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Economic Globalization

Economic Globalization

Posted on Aug 2017:- By: PaperHub
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Table of Contents

Introduction. 3

Theorists Arguments on Free Market 4

Theorists Argument on State.. 7

Theorists Argument on Social Order 9

Conclusion. 11

References. 13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Globalization

Introduction

 Today globalization is an integral part of the world, especially in areas of education, culture, and economics. Globalization has played a major role in making the world a village, as people in the U.S can know what is happening in Japan immediately an issue occurs. The concept of globalization has made the movement of people and goods easier from one geographical region to another. Most of the countries and consumers have ended up benefiting from globalization in the area of product quality, prices, cheap labor, and technology transfer (Ching et al., 2011). This shows that globalization plays an instrumental role in improving the quality of life as well as enhancing economic development in many countries around the world (Ching et al., 2011).

            Economic globalization has been of great benefits to the global economy. According to Hirst, Thompson, and Bromley (2015), economic globalization can be defined as growing interdependence of global economies due to rise in the amount of cross-border trading of services and commodities, capital flow internationally, as well as rapid and wide technology spread. Therefore, globalization in the area of economy is concerned with flow of factors of production, such as labor, capital and technology from one region to another, making access of goods and services easier for the majority of the people, whom would otherwise not access the same in a world which is not globalized (Hirst, Thompson and Bromley, 2015). Some theories have been developed by different theorists with an objective of explaining the concept of economic globalization. The main theorists in the area of globalization include Castells, Stiglitz, and Bhagwati. These theorists touch on the issue of globalization regarding the state, social change, social order, social justice, the market, free trade, and other critical economic themes. However, there are theorists who give an accurate as well as persuasive explanations concerning globalization. This paper argues that Bhagwati ideas provide us with a better comprehension of globalization than Stiglitz and Castells ideas on globalization.

Theorists Arguments on Free Market

 Different arguments concerning the concept of the free market have been developed by different economists. The free market is the fundamental element of globalization. A free market is a form of economic system where prices of goods or services are determined by competitive forces, such as demand and supply without government interference through regulations. However, there are different schools of thoughts in the area of economy concerning the free market concept. From Keynes point of view the idea of the free market cannot apply effectively to an economy as it creates some instability in prices, thus advocates for government intervention as the basis of dealing some forms of instability in an economy. On the other hand, Adam Smith advocated for free market by pointing out that government should allow forces of demand and supply to determine prices of services and goods within an economy. Apart from the general economic points of views concerning free market, when it comes to globalization, there are those who support globalization from a free market view, and others are strongly opposed to it.

            According to Bhagwati argues that removal of barriers to trade in an economy is beneficial to an economy and its people. Bhagwati notes that free market facilitates globalization of an economy and this result in the improvement of the overall quality of life for the people (Bhagwati, 2004). Bhagwati indicates that free market enhances economic growth in the economy, through facilitating free movement of labor and goods within an economy. The free movement of goods and services in an economy result in the reduction in child labor helps in bridging the income gap between women and men in the workplace and reduce levels of poverty in an economy (Heilbroner and Milberg, 2012). For example Bhagwati indicates that globalization, which is a concept of free economy allows more investments in economy, which in turn results in many jobs opportunities being created and this ensure most of the people within an economy has a source of economy, thereby improving their standards of living in the long run (Bhagwati, 2004). Bhagwati main arguments are that free market is good in facilitating economic and social growth in a nation, leading to an overall improvement in quality and standards of living of the people.

            However, Stiglitz is strongly opposed to the idea of free market. Stiglitz believes that free market concept does not work, but rather creates more economic problems than benefits (Stiglitz, 2006). Stiglitz is therefore opposed to the idea of free trade within an economy. The free-market concept cannot work effectively, given that market are inefficient; hence the flow of information is asymmetric. This means that flow of information which is instrumental in facilitating the determination of prices of services and goods is imperfect. Stiglitz strongly advocates for government intervention in an economy as the basis of dealing with various problems that are presented with market imperfection. Therefore, Stiglitz tries to show that globalization does not benefit the majority of the people, and in some instances it has to come with interventions aimed at protecting the interest of the poor, such as regulating the free flow of goods, which in turn might be a threat to the survival of local industries, which are a major source of income for the poor. According to Stiglitz the financial crisis in 2008 occurred due to the poor free market concept, whereby, the government failed to intervene through its policies but allowed forces of the market to determine the movement in the housing market, leading to collapse of many financial institutions and other sectors of the economy.

