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101 views46 pagesTCP 2
The contemporary world
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© © All Rights Reserved
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/ 46
(GHAPTER3 «= MARKET INTEGRATION
Introduction
The social institution that has one of the biggest impacts on society is the ;
You might think of the economy in terms of number—number of unemployed, gross
domestic product (GDP), or whatever the stock market is doing today. While we often tak
about it in numerical terms, the economy is composed of people. It is the social institution
that organizes all production, consumption, and trade of goods in the society. There are
many ways in which products can be made, exchanged, and used. Think about Capitalism of
socialism. These economic systems—and the economic revolutions that created them—
shape the way people live their lives.
Economic systems vary from one society to another. But in any given economy,
production typically splits into three sectors. The Primary sector extracts raw materials
from natural environments. Workers like farmers or miners fit well in the primary sector.
The secondary sector gains the raw materials and transforms them into manufactured
goods. This means, for example, that someone from the primary sector extracts oil from
the earth then someone from the secondary sector refines the petroleum to gasoline.
Whereas, the tertiary sector involves services rather than ‘goods. It offers services by doing
things rather than making things. Thus, economic system is more complicated or at least,
more sophisticated than the way things used to be for much of human history.
This chapter will show the contributions of the different financial and economic
institutions that facilitated the growth of the global economy. The history of the globat
market will be discussed by looking at the different economic revolutions. The growth and
dynamics of multinational corporations that are emerging in today's world economy will
also be examined.
International Financial Institutions
World economies have been brought closer together by globalization. It is reflected
in the phrase “When the American economy sneezes, the rest of the world catches 2
cold.” But itis important to remember that it is nat only the economy of the United States
but also other economies in the world that have a significant impact on the global market
and finance. For instance, the financial crises experienced by Russia and Asia affected
4A The Comemporary World Pr
the world economy. The strength of a more powerful economy brings greater
effect on other countries. In the same manner, crises on weaker economies have
\ess effect on other countries, For example, Argentina's serious financial crisis in
the late 1990s and early 2000s had a comparatively small impact on the global
economy:
Although countries are heavily affected by the gains and crises in the world
economy, the organizations that they consist also contribute to these events.
the following are the financial institutions and economic organizations that made
countries even closer together, at least, when it comes to trade.
The Bretton Woods System
The major economies in the world had suffered because of World War |,
the Great Depression in the 1930s, and World War II. Because of the fear of the
recurrence of lack of cooperation among nation-states, political instability, and
economic turmoil (especially after the Second World War), reduction of barriers
to trade and free flow of money among nations became the focus to restructure
the world economy and ensure global financial stability (Ritzer, 2015). These
consist the background for the establishment of the Bretton ‘Woods system.
In general, the Bretton Woods system has five key elements. First element
is the expression of currency in terms of gold or gold value to establish a par
value (Boughton, 2007). For instance, a 35 U.S. dollar pegged by the United
States per ounce of gold is the same as 175 Nicaraguan cordobas per ounce of
gold. The exchange rate therefore would be 5 cordobas for 1 dollar. Another
element is that “the official monetary authority in each country (a central bank
or its equivalent) would agree to exchange its own currency for those of other
countries at the established exchange rates, plus or minus a one-percent margin”
(Boughton, 2007, pp. 106-107). The third element of the Bretton Woods system is
the establishment of an overseer for these exchange rates; thus, the International
Monetary Fund (IMF) was founded. Eliminating restrictions on the currencies
of member states in the international trade is the fourth key element. The final
dlement is that the U.S. dollar became the global currency.
The General Agreement on Tariffs and Trade (GATT) and the World Trade
Organization (WTO)
Actording to Peet (2003), global trade and finance was greatly affected by
the Bretton Woods system. One of the systems born out of Bretton Woods was
the General Agreement on Tariffs and Trade (GATT) that was established in 1947
(Goldstein et al., 2007). GATT was 2 forum for the meeting of representatives
from 23 member countries. It focused on trade goods through multinational
Chapter 3: Market Integration
las
— 9 i i
trade agreements conducted in many “rounds” of negotiation, However. «,
out of the Uruguay Round (1986-1993) that an agreement was reacheq tocn -
the World Trade Organization (WTO)" (Ritzer, 2015, p. 60). Pate
it
The WTO headquarters is located in Geneva, Switzerland with 152 memp,
states as of 2008 (Trachtman, 2007). Unlike GATT, WTO is an indepe, =
multilateral organization that became responsible for trade jin Services, hes.
