Web and software guru Bill Gates once said, "The Internet is becoming the town square for the global village of tomorrow." Indeed, none could or would dispute the fact that the Internet has created cross-cutting channels of communication, exchange, and activity that today encircle the entire globe. Arguably, the online revolution was one of the fundamental drivers of the current peak in globalization, and it continues to welcome more and more individuals into global society. Regardless of the minutiae, the Internet has helped to bring jobs, provide information, and enrich the lives of all its users. All told, this crucial development cannot possibly be more detrimental than it is beneficial.
Unfortunately, countries like Iran, North Korea, China, and Saudi Arabia don't see things this way. While trolling through the recent articles on the LA Times page yesterday, I noticed one entitled "Google, Gmail Blocked as Iran Pushes 'National Internet.'" Essentially, Iran has denied its citizens access to Google and Gmail, continuing its trend of ruling web use with an autocratic iron fist. Many Western sites, such as YouTube, Facebook, and Google, are seen as "espionage tools" and are said to contain content impermissible under Shari'a Law. Some calls have even been made (largely within the government) to launch Iran's own "national Internet," cut off completely from the global web, and contained and controlled tightly within Iranian borders. Similar actions and localizations are supported in China, North Korea, Vietnam, and numerous other countries. In forceful efforts to monitor web traffic--especially to identify political dissenters or filter content from foreign sources--these states continue to move toward "big brother" models of Internet regulation. Although none of these would ultimately construct its own Internet, Greece and Norway have already advanced legislation that would require data generated within the country to be stored on servers located in the country. Such localization moves push back against the recent cloud computing revolution, discouraging foreign firms from conducting business within their borders.
So, what does international tech policy have to do with the international political economy? Trade barriers and protectionism. Though these certainly don't come to mind when we think of regimes choking off international trade with government-imposed tariffs, quotas, and regulatory barriers, moves to control the Internet are every bit as important. Largely imposed for the purposes of national defense or protection of jobs--two of the pro-protectionist arguments Coughlin outlines--these restrictions can be extremely detrimental to international trade. For instance, if the more heavy-handed policies are implemented, such as the establishment of a true "national Internet," that particular country would be cut off from an inestimably large portion of all international trade. Because so much business, research, and communication is done online today, such a creation would function like a tariff on steroids. Essentially, what some Iranian officials are calling for is a policy that would send them back to the Stone Age, and, without a doubt, destroy the country's general wealth and standard of living.
Even in a less-extreme case, countries with top-down web regulations might block some sites completely (e.g. Facebook in Southeast Asia), censor content of others, or force potential traders to set up shop within their country and comply with their specific regulations. On any and all accounts, these damage domestic ties with the global web community and, most importantly, discourage international trade. While they operate differently from tariffs and quotas, these strict regulations create strong trade barriers that are largely unique to the 21st century. As the Chinas, Russias, and North Koreas of the world attempt to make this "protectionism.com" the norm, one can only hope that few others will follow suit.
As Coughlin mentions at the end of his piece, "The costs of protectionist trade policies far exceed the benefits. The losses suffered by consumers exceed the gains reaped by domestic producers and government...Not only are there inefficiencies associated with excessive domestic production and restricted consumption, but there are costs associated with the enforcement of the protectionist legislation and attempts to influence trade policy." If you frame Coughlin's points in terms of Internet protectionist policies, keeping in mind their highly detrimental effects on free trade, these points ring especially true. When countries like Iran and China block off key sites, closely monitor web traffic, and consider establishing a "national Internet," nobody wins. These policies, whose intrusion on basic freedoms is another point entirely, cause both parties to ultimately lose out. Domestic consumers are forbidden from purchasing goods online (or even forbidden from finding them), foreign producers must deal with numerous restrictions, and neither information nor wealth is allowed to flow.
