Over the past centuries, trade has improved right from barter trade to other forms such as those experienced in the modern world in the present day and age. According to Gywnne, there has been a gradual and uneven emergence of more liberalized trading system in the world over the latter half of the twentieth century. Some argue that during this era, trade was fair and freer across nations compared to the present age. In some systems, some government’s control the economy and anything that deals with trade in that country. In some other countries, there are specific regulations that the governments have put forward to help control and govern the activities of their markets. The contents of this paper look into issues that try to answer the question ‘to what extent can markets function effectively without the state?
For starters, it is important to have a clear meaning of the state. A state is a geographical portion within which the resident population is governed or ruled by an authority structure. A state has an external recognized sovereignty over the territory (Dicken, 2011). A nation in so many ways is different from a state. A nation is a much larger group of people who have a common culture and share one or more cultural traits such as religion, language, values, political institutions and historical experiences (Dicken, 2011).In a nation, the people tend to identify with one another on so many things, and they are much closer to one another than they are with outsiders. They also believe that they belong together and tend to distinguish themselves from people they do not share the same culture with. According to Dickens (), a nation-state is where the ‘nation’ and the ‘state’ are coterminous i.e. a nation with a state wrapped around it. Nation-state emerged from some power configurations in Europe after the Treaty of Westphalia helped in ending the thirty year war in 1948. A market on the other hand, is a place where traders or people with business transactions can meet and exchange their goods and services. Over the past years, the market has changed from one where traders had to be in the same location at the same time for this to happen, to a situation where they can still exchange their goods and services while they are miles away. It has also changed in such a manner as there is no need to use gold or paper money to a situation where paperless money is used. Such changes within the market structure are some of the reasons why sometimes the question on whether the state needs to be involved in matters of the market usually comes up.
For any trade to take place in any market the trader needs to be a bit free so as to enable traders to carry out their business smoothly. Theoretically, trade usually has a strong base geographically. Most scholars argue that geographically, where there is a heterogeneous landscape people find it advantageous to develop the resources within these boundaries. They also find it advantageous to work in those activities that they are best suited in. By doing so; it gives these people a chance to trade in these goods especially with products that they have a comparative advantage in with those that they cannot produce (Gwynne, 201). These exchanges are what lead to the developments of markets in any place as the exchange can be done at a wide range of different geographical regions- whether local or national and global basis. Trading and the production of products within some borders led to international trading, which in the present day is termed to as globalization. International trading is happening mainly because of the existence national differences in terms of production costs in countries and also the price of different products (Gwyenn, 202). When one nation or state produces goods that they have resources to produce in surplus, there is need to trade or exchange with other states or nations that cannot produce that particular good. In return, the first nation is in a position to dispose off their surpluses and import products that they are not in a position to produce. International trade is mainly based on the fact that there are differences in the endowments of countries; some countries are endowed in natural resources while others are endowed in labor or capital. These differences are enough to bring a difference in the costs of production of any products and the prices of goods too. Due to this, international trade is created and thus leading to the creation of an international market all together. According to Gwyenn (2008), other factors that can lead to comparative advantage of a state or nation include technology, economies of scale, the consumption factors and the quality of factors of production.
International trade, which leads to globalization causes and even faced with problems, especially when dealing with the governments of any state. International trade has regulations and rules that govern and ensure that the trade is done smoothly. In most cases the governments of any state or nation are usually in charge of ensuring that there are regulations that govern any trade within its borders, whether it is international or local trade. In the modern markets where there are Multi National Corporations in almost all the corners of the world, modern states have made it their business to ensure they regulate these markets. One of the ways through which the states are involved in the markets within their borders is through trade protectionism (Sowers 2010, 165). During the eighteenth and the nineteenth century, most of the markets followed the mercantilism system. The mercantilism system extolled the protection of domestic industries from any foreign industries that would bring forth competition. From the experiences of the previous years, there were problems in cases where the markets were strictly governed and monitored by the central governments (Sowers 2010, 167). In most cases, when the central government is involved too much into the affairs of any market, many issues will arise since markets and economies need to balance on their own, with little governance and interferences from any individuals or forces. From the case study above, some have argued that to some extent, the Act was responsible for the decline in the levels of imports in the US and worked with deflationary economic pressures in the US to reduce trade. The great depression and its impacts can be gauged in terms of the Act, and with this, we can deduce some of the effects of the governance of the markets by any central government. Due to such effects, some of the methods that are developed help in governance of the market without really having to be influenced directly by any central government. Due to the great depression and the consequences of the Act, the IMF and the World Bank were created together with the establishment of the General Agreement on Tariffs and Trade in 1947. All of these were meant to reduce global trade tariffs. But all of these have changed in some ways over the past century due to the rapid changes and developments in the global market and trading arena.
There is the existence of regional and global trade governance institutions due to the prevailing attitudes and state policies in the 20th Century. The rules of the twentieth century have moved from protectionism towards the principle of free and liberalized trade and multilateralism. Free and liberalized trade and multilateralism, however, does not mean that corporations are in a position to trade freely with each other without any regulations. There are regional agreements and international trade governance bodies, the World Trade Organization and many more that exist for the mere purpose of governing institutions. Free trade needs such bodies that govern and regulate it to help in function smoothly.
The governance of the state is important in some ways because with institutions such as the WTO a forum for trade negotiation purposes is provided. With such a forum, there is room for solving disputes within countries and various regional markets. One example that is provided by Sowers (2010, 169), is during the third conference that was held in Seattle in 1999, which was met by massive anti-globalization demonstrations that required police and National Guard crowd control. Such events are some of the reasons why there needs to be governance within the markets as traders and other parties might cause trouble, which in turn can lead to the collapse of any business deals and markets within any regions. Some parties might also get greedy and need to control the markets so as to benefit more they need to benefit. Such behaviors will need to be tamed and controlled, and it can only be done through governance by the relevant bodies within any state or nation.
References
Coe at el 2007, Chapter 7, The state
Dicken, P 2011, Chapter 6, The state, London, New York.
Gwynne, RN 2008, Free trade and fair trade,
Sowers, B 2010, Economy and state, Chapter 7,
