of huge and cheap labor resources, East Asia has been able to develop economies of scale and offer more goods at lower rates. Dongguan, once again, is a prime example of an economy of scale.
However, problems have arisen alongside some of these benefits. Although there are several, several factors that contributed to the East Asian financial crisis of 1997, many reports seems to indicate that because the East Asian countries focused far too much on exports and catering to a world market, rather than their own domestic markets, many East Asian markets were so vulnerable to the shifts in the global economic climate and policy changes towards East Asia that when those global factors did change, the East Asia economy crumbled.
Here is where East Asia can yet again benefit from the effects of globalization, though. The first wave of globalization broke down distance barriers, but the second wave no longer has to deal with distance. Distance has become negligible, but innovation, face-to-face communication, agglomeration and intra-industry trade have all become sorely important. The World Bank report on Scale Economies and Agglomeration details the evolution of developing cities in a country. When a city becomes large, it is noted for its diversification of firms and companies, mostly in the service area. The most notable thing about this is that all these firms, and likewise all the people needed to work for them, must all live within that city, within that country. When the firms and companies and workers are within the city, they contribute to the city’s and the country’s domestic market. Phillip Hookon Park pointed out that one of the differences between the economies of South Korea and Taiwan, was that Taiwan was very much concerned with the stability of its own monetary system and economy.
So East Asia has benefited greatly from globalization in the past, and although the global market is changing, East Asia can still find ways to take advantage of globalization. Indeed, East Asia will have to face a changing world market since transportation costs are no longer as low as before. But this should be done easily if East Asia continues to take advantage of the broken-down barriers and continues to fortify and strengthen their own domestic markets.
Mid-term
East Asia, as with most other regions of the world, has greatly benefited from the transformations brought on by globalization. As summarized in the World Bank’s report on Transport Costs and Specialization, there have been two main waves of globalization. “The first wave of globalization was characterized by ‘conventional,’ inter-industry trade that exploited differences in natural endowments, the second by a ‘new international trade’ driven by economies of scale and product differentiation.” Because of their location and resources, countries in East Asia have been able to capitalize on both waves of globalization. Countries in East Asia are now legitimate players on the world’s market and economic stage. However, because East Asia has ridden the waves of globalization thus far, East Asia will soon have to navigate through the rocks that come with an ever-changing global market.
One of the biggest globalization benefits for East Asia has been transportation, or as Thomas Friedman might put it, a flattening of the world. East Asia originally was quite isolated from the rest of the globe. One reason was simply because East Asia refused to open up to trade, but another was that East Asia was just so far removed from other possible traders. With breakthroughs in transportation, though, the foreign goods and extra services of East Asia became feasible products for international trade. The World Bank states, “In East Asia, as the costs of transporting goods by sea and air fell, the production of manufactured goods spread from Japan to neighboring economies such as Hong Kong, China; the Republic of Korea; and Taiwan, China.” As noted in Phillip Hookon Park’s analysis of the South Korean and Taiwanese economies, newly industrialized economies in East Asia all shared the common characteristic of being export-driven markets. East Asia offered many goods that were not available elsewhere on the globe. And because of the East Asian NIE’s focus on exports, the East Asian countries reaped huge benefits from the globalization of transportation.
Another aspect closely related to the globalization of transportation is the globalization of communication. Just as innovation for transportation helped break down barriers of distance, communication helped break down a whole other set of barriers. Traders did not have to worry about wasting time on communication with countries on the opposite side of the globe. Also, innovations such as the Internet made it much easier for firms and companies separated by large distances to find and coordinate with each other. Furthermore, because companies could more easily find each other and work together, the trade of intermediate goods, rather than primary or final goods, became economically feasible and efficient.
The city of Dongguan in China is a prime example of a city that takes advantage of the global market for intermediate goods. The World Bank report for Scale Economies and Agglomeration states that Dongguan manufactures about 95 percent of the parts needed to make a personal computer. The report also states that Dongguan’s factories produce as much as 40 percent of the world’s supply for some products. Without the flattening of global transportation or communication, no company would be able to tap into the resources available in East Asia.
