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The nineteenth century period was a memorable period in the history of human kind. Rhea Industrial Revolution transformed society from an agricultural to a mechanized society. The output of production increased enormously thus creating a substantial amount of Jobs.
Although the economy was drastically affected by the increasing industrialization; many people were horrified at the evils of the Industrial Revolution. It was this period of time when new ideas and philosophies began to emerge regarding the government intervention. For example; the Liberal ideology was reformed and transformed by John Stuart Mill. Initially, many supported Adam smith’s Laissez-fairer capitalism. However, as the abuses of Industrialization multiplied and as the Industrialists showed little concern for the plight of their Norse, a new period emerge known as the enlightenment era.
In this period, philosophers of the time such as Mill gradually came to believe that government should play a role in the economy. The ideas of Mill and his fellow philosophers influenced the passage of several factory acts and spread the ideas of market oriented economy. The market oriented economy allows private enterprises while removing the worst abuses of capitalism. For example, Health and safety controls ensure that safety standards are met while fairness laws prevent false advertising and discriminatory hiring practices.
The implementation of progressive taxes by government agencies also created equality and eliminated the negative aspects of pure capitalism. ANALYSIS Through the examination of various aspects with regard to historical progression as Intervention to safeguard the backlashes of free market forces the essay will now go on to look into the fields of economic and political facets, the importance of government intervention and to what extent should government intervene in the process of globalization.
In order to arrive at a congenial argument of the above mentioned objective, the pros and cons of government intervention in the economy is briefly studied. Arguments consenting to the need for government intervention * To monitor the market system in an orderly manner by imposing rules and regulations * Assists in absorbing failing or insolvent business/companies to revive and indirectly reliving the economy of any repercussion that may be caused due to the downfall of these firms otherwise. If not for government intervention, monopolies would overrule by raising their prices, it is possible for businesses to get involved in corruption, and also monopolies not producing enough goods and/or underpaying the employees (as Nas in the case of the sass’s, where the government intervened in protecting the interest of those employees ) * Saving big companies struggling financially, in order to save the economy. The collapse of a company that contributes considerably to the economy can hurt the economy a lot more than the money required in bailing the company out of such a crisis. The American government’s role in helping out the automakers in 2008) * Need of government support in order to protect the interest of Small and Medium scale enterprises. * Governments interest in focusing on Job creation and securing Jobs (government intervention was a complete success and allowed many Americans’ to retain their Jobs) * Government intervention in facilitating globalization through FED and exports can earn profit, which can be invested in the economy or support potential and upcoming businesses and/or invest in the social and economic welfare of the economy in question. A general need for law and order in times of recession, economic slowdown or any form of crisis in the world economy. Arguments counteracting the need for government intervention Arguments are based on the fact that only market forces operate without any government intervention. * Free market forces allocate human and financial capital in the most efficient manner possible, through motivation to pursue business and trade. Government may distort this process by favoring undesirable or weak companies.
The 2008 crisis was partially the result of unmindful government regulation when banks were allowed to give unsafe loans that allowed people to use their house as credit, that led to the impending debt which eventually led to the crisis. * Government intervention like subsidies, tariffs, quotas, price settings hurts mechanism of free market by creating artificial, immoral and biased system. * Firms Nil lose or fail to develop the ability to revive themselves and will begin to rely heavily on the government.
This means inefficient businesses will continue to operate in the market or firms will lose themselves to inefficiency. * Free market operation encourages competition among various firms that leads to increased efficiency. * This form of operation is an incentive for people to work harder, to look for new products to sell and find cheaper ways to produce them. * It attracts foreign investment because of new available opportunities to earn profit. Dependency on the state bureaucracy is correspondingly reduced as various activities that are usually associated with the public sector are taken over by private enterprises * Variety of consumer goods become available and the forces of production undergo rapid development The process and effect of globalization is different among different economies Now that we have examined how economies benefit with and without government intervention, through my research I have come to the conclusion that a generalized form of operation does not work for all economies.