tarriff-related barriers to trade, and other broader areas of trade \iberatizay, on
An example cited by Ritzer (2015) was that of the “differences between nai
inrelation to regulations on items as manufactured goods or food. A Sven nation
can be taken to task for such regulations if they are deemed to be an unfaie
restraint on the trade in such items” (p. 61). The general idea where the Wo
is based was that of neoliberalism. This means that by reducing or eliminating
barriers, all nations will benefit.
There are, however, significant criticisms to WTO. One is that trade barriers
created by developed countries cannot be countered enough by WTO, especially
in agriculture. A concrete case was that the emerging markets in the Global South
made the majority in the WTO, but they suffered under the industrial nations
which supported the agriculture with subsidies. Grain prices increased and food
riots occurred in many member states of WTO, like Mexico, Egypt, and Indonesia |
in 2008. Aside from issues in agricultural sector, the decision-making processes
were heavily influenced by larger trading powers, in the so-called Green Room,
while excluding smaller powers in meetings. Lastly, Ritzer (2015) also pointed
out that International Non-Government Organizations (INGOs) are not involved,
leading to the staging of “regular protests and demonstrations against the WTO”
(p. 61).
The International Monetary Fund (IMF) and the World Bank
IMF and the World Bank were founded after the World War lI. Their
establishment was mainly because of peace advocacy after the war. These
institutions aimed to help the economic stability of the world. Both of them are
basically banks, but instead of being started by individuals like regular banks, they
were started by countries. Most of the world’s countries were members of the
two institutions. But, of course, the richest countries were those who handled
most of the financing and ultimately, those who had the greatest influence.
IMF and the World Bank were designed to complement each other. The
IMF's main goal was to help countries which were in trouble at that time and
who could not obtain money by any means. Perhaps, their economy collapsed of
‘their currency was threatened. IMF, in this case, served as.alender ora lastresort
46) The Contemporary World
ace for countries which needed financial assistance. For instance, Yemen loaned 93
rifion dollars from IMF on Apri, 2012 to address its struggle with terrorism.
the World Bank, in comparison, had a more long-term approach. its main goals
revolved around the eradication of poverty and it funded specific projects that
helped them reach their goals, especially in poor countries, An example of such
istheir investment in education since 1963 in developing nations like Bangladesh,
chad, and Afghanistan, one wt
Unfortunately, the reputation of these institutions has been dwindling,
canreue’ an aslending the corrupt governments or even dictators
and imposing ineffective austerity measures to get their money back.
The Organization for Economic Cooperation and Development (OECD),
the Organization of Petroleum Exporting Countries (OPEC), and the
European Union (EU)
The most encompassing club of the richest countries in the world is the
Organization for Economic Cooperation and Development (OECD) with 35
member states as of 2016, with Latviaas its latest member. It is highly influential,
despite the group having little formal power. This emanates from the member
countries’ resources and economic power.
In 1960, the Organization of Petroleum Exporting Countries (OPEC) was
originally comprised of Saudi Arabia, Iraq, Kuwait, Iran, and Venezuela. They
are still part of the major exporters of oil in the world today. OPEC was formed
because member countries wanted to increase the price of oil, which in the
past had a relatively low price and had failed in keeping up with inflation. Today,
the United Arab Emirates, Algeria, Libya, Qatar, Nigeria, and Indonesia are also
included as members.
The European Union (EU) is made up of 28 member states. Most members
iin the Eurozone adopted the euro as basic currency but some Western European
nations like the Great Britain, Sweden, and Denmark did not. Critics argue that
‘the euro increased the prices in Eurozones and resulted in depressed economic
growth rates, like in Greece, Spain, and Portugal. The policies of the European
Central Bank are considered to be a significant contributor in these situations.
