Global Capitalism and its Discontent Essay

May 28, 2022 by Essay Writer

Introduction

At the inner core of the ideologies of free market, there is an associative mode linked to Adams Smith. The mode predominantly points out the profit-propelled market forces, which shape economies efficiently in a manner that permits the realization of plausible outcomes.

From the conceptualizations of Smith’s model, these free market forces orient economies in a way that ensures maximum efficiencies and effectiveness to sustain the growth of economies.

In the sphere of the modern economic arguments, a considerable achievement rests on the capacity to demonstrate the logical contexts, conditions and the sense under which the conclusions reached by Adams Smith are valid and correct.

In the economic theory, people argue that in the situations of imperfect information flow coupled with incomplete markets, a situation more common in the developing countries, hard works that are invisible also end up as imperfect. However, a government and international trade organizations and institutions introduced by market failures can deploy some interventions to bridge the inefficiencies.

Globalization, as a concept widely acclaimed by the World Bank, is one of the concepts that people believe to narrow the gap of inefficiencies in production capacities of less endowed nations. It fosters the transfer of human capital while not negating the free global movement of skills. Consequently, people have formulated many of the World Bank’s policies to achieve the mentioned goals of globalization.

However, with the advancement of the arguments by anti-globalists about the capacity of globalization to introduce inconsistencies and discontents, over the last decade, the World Bank has considered an alteration of some of its policies and practices in relation to drumming up the support for globalization.

By appreciating such changes, the paper unveils some reasons why the World Bank reformulated its development policies and practices in the last decade.

Why the World Bank reformulated its development policies and practices in the last decade

Reformulation of development policies and practices by the World Bank over the last decade was not only anticipation but also a necessity. In the book Globalization and Its Discontents, Stiglitz’s reflects his 1993 personal experiences while serving the capacity of the chairperson of the Bill Clintons’ council of advisors coupled with his experiences as the chief economist of the World Bank as from 1997.

According to Stiglitz, IMF and other international institutions work without paying much attention to the poor nations while formulating their policies (2002, p.26). Somewhat paramount to note is that policies formulated by such international institutions were mainly framed in such a way that they would foster the breakdown of world nations demarcations in terms of flow of human capital, technology and trade.

Unfortunately, as Hass posits, these goals are not precisely achieved since globalization results in the placement of an obligation for nations to conduct an abridgement of their social legislations (2009, p.79). Often, this obligation gives rise to domestic protests. The trade policy debate during campaigns in the US may perhaps exemplify the magnitude of such protests especially in times of economic distress.

Through the conceptualization of such a case under study, Stiglitz, (2002) claims about “…The IMF, WTO, and the World Bank’s lack of transparency and accountability…Without government oversight, they reach decisions without public debate” (p.57).

With other criticisms and conflicts of globalization introduced and discussed by O’Brien and Marc (2010) and Ravenhill (2010), a clear indication of the reasons why World Bank reformulated its policies and practices over the last decade surfaces.

After the collapse of the infamous Washington DC conference, termed by Stiglitz (2002) as a conspiracy meeting aimed at engineering ways of running worldwide reforms in economic sectors (p.98), the World Bank considered sponsoring an online debate about globalization. People defined the subject under discussion as “the most common core sense of economic globalization” (Stiglitz 2002, p.98).

This means that the core aim of globalization is to foster integration of the world economies into a single whole. During the Aspen Institute’s Conference, the president of the World Bank, Mr. Wolfensohn, informed the audience that “Globalization is a practical methodology for empowering the poor to improve their lives” (Stiglitz 2002, p.98).

The query on the capacity of globalization to achieve this noble role has, in return, immensely contributed to the alteration of the World Bank’s policies and practices. However, arguably, the change of the World Bank policies and practices in relation to globalization results from the repercussions of globalization as a worldwide trend.

Proponents of globalization argue that global institutions, such as the World Bank, have been capacitated by advents of globalization to extend their services to not only their member states as stipulated by their charter, but also the global economy that is integrated.

Nevertheless, Ravenhill reckons that “concrete reality lies behind that grand abstraction, not real individual workers, peasants, or small businessmen, but rather giant fictitious individuals, the transnational corporations” (2010, p.108).

It is perhaps then significant to consider now some of the consequences of globalization that have made the World Bank to reconsider its policies and practices over the last decade. In the advancement of the arguments in the next sections, people consider globalization as part of World Bank and other international organization policies.

Ability of nations

As argued by critics, “Globalization has, over the years, been undercutting nations’ abilities to comprehend social and environmental costs in terms of prices” (Sklair 2002, p.77). Economic integration, as guided by principles of free markets in this context, may appear to produce lowering of standards of competition.

However, as Stubbs and Underhill (2005, p.37) clarify, “The most competitive advantage in the arena of the international trade remains a reserve for those nations that conduct the poorest merging of social and environmental costs with prices”. The most conspicuous consequence of this is that a big portion of the world production moves to the nations that carry out the poorest tasks of counting costs.

In a different perspective, this gives rise to contrasting impacts on domestic politics of a nation especially in those nations that are industrialized. On one hand, enhanced productivity improves the wellbeing of citizens. On the other hand, unemployment emerges. This constitutes to a paradox that requires interventions especially in the era of globalization.

A migration from menial tasks also takes place following the global transfer of human capital permitted by globalization. Clash of cultures arises coupled with the emergence of nationalism euphoria that advocates for exclusions.

Advocates of globalization including the World Bank have then looked for ways of addressing this challenge. Perhaps based on these predicaments, the World Bank, over the last decade, has altered its policies and practices to incorporate and establish a central concern for multiculturalism tolerance.

