Managing in the Global Environment
Globalization is a complex concept that has elicited much controversy. The available literatures on the globalization have little harmony in regard to what it is and whether it is a new or an old idea. Narrowly, globalization implies a process of aggravation of political, economic, and cultural interdependence amid the different actors within the global system. Globalization is more systematic in the economic field where it signifies a process of intensification of national economies with the purpose of developing the capacity of the global economy to work as a unit.
This integration comes with certain socioeconomic conditions as well as policy mechanisms. Therefore, understanding globalization necessitates the description of the underlying context that makes it viable, as well as the institutional set up and policy frameworks that promote it.
Globalization and its changes
Over the last two decades, some significant changes in the global system have precipitated globalization. One is the changes in power distribution on a global level where the United States emerged as the sole superpower. This development has per se eliminated the competition among nations for global leadership and dominance; it would be difficult to have a common economic space while there are competing superpowers. However, in this regard, globalization is perceived as a United States dominated set up. In addition, it implies that if another superpower emerged, then the process would be reversed. (Scholte, 2003)
Another factor which precipitated globalization is the bouncing back of the global predomination of capitalism as well as the free market economic system. Conflicting economic frameworks and visions would not be compatible with the processes of making a common economic space. Thus the lack of competition between various economic visions has created a favorable environment for globalization.
Globalization and policies
Several policy instruments have been created to act as mechanisms of globalization; this is after the establishment of the acknowledged underlying conditions. There has also been creation of fresh multilateral institutions with the restructuring of the older ones so as to manage and promote the mechanisms of globalization; a few key examples include the International Monetary Fund (IMF), The World Trade Organization (WTO), and the World Bank.
The policy mechanisms developed in harmony with neoliberal ideology also aim to foster globalization; disengagement of state in economic activity especially in regard to regulation and institutional changes like trade barriers restriction, privatization, and capital mobility liberalization are some examples of these mechanisms. In developing world, the World Bank and IMF through their sponsored programs has been the vehicle behind the adoption of these mechanisms.
There are two major reasons, in regard to globalization, that explain the harmonization of economic policy with neoliberal ideologies. First is that it would be close to impossible to think of convergence of national economies into a common space controlled by hegemonic power where countries are not prevented from exercising their powers such that they single handily design economic policies in line with their specific circumstances. (Gill, 2002) Second, the identified underlying shift stands for a change in power balance amid the social classes in support of capital at the world level.
This change coupled with the United States hegemony has resulted into a condition suitable for the integration of capital’s goal of the world economic system. The goal involve trade and capital flow liberalization as well as labor markets deregulation keeping in harmony with the interest of capital. Consequently, capital flow liberalization across borders coupled with technological development has reinforced the increased capital’s power by allowing it the power of mobility. In contrast, the capacity to organize and maintain pooled bargaining by labor has been shaken by deregulation of the capital mobility, labor market, and technological changes.
In consideration of the acknowledged underlying shift and globalizing mechanism, a more comprehensive definition of globalization could be; a process of aggravation of interconnectedness amid national economies where it aims to create a single economic space and largely aligning with the capital’s interest, led by a hegemonic power and supported by different policy instruments and institutional frameworks.
Globalization; New or Old Phenomenon
There is widespread discussion as to whether globalization is a new or old phenomenon. Some analysts consider the concept to be new as well as revolutionary. Others including Kenneth Waltz argue that, in comparison to the era prior to the first world war, the current global set up has underachieved in terms of the level of intensification. Furthermore, the earlier governments especially before the First World War had less intervention than the government of toady.
The aforementioned points are valid but they also do not denounce that capitalism brought a vigorous stride in global integration that was affected by the interwar of between 1918 and 1939 and the Cold War. The degree of consolidation of the worldwide production systems and disengagement of nations from economic activity may still be below the levels achieved in 1910. However the present rate globalization is high and the level of intensification may soon exceed the prior set records. (O’Rourke and Williamson, 2000)
Notably, the welfare state set up that had been predominant since years of the interwar in the 21st century has declined. As a result, a new direction in global order that is designed in line with the reasoning tradition of Milton Friedman and Friedrich Hayek has arisen. According to Hayek, for example, the concerns of social imbalance are just indication of the outdated communalistic idea which should be scraped out and replaced by individual responsibility and freedom the issues of poverty and inequality not withstanding. Again, there is an increase in the outlook that national economies have integrated into a common space of worldwide economy; furthermore, only one form of organization is appropriate.
The realization of a single global economy has still a long way to go. However, there is a powerful force propelling the world to that direction. Controversy also mars the factors that promote globalization. Obliviously, technological development has contributed to the intensification of interdependence. However, it is not substantial to claim that technology, by itself, would precipitate globalization. For instance, it is unclear whether capital mobility would be achieved due to technological advances alone; development in communication coupled with capital flows deregulation have improved capital mobility. (Bello, 2002)
Some sectors agree that globalization is modeled by the forces of the market system. In argument, to realize an economic system a political system must come in handy. Therefore, globalization is dictated by the assent of governments and in this regard, the United States predominant power as well as other developed nations.
The strict followers of the market system argue that the reception of globalization by governments is inevitable such that they cannot prevent globalization in which case they would incur immense costs. Interest of powerful capital can punish national governments which implement monetary and fiscal policies that impact greatly on their visions. In these circumstances, developing countries have sided with capital due to amounting pressure from the advanced nations and the multilateral globalization agents. (Stiglitz, 2002)
Bello, W. (2002): Deglobalization: Ideas for a New World Economy, Zed Books,
Gill, S. (2002): The Political Economy of Globalization: the Old and New, in E. Aksu and J. A. Held, D. and McGrew, A. (2002): Globalization/Anti-Globalization, Cambridge, Polity, 2002
O’Rourke, K. and Williamson, J. G. (2000): Globalization and History: The Evolution of the Nineteenth Century Atlantic Economy. Cambridge, Mass.: MIT Press.
Scholte, J.A. (2003): Democratizing the Global Economy: The Role of Civil Society,
Stiglitz, J. E. (2002