North American Free Trade Agreement (NAFTA)
The North American Free Trade Agreement (NAFTA) is a trade pact between
the United States, Mexico, and Canada created on January 1, 1994 when Mexico
Joined the two other nations. It was first created in 1989 with only Canada and
the United States as trading partners. NAFTA helps in developing and expanding
World trade by broadening international cooperation. It also aims to increase
‘Chapter 3: Market integration ar
working conditions in North Amer.
y T
eter improving working conditions in North Americg
corms oe asit expands the markets of the three countries, " “hs,
The creation ©
nations (canada oF
¢ NAFTA has caused manufacturing jobs —
the United States) to transfer to less deveopeg
Mexico) inorder to reduce the cost of their products. In Mexico, al,
5 me and some two milion Farmers were forced to leave their erg
ir ‘ en
rices rose, causing 20 million Me Nur
this time, consumer food pr ie lexicans, about thy
their population, to live in “food poverty.” nt
the free trade, however, gave @ modest impact on US GDP, It hag:
due to trade growth. One can argue that Mare
$127 billion richer each year wth,
was to blame for job losses and wage stagnation in the United States fe
competition from Mexican firms had forced many U.S. firms to mt |
Mexico. This is because developing nations have less government ee
and cheaper labor. This is called outsourcing. As an example, the Unite Sty
cqutsourced approximately 791,000 jobs to Mexico in 2010. : |
As for Canada, 76% of Canadian exports go to the United States and about
a quarter of the jobs in Canada are dependent in some way on the trade with the
United States. This means that if NAFTA changes or is eradicated, it would b. |
devastating for Canada's economy. |
Generally, NAFTA has its positive and negative consequences. It lowered
prices By removing, tariffs, opened up new opportunities for small- and medium. |
sized businesses to establish a name for itself, quadrupled trade between the
three countries, and created five million U.S. jobs. Some of the negative effecs,
however, include excessive pollution, loss of more than 682,000 manufacturing
jobs, exploitation of workers in Mexico, and moving Mexican farmers out of
business.
History of Global Market Integration
Before the rise of today’s modern economy, people only produced for thet
family. Nowadays, economy demands the different sectors to work together 1
order to produce, distribute, and exchange products and services. What caused
this shift in the way people produce for their needs? In order to understand this,
we will be going back in time, 12,000 years ago.
The Agricultural Revolution and the Industrial Revolution
The first big economic change was the Agricultural Revolution (Pomer™
2000). When people learned how to domesticate plants and animals,
: realized that it was much more productive than hunter-gatherer societies:
49) The Contemporary World
il _ a — AW lll
the new agriciltural economy, Farming helped societies build surpluses
ing, not everyone had to spend their time producing food. This, in turn,
io majo" developments like permanent settlements, trade networks, and
@ ition growth.
qhe second major economic revolution is the Industrial Revolution of the
., with the rise of industry came new economic tools, like steam engines,
facturing, and mass production. Factories popped up and changed how
functioned. Instead of working at home where people worked for theit
iy by making things from start to finish, they began working as wage laborers
then becoming more specialized in their skills. Overall, productivity went UP,
ards of living rose, and people had access to a wider variety of goods due
soma production.
However, every Economic revolution comes with economic casualties. The
oskersinthe factories—who were mainly poor womenand children—worked in
dangerous conditions for low wages, As aresult, nineteenth-century industrialists
were known as robber barons—with more productivity came greater wealth,
putalso greater economic Inequality. in the late nineteenth century, labor unions
to form. These organizations of workers sought to improve wages and
working conditions through collective action, strikes, and negotiations. Inspired
pyMarxist principles, labor unions gave way for minimum wage laws, reasonable
working hours, and regulations to protect the safety of workers.
Capitalism and Socialism
There were two competing economic models that sprung up around the
time of the Industrial Revolution, as economic capital became more and more
important to the production of goods. These were capitalism and socialism.
(Capitalism is a system in which all natural resources and means of production are
privately owned. It emphasizes profit maximization and competition as the main
drivers of efficiency. This means that when one owns a business, he needs to
‘outperform his competitors if he is going to succeed. He is incentivized to be
more efficient by improving the quality of one's product and reducing its prices.