While the United States of America has long been the global superpower in terms of economic prosperity and technological advancement for some decades now. Accounting for only 5% of the world’s population, it produces more than one fourth of the global economic output. Driven by the ideals of “free market” and the rationale of “individual freedom” and “free enterprise”, the US market economy has been deemed one of the most efficient economies.
It is a classic example of a developed country benefiting the rewards of globalization. Although it does not follow the concept of ‘free market” typically in the theoretical sense as there is minimal amount of government intervention. An example of an economy that strictly follows the “free arrest” regime would be Somalia. Moving onto globalization in developing countries, it is generally agreed that East Asia benefited from globalization whereas Africa and Latin America (with some exception) lost.
Could this experience of East Asia be generalized? It has been argued that the export-orientation of East Asia has been contributed to its success in the process of globalization, but it would be fallacious to apply this experience to all developing countries. Taiwan, Singapore and Hong Kong can create many Jobs by labor intensive exports because they are small countries in whose economy foreign reader plays a large part.
India and Brazil, on the other hand, have to devote the bulk of their efforts to designing and adapting technologies, processes and products for their vast domestic markets. Globalization has not been equally helpful, and it may in some instances have been damaging to these efforts. It is notable that, there is a different role played by the government. Korea and Taiwan did not achieve their success by laissez-fairer.
The invisible hand of the market was guided by the highly visible and strong arm of the state. The issue was not government intervention rears laissez-fairer, but efficient forms of governing rather that restrictive and crippling ones. The countries here are cited as examples of free markets that have been powerfully and efficiently intervened in allocating investment through steering interest rates, import controls and export incentives.
The South Korean public-sector ‘Pongee Steel Company is one of the most efficient public enterprises in the world contrary to which the ‘Steel Authority of India’ is subject to close political scrutiny and interference, its prices are politicized and it is protected from completion through overspent and bureaucratic control are different in different economies and therefore a country must refrain from policies that maybe undesirable and adapt clear objectives and prospective government intervention that may be favorable in their success in making good use of globalization. He changing role of governments and emergence of transnational organizations Economic globalization has affected political, social and economic developments all over the world. From the viewpoint of international political economy, globalization means foremost the changing architecture of the international system. The varied development in the field of economics, politics and sociology has been altering the role of governments across different nations; the government was initially considered the core of international system after the Treaty of Westphalia.
Today, profound changes in the world economy associated with economic integration and the rise in significance of transnational economic structures and the emergence of institutions such as the World Bank, the European Union and WTFO etc. , involving new constraints and imperatives have considerably increased the influence of global markets on nation states. The prevalence of these newly established international organizations that regulate trade and business globally, has changed the economic policies of states.
Governments are not concerned anymore with the maintenance of strategic Industries and the sustenance of the overall strength of a national economy, but instead try to respond flexibly to competitive conditions in a range of diversified and rapidly evolving international markets. They have moved away from the general provision of welfare in society to the promotion of enterprise, innovation, and profitability in both private and public spheres. With their world-wide operations succeeding in maximizing profits, corporations have assumed extraordinary power, often far surpassing that of governments.
With virtually no global rules or regulations, corporations have been able to operate with a free hand in the international marketplace, moving factories where labor costs are low and where resources are cheap. But corporations themselves are finding out that there are limitations in these operations. Some corporations have learned this the hard way. Union Carbide learned this when its chemical plant in Opal, India, spewed poisonous gases that killed 6,000 people. And Exxon learned this when its tanker, the Exxon Valued, spilled 11 barrels of oil over the Gulf of Alaska, which caused the company’s sales to fall from U.
S. $9. 9 billion a year to US $. 4. 8 billion eight years later, plus an addition billion in clean-up costs. Or what extent should the Government intervene? Globalization does not mean that states are likely to disappear or that the role of government decreases in the era of the globalizes economy. On the contrary, if economic decisions were left to market forces alone, the likely result would be some kind of economic crisis, or stagnation. So far “… The markets have not demonstrated that they are sufficiently sophisticated and function sufficiently smoothly to discriminate between good and bad policy objectives. With increasing economic openness and with the pressures of international production and financial globalization, it is very hard to overestimate the central role of the state in providing global economy. If governments cannot react to the fast changing international economic environment, they lose out. After the first painful experiences, they must learn to navigate in the dangerous waters of the globalizes economy. This does not apply to developing countries and transition economies alone, but to every open economy in the world.
