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Introduction to International Political Economy Within the last decade, International Political Economy emerged as a distinctive branch of International Relations and there are a lot of factors that contributed to this. However, as we analyze those factors closer, it is evident that they all constitute one distinctive factor that is solely responsible for the increase of International Political Economy's importance, and that factor is globalization. Globalization is a process in which economic, political, and socio-cultural relations are established across a long geographic distance. Globalization gains its strength from the possibilities opened up by technologies, strategies and policies. The reality takes effect when the fears, ideas, actions and reactions occur due to globalization. In a fully globalize society, borders no longer protect people, goods, and symbols.
The world becomes this worldwide network where the borders fade away, and International Political Economy definitely becomes more important under those circumstances. A factor within globalization is consolidation. This is when globalization is forcing companies that used to enjoy protected home markets to compete with foreign rivals. Globalization is something that is acknowledged and then acted upon.
When globalization is properly acted upon, political policies begin to affect economic strategies, which then affect social reactions and so on. This process occurs at many different interconnected geographic levels. Globalization is a journey, a process, and it is on-going. Globalization is a reality that touches our lives in ways most people never stop to think about. Certainly, globalization of international business is the key aspect of globalization; there are a lot of solid reasons that undoubtedly prove that point. The globalization of international business has its advantages and disadvantages, and by analyzing them, we will see that this globalization is inevitable.
Globalization has become one of the biggest issues in the economic world today, and that is also a factor that contributed to the emergence of International Political Economy as a distinctive branch of International Relations. Many people believe globalization is a good thing, and there are also many people who think it is bad. Some of the comparative advantages of globalization of international business are that the allocation of the worlds resources are more efficient, it will lead to lower prices for consumers, and it will also provide more choice for the consumers. Even though there are these noticeable advantages of free trade, there are still people who believe globalization is a bad thing. On January 13, 1998, Stephen Golub, professor of economics at Swarthmore College, led the sixteenth seminar in AEIs series, Understanding Economic Inequality. His presentations sought to dispel fallacious but widespread views concerning the effects of competition from low-wage countries in international trade, including the view that such competition has significantly increased wages inequality in the U.
S. The argument that low foreign wages has provided an unfair competitive advantage has been widely believed in the United States for at least 150 years. On the question of whether competition from low-wage countries is the cause of the widening income gap in the U. S. , many agree that wage inequality reflects greater demand for skilled labor, as evidenced by the growing wage premium earned by college students.
There are two possible causes of the increasing demand for more sophisticated skills: economic globalization and skill-biased technological change. Economic globalization does not increase the demand for relatively higher skilled labor, as would be expected from the theory of comparative advantage. But many studies of this issue conclude that trade with low-wage countries has played, at most, a secondary role in income inequality. The studies show that technological change is the main reason for the shift in demand for labor. As a result, this article points out that globalization does not affect income inequality, therefore it is inevitable. Trade with low-wage countries is very small relative to the U.
S. GDP. Globalization with these countries does not do what most economist report. In the next article, Globalization: Benefits and Responsibilities, U.
S. Ambassador Richard Hecklinger reports his views on globalization of international business. In his introduction, he states globalization is a phenomenon that touches every one of us. This statement is true because economic globalization causes many things to be better for consumers. Later in the introduction, Hecklinger says that the entire society has a responsibility to work together to take full advantage of globalization and to minimize any negative impacts it might have. In the first section -- Markets, Poverty, and Globalization -- he starts off by saying that open markets and rules-based trade are the best means we know of to lift the standard of living.
He points out that international trade and investment are essential to the prosperity and well being of our citizens. He showed a statistic of among developing nation that showed that from 1970 - 1990, economic growth rates were 4. 5 % for those who were opened to economic globalization, and less than one percent for those who blocked trade and investment. The second point he makes is that economic growth is the best and probably the only cure for poverty. In studies done, out of 125 countries with relatively close relationships in overall income, 108 of them had increased income among there poor.
The global economy offers countries markets for the products, lowers prices and expands choice for consumers and domestic industries alike, creates jobs, and ultimately reduces poverty despite disruption to some sectors. Of course, open markets and competition will always allow some people to become rich, but disparity in income levels is less important than whether people are moving out of poverty, and whether they are given the opportunity to benefit from economic growth. The third point he makes is that globalization does not mean the end of local business, ethnic identities, or national culture. In fact, revolutionary changes in transportation and communications obliterate many barriers to global market entry, creating countless opportunities for micro-entrepreneurs. These three points are the main reasons Mr. Hecklinger believes globalization of international business is a vital part of international economics and it is inevitable.
Next, an article by Andrew Kohut shows the varying views people hold on globalization. In a Pew Research Center nationwide survey in April, 43 % of the respondents said that the future of global economics would help the average person while 52 % said it would hurt. The survey shows that as the earnings of the families decreased, so did their belief that globalization would be beneficial. Another survey showed that, on the average, most American families are better financially now than they were a few years ago. But once again, they found that financial satisfaction is also decreasing as the family's income levels decrease. Wages also continue to be a source of concern.
Only 39 % of people in developed countries say they earn enough money to lead the life they want. With the expansion of globalization, 67 % of those people worry that good jobs will begin to move oversees, and that they will be left with jobs that do not pay enough. Although most people favor economic globalization, they also criticize the specific policies and agreements. To conclude his article, Mr. Kohut states that the dissatisfaction showed is less important than a more widespread public optimism about future economic gains.