The example of Dongguan leads into an aspect of the second wave of globalization that East Asia has particularly benefited from. The World Bank report on Transport Costs and Specialization states that the second wave of globalization is driven by economies of scale. Because of East Asia’s, particularly China’s huge resources in the area of huge and cheap labor resources, East Asia has been able to develop economies of scale and offer more goods at lower rates. Dongguan, once again, is a prime example of an economy of scale.
However, problems have arisen alongside some of these benefits. Although there are several, several factors that contributed to the East Asian financial crisis of 1997, many reports seems to indicate that because the East Asian countries focused far too much on exports and catering to a world market, rather than their own domestic markets, many East Asian markets were so vulnerable to the shifts in the global economic climate and policy changes towards East Asia that when those global factors did change, the East Asia economy crumbled.
Here is where East Asia can yet again benefit from the effects of globalization, though. The first wave of globalization broke down distance barriers, but the second wave no longer has to deal with distance. Distance has become negligible, but innovation, face-to-face communication, agglomeration and intra-industry trade have all become sorely important. The World Bank report on Scale Economies and Agglomeration details the evolution of developing cities in a country. When a city becomes large, it is noted for its diversification of firms and companies, mostly in the service area. The most notable thing about this is that all these firms, and likewise all the people needed to work for them, must all live within that city, within that country. When the firms and companies and workers are within the city, they contribute to the city’s and the country’s domestic market. Phillip Hookon Park pointed out that one of the differences between the economies of South Korea and Taiwan, was that Taiwan was very much concerned with the stability of its own monetary system and economy.
So East Asia has benefited greatly from globalization in the past, and although the global market is changing, East Asia can still find ways to take advantage of globalization. Indeed, East Asia will have to face a changing world market since transportation costs are no longer as low as before. But this should be done easily if East Asia continues to take advantage of the broken-down barriers and continues to fortify and strengthen their own domestic markets.
One of the biggest globalization benefits for East Asia has been transportation, or as Thomas Friedman might put it, a flattening of the world. East Asia originally was quite isolated from the rest of the globe. One reason was simply because East Asia refused to open up to trade, but another was that East Asia was just so far removed from other possible traders. With breakthroughs in transportation, though, the foreign goods and extra services of East Asia became feasible products for international trade. The World Bank states, “In East Asia, as the costs of transporting goods by sea and air fell, the production of manufactured goods spread from Japan to neighboring economies such as Hong Kong, China; the Republic of Korea; and Taiwan, China.” As noted in Phillip Hookon Park’s analysis of the South Korean and Taiwanese economies, newly industrialized economies in East Asia all shared the common characteristic of being export-driven markets. East Asia offered many goods that were not available elsewhere on the globe. And because of the East Asian NIE’s focus on exports, the East Asian countries reaped huge benefits from the globalization of transportation.
Another aspect closely related to the globalization of transportation is the globalization of communication. Just as innovation for transportation helped break down barriers of distance, communication helped break down a whole other set of barriers. Traders did not have to worry about wasting time on communication with countries on the opposite side of the globe. Also, innovations such as the Internet made it much easier for firms and companies separated by large distances to find and coordinate with each other. Furthermore, because companies could more easily find each other and work together, the trade of intermediate goods, rather than primary or final goods, became economically feasible and efficient.
The city of Dongguan in China is a prime example of a city that takes advantage of the global market for intermediate goods. The World Bank report for Scale Economies and Agglomeration states that Dongguan manufactures about 95 percent of the parts needed to make a personal computer. The report also states that Dongguan’s factories produce as much as 40 percent of the world’s supply for some products. Without the flattening of global transportation or communication, no company would be able to tap into the resources available in East Asia.
The example of Dongguan leads into an aspect of the second wave of globalization that East Asia has particularly benefited from. The World Bank report on Transport Costs and Specialization states that the second wave of globalization is driven by economies of scale. Because of East Asia’s, particularly China’s huge resources in the area of huge and cheap labor resources, East Asia has been able to develop economies of scale and offer more goods at lower rates. Dongguan, once again, is a prime example of an economy of scale.
