Part 2
Rodrik portrays globalization as problematic and continues to claim that it leads to a problem of triangulation. He asserts that the countries cannot pursue all their internal activities without external interference. This is a case of a trilemma where nations are unable to afford national autonomy, democracy and economic liberty at the same time. This is because trade affects the internal structures of countries and also exerts political influence in the countries administrations.
Globalization has suffered many hitches since it was introduced. The author cites the collapse of the gold standard of the 1914 due to economic problems. This was because there were no relevant measures put in place to mitigate such a calamity. However, there are countries that have made use of globalization to eliminate poverty to a great extent. Good examples are China and India where the countries engage in mass production of goods which they get ready market in foreign nations.
The Bretton woods institutions were established to reignite free trade. The compromise worked well and many of trade barriers were eliminated. In addition, the governments were left to manage their own policies pertaining the economies. However, the Bretton woods compromise became void when the movement of capital became so profound. The oil fluctuations of 1970s destroyed the economies of developed nations to a great extent. The nations adopted more comprehensive plans that were aimed at reducing this effect. This resulted in economic globalization where all the controls were removed. This policy worked in the short run but affected trade heavily in the long run. This is because liberalized trade was very unstable and inequality was rampant.
At this particular point, the author includes the tactics that were played by China and India in attaining trade benefits. These two countries did not embrace fully trade liberalization but adopted the previous Bretton woods style. By doing this, china was able to lift over 4 million people out of poverty in a decade. The reason is that they were able to put limits and measures to protect their on interest and internal economic agenda. The World Bank also constitutes of strong economies that push the agenda that favor them. A good example that the author cites is the ‘Asian miracle’ where Japan rose economically and became a major contributor to the World Bank. According to Rodhrik, the Japanese envoy to the World Bank was astonished by the way the institution relied on the decisions made by the USA. This means that the USA must make policies that strengthen its economic might.
The book is very thorough and provides vivid examples to support the arguments. This is the main point where the author gains credit and proves the validity of his argument. The book is full of examples that are real; those that have happened and/or are prone to happen. He also addresses the thorny issues that have given rise to economic discrepancies between the developed and the less developed nations.
Despite his arguments, the author has weak points. First, he mistook the financial crisis of the 1991 to be as a consequence of free trade yet it was common knowledge that it was due to excess financial liberalization. He also did not capture the Asian crisis of the 1997 well. In addition, Dani Rodrik fails to acknowledge the many benefits that free trade gives to nations that cannot beat the odds to export with high tariffs. Countries with low value goods need free trade to reap sizeable benefits.
Part 3
The key debate on The Globalization Paradox is framed with various fundamental arguments. One of the arguments is that the markets should be conterminous with the regulation and governance institutions that motivate them. This follows the Adam Smith’s idea that suggests that the division of labor need to be limited by the magnitude of the market. In my view, I support the idea that the scope of the market is influenced by the extent of the workable. Therefore, workable, governance and regulation should be emphasized in the contemporary global economic arrangements (Emadi-Coffin 78). Markets are considered as institutions that requires support from other institution such as non-market institutions.
The second argument is founded on the fact that the policy of the valid governance at present is still considerable at national level. In the contemporary world there are various creative and new ideas about the mechanism of the governance that could go beyond the nation state (Emadi-Coffin 89). These different mechanisms of international governance include the international and traditional multilateral organizations such as World Trade Organization and International Monetary Trade. These are some of the various important and innovative ways of transitional governance that deals with some of the effects of the fact that markets goes beyond national state. However, these institutions are fragile and are prospective to remain fragile. This is because; on their own they are not likely to provide substantial support to the globalization if democratic deliberations still exist in the nation state.
The third argument is based on the idea that different countries acquire different tastes and preferences regarding the direction that the institutions of the governance should take. This difference is propelled by various factors such as cultural background, historical trajectories, levels of development and income and needs and preferences. So when the issues of social protection mechanisms, labor-market institutions, and financial regulations are discussed, there must be some considerable variations between nation states. Therefore, regarding the local desires from various states, the shape and directions that the institutions of governance should take would be difficult to determine.
As a consequence of free trade, global markets suffer weak governance, inefficiencies and prone to collapse. In case of collapse, nations that depend heavily of international trade are worst hit and unrest may result. A good global system is supposed to negotiate a balancing compromise between the national governments and the markets. This is because too much authority on the government side leads to autarky and protectionism. On the other hand, the markets can become extremely violent and unstable if no control is available. Social and political control is mandatory if free trade is to be successful as intended. However, the control adopted should not be meant to bar trade but to boost the gains of a country from trade. (Gerdes 201).
As a result, the countries make huge gains thereby improving their welfare standards. In opposition, Rodrik asserts that the basis of this trade has not backup measures and is weakly embedded thus can collapse anytime. Rodrik claims that there is no lender of last resort, no regulator, not democracy and therefore trade is marred by antitrust measures. It is worth noting that there are financiers who are eager to promote this trade and it is regulated by mutual benefits of partners. A good example is the between 2003 and 2008, African GDP grew by a rate of 13% while that of the EU grew by 3.9%. Though the per capita income remains a major concern in africa, it is estimated that with time, trade will upgrade the living standards of Africans.