The difficult part under the new rules of the global economy is to know when government should intervene. The best alternative for governments here would be to see what policies have worked and what have failed worldwide. For example, following the emerging markets’ financial crisis, the state’s active supervisory and regulative function over the financial institutions deserves great attention. And with regard to trade and investment policies the state is more portent than ever for creating a good business environment, for educating its people and for keeping the infrastructure and social services in good shape.
It is still the primary responsibility of government to take the necessary measures to ensure economic growth and the well-being of its citizens. After a period of blind faith in market forces, which existed in the industrialized countries in the asses and -ass and still lingers in some transition countries, the state has been re-invented all over the world as a crucial actor for facilitating business development and for moving towards an innovation based economy.
Reasons that Justify why government should intervene in the process of international trade shaping Globalization * Protection of the National Economies: This mainly came from the labor activists who were against the outsourcing of Jobs from Europe and the united states to India and requesting for government intervention to curtail the import of cheap products and increase trade barriers. * Protection of Infant Industries: Emerging industries, companies are often inexperienced and lack the technology and skill to compete with already established global firms and industries. National Security: Nations impose trade barriers on products that they deem critical to national defended and security; these could be in the form of military technology and computers. These trade barriers can be used to boost local production and capacity. * National Culture and Identity: Sometimes governments need to protect some occupations, industries, public assets that are central to national culture and identity * Trade arises – Government can impose some trade barriers to ensure the infant industries are protected until such a time when they can effectively compete.
Government will present trade barriers like the Quotas and tariffs that the overspent can use, increment in quotas and tariffs would mean the products of imports would become more expensive than the local products or services people might end up resenting these products. * Investment Barriers – These are investment restrictions in particular industries or being able to acquire a local firm. Reese restrictions are common in industries such as broadcasting, air transportation, financial services, military technology, and the oil industry. These are left to enable the infant industries to grow until such a time when they can compete.
Most of these laws were very prevalent in India, and Mexico. Subsidies – aid or resource support from the government to the smaller firms to help them with production and other services that they need to help them grow. This is in the effort to reduce import by all means and encourage exports and therefore subsidies can also take the form barriers within the bloc – For the firms within the bloc such as the European Union, the countries within the bloc ensure that trade and investment barriers are reduced and this also allows currency flow within the bloc.
Membership to such supranational organizations also fosters a huge market for export within the bloc. Concluding remarks and comments There is no world government to regulate all the facets of globalization. Yet to manage globalization to ensure that all enjoy its benefits, there is a need for more comprehensive global governance??a system of international law based on the principle of multilateral that will spell out the ground rules for all participants in the global economy. Many areas of interdependence need global attention.
The benefits of a globalize economy must be accompanied by greater global cooperation to prevent and contain the spread of “global bad,” such as the spread of economic rises, epidemics, environmental degradation, crime and drugs. Cooperation is to address macroeconomic policies, and on trade, aid and the need for a fair and equitable system to protect intellectual property. At present, there are organizations to address many of these issues, but by and large, their work is uncoordinated, and poorly supported by the international community.
To achieve a more integrated degree of policy coherence, gaps must be filled and existing structures improved. Not to dominate national governments and overpower cultures and societies, the essential role for global governance is to define objectives, set standards, and to monitor compliance. The United Nations, made up of 189 countries, is part of the answer. But to address the needs of people, it needs the support not only of governments, but also of civil society, the private sector, parliamentarians, local authorities, the scientific community, and many others.
It is important for the government to protect the trade of their respective countries as this builds their economies, and makes their firms strong enough to contend with the firms in the international market. This also builds the trust of the people or citizens in these regions as they know that their government are willing to support and thus see the need to keep them in power. Bibliography * Edited by J. Launcher and John Boll, (2nd Edition), ‘The Globalization Reader’, Blackwell Publishing * Czerny, Philip G. (1990) The Changing Architecture of Politics: Structure, Agency and the Future of the State.