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GLOBALIZATION.
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Reviews the mechanisms and social implications.... More...
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Paper Abstract:
Reviews the mechanisms and social implications. Globalization in the 21st Century. The spread of economic innovations and activity around the world, and resultant political and cultural adjustments. Resistance to global linkages by some societies. Debt crises; example of Argentina. Balance of payments. Concept of economic contagion. Future outlook.
Paper Introduction:
GLOBALIZATION: CONTEMPORARY MECHANISMS AND SOCIAL IMPLICATIONS — A REVIEW
Introduction
Globalization — the spread of economic innovations and activity around the world, together with the political and cultural adjustments that accompany such diffusion — is not a new phenomenon or even a 20th century phenomenon. Rather, globalization has been occurring in one form or another for 3,000 years. The Phoenicians
… spread innovations almost entirely through the movement of products (trade) to small centers of development scattered around the Mediterranean. The diffusion of process technology followed after — sometimes centuries later. (Lewis & Harris, 1992, p.
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New England Economic Review, 45-62.United States Department of State. This vulnerabilitybecame apparent in 1997-1998 when short-term financial capital fled theBuenos Aires stock exchange in the wake of the Asian financial crisis. The privatization initiative and openingof the economy were elements of a plan proposed by the InternationalMonetary Fund (IMF) and strongly supported by IMF's dominant member state,the United States (United States Department of State, 1999). Dunn (2 1 takes a different approach, as his interest is more ineconomic stabilization than in economic and social justice. New York: McGraw-Hill Irwin.Down and almost out in Buenos Aires. The contagion has already spread to Uruguay and threatens tospread to Brazil. Unfortunately, the tying of value of the nation'scurrency directly to the value of the United States dollar on a one-to-oneratio compromised Argentina's export trade, as well as increasing the costsof imports beginning in 2 ("Down and Almost Out in Buenos Aires", 2 1). Argentina's heavy reliance on foreign direct investment,agricultural exports, and the fixed dollar-peso exchange rate made thecountry vulnerable to fluctuations in capital flows. Implications of the globalization of the banking sector: The Latin American experience. (2 2, January 9). The routes to crisis contagion. Business Week, (3734), 56-57.Barber, B. (Lewis & Harris, 1992, p. (2 1, December 6). Wisman (1997) refers to such an approach as the development ofworkplace democracy. Why globalization must prevail. During the same period, however, imports increased from US$15 billion toUS$33 billion (United States Department of State, 1999). globalization: contemporary mechanisms and social implications - a review Introduction Globalization - the spread of economic innovations and activity aroundthe world, together with the political and cultural adjustments thataccompany such diffusion - is not a new phenomenon or even a 2 th centuryphenomenon. The law linked the value of the peso directly to the value ofthe United States dollar at a one-to-one ratio. The problems experienced by Argentina have promoted to country to takemany of the actions identified by Dunn (2 1) that lead to economiccontagion. The discussion following thereview of the mechanisms of contemporary globalization considers the socialimplications of contemporary globalization with a specific emphasis on thechanging status of labor and the ability of societies to preservetraditional values. While the conceptis appealing to many (perhaps most) people, there is no indication thatanyone in powerful positions in the world's most powerful economy, theUnited States, has any empathy toward this approach. Wisman (2 1) argued that, as corporations acting within the frameworkof capitalist theory, continue the pursuit of changes in the productionfunction to lower prices and implement, the creative destruction of theprocess is not restricted to economic activity. Creative destruction and labor's options. Business Week, (3775), 14-16.Heilbronner, R. spread innovations almost entirely through the movement of products (trade) to small centers of development scattered around the Mediterranean. (2 1, September-October). The making of economic society. Gary Becker (2 2) attributes Argentina's current monetary problems tofiscal policy - deficit spending. (2 2, April 7). Specific emphasis is directedat the following issues: > The quickening pace of globalization > The role of the movement of financial capital in the development of balance of payments and debt crises > The character of the monetary crisis experienced by Argentina in 2 1-2 2 > The concept of economic contagion Heilbronner and Milberg (2 2) attribute the quickening pace ofglobalization to the fact that technological innovation, in their words,"shrinks the globe" (p. Dunn (2 1) refers to the externalities associated with such capitalflows as a form of contagion, which he defines as a two-step process thatbegins with the experience by a country of "negative payments shock thatmakes it unable to make scheduled payments of interest and principal" (p.46). Argentina has a diverse and strong export base. S. 114). The country'sprincipal exports are cereals, feed, motor vehicles, crude petroleum, andmanufactured steel. The diffusion of process technology followed after - sometimes centuries later. ReferencesArgentina's long shadow. Macroeconomics. Retrieved from the Internet 2 2-12- 3 at: http://www/globalpolicyformum/globalpolicy.orgPeek, J., & Rosengren, E. Social Implications of Contemporary Globalization The consideration of the social implications of the process ofglobalization in the contemporary