This is what economist Adam Smith in the 1770s called the “invisible hand” of the
Market. The idea is that if one leaves a capitalist economy alone, consumers will
"egulate things themselves by selecting goods and services that provide the best
value,
In practice, however, an economy does not work very well if it is left
Completely on autopilot. There are many sectors where a hands-off approach
“n lead to what economists call market failures, where an unregulated market
ds up allocating goods and services inefficiently. A monopoly, for example, is
‘Chapter 3: Market Integration ae can charge higher prices without worrying about losing customers, C Sto
£0, monopoly becomes inefficient at least on the consumer end, in < Aca
these, agovernment might step in and force the company to break Re aa
companies to increase competition. Market failures like this are the iy .
countries are not purely capitalist societies. For example, the Unites 24
overnments own and operate a number of busin Say
federal and state 6
schools, the postal service, and the military. Governments also eet
wages, create workplace safety laws, and provide social support p iia |
unemployment benefits and food stamps. Bram lg
Whereas, government plays an even larger role in socialism, in a |
system, the means of production are under collective ownership. tt ry, t
capitalism's private property and hands-off approaches. Instead, in sociaie. |
sroperty is owned by the government and allocated to all cizens, ng au
voce with the money to afford it Socalism emphasizes collective a
expecting everyone to work for the common good and placing a higher valu,
meeting everyone's basic needs than on individual profit. When Karl Marx fim |
wrote about socialism, he viewed it as a stepping stone toward communisn, |
a political and economic system in which all members of a society are socialy |
equal. In practice, this has not played out in the countries that have modeleg
their economies on socialism, like Cuba, North Korea, China, and the USSR. Why |
Marx hoped that as economic differences vanished in communist society, the
government would simply wither away and disappear, but that never happened,
if anything, the opposite did. Rather than freeing the workers—in Marxist terms,
the proletariat—from inequality, the massive power of the government in these
states gave ‘enormous wealth power and privilege to political elites. The resultis
the retrenchment of inequalities along politica |—rather than strictly economic—
a kind of market failure. When & company has no competition for ¢y y
lines. |
At the same time, capitalist countries economically outperformed ther
socialist counterparts contributing to the unrest that eventually led to the
downfall of the USSR. Before the fall of the Soviet Union, the average output iu
capitalist countries was about $13,500 dollars per person, which was almost thret
times than in the Soviet countries. But there are downsides to capitalism, t00
namely, greater income inequality. A study of European capitalist countries
socialist countries in the 1970s found that the income ratio between the top s+
and the bottom 5% in capitalist countries was about 10 to 1; whereas, in socalt
countries, it was 5 to 1. Those two models are not the end ofthe story because ¥*
are living in the middle of the economic revolution that followed the ingust
Revolution.
"BA Me Contemporary World
> 2 cea "a Pe CL RRS Pe
yaformation Revolution
ours is the time of the information revolution, Technology has reduced
ole of human labor and shifted it from a manufacturing-based economy
ge that IS based on service work and the production of ideas rather than
, fs. This has had a lot of residual effects on our economy. Computers and
07 "gechnologies are beginning to replace many jobs because of automation
qutsourcing jobs offshore. We also see the decline in union membership.
# adays, most unions are for public sector jobs, like teachers.
what do jobs in a post-industrial society look like? Agricultural jobs, which
were a massive part of the Philippine labor force, have fallen drastically over
gst century. In other countries such as the United States, manufacturing jobs,
which were the lifeblood of their economy for much of the twentieth century,
have declined in the last 30 years. The U.S. economy began with their many
workers serving in either the primary or secondary economic sectors. But today,
auch of their economy is centered on the tertiary sector or the service industry.
The service industry includes every job such as administrative assistants, I.
rurses, teachers, and lawyers. This is a big and diverse group because the tertiary
sector, like all the economic sectors we have been discussing, is defined mainly ; :
by what it produces rather than what kinds of jobs it includes. Sociologists have
away of distinguishing between types of jobs, which is based more on the social
status and compensation that come with them. These are the primary labor
jmarket and the secondary labor market. The primary labor market includes jobs
that provide many benefits to workers, like high incomes, job security, health
insurance, and retirement packages. These are white-collar professions, like
doctors, accountants, and engineers. Secondary labor market jobs provide fewer
benefits and include lower-skilled jobs and lower-level service sector jobs. They
tend to pay less, have more unpredictable schedules, and typically do not offer
benefits like health insurance. They also tend to have less job security.