At the end of the day, countries with such autocratic, "big-brother" web policies shield their citizens from the rest of the world's activity, and consequently, forfeit free trade in the name of government surveillance. Indeed, the Internet may be the town square for the global village of tomorrow, but their corner of the marketplace will languish in disrepair.
Wednesday, September 26, 2012
Monday, September 17, 2012
Policymaking: The Biggest Challenge of the 21st Century
As it moves further into the 21st century, the international political economy will undoubtedly be met with a host of new obstacles, questions, innovations, and speed bumps. In these one hundred years, industries will shift, the global balance of power will likely change, and citizens and politicians alike will grapple with seemingly unanswerable questions. But, which of these challenges will be hallmark of this new era? What one issue or group of issues will constantly test the global economy and all the prominent actors within it? Though this question can only truly be answered in hindsight, a number speculative responses could seem quite plausible, given the numerous and complex issues that the world currently faces. All things considered, however, the strongest argument might be made for the business of domestic and international policymaking. In other words, the way in which each major economic actor forms its trade policies, industry regulations, and even domestic values will greatly affect the progress or deterioration of the international political economy.
As Wolf notes in Why Globalization Works, "the policies and capacities of states remain central to any understanding of how economic globalization works" (Wolf 16). Although "policymaking" is an extremely broad response, encompassing a myriad of different activities and areas, it is important to realize its overall role as a "make-or-break" component of the global economy. Today, globalization has created a world that is more interconnected than ever before, marked by international competition, price reduction, product innovation, glorification of free market principles. From a Western perspective, this phenomenon tends to be viewed in a very positive light, having raised the standard of living and created dramatic economic growth. The problem, however, is that not all global actors share these positive sentiments. According to Stiglitz, the 1999 WTO riots showed that "Globalization had succeeded in unifying people from around the world--against globalization. Factory workers in the United States saw their jobs being threatened by competition from China. Farmers in developing countries saw their jobs being threatened by the highly subsidized corn and other crops from the United States" (Stiglitz 7). Those who do not prosper in this system tend to view this global capitalism as "unjust, unstable and inefficient" (Wolf 126). And, not only does today's globalized economy create "losers," who are often struggling developing countries, but it also reveals the different values that back policies in various countries. For instance, the West may praise individuality, victory, and wealth, whereas other cultures support community, economic modesty, and even adherence to various religious codes.
Moving forward, the struggle will undoubtedly be to sustain the system and make it more workable for all players within it. While Wolf might argue that all countries--particularly the struggling developing ones--need to knock down all barriers and jump headlong into a free global market, the problem is nowhere near that simple. In fact, Stiglitz' premise rings true: the major players must find a way to construct policies that make globalization work. Though a few may believe otherwise, the global economic system is here to stay. When the Soviet Union attempted isolation and firm economic controls, it ultimately crumbled. This was "not because it was physically impossible to control cross-border movement of knowledge and ideas, but because the costs of doing so became unbearably high" (Wolf 121). If we take this point to be true, then the central challenge of the 21st century will be for major states and treaty organizations to find a way that addresses the problems of globalization yet still provides a way to sustain it.
So, why will global and domestic economic policies will be increasingly contentious and important in the international political economy? To those in developed, strong, and influential countries, globalization is viewed with optimism and praise. But, these major players cannot leave suffering areas like Africa and Southeast Asia to languish in economic misery forever. Something must be done to encourage their inclusion and adoption of policies that will benefit themselves as well as the global community. In addition to this, political tensions and self-interest consistently drive a wedge between even the most "compatible" economic partners. With China, Russia, and other non-Western countries experiencing recent economic booms, the reception has been somewhat chilled and wary. Although trade among the world's major economic players occurs, political tensions and defense concerns have spurred various tariffs, regulations, and other anti-free market measures. Within some of these countries, an explosive growth in the middle class can invite protectionist policies to "reward" them and guarantee stability in the industries (Wolf 124). Even now, the major economic actors may adopt small tariffs or red tape here and there in attempts to revitalize their economies or spur growth in a given sector. In any case, there are many reasons why the current policy framework is unsustainable--something has to give.