era focuses on the changing status oflabor and the ability of societies to preserve traditional values.Specific emphases are placed on the following issues: > The social implications of balance of payments and debt crises > The social implications of the Argentinean monetary crisis of 2 1-2 2 > The implications of economic contagion for social and political stability > The implications for labor of the contemporary process of globalization Colander (2 1) argues that, because the process of globalizationleads to an overall increase in the level of economic activity, everyonebenefits from the process. The second step of this process is the spread of the problem to othercountries that experience similar outcomes because of what happened to theinitial country. Thus, foreigners with primaryinterests and loyalties outside Argentina boxed Argentina into an untenablesituation. L., & Milberg, W. 169). Canada, as anexample, found it necessary to reduce the level of many of its socialservices to the level of those in the United States to remain economicallycompetitive following strengthened economic linkages between the twocountries resulting from the North American Free Trade Agreement (NAFTA)and the evolution of the WTO. Rather, they would be partners in corporate governancealong a Western European model of social democracy, which Heilbronner andMilberg (2 2) refer to as "Western Socialism" (p. Following a recession that lasted through most of 1995 and 1996,Argentina's real GDP growth reached eight-percent in 1997 - higher than theaverage of 6 percent for the 1991-1997 period (United States Department ofState, 1999). (2 1, May 28). To a lesser extent, Heilbronnerand Milberg (2 2) are referring to greater efficiencies in the movement ofgoods on a global basis. From 1996 through 1998, Argentina experienced its highest rate ofsustained investment growth in 5 years (United States Department of State,1999). Rather, the process ofcreative destruction extends to all aspect of social interaction. (2 1. Argentina's exports morethan doubled from a level of US$12 billion in 1992 to US27 billion in 1998. (1997). Structural reforms, together with monetary stability, resulted inmajor new investment in services and industry. Argentina implemented what some observers described as anunprecedented and successful economic restructuring based on macroeconomicstabilization, trade liberalization, privatization, and publicadministrative reform in 1989. Some view the actions of playersin the creation of the General Agreement on Tariffs and Trade (GATT) thatled to the creation of the World Trade Organization (WTO) as plannedactions of the concerted application of ideological government andcorporate power designed to subvert the political power of nation statesand to create an ideological conformity that facilitates the solidificationof corporate power at the expense of labor and social values (Barber,1995). Unfortunately, most global corporate leaders either lack thecapacity or the desire to recognize the shortsightedness of such astrategy. The Bush Administration supported the IMF ("IMFRequest Puts Government in Bind", 2 2). Cambridge, Massachusetts: Harvard University Press.Becker, G. 114). How Argentina got into this mess. Heilbronner and Milberg (2 2), however, pointout that increasing the strength of economic linkages among countries doeslead to a situation wherein social benefits and social services generallytrend downward toward the lowest common denominator. More than anything else, Heilbronner andMilberg (2 2) are referring to the capacity of telecommunicationtechnology to facilitate almost instantaneous economic action and response,as opposed to intervals of hours, days, weeks, or months that separatedactions and responses in earlier periods. While Heilbronner and Milberg (2 2) stopshort of endorsing the race-to-the-bottom concept, they do acknowledge thatlabor's ability to influence working conditions, benefits, and compensationis compromised by the same mechanism that caused Canada to curtail some ofits social benefits. Argentina experienced a boom in economic growth beginning in the early-199 s. The Argentinean governmentprivatized most state-controlled companies, opened the economy to foreigntrade and investment, improved tax collection, and created private pensionand workers compensation systems. D. The 1991 Convertibility Law created a quasicurrency board that initially was successful in maintaining pricestability. (1999). D. Other observers disagree with the benign causes, motivations, andoutcomes of the process of globalization. (2 1, November/December). Economist, 5886, 6 -62.Dunn, R., Jr. There is no doubt that deficit spendingcontributed to the problem; however, the primary culprit was the adoptionof ill-advised monetary policies at the urging of the IMF. Both the capacity and the willingness of the parties whocontrol financial capital to supply or withdraw capital from an economyquickly contribute to the rapid development, as well as to the severity, ofbalance of payments and debt crises. Argentina's banking system both consolidated and sold elements of thesystem to foreign investors. 