What is next for capitalism and socialism? No one knows what the next i
economic revolution is going to look like. Nowadays, a key part of both our h
‘onomic and political landscape is corporations. Corporations are defined as i:
Organizations that exist as legal entities and have liabilities that are separate from o
ts members. They are their own thing. More and more these days, corporations
*e operating across national boundaries which means that the future of the
Philippine economy—and most countries’ economies—will play out on a global
Stale.
‘Chapter 3: Market Integration & What are the effects of the information
revoluti
: ion in tod. ay’s
market? :
2. What are the effects of multinational Corporations in the Phiy;
economy? 0h
3. Analyze socialism and capitalism in relati
ion with the Philippine Soci
Which of these economic systems woul
Id work in our country?
The history of global market brought positive and m1
time. At this point, markets will be assessed through
and financial globalization.
This activity will help you understand the
harms of global economic
Processes, structures, and technologies,
benefits and
1. Listed below are the scenarios that have to d
Pairs, discuss the major impacts of these scenarios whether they are
Positive or negative (for you, for the country, or for the Filipinos). The
“Case-by-Case” column can be used. Justify your answers.
Scenario Positive Negative Case-by-Case
|
Scenario A: Agriculture is the main source of employment in your
home province. The government has recently decided to develop the
farmlands into real estate and exclusive subdivisions in order to attract
foreign investors to the country.
Scenario B: You decided to
shop based in London.
lo with the economy. In
Purchase a new shirt through an online
Scenario C: The Philippine government is being pressured by the
current economic crisis to import rice from Taiwan and other nearby
countries in the region. ;
5a The Contemporary World v —— LLL
scenario D: A multinational close.
corporation decided to
ee your father is one of its many employees whose work
has bee! - hinated. However, he could still be employed if he were
to accept the offer to move or relocate to another country.
Scenario E: The global financial crisis has affected the investment funds
of your mother that she can use for her retirement.
How did you decide for each scenario? What are the pros and cons that
you list down before you came up with the final judgment? Share with
the class your responses to each scenario.
global Corporations
The increase in international trade has both created and been supported by
international regulatory groups, like WTO, and transnational trade agreements,
jke NAFTA. There is not a single country that is completely independent. All
wre dependent to some degree on international trade for their own prosperity.
without intel rnational trade, there would be no need for international regulatory
groups: Without the international regulatory groups, international trade at the
current massive scale would be impractical. The trade regulatory groups and
ents regulate the flow of goods and services between countries. They
reduce tariffs, which are taxes on imports, and make customs procedures easier.
This makes trading across national borders much more feasible.
These international trade agreements often benefit private industries the
most. Companies can produce their goods and services across many different
countries. For instance, you can have a backpack that was designed in the United
States but the materials came from China, and it was put together in Mexico
before it was shipped back to the United States to be sold.
These companies that extend beyond the borders of one country are called
multinational or transnational corporations (MNCs or TNCs). They are also referred
to as global corporations. They intentionally surpass national borders and take
advantage of opportunities in different countries to manufacture, distribute,
market, and sell their products. Some global corporations are ubiquitous, like
McDonald’s or Coca-Cola, and yet, they still market themselves as American
companies. Others can be surprising like General Electric, which is based in the
United States but has more than half of its business and employees working in
other countries. Another example is Ford Motor Company, the classic American
‘ar company, headquartered in Michigan that manufactures cars worldwide.
‘Chapter 3: Market Integration os] —™
© global e
tion, i .
Political ca mikey
laws of the interna
tional corporations have a significant tole in th
ae ater production advantages than an entire nai
fe com ae politics by donating money to specific
igen. oy can even influence the global trade |
lobbyists.
regulatory groups,
Glebal corporations often locate their factories in ‘Countries
rovide the cheapest labor in order to save Up for expenses in the
ea Asaresult, developing nations will Provide ii
incentives, like tantra Oty
zones or cheap labor. The companies will set Up shop in their Country in
Which on
Inthe end, however,
the ‘developing nation, Thi
“orporations but the
these incentives often hurt the working Population
© upper classes may benefit from the busin
People working in the factories are exploited as
they are often, Prohibited from Unionizing. Itean
in sweatshop Conditions with long working hours, Substandard wa;
‘working conditions. If the labor lay
'BES, and poe
ws in one country become too icin
their:
: There are, however, positive effects
allocation of resour
@s, lower prices for products, mot
orldwide, and higher product ‘output.