            On the other hand, Castells points out that the concept of free market is being advanced through the creation of the network societies. Castells indicates that the internet creates free market, whereby, people from different parts of the world can share information and ideas on different issues, such as service provision. Castells argument is that network society a new ideology of free market that might benefit people or not depending on the way the ideology is exploited (Castells, Caraça and Cardoso, 2012). The network society creates alternative economic cultures in the world. The every changing environment according to Castells leads to people advocating for more political space and failure of any government to give people free space leads of many societies (Rhodes-Purdy, 2015). This argument indicates that the idea of a free market in a network society might end up not working effectively to those societies that are not receptive to change, as it will eventually lead to their collapse.

 The argument presented by Bhagwati on the concept of free market and globalization is strong compared to what is provided by Stiglitz and Castells. Bhagwati argument on the free market is clear and persuasive in nature. The argument shows that the ideology of globalization by free trade is beneficial to the people. The argument shows that free market concept benefits usually outweigh the costs that are associated with the allowing free trade within an economy. For example, the explanation of free market and its impact on child labor, which is one of the bases of Stiglitz opposing globalization, is very persuasive in nature. The argument indicates that globalization results in the creation of many factories in an economy, and this makes parent generate higher income and as a result reduce chances of children being away from school to work as laborers, as a parent can earn enough by working in new industries and business in an economy. This argument is powerful and makes Bhagwati concepts of free market easier to understand than what is provided by Stiglitz and Castells.  

Theorists Argument on State

 State plays an important role when it comes to the economic development of any given nation. Different economics have provided different arguments concerning the role of state when it comes to the economic development of a nation. According to Keynes, a state has a role to play in determining economic policies to be used in bringing stability. Keynes advocates for the state interventions using monetary policies, such as a change in interest rates with the aim of controlling inflation and employment growth (Keynes, 1924). Alternatively, Adam as an economist advocates for the state to be only involved in creating a good business environment to facilitate trade and economic development. Adam Smith as an economist was opposed to direct intervention of the government on an economy, such as through economic policies, such as import duties, as they hinder the free flow of goods and services. Various theorists of globalization also provide ex-explanations concerning the role of state when it comes to dealing with issues of globalization.

            Bhagwati (2004) points out that a state should not interfere with globalization, but should allow free trade. The state should only put in place measures that facilitate in creating a good business environment rather than interfering directly in economic policies, such as the implementation of policies that make it impossible for the free flow of services and goods. The role of the state is to make the process of globalization easier within an economy by passing regulations that do not restrict the flow of new technologies within an economy (Heilbroner and Milberg, 2012). The role of the state is to make sure that trade policies facilitate movement of goods and services, but do not act as impediments to globalization (Heilbroner and Milberg, 2012). Bhagwati argument is that the government should not try in a way to control globalization in an economy as it is more beneficial to the people, in the area of job creation and improvement of the quality and standards of living (Hirst, Thompson and Bromley, 2015).

 Stiglitz, on the other hand, is of the view that the state should be directly involved in dealing with economic issues, such as globalization. Stiglitz is the view that government interventions are essential with the aim of protecting customers from imperfect market movements (Stiglitz, 2006). The government has a legal obligation of putting in place measures aimed at protecting customers and citizens from inefficiencies in the market. For example, in the market local industries may not be at the same competitive level with foreign companies, therefore, allowing globalization in this context would result in killing of the local industries, and the only solution would be for the government to put in place economic interventions aimed at protecting the local industries by making foreign exports expensive in the local market, such as import duties and others. This shows that Stiglitz is a believer that globalization should be controlled by the government through implementation of economic policies that aim at protecting certain aspects of the local economy from being hurt by allowing free entry of good as well as services.

 Moreover, Castells provides a similar argument from with Stiglitz concerning the role of the state as far as globalization is concerned. Given that Castells is of the view that the economy is changing due to the creation of the network societies through the internet, he indicates that government interventions are critical in making the network societies stable. Castells is the view that the state has to come up with policies that facilitate political change within an economy so as to make an economy beneficial to the people (Hirst, Thompson and Bromley, 2015). For example, the government has to intervene and implement economic policies that facilitate the adoption of every changing environment in a network society, failure to which it can result in economic collapse.

 The argument by Bhagwati concerning state and globalization is strong. It shows that the role of the state is to facilitate the process of globalization to benefit the society. However, the arguments provided by Stiglitz and Castells seem to be vague, as they seem to advocate for direct government intervention, an indication that they do not agree with the concept of globalization. 

Theorists Argument on Social Order

 Social order is state of having a society is stable. The stability of the society is essential when it comes to economic growth as well as development. Keynes one of the renowned economists believes that governments' interventions with an economy are essential when it comes to trying to address social problems. However, Adam Smith believes that governments should not interfere with working on an economy as economic and market forces will end up working on their own leading to solving of social disorder, such as high cost of living.

