Markets at the Mercy of States in International Relations - Assignment Example

International Relations and the Global Economy By [Name] [Course] [Professor’s Name] [Institution] [Location of the School] [Date] Markets are ultimately at the mercy of States in International Relations Introduction Over the last few decades, free trade has been advocated as the most important factor that facilitates democracy, peace, and prosperity in the increasingly globalizing market. Recently, there has been an unprecedented proliferation of various forms of foreign direct investment, and most of these investments are spurred by increasing globalization. The investments have raised concerns regarding the impact of globalization to the local politics and economies (Hobson & Seabrooke 2007, 46). This section addresses factors which determine how globalization influences the attractiveness of markets to investors as well as the impact of such investments on the local politics. Discussion Overview Many multinational corporations opt to invest in markets where political and legal institutions are anchored in the rule of law. Corporations value the protection of property rights as well as democratic processes in the political sphere. This is because such arrangements have proved to have the capacity to stabilize economies, thus facilitating a desirable environment for doing business. Even with globalization being witnessed, no corporation would wish to invest or operate in a market where there are instances of theft of intellectual property, or where civil unrests are common (Gilpin 2011, 7). In this regard, globalization demands of governments around the world to facilitate the alignment of their economic and political environment to the global/worldwide trend. Research has indicated that the administrative costs of entry and operations vary widely across countries. Markets where there are complex administrative procedures discourage the inflow of investments. In most developing countries, for instance, such barriers as the difficulty in accessing and acquiring land or building permits derail business operations. With globalization, developing countries are forced to improve their administrative procedures so as to enhance trade with the rest of the world (Gilpin 2011, 9). Most investors believe that governments which impose excessively high administrative costs tend to be unnecessarily intrusive in the operations of the organizations and, therefore, they tend to derail trade interdependence. Moreover, the level of the costs of administration has been positively correlated with high corruption incidence. Indeed, it does also negatively correlate with the degree of openness, public wages, as well as the quality of governance. These correlations indicate that markets are at the mercy of states, and that reforms in the political sphere are what facilitate trade reforms; financial liberalization; and, indeed, globalization itself (Devetak et al 2011, 80). Administrative Procedures Administrative procedures are necessary since government control and screening of investors and their activities are legitimate activities. Throughout the world, states regulate the activities being undertaken in their territories. Control facilitates the enhancement of security, the protection of workers’ rights, as well as quality as per the standards which are globally acceptable. In essence, the objective of having administrative procedures is to eliminate or reduce market failures, and this raises the global public utility (O’Neill 2009, 60). As it has already been indicated, states differ in the manner in which business operations are regulated. Research has indicated that excessive regulations results into substantial derailment to globalization. When delays prove to be costly to organizations, organizations may eventually decide to operate informally or relocate elsewhere. This means that state regulation is among the primary factors which influence globalization (O’Neill 2009, 61). Country Commercial Guides Country Commercial Guides refer to an overview of the commercial environment based on the global political, market, and economic analyses. The guide is compiled on an annual basis, and it is accomplished in mutual cooperation between the American government agencies and other nations. Many corporations rely on this guide while making investment decisions in markets around the world. The position at which a country is ranked depends on a number of factors, and political stability is the most important amongst those factors. Politics have a significant impact on the level of corruption as well as social and economic stability of a market (Spero & Hart 2010, 92). As it has been indicated above, social and economic stability have a significant influence on globalization. In order to ensure that a market retains its attractiveness, the state must ensure that the level of corruption is maintained at the minimum. The government must also assume an active role in managing the economy while still avoiding unnecessary political interference. For instance, the government may choose to invest in infrastructural development and also foster close alliances between the private sector and the state agencies. Moreover, it is the duty of a state to design and implement programs and policies which have the capacity to enhance the economic environment, and thus align the country in a manner that enables it to exploit globalization as opposed to being exploited by it (Stone 2011, 72). Conclusion This section has addressed some of the factors which influence the attractiveness of a market. The section has indicated that the factors are strongly anchored on the political environment of a country, and this means that a state play a significant role in ensuring the economic success of a market. Investments, politics, and international relations are closely intertwined. In this regard, markets are at the mercy of states as it is the states which control international