Anti-globalists argue that globalization, as highly advocated for by the World Bank, serves as a sure catalyst of global production efficiency reduction. It becomes necessary to alter practices and policies of the World Bank especially by bearing in mind that “As uncounted, externalized costs increase, the positive correlation between GDP growth and welfare disappears, or even becomes negative” (Stubbs & Underhill 2005, p.37).

In high wage nations such as the United States, standards-lowering competition, which is a key component of globalization, produces income disparities. With the easy flow of human capital fostered by globalization, people anticipate in a global bidding of the labor.

Since free market principles advocate for a reduction of production costs to maximize their profits, it is likely for unemployment levels to rise especially upon the embracement of other components of globalization such as overseas contracting. However, nations have the chief obligation of providing employment opportunities to their citizens.

The World Bank, consequently, finds it necessary to control the porosity of the national boundaries as various nations endeavor to increase their productivity and global spread. One of the subtle ways of accomplishing this precisely is through alteration of policies and practices of international bodies that fund and praise globalization such as the World Bank.

The World Bank recognizes this fact. Over the last decade, it has aligned its policies to foster comparative advantage to all nations. Its focus has been in the advancement of financial aid to poor nations in the endeavor to bridge and reduce the gap between the developed world and the developing world.

Open capital and trade quality

With regard to the constructs of competitive advantage upheld by globalization proponents, “…free trade and capital mobility amplifies specialization pressures” (Stubbs & Underhill 2005, p.98). Interpreted differently, this implies the creation of a narrow range of ways of earning livelihood.

Perhaps, as an example, if the main economic activity in America would be livestock farming with respect to the voices of competitive advantage, then every American would be a cowboy or a shepherd only contributing towards this effort in the global market. Any concerned person would import anything else consumed in America in exchange with mutton, leather and beef among other animal products.

A more robust interpretation of competitive advantage is that those Americans who may wish to indulge in other careers such as piloting, manufacturing and other chores need to migrate into other nations that specialize in these activities.

While this may not have been the actual interpretation or meaning of specialization as a key constituent of globalization policies on the ground, international systems give rise to the emergence of paradoxes.

With this in mind, the World Bank appreciates that while the prosperity and success of nations are akin to the flourishing of globalization, a dielectric that works counter to the globalization process surfaces thereby deterring the initially intended aspirations of the process.

The altered practices and policies within the last decade have an evident proactive shaping to neutralize this dielectric. Additionally, the success of the new 21st century phase of globalization predominantly rests on the capacity to bridge the gap between political and economic stalemates, which more often than not, are incongruent. This means that the established challenges also need a matching set of policies and practices.

The World Bank has a noble role to respond to these sets of demands. According to Stiglitz (2002), there was an evident unfair pushing through of the process of globalization in that liberalization policies were based on rapid implementation and enactment, following wrong order and, more importantly, through the deployment of inappropriate and inadequate economic analysis models (p.145).

From this argument, instances of social conflict, general frustrations and destitution arising henceforth, require a collective mechanism tantamount to and reflected by the experienced variations in the policies and practices of the World Bank over the last decade.

Sequencing and speed emphasis

Success of economic liberalization is dependent on the sequence and the speed of advancement of reforms. Stiglitz (2002) argues that, in the endeavor to achieve success in the process of economic liberalization, it is critical for the concerned parties to implement reforms at the right pace following the right sequence (pp.73-78).

This means that in case of a rapid opening of capital accounts, the chances are that conspicuous dislocations are eminent. However, it is essential to note that the debate on pace and sequence in policy discussions is not a new thing in the economic profession.

In his book, Wealth of Nations, Adams Smith had argued about the issue of pace and sequence of policies as hard, which often required political interventions (Manfred & Ravi 2010, p.49).

The World Bank stood an excellent chance in the front line, as it was immensely interested in the understanding of issues related to sequencing and speed of policy discussions. Upon conducting numerous studies in 1980’s, the members present reached some various recommendations.

One of the recommendations was that liberalization of trade was essentially worth realizing in a buttressed and gradual process that required extensive foreign aid. In relation to sequencing, the reform agenda needs to embrace the demands of the nations experiencing large fiscal imbalances and escalated inflations (Stiglitz 2006, p.87).

They placed appropriate strategies on high demand to ensure that in cases where the reform agenda produced unemployment, they maintained the consequences minimal. In addition, they recommended that financial reforms required some regulatory agencies for their cute performance. Finally, in the last sequence order, they recommended capital accounts that they needed to liberalize as the process summed up.

However, they placed a precondition on this last proposition: liberalization of capital accounts was only necessary when an economy had established strong foundations for its export sector. Even though these recommendations never satisfied all economists, they have been critical constituents of propellers of the alterations of the World Bank’s development policies and practices.

Conclusion

With the stringent concerns of globalization, the World Bank recognizes the various drawbacks introduced by the policies that multinational organizations cringed on to enhance their profitability and global presence in the years proceeding the last decade.

As argued in this paper, the World Bank, consequently, adopts various changes in its development policies and practices to improve and redefine such institutions coupled with incentives extended to help in inculcating the spirit of efficiency and fair competition in the global fronts.

The reasons why this is necessary are that destitution, corruption and abuse are critical elements for curtailing the success of policies that aid in hiking the productivity of nations. By providing hindrances to the spreading of such drawbacks of national productivity, globalization ends ups as a fair process.

Therefore, industrialized nations acquire the ability to dismantle the hindrances of the growth of their productivity. The main agenda and objective of the World Bank is to shield bureaucrats, corrupt politicians, and xenophobic autocrats from running the economies of nations if the nations of the world are to move coherently in a homogeneous way with the calls of globalization.