 Bhagwati indicates that social order is realized by society through globalization. Bhagwati (2004) indicates that globalization makes it possible to bring social stability within an economy through addressing social challenges, such as gender inequality, child labor, and others. For example, globalization helps in bridging the income between the men and women in an economy, something that ends up facilitating the process of ending income gaps as far as gender is concerned (Bhagwati, 2004). Globalization helps in bringing social stability in the society by improving the social well-being of the majority of the people.

            On the other hand, Castells argues globalization creates a network society which can create social instability within an economy. Castells indicates that social networks have resulted in the world spread of economic crisis, as social networks are used to spread panic in an economy. The creation of alternative society through globalization, which is more of network societies that traditional societies, creates social challenges that are difficult to be managed by the government unless it put in place measures of adapting to the changing social environment (Castells, Caraça and Cardoso, 2012).

            Alternatively, Stiglitz strongly opposes the idea of globalization by social disorder. Stiglitz (2012) argues that allowing globalization within a society creates social inequality, which is one of the major disorders that many economies around the world are trying to address. Stiglitz indicates that failure of the government to intervene with policies that allows the process of globalization to be controlled in nature leads to creation of social problems, such as high unemployment levels arising from collapse of the local industries due to failure of the government to protect them from unfair competition arising from the international companies (Stiglitz, 2006). This argument tries to show that globalization that is unregulated by the government is not beneficial to the society as it creates more social problems, such as high crime rates, unemployment. Therefore, Stiglitz is of the view that in order to social inequality to be addressed in a society it is appropriate for the government to put in place measures aimed at controlling some aspects of globalization so that they can be adopted slowly so as to avoid creation of social disorders within an economy (Stiglitz, 2006). Overcoming income inequalities in the society can only be achieved by controlling some aspects of globalization that leads to only a small part of the society becoming richer, while the biggest numbers of people become poorer (Piketty and Saez, 2006).

 The argument provided by Bhagwati concerning social order persuades one to believe that globalization aids in addressing some of the social problems in the society. It shows that globalization facilitates economic growth, which is essential in dealing with gender inequality and child labor (Bhagwati, 2004). The argument provided by Castells and Stiglitz seems to be less convincing as they fail to indicates how social order can be impacted in a great way by globalization, especially negatively, as their arguments somehow advocate for globalization in the society.

Conclusion

 The three main arguments presented in this essay indicates that Bhagwati arguments on globalization appear to be more persuasive and clear in nature compared to what is provided by Castells and Stiglitz. The first focus of the arguments was in line with the free market. The argument provided by Bhagwati is that free market is a good component as it makes globalization beneficial to an economy regarding creating economic and social opportunities that help in dealing with child labor and gender inequalities (Bhagwati, 2004). The counter argument provided by Stiglitz is that free trade is not a good ideology at all as it makes globalization to benefit a small fraction of people in the society while making the majority poor (Stiglitz, 2006). The argument provided by Castells is that free market concept in a globalized world creates a network society, which unless controlled can result in social problems.

 When it comes to social disorder, Bhagwati argues that globalization helps in addressing social disorder in the society, through creating opportunities that cannot be found in a society which is not globalized (Bhagwati, 2004). Nonetheless, Stiglitz is opposed to the idea that uncontrolled globalization helps in solving social problems in the society, but view globalization as the basis of creating social disorder within the society through the killing of local industries. Stiglitz tries to shows that collapse of economies in Eastern Asia in 1997 was mainly due to uncontrolled globalization. On the other hand, Castells shows that emergence of network society due to globalization results in the emergence of a new set of demands in the society leading to social instability.

 The last arguments are about the concept of state. Stiglitz argument is that state should be actively involved in controlling globalization (Stiglitz, 2006). On the other hand, Bhagwati is of the view that globalization should not be controlled by the government, but Castells holds that globalization in some aspects some be regulated internally by the state. 

 The main argument of the essay is that Bhagwati explanations on globalization are better compared to one provided by Castells and Stiglitz. Bhagwati arguments are obvious on the idea of globalization, especially on its impact on social order, stand on free market and role of the state. It shows that globalization is beneficial and best work within a free market economy (Hirst, Thompson and Bromley, 2015). It shows that the role of the state should be to facilitate economic activities, rather than trying to control them as it is advocated by Stiglitz and Castells.

            It is recommendable in the future that the idea globalization to be explained from the perspective of Bhagwati arguments as they are more clear and persuasive naturally in comparison to what is provided by Castells and Stiglitz. In conclusion, it is important for further research to be carried out on the concepts network society as discussed by Castells so as to understand how it influences the process of globalization in the modern society.