196). Globalization: Contemporary Mechanisms The consideration of the contemporary mechanisms of the process ofglobalization focuses on the character and strength of global linkages andthe outcomes associated with such linkages. The ignored question of workplace democracy in political discourse. McKinsey Quarterly, (2), 114-131.Lindsey, B. The Argentineanmonetary crisis also holds lesions related to the concept of economiccontagion. Challenge, 44(6), 45-58.Even the posh are feeling the pinch. The nextdiscussion considers the contemporary mechanisms of globalization with aspecific emphasis on the character and strength of global linkages and theoutcomes associated with such linkages. By 2 2, the country's economy was a shambles and the people ofArgentina were suffering ("Even the Posh Are Feeling the Pinch," 2 2).The IMF, a major causal force in the debacle, opposed financial aid forArgentina (Norman, 2 1). Wall Street Journal, A14.Norman, L. Forum for Social Economics, 3 (2), 51-76.Wisman, J. International Journal of social Economics, 24(12), 1388-14 3. The Convertibility Law, while highly successful before 2 1 inmaintaining price stability, was almost as unsuccessful in relation toemployment. Unemployment remained in the double digits (United StatesDepartment of State, 1999). This dichotomy relevant to the phenomenon of globalization in itscontemporary clothing leads to this review of globalization. S. Upper Saddle river, New Jersey: Prentice-Hall, Inc.IMF request puts government in bind. Peso and dollardeposits in the banking system grew to approximately US$75 billion by July1998, which was double the level of deposits in June 1995. (2 2). (2 2, February 11). Some observers view globalization as a benign process because,according to their perception, it is not an outcome of either a plannedactivity by government or military power designed to create either "everlarger geopolitical entities" or an "ideological conformity" (Lewis &Harris, 1992, p. (2 1, Spring). Foreign-controlled banks' share of total deposits approached 5 percent by 2 1(Peek & Rosengren, 2 1). The reasons for the spread of the outcomes are asfollows: > The initial country is unable to pay debts to other countries that then experience their own payments crisis > The initial country, in an effort to generate cash, lowers prices on exported goods, and action that, in turn, affects the ability of other countries to compete, thereby lowering the level of their economic activity > Both the initial country and other countries resort to currency devaluation in an effort to enhance the competitiveness of their exports, actions that lead to economic deflation > In the face of such developments, international lenders make early calls on loans and curtail the extension of new loans (in each case whether or nor a specific country defaulted on existing loans), actions that exacerbate the entire contagion cycle The monetary crisis experienced by Argentina in 2 1-2 2 provides anexample of the influence of international capital movements in thedevelopment of balance of payments and debt crises. (1995). The Phoenicians ... While Argentina had almost 3 commercialbanks in 199 , he total had dropped below 12 by mid-1998. Business Week, 34.Colander, D. 114) What is new about globalization in the early years of the 21st centuryis (1) the relative speed that characterizes the diffusion process and (2)the difficulties encountered by societies who desire for whatever reason toresist some of the invasive aspects of globalization where theexternalities accompanying strengthened global linkages are eitherunacceptable or simply undesirable. Deficit spending got Argentina into this mess. Somewhat pompously, Lewis and Harris (1992)contended that globalization is "the organic result of the virtuous cycle..., by which economic convergence and the diffusion of innovation raisestandards of living over time" (Lewis & Harris, 1992, p. (4th ed.). C. (2 2, March 25). Amongother outcomes of the extension of the process of creative destruction isthe destruction of traditional values, traditional community life, and theloss of control over work by the people who perform work Prospects for the Future Heilbronner and Milberg (2 2) view the stakeholder concept (as theyinterpret that concept) as a way to a more balanced distribution of powerin a globalized world. Chicago Tribune, A3.Lewis, W. Washington: United States Government Printing Office.Wisman, J. Rather, globalization has been occurring in one form oranother for 3, years. Labor, in the era of contemporary globalization, mustcompete with labor on a global basis, regardless of how untenable theworking conditions, benefits, or compensation may be in some of theunderdeveloped areas that global corporations seek out in an effort tolower production costs to the point that workers cannot afford to buy whatthey produce. Brink Lindsey(2 2) writing in the Wall Street Journal, an organ that supports every ill-advised policy forced on struggling countries in the name of "free markets"and then blames the countries when the policies do not work, almost twistedhimself in knots explaining away IMF fault and casting back to the Peronistdays for a villain. He argues fora continued and strengthened role for the International Monetary Fund (IMF)to deal with short-term capital-induced crises. Heilbronner and Milberg (2 2) also note that the volume and rapidityof the movement of financial capital in the contemporary period is the mostdramatic mechanism of today's manifestation of the process ofglobalization. IMF opposes Argentina bailout. In such a vision, labor and corporate leaders wouldnot be antagonists. Social/Economic Policy. Jihad versus McWorld. Country commercial guide: Argentina. Wisman (1997) alsoadvocates an enhanced role for labor in the governance of the workplace asa counterbalance to the developing dominance of corporate power over theworkplace. The IMF demanded from Argentina more stringentreductions in public spending at a time when the needs of the Argentinepopulation were increasing because of the collapse of the country's economyand financial system. Thesituation was rocky in 1999 and 2 and fell completely to pieces in 2 1("Argentina's Long Shadow", 2 1). One ironic aspect of thissituation was that the Bush Administration was leading the United Statesback into a deficit spending pattern while simultaneously urging the IMF toassure that Argentina move in the opposite direction. W., & Harris, M. (2 1, November 3). Argentina essentially passed control over its currency and monetarysystem to the United States Federal Reserve by linking the peso with thedollar at one-to-one, as well as to the foreign banks allowed to assume thedominant role in Argentine banking. (1992 Spring).
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