Though a solution to this problem would be quite difficult to construct at the moment, the main states, corporations, and governing groups in the international political economy must give it significant consideration in the coming years. The challenge, then, is to understand how different countries' policies affect the global market, and what forces are backing them. Even within the G20, national concerns and "selfishness" lead to tariffs and trade barriers--all of which reflect an imperfect market. Because the globalized world is not going to vanish or fall out of vogue, it is very important to develop and encourage policies that will make it progress successfully and smoothly into the coming years. While political tensions will always create friction between countries, thus impeding optimal economic relationships, there is a way to lessen other tensions and get more of the world on track to progress and prosperity. Given the current world of interconnectedness, technological advances, and international trade, major actors must evaluate how other players, as well as themselves, can adopt policies that are both fair and beneficial. Though we will not reach a utopian world of perfect markets and wealth for all, perhaps with this in mind, these entities will be able to address some of the problems that have plagued the international political economy of the 20th century.
As Wolf notes in Why Globalization Works, "the policies and capacities of states remain central to any understanding of how economic globalization works" (Wolf 16). Although "policymaking" is an extremely broad response, encompassing a myriad of different activities and areas, it is important to realize its overall role as a "make-or-break" component of the global economy. Today, globalization has created a world that is more interconnected than ever before, marked by international competition, price reduction, product innovation, glorification of free market principles. From a Western perspective, this phenomenon tends to be viewed in a very positive light, having raised the standard of living and created dramatic economic growth. The problem, however, is that not all global actors share these positive sentiments. According to Stiglitz, the 1999 WTO riots showed that "Globalization had succeeded in unifying people from around the world--against globalization. Factory workers in the United States saw their jobs being threatened by competition from China. Farmers in developing countries saw their jobs being threatened by the highly subsidized corn and other crops from the United States" (Stiglitz 7). Those who do not prosper in this system tend to view this global capitalism as "unjust, unstable and inefficient" (Wolf 126). And, not only does today's globalized economy create "losers," who are often struggling developing countries, but it also reveals the different values that back policies in various countries. For instance, the West may praise individuality, victory, and wealth, whereas other cultures support community, economic modesty, and even adherence to various religious codes.
Moving forward, the struggle will undoubtedly be to sustain the system and make it more workable for all players within it. While Wolf might argue that all countries--particularly the struggling developing ones--need to knock down all barriers and jump headlong into a free global market, the problem is nowhere near that simple. In fact, Stiglitz' premise rings true: the major players must find a way to construct policies that make globalization work. Though a few may believe otherwise, the global economic system is here to stay. When the Soviet Union attempted isolation and firm economic controls, it ultimately crumbled. This was "not because it was physically impossible to control cross-border movement of knowledge and ideas, but because the costs of doing so became unbearably high" (Wolf 121). If we take this point to be true, then the central challenge of the 21st century will be for major states and treaty organizations to find a way that addresses the problems of globalization yet still provides a way to sustain it.
So, why will global and domestic economic policies will be increasingly contentious and important in the international political economy? To those in developed, strong, and influential countries, globalization is viewed with optimism and praise. But, these major players cannot leave suffering areas like Africa and Southeast Asia to languish in economic misery forever. Something must be done to encourage their inclusion and adoption of policies that will benefit themselves as well as the global community. In addition to this, political tensions and self-interest consistently drive a wedge between even the most "compatible" economic partners. With China, Russia, and other non-Western countries experiencing recent economic booms, the reception has been somewhat chilled and wary. Although trade among the world's major economic players occurs, political tensions and defense concerns have spurred various tariffs, regulations, and other anti-free market measures. Within some of these countries, an explosive growth in the middle class can invite protectionist policies to "reward" them and guarantee stability in the industries (Wolf 124). Even now, the major economic actors may adopt small tariffs or red tape here and there in attempts to revitalize their economies or spur growth in a given sector. In any case, there are many reasons why the current policy framework is unsustainable--something has to give.
