New policy a must for globalization<\/p>\n
By Djauhari Oratmangun<\/p>\n
This is the second of two articles on globalization and the
\nrole of the nation states.<\/p>\n
JAKARTA (JP): There is no doubt that globalization is probably
\none of the answers to meeting development objectives in most of
\nthe developing world. As we are all aware, the ultimate objective
\nof the development policy of most developing countries is to
\nraise the living standards of their population by eradicating
\npoverty, increasing the welfare of the people and closing the gap
\nbetween the rich and the poor, in short, guaranteeing and
\nproviding a better life for their people.<\/p>\n
The globalization process will of course create more
\nopportunities for developing countries to accelerate their
\ndevelopment program. There are indeed benefits, such as the
\nlowering of tariff and non-tariff barriers, the mobility of Trans
\nNational Corporation (TNC) and FDI, the reallocation of
\nindustries, the linking of capital markets, the advancement of
\ninformation technology etc.<\/p>\n
However, globalization has also been characterized by a
\nmarket-driven economy which carries the nuance of a \"fast train\"
\nin the world economy.<\/p>\n
Therefore, if a developing country wants to take the \"fast
\ntrain\" of globalization, it needs to integrate or became an
\nactive passenger on the world economy's \"fast train\".<\/p>\n
To enable it to do so, it will however, have to fulfill
\nseveral conditions such as deregulation, privatization, opening
\nup to the world economy and FDI, apply tight discipline on
\nmonetary and fiscal policies, etc. Experience has shown that an
\nopen market, a strong financial environment, sound economic
\npolicies and public investment are crucial in this respect.<\/p>\n
The developing countries that are unable to do this will
\ncertainly fail to become passengers on the fast train of
\nglobalization and, as a consequence, they will be left behind and
\nhence marginalized.<\/p>\n
Economic history shows that the process of liberalization and
\ninternationalization of the economy using market forces has
\nrecognized some failures, in particular during the end of 19th
\ncentury and the early part of the 20th century.<\/p>\n
In order to correct the situation, the government was called
\non to intervene. Therefore, in this recent era of globalization,
\nthe nation state still has a definite role to play to protect
\ncivil society by pursuing a policy of intervention to influence
\nthe market.<\/p>\n
This role should ensure that growth and distribution as well
\nas the quality of development efforts can be achieved through
\nglobalization.<\/p>\n
In simple terms, the role of the nation states is to maximize
\nthe benefits of globalization while altering or diminishing its
\nadverse impact. In this regard, the nation state should take the
\ndual dimensions of the problem, namely domestic and
\ninternational, as globalization is a borderless process.<\/p>\n
At the domestic level, the role of the nation states is first
\nto create the policies and regulatory environment which will
\nallow their country to take advantage of the rapidly growing
\nopportunities arising from globalization.<\/p>\n
Nation states can create a conducive environment that will
\nbenefit civil society, particularly by providing an appropriate
\nenvironment for the private sector as the market player and prime
\nmover of development to enable the benefit of globalization to be
\nreaped.<\/p>\n
In this regard, special attention must be paid to the small
\nscale and intermediate industries which need to be guided and
\ngiven assistance by the government to enable them to compete in
\nthe global market. Larger industries could be encouraged to enter
\nmuch bigger markets and global competition by giving them the
\nappropriate incentives, taking into account various international
\nrules that all nations have agreed upon and adhere to.<\/p>\n
Second, nation states through government policies have a
\ncrucial role to play in promoting economic growth and ensuring
\nmore fair competition and in aligning these with social
\nobjectives. This role is to complement and regulate rather than
\nrestrict market forces and should of course be tailored to the
\ncircumstances of individual countries.<\/p>\n
In this regard, the role of nation states to create the
\ninfrastructure and rules needed to reconcile the creative forces
\nof the market with the needs of the disadvantaged is essential.
\nThis is due to the fact that stabilization and liberalization of
\nthe macro economy are not sufficient to ensure social progress or
\nfor more successful competition on the global market.<\/p>\n
Third, nation states must formulate policies aimed at avoiding
\nthe creation of the dual-economy problem prevailing in the
\ndeveloping countries as a result of the process of globalization.