However, problems have arisen alongside some of these benefits. Although there are several, several factors that contributed to the East Asian financial crisis of 1997, many reports seems to indicate that because the East Asian countries focused far too much on exports and catering to a world market, rather than their own domestic markets, many East Asian markets were so vulnerable to the shifts in the global economic climate and policy changes towards East Asia that when those global factors did change, the East Asia economy crumbled.
Here is where East Asia can yet again benefit from the effects of globalization, though. The first wave of globalization broke down distance barriers, but the second wave no longer has to deal with distance. Distance has become negligible, but innovation, face-to-face communication, agglomeration and intra-industry trade have all become sorely important. The World Bank report on Scale Economies and Agglomeration details the evolution of developing cities in a country. When a city becomes large, it is noted for its diversification of firms and companies, mostly in the service area. The most notable thing about this is that all these firms, and likewise all the people needed to work for them, must all live within that city, within that country. When the firms and companies and workers are within the city, they contribute to the city’s and the country’s domestic market. Phillip Hookon Park pointed out that one of the differences between the economies of South Korea and Taiwan, was that Taiwan was very much concerned with the stability of its own monetary system and economy.
So East Asia has benefited greatly from globalization in the past, and although the global market is changing, East Asia can still find ways to take advantage of globalization. Indeed, East Asia will have to face a changing world market since transportation costs are no longer as low as before. But this should be done easily if East Asia continues to take advantage of the broken-down barriers and continues to fortify and strengthen their own domestic markets.
Economic Globalization and East Asia
Midterm Essay I
Jessica Moeller
In what ways has East Asia benefited from economic globalization?
Jessica Moeller
In what ways has East Asia benefited from economic globalization?
East Asia has benefited in a large way from economic globalization. East Asia has received large amounts of FDI that have provided capital for their own countries. Its foreign trade has increased because of the decrease in transport costs. East Asia has also been able to fill manufacturing needs with the relatively large population size that it has and has been able to take advantage of the scale economies and agglomerations that developed.
One of the major driving forces in East Asia’s economic development has been the FDI that East Asian countries have received. Because many East Asian countries (such as Japan, Korea, and China) have had governments that strongly control their countries’ economies, they have been able to make sure that the FDI that they receive goes toward areas of their economies that need the extra help. They have been able to protect the domestic sectors that are doing well from outside competition while allowing the influence of economic globalization to benefit areas where they have lagged behind. This has allowed for Japan’s zaibatsu and Korea’s chaebol to increase and prosper. Another source of capital for East Asian countries comes from their respective diasporas. East Asians who have moved to work abroad are more likely than people from most other areas of the world to send remittances back to their home countries. Economic globalization has opened up international jobs that provide the opportunity for East Asians to make a higher salary working abroad and to be able to contribute even more to their home countries.
Another one of the major factors of economic globalization that has benefited East Asia is the decrease in transport costs. The decrease in the cost of transportation has made it more feasible and practical for other countries to engage in international business with East Asia. This was especially true when transport costs first began to decrease. At that point in time, Western countries were more likely to trade with East Asia since they were further apart and had different resource endowments. This was especially beneficial to East Asia as Western countries were largely the best-developed countries. This was an essential step in East Asia’s development since so many East Asian countries’ geography makes them relatively inaccessible. Japan, Singapore, and Taiwan are all islands that depend solely on water and air transport – which had been very expensive. Korea and China are also fairly isolated geographically and benefited from the decrease in transport costs.
Other countries not only began to trade more with East Asian countries, but also outsourced more work to East Asia as well. The relatively high population size of most East Asian countries has been suitable for the development of manufacturing industries. After these industries had begun developing, they generally became scale economies that developed into agglomerations as similar industries clustered together. These areas then became attractive not only to workers, but also to investors. By moving to these areas to look for jobs, workers were more likely to be able to find work and would also have a higher degree of job security, as it would be easier for them to find a job in the same area if they should lose theirs for some reason. Investors were also more likely to invest in these areas because of the large amount of low-cost labor already established there. China’s Dongguan is a good example of this phenomenon. The city’s development originally began with small to medium-sized enterprises that later benefited from the agglomeration that occurred there. Dongguan is now sometimes known as the “factory of the world” as it produces a large percentage of electronics sold worldwide. This type of agglomeration has also led to knowledge spillovers and allowed for the differentiation of goods, both of which have also helped East Asia to develop economically.
