Wednesday, October 24, 2012

Globalization and National Economy

            Globalization as a process has occurred in waves throughout human society, beginning as far back as the “Out of Africa” migration many millennia ago.  While political and social integration on a national scale have occurred in varying intensities over human history, economic globalization has only recently begun to impact the world in a day to day manner.  While many social scientists, namely Jürgen Osterhammel and Niels Petersson, believe that the height of economic integration came in the period leading up to the first World War (1880-1910), I will focus on the current wave of economic globalization which came in the wake of the second World War. 

            The process of economic globalization has powerful political ramifications the world over.  As vividly highlighted in the current presidential campaign as similar elections in foreign states, the national economy, especially with regards to the current stagnation worldwide, is one of the most contentious issues in politics in any country.  Juxtapositioning this increased domestic importance of the economy is the decreasing control that individual nations possess over their economy.  As it becomes harder and harder to run of political office in any democratic nation without the economy on one’s side, it is simultaneously becoming harder and harder to have effective national control over the domestic economy.   
            Just as manufacturing jobs once fled New England for the cheaper labor of the post-Civil War South, Manuel Castells explains that in the previous decades many manufacturing plants have left industrial nations, such as the United States, for cheaper localities abroad.  This flight to inexpensive labor, primarily in underdeveloped countries such as India, China, Bangladesh and Indonesia, is one part of what Castells labels as a new international division of labor.  An example of this can be seen in what has become a staple of life today:  Apple products.  An Apple iPhone contains electronic minerals mined in the heart of Africa, shipped to China where they are crafted into microchips and installed into iPhones and then shipped to Apple offices in America before being distributed to the various retailers.   
            Because of this international division of labor, it has become more difficult for a nation to wield control over its economy.  Since few goods are completely domestic products, the transnational corporations which manufacture and distribute them possess more effectual power over the economy than at any time in the past.  Quite simply, it is far cheaper for companies such as Apple, Nike, or Ralph Lauren to have their plants in foreign nations rather than in the United States.  There is very little that politicians from either pole on the ideological spectrum can do to change this trend, regardless of their promises to “bring back jobs from overseas.” 
            This is not to say that the concept of a “national economy” is obsolete one, but simply that nations have less economic power than they have in the past.  Governments still dictate trade policy, domestic monetary policy, tax rates, and the allocation of government investments.  The fact of the matter is, however, that national governments have largely taken a back seat to the international organizations which have jurisdiction over economic matters.  The World Trade Organization, the World Bank, and the International Monetary Fund all control aspects of the global economy. 
            With the ease of international trade, brought upon by transportation innovations such as the jet aircraft and high capacity freight ships as well as the invention of high speed communication systems, namely the internet and satellite communications, the global economy has planted deep roots in almost every individual nation, regional trading bloc, such as NAFTA or ASEAN, and the previously mentioned international organizations.  It is this deep-seeded interconnectivity between national economies, trading blocs and international organizations which undermines the ability of the constituent nations to wield supreme authority over their own economy.
            The web of connections between economies has had a destabilizing effect which the state has not yet found a way to counter.  The sputtering of a single nation’s economy threatens to spill over and drag nearly the entire world down with it.  The clearest example of this is Greece, in the throes of the Euro Crisis.  While I do not pretend to have even the slightest sense of omniscience regarding this issue, my understanding is as follows:  Greece, wracked with a debt nearly twice its GDP, has been forced to commit to massive austerity measures to cut governmental spending in order to secure a bailout from the European Central Bank.  Should Greece obtain this bailout-loan and fail to pay it back, Greece will once again default on its loans, causing it to be expelled from the European Union, which in turn will cause a cascade of panic across the financial markets which will cause the floor to drop out from under the global economy and plunge the world into a full-fledged depression.  Should this situation come to fruition, it will affect every nation, regardless of their involvement in the instigating problem.  The economy of Argentina will suffer just as much as that of the member-states of the European Union. 
            In economic terms, the nation-state is still alive and well, although with almost every passing day it finds itself weaker and weaker when compared to trans- and international processes and organizations.  Political leaders of states must now rely more on their ability to influence the international community to accept their desired economic policies than their ability to mobilize domestic support for said policies. 

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