The Globalization Of World Politics Pdf
Andree Vandestreek
For much of the 20th century, geopolitics drove American foreign policy. Successive presidents sought to prevent any single country from dominating the centers of strategic power in Europe and Asia. To that end the United States fought two world wars and carried on its four-decade-long Cold War with the Soviet Union. The collapse of the Soviet empire ended the last serious challenge for territorial dominion over Eurasia. The primary goal of American foreign policy was achieved.
Progress has been slower, though still significant, in Asia. U.S. relations with its two key regional partners, Japan and South Korea, remain the foundation of regional stability. Democracy is taking root in South Korea, the Philippines, Indonesia, and Taiwan. U.S. engagement with China is slowly tying an economically surging Beijing into the global economy.
Globalization is not just an economic phenomenon, but a political, cultural, military, and environmental one as well. Nor is globalization new; networks of interdependence spanning continents were increasing rapidly in the decades before the First World War as the steam engine and the telegraph reduced the cost of transportation and information. What distinguishes globalization today is the speed and volume of cross-border contacts.
But globalization also brings terrible new perils. A handful of men from halfway across the globe can hijack four commercial airliners and slam them into key symbols of American power, killing thousands. A computer hacker in the Philippines can shut down the Internet and disrupt e-commerce thousands of miles away. Speculators can produce a run on the Thai currency, plunging Russia and Brazil into recession, robbing American exporters of markets, and costing American jobs. Greenhouse gases accumulating in the atmosphere in newly booming economies can raise global temperatures, possibly flooding coastal plains and turning mountain meadows into deserts.
Much of the foreign policy debate in the United States today revolves around assessments of the fundamental importance of American primacy and globalization. Americanists, so called because they emphasize American primacy, see a world in which the United States can use its predominant power to get its way, regardless of what others want. They believe the United States must summon the will to go it alone if necessary. Globalists emphasize globalization. They see a world that defies unilateral U.S. solutions and instead requires international cooperation. They warn against thinking that America can go it alone.
But Globalists are right that while America is powerful, it is not omnipotent. Far more able than most countries to protect itself against the pernicious consequences of globalization, it is by no means invulnerable. Some crucial problems do defy unilateral solutions. Global warming is perhaps the most obvious case, but others include stopping the spread of weapons of mass destruction and fighting global terrorism. In other cases, such as protecting the American homeland from terrorist attack, unilateral action can reduce but not eliminate risks.
Similarly, unilateral American power may not be enough to sustain the benefits of globalization. Globalization is not irreversible. World War I, the Russian Revolution, and the Great Depression combined to strangle the economic and social interactions that emerged early in the 20th century. Economic globalization today rests on an intricate web of international trade and financial institutions. Extending, developing, and improving these institutions requires the cooperation of others. Without it, the benefits of globalization, which help to underwrite American power, could erode.
Finally, cooperation can extend the life of American primacy. Working with others can spread the costs of action over a wider array of actors, enabling the United States to do more with less. By creating international regimes and organizations Washington can imbed its interests and values in institutions that will shape and constrain countries for decades, regardless of the vicissitudes of American power. And cooperation can build bonds with other countries, lessening the chances of cultural and political tactics that can over the years sap U.S. power.
Both Americanists and Globalists understand essential truths about the world today. Power continues to matter, but power alone will often not be enough to achieve our goals. A pragmatic American internationalism would recognize that we do not need to pick between these two truths. Both should guide American foreign policy.
Finally, U.S. policy must take the lead in creating effective international institutions and arrangements to handle new challenges, especially those arising from the downside of globalization. The United States must lead not only because it alone can help the international community overcome its collective-action problems, but because it is most likely to be hurt by inaction. Just as one example, an international system for reporting and monitoring research in dangerous pathogens could provide early warning if biotechnologists create such pathogens either deliberately or inadvertently.
A perennial challenge facing all of the world's countries, regardless of their level of economic development, is achieving financial stability, economic growth, and higher living standards. There are many different paths that can be taken to achieve these objectives, and every country's path will be different given the distinctive nature of national economies and political systems. The ingredients contributing to China's high growth rate over the past two decades have, for example, been very different from those that have contributed to high growth in countries as varied as Malaysia and Malta.
Yet, based on experiences throughout the world, several basic principles seem to underpin greater prosperity. These include investment (particularly foreign direct investment), the spread of technology, strong institutions, sound macroeconomic policies, an educated workforce, and the existence of a market economy. Furthermore, a common denominator which appears to link nearly all high-growth countries together is their participation in, and integration with, the global economy.
Economic "globalization" is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political, and environmental dimensions of globalization.
The broad reach of globalization easily extends to daily choices of personal, economic, and political life. For example, greater access to modern technologies, in the world of health care, could make the difference between life and death. In the world of communications, it would facilitate commerce and education, and allow access to independent media. Globalization can also create a framework for cooperation among nations on a range of non-economic issues that have cross-border implications, such as immigration, the environment, and legal issues. At the same time, the influx of foreign goods, services, and capital into a country can create incentives and demands for strengthening the education system, as a country's citizens recognize the competitive challenge before them.
The world's financial markets have experienced a dramatic increase in globalization in recent years. Global capital flows fluctuated between 2 and 6 percent of world GDP during the period 1980-95, but since then they have risen to 14.8 percent of GDP, and in 2006 they totaled $7.2 trillion, more than tripling since 1995. The most rapid increase has been experienced by advanced economies, but emerging markets and developing countries have also become more financially integrated. As countries have strengthened their capital markets they have attracted more investment capital, which can enable a broader entrepreneurial class to develop, facilitate a more efficient allocation of capital, encourage international risk sharing, and foster economic growth.
A recent paper by the IMF's Research Department takes stock of what is known about the effects of financial globalization.5 The analysis of the past 30 years of data reveals two main lessons for countries to consider.
First, the findings support the view that countries must carefully weigh the risks and benefits of unfettered capital flows. The evidence points to largely unambiguous gains from financial integration for advanced economies. In emerging and developing countries, certain factors are likely to influence the effect of financial globalization on economic volatility and growth: countries with well-developed financial sectors, strong institutions, sounds macroeconomic policies, and substantial trade openness are more likely to gain from financial liberalization and less likely to risk increased macroeconomic volatility and to experience financial crises. For example, well-developed financial markets help moderate boom-bust cycles that can be triggered by surges and sudden stops in international capital flows, while strong domestic institutions and sound macroeconomic policies help attract "good" capital, such as portfolio equity flows and FDI.
The second lesson to be drawn from the study is that there are also costs associated with being overly cautious about opening to capital flows. These costs include lower international trade, higher investment costs for firms, poorer economic incentives, and additional administrative/monitoring costs. Opening up to foreign investment may encourage changes in the domestic economy that eliminate these distortions and help foster growth.
Looking forward, the main policy lesson that can be drawn from these results is that capital account liberalization should be pursued as part of a broader reform package encompassing a country's macroeconomic policy framework, domestic financial system, and prudential regulation. Moreover, long-term, non-debt-creating flows, such as FDI, should be liberalized before short-term, debt-creating inflows. Countries should still weigh the possible risks involved in opening up to capital flows against the efficiency costs associated with controls, but under certain conditions (such as good institutions, sound domestic and foreign policies, and developed financial markets) the benefits from financial globalization are likely to outweigh the risks.
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