Economic globalization has certainly benefited East Asia. Foreign investment helped to support East Asian economies as their funds were often directed towards sectors in which East Asian countries’ domestic companies lacked. East Asia also received remittances from others abroad. Decreasing transport costs encouraged foreign countries to do more business with East Asia. This was important for the geographically isolated East Asian countries. Other countries also began to outsource work to East Asia. Scale economies and agglomerations began to develop which were also of great economic benefit.
INST 310 Section 2 Midterm Exam I
Write a two- or three-page essay on the following question*. Use some examples from the first five weeks of this course to illustrate your points. Post your essay on the course blog by 16:15. Late essays will be penalized by one letter grade per hour late.
* In what ways has East Asia benefited from economic globalization?
* In what ways has East Asia benefited from economic globalization?
Benefits of Intra-Industry Trade
Jessica Moeller
INST 310 – Spring 2009
February 25th, 2009
The World Bank article discusses the two different waves of trade increases that followed the decrease in transportation costs. The first wave led to more trade between countries that were separated by long distances. This is because these countries are more likely to have different resources. The second wave was followed by an increase in trade between countries that were closer together. This trade was not trade between different industries (inter-industry trade) but rather between the same industries (intra-industry trade). “In other words, in the old trade theory and with high transport costs, countries trade only what they need to. In the new trade theory and with scale economies, a love of variety, and low transport costs, countries trade because they want to” (World Bank, 182).
Ricardo’s theory of comparative advantage was part of the basis of standard trade theory. It argued that, “goods are mobile across international boundaries than are resources (land, labor, and capital)” (Ruffin, 2). The Heckscher-Ohlin model stresses the importance of factor endowments in trade (Ruffin, 3). The differences in resources that countries have are often catalysts to trade between these countries. These theories both explain the relative frequency of inter-industry trade. They do not, however, explain the relative frequency of intra-industry trade.
Intra-industry trade is when two countries trade products that come from the same industry – like different brands of cars, for example. As Ruffin explains, “The significance of intra-industry arises from its basic character: it need not be based on comparative advantage. To a large extent intra-industry trade arises from the facts that products are differentiated and the production of any particular product requires some fixed costs” (Ruffin, 6). By trading products within one industry, countries and companies are able to specialize and then mass-produce these products. Large-scale production in turn reduces the over-all cost of the products. “Intra-industry trade enhances the gains from trade through better exploitation of economies of scale – rather than through comparative advantage – as trade leads countries to concentrate on a limited number of products within any particular industry. This leads to an expansion of world output because of the saving of fixed costs” (Ruffin, 7). Allowing for specialization also provides more opportunities for innovation. These effects all benefit the over-all economy.
Another benefit of intra-industry trade is that it provides a more stable form of trade. “Productive factors do not switch from one industry to another, but only within industries, intra-industry trade is less disruptive than inter-industry trade” (Ruffin, 8).
The frequency of intra-industry trade decreases as the distance between two countries increases. This has often been believed to be caused by the increased transportation costs associated with further distances. After analyzing the trends of intra-industry trade, Rice, Stewart, and Venables came to the conclusion that while the costs associated with distance do play some part in explaining why distance decreases its frequency, it is not the most important factor. They argue that, instead, countries that are close together have more similar economies and are therefore better able to trade within industry. “Closer countries tend to have more similar structures of underlying export supply and import demand” (Rice, 17). These countries produce and have markets for similar products, and therefore have reason to trade with each other.