Though a solution to this problem would be quite difficult to construct at the moment, the main states, corporations, and governing groups in the international political economy must give it significant consideration in the coming years. The challenge, then, is to understand how different countries' policies affect the global market, and what forces are backing them. Even within the G20, national concerns and "selfishness" lead to tariffs and trade barriers--all of which reflect an imperfect market. Because the globalized world is not going to vanish or fall out of vogue, it is very important to develop and encourage policies that will make it progress successfully and smoothly into the coming years. While political tensions will always create friction between countries, thus impeding optimal economic relationships, there is a way to lessen other tensions and get more of the world on track to progress and prosperity. Given the current world of interconnectedness, technological advances, and international trade, major actors must evaluate how other players, as well as themselves, can adopt policies that are both fair and beneficial. Though we will not reach a utopian world of perfect markets and wealth for all, perhaps with this in mind, these entities will be able to address some of the problems that have plagued the international political economy of the 20th century.
Sunday, September 16, 2012
International Trade and the Counter-Force of Globalization
Several days ago, an article in The Economist noted a sharp decline in global trade this year. Unsurprisingly, in times of stagnant economies, a slowdown of international trade is inevitable. In today's world, however, when buying power has been weakened and demand decreases, more than one economy must suffer the sometimes devastating effects of recession. Indeed, while many of us in the U.S. are well aware of the current economic downturn, we may not be so informed about its larger implications in the rest of the world.
Though many, like Martin Wolf, have championed the benefits of globalization--such as increased competition, reduced prices, cultural integration, and economic growth--others have made us well aware of its drawbacks. In Making Globalization Work, Joseph Stiglitz frequently points out the potential inequalities, struggles, and creation of "losers" in the global open market system. Because globalization links countries around the world culturally, technologically, and most importantly, economically, most activities are no longer confined to a single player or cluster of players. Not more than a century or two ago, an economic downturn in a sovereign, self-sufficient country would only have implications for its own people and operations. Nowadays, however, a shortage of raw materials, change of political outlook, or other shock could easily be felt by economies around the globe. Whether fortunately or unfortunately, this ripple effect applies directly to international trade, which now constitutes a hefty one-third of world GDP.
According to the web article, "The OECD reports that exports fell by over 4% in the second quarter of 2012 in Britain and India; Russia and South Africa lost more than 8%. That is particularly bad news for places like Singapore and Hong Kong, which are important trade hubs (see chart 1); open euro-zone countries like Ireland and Belgium are also highly exposed." The article goes on to mention that "If the global economy were the only factor in determining trade, a pick-up in world output would translate automatically into rising trade. The IMF, for example, thinks that trade will grow by 5.1% in 2013 on the back of a strengthening economy." Such predictions, however, are likely to be overshot and over-optimistic, due to the multiplicity of unpredictable factors in play. Because of its complex nature, the significant dip in trade reflects well the drawbacks of globalization.
Although the interconnected trade channels are often greatly beneficial, it is no secret that globalization creates some losers. Both developed and developing countries may end up with the short end of the stick, but unfortunately, pressures on industry subsidies and prices often hit developing countries the hardest (Stiglitz 16). Though proponents like Wolf sing the praises of the free market--and indeed I agree with him much of the time--the effects of decreased trade highlight the problems of what some call "a chaotic, uncoordinated system of global governance without global government" (Stiglitz 21). Because global trade is such a complex and encompassing phenomenon, it is nearly impossible to regulate, predict, or completely control. When one major economy experiences a recession, especially of a significant degree, globalization's many webs actually serve to exacerbate the problem. Without all these cross-cutting industries and ties, an economically-troubled state might struggle internally with its problems, but its counterpart across the ocean would be able to carry on totally unscathed. As Stiglitz points out, "globalization has made us part of a part of a global community...we may live locally, but increasingly we will have to think globally" (Stiglitz 22). With trade being such a huge part of world GDP, and with globalization greatly enabling trade, it is no wonder the statistics reflect significant declines in countries all around the world. While many tend to focus on the benefits of the relationship between economic growth and world trade, we must not forget that this can serve as a medium for serious shock waves (Wolf 108).