TY experiences
Of the cultural chan
th
only
from intemational trade are not
16€5 are as important and a
an the economic changes thie nation can experienc iY
ices are exchanged, Cultural
a zen nations, spreading from we and expressions are also passed
ie -actices spread from where ¢ i BrOUup. This is called diffusion. Ideas
# ‘well kr
ces where they are new ang not often ob ‘nown and frequently apparent
© gy conquests, missionary served. In the past, exploration,
ag of ideas, But eine and tourism provided the means for
ee Nowadays, mass re) tts ©xponentially increased the speed of
t petantanenuny te and the internet allow the transfer of ideas
a knowledge and th 'S Most commonly seen in the transmission of
ei © Spreading of the North American culture, which
rinates the Internet. a
ional
ees trade and global corporations, along with the Internet
iad more global processes, contribute to globalization because people and
caporations bring their own beliefs, their traditions, and their money with them
wwen they interact with other Countries. These ideas and capital can then be
incorporated in other countries, and thus, change the cultures and economies of
hese foreign nations.
1. Analyze the “global” nature of multinational corporations.
2, Do you think the positive effects of multinational corporations
outweigh the negative effects? Why or why not?
| 3. What do you think are the ways to lessen, if not eliminate, the negative
| consequences of multinational corporations?
The Corporation is an award-winning documentary film that examines the
Modern-day corporation. it assesses the corporation as a person and provides
‘titicisms to corporate business practices. It also describes the contemporary
"ATE
Introduction
The state has traditionally been the subject of most interest to scholars oF glob
politics because it is viewed as “the institution that creates warfare and sets econ
policies for a country.” Furthermore, the state is a political unit that has authority over iz
own affairs. In other words, its borders are recognized by other countries. It is @ssumeg
that whoever is in charge of those borders has the right to determine exactly what is Boing
to happen in their country. The Treaty of Westphalia of 1648 established the notion of the
nation-state and the idea of state sovereignty. Today, the globalization of politics createy
anatmosphere where the ideas of the nation-state, state sovereignty, government ‘control,
and state policies are challenged from all sides.
With globalization, some scholars suggest a decrease in the power of the state and
that other actors are actually becoming more powerful. These actors include multinational
corporations and global civil society organizations, like the Red Cross, that cross national
boundaries.
Is the idea of the nation-state outdated in the contemporary world? If so, what is it
that we need to think about as “replacements”? In this chapter, we will look at regional
alliances and worldwide organizations of states. This manifests the efforts of countries and
governments in the world to cooperate and collaborate together. Next, in ternational and
regional economic bond bodies, such as IMF and the World Bank, must also be considered
as they often push for neoliberal reforms in the world. The third kind of replacement to
the traditional nation-state and the idea of national autonomy comes from the non-state
actors, One of these is the private capital groups, including banks and groups of people,
with money that can determine the well-being of people in a particular area. Multinational
corporations and non-governmental organizations, such as the Amnesty International, ar
significant organizations that put into question the strength of national autonomy =
global politics. The emergence of non-state organizations, like Al-Qaeda, ISIS, and terror
organizations, which seek power try to depose a government and replace the system wit
their own ideological belief.
56] The Contemporary World
ae Val a
< Contemporary World #
Governance in the Twenty-First Century
spore 1S 2 Series of specific factors behind the emergence of global
nance The first on the list must be the declining power of nation-states. if
oe themselves were “highly contingent and in flux” (Cerny, 2007, p: 854) it
wdoner the possibility of the emergence of some form of global governance
spe vols
‘second factor is the vast flows of all sorts of things that run into and often
through the borders of nation-states. This could involve the flow of digital
mation of all sorts through the Internet, It is difficult, if not impossible, for 2
ationrstate to stop such flow and in any case, itis likely that such action would
pe politically unpopular and bring much negative reaction to the nation-state
_ volved in such an effort. For example, China’s periodic efforts to interfere with
spenternet have brought great condemnation both internally and externally.