The World Bank article argued that while inter-industry trade increased when transport costs first decrease, intra-industry costs increased when transport costs further decreased. Ruffin states that intra-industry trade “is more beneficial than inter-industry trade because it stimulates innovation and exploits economies of scale” (Ruffin, 8). The benefits of intra-industry trade are most often shared by countries in close proximity because they frequently have similar economies.
Sources:
Rice, Patricia, Martin Stewart, and Anthony J. Venables. The geography of intra-industry trade: empirics. Revised, Nov 19, 2002. http://www.econ.ox.ac.uk/members/tony.venables/prtv18.pdf
Ruffin, Roy J. The Nature and Significance of Intra-industry Trade. Economic and Financial Review. Federal Reserve Bank of Dallas. Forth Quarter 1999. http://www.dallasfed.org/research/efr/1999/efr9904a.pdf
World Bank. World Development Report 2009 “Reshaping Economic Geography”. 2009. Chapter 6: Transportation Costs and Specialization. http://siteresources.worldbank.org/INTWDR2009/Resources/4231006-1225840759068/WDR09_12_Ch06web.pdf
INST 310 – Spring 2009
February 25th, 2009
The World Bank article discusses the two different waves of trade increases that followed the decrease in transportation costs. The first wave led to more trade between countries that were separated by long distances. This is because these countries are more likely to have different resources. The second wave was followed by an increase in trade between countries that were closer together. This trade was not trade between different industries (inter-industry trade) but rather between the same industries (intra-industry trade). “In other words, in the old trade theory and with high transport costs, countries trade only what they need to. In the new trade theory and with scale economies, a love of variety, and low transport costs, countries trade because they want to” (World Bank, 182).
Ricardo’s theory of comparative advantage was part of the basis of standard trade theory. It argued that, “goods are mobile across international boundaries than are resources (land, labor, and capital)” (Ruffin, 2). The Heckscher-Ohlin model stresses the importance of factor endowments in trade (Ruffin, 3). The differences in resources that countries have are often catalysts to trade between these countries. These theories both explain the relative frequency of inter-industry trade. They do not, however, explain the relative frequency of intra-industry trade.
Intra-industry trade is when two countries trade products that come from the same industry – like different brands of cars, for example. As Ruffin explains, “The significance of intra-industry arises from its basic character: it need not be based on comparative advantage. To a large extent intra-industry trade arises from the facts that products are differentiated and the production of any particular product requires some fixed costs” (Ruffin, 6). By trading products within one industry, countries and companies are able to specialize and then mass-produce these products. Large-scale production in turn reduces the over-all cost of the products. “Intra-industry trade enhances the gains from trade through better exploitation of economies of scale – rather than through comparative advantage – as trade leads countries to concentrate on a limited number of products within any particular industry. This leads to an expansion of world output because of the saving of fixed costs” (Ruffin, 7). Allowing for specialization also provides more opportunities for innovation. These effects all benefit the over-all economy.
Another benefit of intra-industry trade is that it provides a more stable form of trade. “Productive factors do not switch from one industry to another, but only within industries, intra-industry trade is less disruptive than inter-industry trade” (Ruffin, 8).
The frequency of intra-industry trade decreases as the distance between two countries increases. This has often been believed to be caused by the increased transportation costs associated with further distances. After analyzing the trends of intra-industry trade, Rice, Stewart, and Venables came to the conclusion that while the costs associated with distance do play some part in explaining why distance decreases its frequency, it is not the most important factor. They argue that, instead, countries that are close together have more similar economies and are therefore better able to trade within industry. “Closer countries tend to have more similar structures of underlying export supply and import demand” (Rice, 17). These countries produce and have markets for similar products, and therefore have reason to trade with each other.
The World Bank article argued that while inter-industry trade increased when transport costs first decrease, intra-industry costs increased when transport costs further decreased. Ruffin states that intra-industry trade “is more beneficial than inter-industry trade because it stimulates innovation and exploits economies of scale” (Ruffin, 8). The benefits of intra-industry trade are most often shared by countries in close proximity because they frequently have similar economies.