Upon reading this article, I was immediately reminded of the "U-shaped curve" used to describe globalization in the readings. Essentially, there is an acknowledged rise and fall of pro-globalization free market and open trade policies, with the early 20th century being widely pointed to as the height of globalization. Though this infrastructure has dipped and risen again since then, The Economist's article seemed to illuminate a self-reinforcing "sine curve" of globalization--essentially, hinting at an impending decline of some degree. Dips and peaks are common to any economy, and often they are characteristic of its natural functions and occasional shifts. While the global economy is no different, states or groups who have been connected by globalization and "lose out" during these downturns or shocks may dig their heels in and try to fight the market. Eventually, these pressures may create forces strong enough to take globalization down from a "peak."
For instance, an economic slowdown and corresponding decrease in trade can create counter-globalization sentiments. Trade finance may become a less attractive endeavor for banks, and they may cut their activity due to lack of capital or increased financial risk. Additionally, because market forces can bear heavily on some governments and national policies, countries who have specialized may find themselves unable to sell and profit off of key exports (Stiglitz 20). Or, global market forces may have forced them to keep the minimum wage at shockingly low levels. Regardless, these negative effects of globalization may incentivize protectionist or other anti-free market policies. This was confirmed in the article, which stated that "An agreement on “trade facilitation” (cutting red tape at borders) would more than offset the petty protectionism of some G20 members. But the tide of support for free trade is ebbing."
Economic crises and seemingly "unfair deals" brought about by globalization may drive some to vehemently oppose it. Even though most changes happen incrementally, with a tariff here and a trade barrier there, no country will ultimately be willing to take the fall for the sake of a free global market. In more extreme cases, the economically disgruntled may even turn to a version of nationalistic self-preservation, which could give rise to social ideologies along the lines of Fascism and Nazism (Wolf 122). Such events, as evidenced in the mid-1900's, can undo a large part of globalization's impact and permeation throughout the world. Still, the most troubling thing is the presence of an underlying line of rational reasoning behind such moves. This is clearly seen in the case of international trade, specialization, and global economic slowdowns. Put usefully but perhaps too simply, globalization appears to contain a very blatant self-contradiction. If the rational choice for some will always be opposing such networks and open policies, we ought not to expect a steady increase of globalization. Rather, barring no extreme setbacks, it will likely continue upward on a rocky path, characterized by fierce debate, conflicting national interests, and occasional steps back.
Though many, like Martin Wolf, have championed the benefits of globalization--such as increased competition, reduced prices, cultural integration, and economic growth--others have made us well aware of its drawbacks. In Making Globalization Work, Joseph Stiglitz frequently points out the potential inequalities, struggles, and creation of "losers" in the global open market system. Because globalization links countries around the world culturally, technologically, and most importantly, economically, most activities are no longer confined to a single player or cluster of players. Not more than a century or two ago, an economic downturn in a sovereign, self-sufficient country would only have implications for its own people and operations. Nowadays, however, a shortage of raw materials, change of political outlook, or other shock could easily be felt by economies around the globe. Whether fortunately or unfortunately, this ripple effect applies directly to international trade, which now constitutes a hefty one-third of world GDP.
According to the web article, "The OECD reports that exports fell by over 4% in the second quarter of 2012 in Britain and India; Russia and South Africa lost more than 8%. That is particularly bad news for places like Singapore and Hong Kong, which are important trade hubs (see chart 1); open euro-zone countries like Ireland and Belgium are also highly exposed." The article goes on to mention that "If the global economy were the only factor in determining trade, a pick-up in world output would translate automatically into rising trade. The IMF, for example, thinks that trade will grow by 5.1% in 2013 on the back of a strengthening economy." Such predictions, however, are likely to be overshot and over-optimistic, due to the multiplicity of unpredictable factors in play. Because of its complex nature, the significant dip in trade reflects well the drawbacks of globalization.