relations. The Wealth of Rich States and the Poverty of the States Introduction Global economic imbalance has resulted into a situation where a number of countries have huge amounts of resources as others lag far behind. This is even as globalization has become among the topics being discussed in countless number of seminars, speeches, and articles. In spite of holding these discussions, many governments in the world are yet to align their policies with what is presumed to be the implications having a globalized world. This situation results into a situation where companies based in developing nations are unable to develop beyond a certain limit. Rich nations have been exploiting the scenario to their advantage (Stone 2011, 73). This section evaluates if poverty in the developing world facilitates the sustainability of the rich nations. Discussion An appropriate analysis of the global economic imbalance is still being undertaken so as to establish who are the losers and gainers in the current state-of-affairs. There are fears that enhanced globalization is bound to widen the gap existing between the haves and have-nots, civilized and uncivilized, as well as the well and the strong. Many feel that globalization enriches a minority of states or individuals in charge of the process by taking advantage of many other stakeholders. This means that most nations are marginalized and impoverished further as a few others benefit significantly (D’Anieri 2011, 24). The impact of the cultural and economic globalization has been sweeping throughout the entire world. While this is not a negative development per se, its imposition on ill-prepared nations results into more imbalances thereby pushing the nation in question to the edge. The developed world is the designer of globalization. Players in the West as well as in such other countries like Japan and Korea have already assessed and understood a host of indicators which empowers them to have a competitive edge in the global market. They are the generators of the commonly accepted indicators, and this means that there is no way the South can match them with regard to international relations and the global economy (Beshoff & Hill 2013, 35). Being ill-prepared has marginalized masses in the developing world resulting into increased unemployment and increased level of poverty. Most of the key decisions, especially those which have global significance, are made by the stakeholders in the West. The West and its allies act in exclusion of most other sections of the global community, a factor which gives them a leeway to design policies in a manner that favors them the most. The North has also made and empowered organizations such as IMF and the World Bank, and these organizations are tightly in their control (Ravenhill 2008, 140). Organizations such as IMF and the World Bank are utilized in shaping global relations. This influences the nature of national policies, and more so in the South. Indeed, there have been a corresponding and gradual depletion of the importance and power of institutions which are more democratic and open. In this regard, it is evident that economic and social agencies of the United Nations are not as functional or powerful as they once were (Ravenhill 2008, 142). Whilst democratic and open institutions avail an avenue for the South to air their views, their significance has been eaten away by the powerful aid and policy clout presented by such organizations as WTO and Bretton Woods. The zealous endeavors by the rich and powerful North to retain its strategic advantage are a clear demonstration of how the current state-of-affairs favors them. It is evident that the arrangement is not for geopolitical reasons; it is clearly for economic reasons. Had it been for the purpose of retaining political mirage, the North would not be watering down the importance and significance political agencies around the world. The rich nations fear having an empowered South since their wealth depend on the poverty of the poor states (Schenk 2011, 101). Conclusion This section has been evaluating the manner in which the wealth of the rich nations relies on the poverty of the poor ones. Many stakeholders in the North feel that their future would be threatened if the capacity of the developing nations improves, especially if the improvement is not in line with their strategic objective. There is clear evidence that the global economy and the international relations are closely intertwined. This is thought to be the reason why the North maintains international relations which are in line with their strategic advantage. Therefore, the wealth of the rich nations does require other states to remain poor. List of References Beshoff, P & Hill, C (2013), Two Worlds of International Relations: Academics, Practitioners, and the Trade of Ideas, London: Routledge, 33-37 D’Anieri, P (2011), International Politics: Power and Purpose in Global Affairs, Stamford, CT, United States of America: Cengage Learning, 23-25 Devetak R, Burke A, & George, J (2011), An Introduction to International Relations, Cambridge, England: Cambridge University Press, 78-82 Gilpin, R (2011), Global political Economy: Understanding the International Economic Order, Princeton, New Jersey: Princeton University Press, 7-11 Hobson, JM & Seabrooke, L (2007), Everyday Politics of the World economy, Cambridge, England: Cambridge University Press, 44-47 O’Neill, K (2009), The Environmental and International Relations, Cambridge, England: Cambridge University Press, 58-61 Ravenhill, J (2008), Global Political Economy, Oxford: Oxford University Press, 135-142 Schenk, C (2011), International Economic Relations Since 1945, New York: Taylor & Francis, 99-102 Spero, JE & Hart, JA (2010), The politics of International Economic Relations, United States of America: Cengage Learning, 90-94 Stone, RW (2011), Controlling Institutions: International Organization and the Global Economy, Cambridge, England: Cambridge University Press, 67-73 Read More