Sources:
Rice, Patricia, Martin Stewart, and Anthony J. Venables. The geography of intra-industry trade: empirics. Revised, Nov 19, 2002. http://www.econ.ox.ac.uk/members/tony.venables/prtv18.pdf
Ruffin, Roy J. The Nature and Significance of Intra-industry Trade. Economic and Financial Review. Federal Reserve Bank of Dallas. Forth Quarter 1999. http://www.dallasfed.org/research/efr/1999/efr9904a.pdf
World Bank. World Development Report 2009 “Reshaping Economic Geography”. 2009. Chapter 6: Transportation Costs and Specialization. http://siteresources.worldbank.org/INTWDR2009/Resources/4231006-1225840759068/WDR09_12_Ch06web.pdf
A new view on mobility
Annotated Bibliography: Factor Mobility (Labor and Capital)
In searching for literature that discussed factor mobility, I found a collection of authors who argued along the same lines as those published in the World Development Report. In fact Dilip Ratha appears in several reports published by the World Bank in 2005 and 2007, all of which argue for the encouragement and formalization of external capital flows (specifically remittances) and labor market stabilization through ease in restrictions to internal and international migration. This appears to be a trend in economics that stems from work done by Robert E. Lucas (as mentioned in the World Development Report). This new trend views labor clustering (especially high-skilled labor) as a positive factor in creating economic spillovers. Low-skilled labor can also contribute to the development process by helping settle the labor market equilibrium and funneling capital through remittances. In addition, new insights on how the capital and labor affects both sending and receiving countries have prompted IGOs to make different policy recommendations regarding the restrictions to migration.
Remittances: Development Impact and Future Prospects
Edited by Samuel Munzele Maimbo, Dilip Ratha World Bank Publications, 2005, 378 pages
This book explores policy options for alleviating poverty in the developing world though use of what now constitutes the largest source of financial flows to developing countries: remittances. Ratha outlines trends and determinates of remittance flows as a component of external capital flows and suggests ways in which receiving countries can increase these flows as well as maximize their development impact. In the first part, Ratha discusses the increase in remittance flows over the past few years and points out remittances are often invested in countries with particularly sound economic situations. This means receiving countries who work to improve economic stability and encourage domestic entrepreneurship can potentially increase remittance flows. Ratha also advocates a strengthening of the financial sector infrastructure so that both source and receiving countries can bring more of the remittances into formal sectors. He suggests that lowering the transaction costs will attract even larger capital flows because of increases in secure transfer of capital with reductions in the cost to transfer. Part two examines the socioeconomic aspects of migration and remittances as many of the remittances are used to invest in health care, education, or savings to fund the future migration of relatives. The economic effect of remittances can also be large because of the effect large amounts of foreign currency can have on domestic inflation rates and international currency exchanges. The book also makes a series of policy recommendations to both countries hosting emigrants and those sending them that aims to ease the restrictions on labor and capital flows as a way to alleviate poverty in the developing countries.
The New Economics of Labor Migration
Oded Stark and David E. Bloom, The American Economic review, Vol. 75, No. 2
Oded Stark and David Brooks analyze changes in theoretical and empirical research regarding the economics of labor migration. They found that migration behavior in individuals differs in accordance with perceived relative deprivation and skill level. Higher perception of depravity and higher skill levels tend to increase the probability of migration; however, the decision to migrate is rarely an individual decision. Migrants often make this calculated strategy “jointly with some group of non-migrants”, with shared costs and benefits. Although remittances serve as the primary reimbursement to non-migrants, better economic scales for the home labor market can also occur due to the migration out thereby benefiting both the migrant (through higher wages at the new destination) and non-migrant (through more stable wage markets). The authors also suggest some areas in which further study should be considered. In terms of labor market adjustment, more research should be done in the substitutability of international and internal labor migration.