Although the interconnected trade channels are often greatly beneficial, it is no secret that globalization creates some losers. Both developed and developing countries may end up with the short end of the stick, but unfortunately, pressures on industry subsidies and prices often hit developing countries the hardest (Stiglitz 16). Though proponents like Wolf sing the praises of the free market--and indeed I agree with him much of the time--the effects of decreased trade highlight the problems of what some call "a chaotic, uncoordinated system of global governance without global government" (Stiglitz 21). Because global trade is such a complex and encompassing phenomenon, it is nearly impossible to regulate, predict, or completely control. When one major economy experiences a recession, especially of a significant degree, globalization's many webs actually serve to exacerbate the problem. Without all these cross-cutting industries and ties, an economically-troubled state might struggle internally with its problems, but its counterpart across the ocean would be able to carry on totally unscathed. As Stiglitz points out, "globalization has made us part of a part of a global community...we may live locally, but increasingly we will have to think globally" (Stiglitz 22). With trade being such a huge part of world GDP, and with globalization greatly enabling trade, it is no wonder the statistics reflect significant declines in countries all around the world. While many tend to focus on the benefits of the relationship between economic growth and world trade, we must not forget that this can serve as a medium for serious shock waves (Wolf 108).
Upon reading this article, I was immediately reminded of the "U-shaped curve" used to describe globalization in the readings. Essentially, there is an acknowledged rise and fall of pro-globalization free market and open trade policies, with the early 20th century being widely pointed to as the height of globalization. Though this infrastructure has dipped and risen again since then, The Economist's article seemed to illuminate a self-reinforcing "sine curve" of globalization--essentially, hinting at an impending decline of some degree. Dips and peaks are common to any economy, and often they are characteristic of its natural functions and occasional shifts. While the global economy is no different, states or groups who have been connected by globalization and "lose out" during these downturns or shocks may dig their heels in and try to fight the market. Eventually, these pressures may create forces strong enough to take globalization down from a "peak."
For instance, an economic slowdown and corresponding decrease in trade can create counter-globalization sentiments. Trade finance may become a less attractive endeavor for banks, and they may cut their activity due to lack of capital or increased financial risk. Additionally, because market forces can bear heavily on some governments and national policies, countries who have specialized may find themselves unable to sell and profit off of key exports (Stiglitz 20). Or, global market forces may have forced them to keep the minimum wage at shockingly low levels. Regardless, these negative effects of globalization may incentivize protectionist or other anti-free market policies. This was confirmed in the article, which stated that "An agreement on “trade facilitation” (cutting red tape at borders) would more than offset the petty protectionism of some G20 members. But the tide of support for free trade is ebbing."
Economic crises and seemingly "unfair deals" brought about by globalization may drive some to vehemently oppose it. Even though most changes happen incrementally, with a tariff here and a trade barrier there, no country will ultimately be willing to take the fall for the sake of a free global market. In more extreme cases, the economically disgruntled may even turn to a version of nationalistic self-preservation, which could give rise to social ideologies along the lines of Fascism and Nazism (Wolf 122). Such events, as evidenced in the mid-1900's, can undo a large part of globalization's impact and permeation throughout the world. Still, the most troubling thing is the presence of an underlying line of rational reasoning behind such moves. This is clearly seen in the case of international trade, specialization, and global economic slowdowns. Put usefully but perhaps too simply, globalization appears to contain a very blatant self-contradiction. If the rational choice for some will always be opposing such networks and open policies, we ought not to expect a steady increase of globalization. Rather, barring no extreme setbacks, it will likely continue upward on a rocky path, characterized by fierce debate, conflicting national interests, and occasional steps back.
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