Less developed nations, otherwise known as the third world countries have less capital equipment and technical knowhow on production thus cannot produce a lot of finished products from their raw materials (Stilgritz 45). As such, they are forced to sell cheap raw material to the developed nations and receive expensive finished products. Stilgritz (61) claims that this is the reason why less developed nations in Asia and Africa experience unfavorable balance of payments. However, regardless of trade control or not, free trade is beneficial to countries that cannot afford to trade in highly taxed environment.
Even if it is hard to go along with the Rodrik’s idea on the normative trade policy, it is important to note a major contribution about the Rodrik’s book. This contribution is brought about by determining the ultimate global institutions that could balance the conflicting policy across nations. The book portrays an undoubted case of the impracticality of global federalism. He argues that capital control is essential and should be administered to different states priorities, hence efficient regulation of the global finance. Consequently, I agree with Rodrik that there is no way nation states would absolutely sacrifice their sovereignty to organizations such as World Trade Organization. Therefore, there is a high demand for valid and concrete institution that can allow those states to discuss over their different policy preferences (Gerdes 56).
Rodrik emphasizes on formulating principles of greater governance, and more importantly the understanding of the balance between the institutions and markets. However, Rodrik recognizes that there are challenges, in the modern world, on attaining global state of governance constituted with institutions that can be able to reach out nation states. Though, he argues that the states need to first achieve governance that looks sustainability, fairness and growth, and has global position that enables each state to formulate their own financial models and arrangements (Gerdes 86). However, he emphasizes that this position should be within the multinational framework of regulation and governance. If this argument is embraced, achieving such objectives would be possible and this could help in averting future crises.
I am pleased by the Rodrik argument that, since manufacturing liberalization had gone far, further liberation will result to more distributional consequences than expansions from trade. However, it is disappointing that he argues that organizations such as WTO and General Agreement on Trade and Trade have not done much in expanding trade. According to economists such as Arviond Subramaniam, it is evident that countries that have been liberalized themselves acquired trade from such institutions. Such institutions are very much influential in the trade market especially in the contemporary world.
It has been noted that the economists had been holding different opinion on the endorsement of open and free market. Various economist are now worried about the effects of growth of inequality, deindustrialization and the regulations and standards that are as a result of current trend of globalization in the developed countries. These though are influenced by the Rodrik thought of restricted trade. Rodrik was arguing against the notion of the simplicity of the free trade in effort of supporting globalization (Trebilcock & Howse 22). Therefore, the economists could spent their time trying to shed light to the efficient and fair mechanisms of regulations and governance that fits different priorities of different states.
In most cases, economists are often characterized by missing broader picture while trying to analyze and elaborate their theories. This is not encountered by Dani Rodrik. He has outlined and discussed a bunch of recommendations and principles that provides an all-encompassing argument needed for a safer and better globalization. Although at some point one could not agree with Rodrik, his argument provides a clear insight of the necessary ideas that should be undertaken to achieve a stable and reliable globalization.
Despite various weaknesses in his argument, Rodrik has got the point. Globalization of finance and trade is significant in the expanding and lifting the expectations of the people across the world if it can be regulated and managed in a way that it is efficient and stable. In other world, Rodrik is trying to urge the global economists to come up with governance mechanisms of institutions that do not undermine the future trade in the world (Trebilcock & Howse 34). These mechanisms should be able to support the civil society with the nation state level and international level. Although profit is the main goal for various global enterprises, there should be a sustainable balance between those goals and the capacity of the particular country. This will enable individual countries to endure their ways of living, resources, environmental protection, labor laws and other factors that can be accomplished best within the national governance context.
This book provides an outstanding set out and outlines complex issues in way that a reader is able to easily grasp the concepts. With historical and entertaining facts, Rodrik is able to spread his ideas to various readers in a more accessible way. Currently, Rodrik has provided ideas that are used by the modern economists in formulating economic policies. This is because Rodrik has made valuable international comparison from his depth study of various countries.
Works cited
Emadi-Coffin, Barbara. Rethinking International Organization: Deregulation and Global Governance. London: Routledge, 2003. Print.
Gerdes, Louise I. Globalization. San Diego, Calif: Greenhaven Press, 2006. Print.
Rodrik, Dani. The Globalization Paradox: Democracy and the Future of the World Economy. New York: W. W. Norton & Co, 2011. Print.
Salvatore, Dominick. International Economics. New York: John Wiley, 2001. Print.
Stiglitz, Joseph E. Globalization and Its Discontents. New York: W.W. Norton, 2002. Print.
Trebilcock, M J, and Robert Howse. The Regulation of International Trade. London: Routledge, 1999. Print.