In searching for literature that discussed factor mobility, I found a collection of authors who argued along the same lines as those published in the World Development Report. In fact Dilip Ratha appears in several reports published by the World Bank in 2005 and 2007, all of which argue for the encouragement and formalization of external capital flows (specifically remittances) and labor market stabilization through ease in restrictions to internal and international migration. This appears to be a trend in economics that stems from work done by Robert E. Lucas (as mentioned in the World Development Report). This new trend views labor clustering (especially high-skilled labor) as a positive factor in creating economic spillovers. Low-skilled labor can also contribute to the development process by helping settle the labor market equilibrium and funneling capital through remittances. In addition, new insights on how the capital and labor affects both sending and receiving countries have prompted IGOs to make different policy recommendations regarding the restrictions to migration.
Remittances: Development Impact and Future Prospects
Edited by Samuel Munzele Maimbo, Dilip Ratha World Bank Publications, 2005, 378 pages
This book explores policy options for alleviating poverty in the developing world though use of what now constitutes the largest source of financial flows to developing countries: remittances. Ratha outlines trends and determinates of remittance flows as a component of external capital flows and suggests ways in which receiving countries can increase these flows as well as maximize their development impact. In the first part, Ratha discusses the increase in remittance flows over the past few years and points out remittances are often invested in countries with particularly sound economic situations. This means receiving countries who work to improve economic stability and encourage domestic entrepreneurship can potentially increase remittance flows. Ratha also advocates a strengthening of the financial sector infrastructure so that both source and receiving countries can bring more of the remittances into formal sectors. He suggests that lowering the transaction costs will attract even larger capital flows because of increases in secure transfer of capital with reductions in the cost to transfer. Part two examines the socioeconomic aspects of migration and remittances as many of the remittances are used to invest in health care, education, or savings to fund the future migration of relatives. The economic effect of remittances can also be large because of the effect large amounts of foreign currency can have on domestic inflation rates and international currency exchanges. The book also makes a series of policy recommendations to both countries hosting emigrants and those sending them that aims to ease the restrictions on labor and capital flows as a way to alleviate poverty in the developing countries.
The New Economics of Labor Migration
Oded Stark and David E. Bloom, The American Economic review, Vol. 75, No. 2
Oded Stark and David Brooks analyze changes in theoretical and empirical research regarding the economics of labor migration. They found that migration behavior in individuals differs in accordance with perceived relative deprivation and skill level. Higher perception of depravity and higher skill levels tend to increase the probability of migration; however, the decision to migrate is rarely an individual decision. Migrants often make this calculated strategy “jointly with some group of non-migrants”, with shared costs and benefits. Although remittances serve as the primary reimbursement to non-migrants, better economic scales for the home labor market can also occur due to the migration out thereby benefiting both the migrant (through higher wages at the new destination) and non-migrant (through more stable wage markets). The authors also suggest some areas in which further study should be considered. In terms of labor market adjustment, more research should be done in the substitutability of international and internal labor migration.
The World Bank Advocates State-guided Economies
The World Bank, in advocating the necessity for cities to understand the concept and theory behind economies and diseconomies of scale and of agglomeration, has also, perhaps unknowingly, become an advocate for a slight version of the state-run, Asian economic model. Although the World Bank has recently expanded its acceptance of various economic theories, the World Bank has seemed to be a strong proponent of the liberalized, capitalistic model of the West, namely the United States, in the past. By supporting an economic model such as the United States’s model, the World Bank would assumedly be in favor of a liberalized approach to economic development. Encouraging the state to step in a take the helm goes against such an advocacy for liberalism. Hidden in the World Bank’s Scale Economies and Agglomeration is a strong case for state-led and state-planned economies.
One of the main purposes of the chapter was to “assess whether policy makers in the developing world have been learning from (scale economies) experience and analysis.” (Scale, 126) And indeed, the closing statement of the assigned reading likewise emphasized the importance of the involvement of municipalities and their governments in their area’s economic development. “…cities and towns should be seen as market agents that, just like firms and farms, serve market needs.” (Scale, 126) Although the content of the chapter could easily pass for an analysis of the natural consequences of a free market and its expansion, the deeper message is one that the Asian tigers, along with China would be proud of.