‘Then, there is mass migration of people and their entry, often illegally, into
various nation-states. If states are unable to control this flow, then there is a
need for sorne sort of global governance to help deal with the problem. The flow
ofcriminal elements, as well as their products (drugs, laundered money, those
bought and sold in sex trafficking, etc,), is a strong factor in the call for global
governance (Levy and Sznaider, 2006). in these cases and others, there is a need
for some degree of order, some sort of effective authority, and at least some
potential for the improvement of human life. These are but a few of the things
that can be delivered by some form of global governance.
‘Another set of issues that has led to calls for global governance involves
horrendous events within nation-states that the states themselves either
foment and carry out, or are unable to control (Nordstrom, 2004). For example,
in Darfur, Sudan, perhaps hundreds of thousands have been killed, millions of
people displaced, and the lives of many disrupted in a conflict that date back
to early 2003. The government of Sudan and its military have been implicated
in the conflict between ethnic and tribal groups and the Sudanese government
bas been resistant to outside interference in its internal affairs. One could even
§0 back to WWII and argue that the Holocaust could have been prevented, or
+t least mitigated, had there been a viable form of global governance to put
Pressure on Nazi Germany and ultimately, to intervene in a more material way,
Perhaps militarily (Bauman, 1998).
Then, there are global problems that single nation-state cannot hope to
‘&ckle on their own. One is the global financial crises and panic that sweep the
World Periodically, which nations are often unable to deal with on their own
et)
Q
Chapter 4: The Global Interstate §
ystem o =
(Strange, 1996). Indeed, some nations (e.g., the nations of Southeast «_.
often been, and are being, victimized by such crises. Unable to help ¢ Asia) hay
such nations are in need of assistance from some type of global ca Perr.
Nation-states have long struggled to deal with problems like
various interstate systems (e.g., alliances such as NATO), but the mo
trend is toward the development of more truly global structures and can,
dealing with various sorts of issues and problems. Method, of
Effects of Globalization to Governments
One of the key aspects of state sovereignty is the government. it isa
of people who have the ultimate authority to act on behalf of a State,
state has its own right to self-determination and that other Country shoulg
intervene in the affairs of that state unless there are extraordinary feat
do so. Other countries must recognize sovereignty or the right to govern
own territorial borders. Each state is autonomous unto itself and res
within its own system of government to those who are governed, The
the conflict, and the resolution of that conflict are done through the institutions
of government established and codified in that particular state, whether o
not through elections. Elections, especially in democratic society, provide the
leadership of the state. In addition, the policy is developed and implemented
in the interest of the people of a state by a specific government. A civil society
within a state can also act as a counterweight or as a supplement to government.
Civil society includes the private economy, educational institutions, churches,
hospitals, fraternal organizations, and other non-profit organizations.
one’s
There have been several challenges to the government and ultimately, to
state autonomy. We can divide these challenges into four: traditional challenges,
challenges from national or identity movements, global economics, and global
social movements.
Traditional Challenges
External intervention can generally be described as invasion by ote
countries. For example, when Saddam Hussein was the ruler of Iraq in saps
decided he was going to take over the oil fields of Kuwait. He invaded Kuwait a
took it over. As a result, he was dislodged by an international coalition led bY
United States.
sia’s
ther forms. Rus
These days, we can see external intervention in o' the pos
external intervention into the affairs of Ukraine, a sovereign state in
56 ‘The Contemporary World
r
_ aati got erais another instance...
© OF ji
i ention|
rvenes In the affairs oF peg, nthe aut ,
in even though they are Pl Crime Snomy of the state. Russia
re
ukraine and ‘c-afllateg With Russia qo? declared its independence
; aa 8 country a, es Of how there might be
amet aieaastterimg tian
jad Russia, not FecOgnizing Ukraine’ sree snes Sovereignty,
Internal political chalje ;
ee te et
au included a mentalist and reiected the notion ofa plural
thegovernment in order to reoresabane ot) Staged a coup that deposed
to control the : ‘examples include the Taliban's
oe Assad came ao" Afghanistan, in Syria, the original rebellion
replace the government ni al dissenters who wanted to
also Syrisin nationals.
