Impacts of the Global Recession in the World Economy
Discuss the impacts of the global recession in processes of economic globalization, internationalization and neoliberalism in the World Economy .
There is debate on to what extent, as a consequence of the recession, the World economy is becoming more or less globalized, more or less internationalized and more or less neoliberal. The essay should use theory and evidence to evaluate both sides in the debate. The discussion should draw on the views of radicals, sceptics and pragmatics regarding to what extent the economy was globalized before the recessions that started in 2008, and then explore whether or not the recession is likely to have changed economic trends. You need to focus on economic globalisation as a new phenomenon, different from internationalization, westernization, neo-liberalism or cultural convergence.
Key authors: HIRST & THOMPSON, SCHOLTE (BOTH IN THE READING PACKAGE.) OHMAE, DICKEN
How Globalization Has Been Influenced
Globalisation has been evidently transforming the means and ways of interaction between nations for a few decades now (Hirst, Thompson and Bromley 2015). International trade and production have increasingly become globalised, and the corporate activities have become more diversified and multiplied to a greater extent. Globalisation is very real, and its consequences can be felt the world over. The global market is today more developed than the way it was in the 60’s and the 70’s and has since become indifferent to the national borders (Beck 2015). Indeed, nations seem to have lost their sovereignty, and their politicians have lost some of their capabilities to exert their influence on some key events (Baylis, Smith and Owens 2013). The end of the era of a nation state is in the offing.
Factors that have shaped the Processes of Economic Globalization
According to Sturgeon (2013), economic globalisation can majorly be thought of as three diverse sets of factors that have shaped the globalisation process, including the changes that have transpired at a global scale in the last few decades. These factors include globalisation of production, globalisation of finance and globalisation of trade.
Globalization of production
Globalisation of production entails the changes on a global scale in regards to the means of organisational production of goods and services and encompasses three dynamics: growth of long-distance network of production, an increased role of transitional corporations in the global economy and an enormous increase in the Foreign Direct Investment (FDI) (Beck 2015).
The enormous increase of FDI: Foreign Direct Investment, as defined by Roberts (2015), refers to an investment that entails a long-term relationship and reflects a long-lasting interest and control of a resident unit in the source country within the host country. As from 1960, FDI was more concerted in the industrialised countries and its destination within the same category. The economic globalisation has however transformed this system to such an extent that the Third World countries have equally become important destinations. A very obvious example is in the case of transnational investments of corporations in which the transition economies have appeared to be having significant growth, and as is depicted by the UNCTAD, China has moved very fast to overtake the United States as the number one destination for FDI as of 2003 (UNCTAD 2005). One would accordingly be tempted to argue that globalisation of production is real phenomenon since economic globalisation has proven to reposition the destination of FDI.
The role of transnational corporations in the global economy: Transnational corporations are those companies with their headquarters based in one country, mainly in the industrialised countries, and many of their subsidiaries based in many other foreign countries (Forsgren 2013). Some of the most popular transnational corporations include Samsung, Apple, Airbus and Nike among others. These companies make up the most important vehicles for FDI and sometimes even surpass the gross domestic product (GDP) of certain national economies. The role of the transnational corporations in the world economy has become of great importance as their numbers have noticeably increased in the recent times (Forsgren 2013). Again, some of these companies that have been located in some developing countries are likely to become important vehicles for FDI. Accordingly, the internationalisation and the increasing importance of these multinational corporations are fast shaping the economic globalisation process (Forsgren 2013).
The growth of a long-distance network of production: According to Selwyn (2011), many of the large transnational corporations are making efforts to diffuse their production networks internationally, and this denotes a fundamental difference from the earlier decades when the processes of production were majorly organised within national borders. The new global product chains continue evolving over time and comprise market-based networks of global range structured by the multinational corporations by way of contracting and sub-contracting the production processes all over the world. Selwyn (2011) argue that two types of global commodity chains exist: producer-driven chain where the large manufacturing multinational companies assume the leadership role so that they organize the chains; and buyer-driven chain where the global retailers and the marketers take up the leadership role. Therefore worldwide production of goods and services progressively takes place by means of broadly-detached network activities which have categorically shaped something comparable to a global network of productive activities.
Consequently, the above-highlighted dynamics that make up the globalisation of production have swayed the global economy while defining the economic globalisation process. However, as was hinted before, economic globalisation also encompass globalisation of finance.
Globalisation is a positive phenomenon, especially when considered from the economic perspective. It is an occurrence that has been shaping the way nations interact in the past few decades, and it has for sure contributed to the elevation of the previously third world countries to almost industrialised countries, with the best example being China. China is one of the most noticeable beneficiaries of globalisation with its FDI currently surpassing that of US. Corporate activities and the international trade and production have increasingly become globalised. It appears that nations have today lost their sovereignty, and they are left with very little voice on the matters of national concern. The debate on globalisation could be argued out through three different schools of thought; the hyperglobalisers, the sceptics and the transformationalists. From the analysis, it can be concluded that the hyperglobalisers are having a more convincing argument when they state that the era of nation-state is soon coming to an end. This is evident in the current economic activities that are cutting across the globe without the consideration of the national boundaries and if globalisation continue with the same pace, anything to do with nation-state will be gone and never to return.
Baylis, J., Smith, S. and Owens, P., 2013. The globalization of world politics: An introduction to international relations. Oxford: Oxford University Press.