Throughout the chapter, the World Bank does seem to emphasize that the development of a city and its specific industries can be attributed to natural causes. Small cities naturally specialize in the manufacturing of standard goods, while large cities somehow naturally cater to the service-oriented industries. (Scale, 137) The World Bank also mentions that a city’s history also has a role to play in what type of industry the city and its citizens will work in. (Scale, 138) Yet the government of a city or a country possesses several tools to guide and foster growth in cities and regions.
In fact, the chapter sets out three basic guidelines for policy-makers to follow in regards to cities, trade and ideas. By encouraging or funding certain research or activities, a government can direct the development of certain industry sectors. (Scale, 137) Even through enacting policies to make a city more “business-friendly and livable” may help direct and guide an area’s economic growth. (Scale, 137)
The chapter also talks about how a state’s mismanagement can inhibit economic growth. According to World Bank, economies of scale rely on large pools of human labor, aka high densities of population. When countries try to discourage a population from moving to larger cities, they inhibit the natural growth that comes from a higher density population. The chapter also talks about how the mismanagement of land and its uses could inhibit the economic growth of a region. The chapter states, “The ability and ease of a city to adapt its land to different uses according to changing market needs will enable its sustainable growth.” (Scale, 142) Later, the chapter discusses how investment in the transportation infrastructure of a city is likewise vital to the city’s economic success. (Scale, 144)
Through all of its recommendations on how a city government should handle its growth and development, there is a degree of credence given to a liberal philosophy on economics. For example, when discussing how city governments can handle the management of its land, the chapter says, “Successful cities have relaxed zoning laws to allow higher-value users to bid for valuable land…” (Scale, 142) Yet beneath the overtones of liberalization and market freedom lies the deeper strain of state-guided growth. The final advice of the chapter to cities that they should see themselves as “market forces,” echoes strongly the principles the East Asian development model has.
One of the main purposes of the chapter was to “assess whether policy makers in the developing world have been learning from (scale economies) experience and analysis.” (Scale, 126) And indeed, the closing statement of the assigned reading likewise emphasized the importance of the involvement of municipalities and their governments in their area’s economic development. “…cities and towns should be seen as market agents that, just like firms and farms, serve market needs.” (Scale, 126) Although the content of the chapter could easily pass for an analysis of the natural consequences of a free market and its expansion, the deeper message is one that the Asian tigers, along with China would be proud of.
Throughout the chapter, the World Bank does seem to emphasize that the development of a city and its specific industries can be attributed to natural causes. Small cities naturally specialize in the manufacturing of standard goods, while large cities somehow naturally cater to the service-oriented industries. (Scale, 137) The World Bank also mentions that a city’s history also has a role to play in what type of industry the city and its citizens will work in. (Scale, 138) Yet the government of a city or a country possesses several tools to guide and foster growth in cities and regions.
In fact, the chapter sets out three basic guidelines for policy-makers to follow in regards to cities, trade and ideas. By encouraging or funding certain research or activities, a government can direct the development of certain industry sectors. (Scale, 137) Even through enacting policies to make a city more “business-friendly and livable” may help direct and guide an area’s economic growth. (Scale, 137)
The chapter also talks about how a state’s mismanagement can inhibit economic growth. According to World Bank, economies of scale rely on large pools of human labor, aka high densities of population. When countries try to discourage a population from moving to larger cities, they inhibit the natural growth that comes from a higher density population. The chapter also talks about how the mismanagement of land and its uses could inhibit the economic growth of a region. The chapter states, “The ability and ease of a city to adapt its land to different uses according to changing market needs will enable its sustainable growth.” (Scale, 142) Later, the chapter discusses how investment in the transportation infrastructure of a city is likewise vital to the city’s economic success. (Scale, 144)
Through all of its recommendations on how a city government should handle its growth and development, there is a degree of credence given to a liberal philosophy on economics. For example, when discussing how city governments can handle the management of its land, the chapter says, “Successful cities have relaxed zoning laws to allow higher-value users to bid for valuable land…” (Scale, 142) Yet beneath the overtones of liberalization and market freedom lies the deeper strain of state-guided growth. The final advice of the chapter to cities that they should see themselves as “market forces,” echoes strongly the principles the East Asian development model has.
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