\nWe have entered the global market but domestic society is
\nunfortunately not ready yet.<\/p>\n
The reason for this is that economic interdependence among
\ncountries has created a situation in which national policy makers
\nare unable to make the best of national policies to meet
\ndevelopment objectives at home if they fail to take into account
\npolicies and developments abroad.<\/p>\n
In fact, those \"external factors\" have a considerable
\ninfluence on a country's economic development. For example,
\nnational monetary policies have immediate international
\nconsequences, and the other way around. The recent financial
\ncrisis in this region and the policies taken to correct the
\nsituation have proved this again.<\/p>\n
Fourth, nation states should implement proactive and reactive
\nstate policy, or a combination of the two, to ensure equitable
\ngrowth. A nation's proactive action should include measures to
\nensure that people have assets and capabilities, systematic
\nefforts to make the unemployed \"employable\", the creation of
\nemployment opportunities, and to provide the poor with assets,
\nwhich requires vast amounts of public investment.<\/p>\n
In this regard, states should create such a policy to ensure
\nthat globalization does not marginalize civil society, because,
\nglobalization cannot bring prosperity to all civil society
\nthrough market forces alone, but excludes many people from the
\nprocess of development.<\/p>\n
Equally important is \"intervention\" by the government to
\ncorrect the market for investment and localize the disadvantages
\nas well as to provide social safeguards. State policies can make
\na difference in achieving distribution goals, and this requires
\nthe willingness of governments to adopt the necessary proactive
\npolicies.<\/p>\n
Fifth, nation states should adopt policies that ensure the
\nsustainability of development. These policies should be enforced
\nstrictly by intervening in the market if it fails to create
\nenvironmental sustainability of economic activity.<\/p>\n
In this respect, Prof Dani Rodrik of Harvard University in his
\nbook entitled Has Globalization Gone Too Far? which was
\nconsidered by Business Week as \"one of the most important
\neconomic books of the decade\", is right when he argues that
\nglobalization can succeed and be sustained, as long as
\nappropriate domestic policy measures are undertaken to cushion
\nthe impact on groups that are adversely affected.<\/p>\n
Moreover, he concludes that policy measures must be taken to
\nequip all sectors of society to take advantage of the benefits of
\nglobalization, rather than be undermined by it.<\/p>\n
While at the international level, the nation state should play
\nthe following role. First, adopt a more active role with a view
\nto achieving greater coherence in world economic policy making
\nprompted by the IMF, the World Bank and the WTO to promote
\ndevelopment dimensions in international organizations and
\nagreements through the attainment of a better balance of rights
\nand obligations. More, and better, coordination among developing
\ncountries to achieve this objective is indeed obligatory.<\/p>\n
Second, nation states should also demand that the
\ninternational organizations, in particular the United Nations and
\nits subsidiary bodies, carry out an economic and social analysis
\naimed at minimizing global disparities and pinpointing the
\nprerequisites at the national and international level of the
\ndevelopment process which lead to better distribution of the
\nbenefits of globalization.<\/p>\n
This is, of course, in line with the idea of \"regulating\" the
\nprocess of globalization in all its dimensions currently being
\npursued by several major developing countries. Globalization has
\nmade national economies more difficult to run for governments,
\ntherefore, there is an urgent need to have some kind of
\ninternational government and regulation in this regard.
\nOtherwise, the excessive adverse impact of globalization will
\naccumulate.<\/p>\n
The above analysis illustrates that globalization, while
\nbringing adverse impacts to civil society -- has important
\nimplications on the attainment of the development objectives of
\ndeveloping countries as well.<\/p>\n
To ensure that the globalization process will benefit
\ndeveloping countries and their people, there is recognition of
\nthe continuing importance of the role of nation states in
\nprotecting civil society, particularly the grassroots level, from
\nsuffering the adverse impact of globalization by creating a
\nbetter environment for them to maximize the benefits of
\nglobalization.<\/p>\n
Of course, nation states cannot govern the market, however
\nthey have the ability to influence markets.<\/p>\n
In this regard they should adjust their policies to meet the
\nchanges that globalization carries. Development objectives can be
\nachieved through globalization in the years to come, if nation
\nstates can properly manage change.<\/p>\n
The writer is an international trade analyst.<\/p>\n
Window: Economic history shows that the process of liberalization
\nand internationalization of the economy using market forces has
\nrecognized some failures, in particular during the end of 19th
\ncentury and the early part of the 20th century.<\/p>",
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