This seems to be one of the main benefits of globalization of international business. The next article, Economic Integration -- Benefits and Costs, shows two of the effects of international trade. The first effect discussed is the static effect. First, they talk about how trade is created. In earlier studies done, imposing tariffs results in some efficiency losses to a countrys economy.
Economic integration has the opposite result -- by removing tariffs, this loss becomes a gain. The removal of a tariff reduces the price back to the world price, which allows for cheaper prices for consumers. Removing a tariff allows both the production distortion loss and the consumption distortion loss to be restored to the economy. These two areas now become gains.
Economic integration can also lead to trade diversion. This is not in the best interest of all member countries. Trade diversion occurs when member countries are not the most efficient producers of a good. Member countries will still trade with the countries offering the best price, but the economic block can distort these prices. By buying goods from member countries with a lower price, the importing country might get a less efficient product.
The country with the higher price might produce those goods at a better quality, but others will not buy from them because of their price. There is also a dynamic effect of economic globalization. In this effect, integration leads to a larger market within the block, allowing countries to take advantage of economies of scale to reduce prices. Integration also allows for specialization by member countries. Rather than having all member countries producing a large variety of goods, they can agree to allocate production of certain goods to certain member countries. This, again, means they can take advantage of economies of scale.
All of this leads to the question of whether economic integration is best type of free trade. The next article researched gave some statistics on globalization. First, the corporate power shows that 2 / 3 of international trade is accounted for by just 500 corporations. This said it shows that transnational corporations have reached the greatest control over the process of globalization.
This article complains that the control of globalization causes the larger industrial countries to have much more power than the smaller developing countries. To explain, the turnover of the 200 leading corporations has increased from 3, 000 to 7, 000 billion since 1982. These corporations are dominating international trade. At the current moment international trade is expanding faster than the worlds economy. This being said, trade is argued to be one of the main engines in economic growth. Even with this, developing countries are still having trouble competing with other nations.
With all of this being stated in this article, I would have to disagree with them. Even though these developing countries cannot compete with the larger ones, globalization is still making it better for them. This article does not show a stat that states the increased GDP in these developing countries. Globalization of international business is a concept with many differing definitions.
Globalization is a process that entails the free movement of capital, goods, services and labor around the world. Globalization is the massive control of the worlds economy by big business; this control transcends the boundaries of state and country. This transcendence across countries makes the subunits of the economy decompose and depend on the larger companies with a controlling interest in most of the capital within a given economy. These companies then form global constituents; they then have a control of a large volume of capital within many countries.
This global control of capital comes through the de industrialization of larger economic superpowers to third world countries for economic gains of these companies. Seeking lower wages and a large unskilled labor force, companies find it in third world countries. These are concrete examples of global companies seeking wage reductions on an international scale. This migration causes a de industrialization for the larger countries and industrialization in these developing countries. In a curious fashion they tend to confirm the Marxist view, long thought out of fashion, that the working classes would be kept at subsistence level.
Reebok Shoes, and other footwear giants, are forever shifting their manufacturing base to lands of lower wage scales. From New England to the American South and on to the American colony of Puerto Rico, thence the Philippines, Taiwan, Korea and Thailand -- until the annual wages of the factory are less than the remuneration paid to the basketball star paid to advertise the final product. No, globalization does not mean workers of the world unite. Joan E. Spero, Under Secretary of State for Economic, Business and Agricultural Affairs stated the issue at hand was one of a formidable size, Capital now moves with startling speed around the world. Each day over $ 1 trillion is traded in a global foreign exchange market that never closes.
Technological advances in computers and telecommunications are paving the way for a new information-based economy. The capital within this globalized economy is not situated as one might have first assumed. The capital is concentrated within the upper management and within the boundaries of the company itself. In strictly economic terms the gap between rich and poor widens and capital accumulates to the point where it no longer quite knows what to do with itself. Rich people valiantly spend what they can on luxuries, but the rich are too few to solve this crisis of overproduction and luxuries are useless to most of the world's people.
The remainder of this excess capital swills around in 'finance houses' and banks getting bored, casting about for something more lucrative to do. That usually means gambling, 'speculation' on whatever comes to hand: commodities, foreign exchange, bonds, stocks, shares, all kinds of 'instruments' created for just this purpose. These days, the temptingly volatile 'emerging markets' of the South and former Soviet bloc have become speculative playgrounds. Foreign-exchange transactions, for example, now amount to more than a thousand billion dollars a day, with only a small proportion relating to any 'real' economic activity at all.
Globalization is an inevitable process that will sooner or later be relevant to everyone. Globalization is the most crucial factor that contributed to the emergence of International Political Economy as a distinctive branch of International Relations. As the process of globalization gains momentum, International Political Economy becomes more and more important. Words Count: 2, 255. Bibliography Cameron, Duncan, Ten Reasons to Oppose the FTAA, web Davis, N, Economic Integration -- Benefits and Costs, web Finley, O, Globalization and the Poor Countries: Viewpoint of the IMF, web Hecklinger, R, Globalization: Benefits and Responsibilities, web Kohut, A, Labor Costs and International Trade, web Statistic Globalization, web Kohut, A, Americans Varying Views About Benefits of Globalization, web Czinkota, M, 1995. The Global Marketing Imperative, Lincolnwood: NTC Business books.
Daniels, J, 1993. Global Vision: building models for the corporation of the future, New York: McGraw-Hill. Dunning, J, 1993. The Globalization of Business, New York: Route ledge Press.
Harris, P, 1996. Managing Economic Globalization, Houston: Gulf Publishing. Maddox, R, 1993. Cross Cultural Problems in International Business, Westport: Greenwood Publishing.
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Research essay sample on Introduction To International Political Economy