There are also regional
Who wy
Ukraine, can 8 become part of Russia
SOuntrY’s own inte
though they were
The next challenges are Part of a
important to know that a nation has cult
while a state is a definite entity due to its
people with different identities can live in
reside in several different countries, Including Iraq, Iran, and Turkey. The Catalans
lve primarily in Spain but we can also find some of them in France. Scottish
nationalism is another example that challenges the traditional notions of state
Sovereignty. In 2014, Great Britain had a vote in Scotland to decide whether
Scotland was going to become its own autonomous state apart from Great
Britain, They voted against it but Scotland has a significant degree of autonomy
"OW as compared to more than two decades years ago,
Rational (dentity or movement. It is
ural identity that People attached to,
Specific boundaries. However, different
different states. For ‘example, the Kurds
Global movements, such as the ALQaeda and ISIS, are another example
Of national or identity movements. In this case, they are structured around the
fundamentalist version of Islam.
Chapter 4 The Global Imersate Sytem Global Economics |
The thifd major source of challenge comes from global ec,
economy demands the states to conform to the rules of free-m;
Government austerity comes from developments of organizatio,
across countries, such as WTO and regional agreements, su
European Union (EU), and the Association of Southeast Asian
nomics,
wi pha
Ms that So0pe,
ich as Ny, AFTA Tate
Nations (astaye®
Neoliberal econoinics or neoliberal capitalism started inthe 19805. tt foe ).
on free trade and dismantling trade barriers. It made sure that Bovernme, :
not impose restrictive regulations on corporate Presence, as well as on ae fr
flow of capital and jobs. Free trade was seen as the ideal or the Normative be; =
that is, the best economy is one where there is free trade everywhere. Laws te,
standards that would interfere with the flow of capital in a Particular cou Be
including environmental regulations, were deemed to. discourage ¢
growth. Neoliberal economics requires a state to cooperate in the glot
through the free flow of capital, the privatization of services, and fiscal austerity
or constraint. In turn, the government’s role is diminished as it relates to the
market. Neoliberal economics is seen as a threat, in general, because a State
‘cannot protect its own economic interest as a sovereign state,
COnomic
bal market
Aspecific example to expand global economic influence is the use of IMF and
the World Bank in forcing government reforms in poorer country. Furthermore,
the regional economic development efforts focused on expanding free trade and
market liberalization. Businesses fram developed countries put their factories
and pay people to build factories and produce goods in developing countries
worldwide. These corporations will sell the products in developing countries.
This exacerbates rising inequality in the world. Greece is one example that
explains how neoliberal economics can threaten the sovereignty of a state. It
began in 1981 when Greece joined the EU. As a larger alliance, the EU broke down
all kinds of barriers among its member states, including Greece, like passports
visas, and license plates. It allowed people to travel across European borders
and encouraged economic cooperation and collaboration of member ate
‘Twenty years later, Greece adopted the euro as its own currency and got rid
the drachma. The government of Greece borrowed money for Indrestruch
improvements, largely linked to their hosting of the 2004 Olympics. rns ec
Greece in a large debt. In 2007 and 2008, the worldwide financial crisis ma
Greece’s economy to collapse.
everal of
Aside from high debt that burdened the government, Greece had s sult
are:
its employees struggling with pensions. Tax revenues were lower, and as
GH The Contemporary World
=
_ le
> a could not = hee debts back. In 2009, their credit rating dropped which
melt ee Pay back their debt. This led to a series of austerity
{acho Ee an ae - seers that there was less government spending. IMF
val re sca toh risis in exchange for more austerity. In conclusion,
on me ‘ce government to subscribe to the terms and conditions
obal financial market and of other nations that can help them regain
rhe gIODe
© nomic stability.
e
giobal social Movements
Finally, we have global social movements. Most of the time, they are not
nasa threat but they definitely challenge state sovereignty. Social movements
gemovernents of people that are spontaneous or that emerge through enormous