A New Geo Economy

Published Date: 02 Nov 2017

Development of globalization indicates the emergence of a new global division of labour took on a geographical dimension. Thus, some areas specialize in certain types of economic activities. Moreover, every element in the production chain is placed in a particular location and form localized social relationships. Transnational corporation able to coordinate production chains in more than one country. By doing so, transnational corporation act as a producer to manipulate the production system or as buyer establishing decentralized production networks in some exporting countries. Additionally, the global economic system consists of different scales and actors. The local, the region, and the global are important economic and political actors to manipulate and capture some of the complexity of the reality.

However, it is argued that the state has a significant influence on the global economy. All the elements in the production chain are regulated within some kind of political structure like the nation-state and supranational institutions such as World Trade Organization or European Union. But, transnational corporations attempt to take advantage of the national disparity in regulatory regimes while states attempt to minimize such regulatory arbitrage. Therefore, new geo-economy limited not only by firms or states alone but by interactions between the two sets of institutions.

On the other hand, people still inhabit an international rather than globalized, national forces remain extremely important in world economy. International economic integration through tradings between international movements of portfolio and independent firms while globalization trends can operate without the globalized company because the market powers are uncontrollable and the nation-state barely passive.

Similarly, it is argued that corporate globalization increasing integration of national economies into global economy through trade and investment rules, assisted by technological developments (Hines 2003). These decreases barriers to trade and investment and reduce democratic manipulates by nation states and communities over economic matters (Hines 2003). Thus, it is happening increasing of social expenses and inequality in most of the world. Localization, by contrast, reverse the tendencies of globalization by discriminating the local. Communities and nation states increasingly control the economy stated by policies. The result becomes a decrease in poverty and an improvement in social infrastructure and environmental protection (Hines 2003). Thus, it is time to replace globalization with localization.

Moreover, globalization has formed the concept of outsourcing (Pourhassan 2011). Works such as software development and customer support is outsourced to developing countries like India (Pourhassan 2011). So the company that outsourced the work receives the benefit of reducing costs because in developing countries the wages is lower than developed countries (Pourhassan 2011). The workers in the developing countries receive employment opportunities and get access to the latest technology.

In contrast, developed countries have outsourced manufacturing works which means lesser job opportunities for their people (Pourhassan 2011). Thus, the situation which stagnant and disparities income occurred. Additionally, globalization has caused exploitation of labour especially child workers applied to work in inhumane situations (Pourhassan 2011). Safety criterions are neglected to make cheap goods.

As a conclusion, globalization helps to improve the economy of the country and localization helps to reduce poverty and inequality and improvement in livelihood although globalization has brought some negative impacts especially in developed countries. The process of globalization should slowly implement to avoid critical issue in a country.

TNCs, global capital and the Third World

Transnational corporation relocated of productive activities to selected parts of the Third World, where labour costs were cheaper. This relocation was accelerated by the improvement of transportation and communications which ensured companies to bring out production tasks and get back completed products immediately. Moreover, globalization of production leads to the emergence of a new international division of labour. However, lower wages and poor working conditions in the development of industrial employment will undermine the ability of Third World states to regulate and control transnational corporate activities. Additionally, the trend and nature of global capital flows depend on mobility. The mobility of productive capital is restricted by the investment in heavier industries is comparatively immobile. This because the equipment and plant needed far less mobile than labour intensive.

In this article, it argues that the rise in the power and field of TNCs are leading to a new global economy but the ability of nation-states to regulate their economies has been undermined by the mobility of capital. For the Third World, TNCs brings new types of production and most importantly the development of industry. However, the pessimists argue that the state is in the pity of powerful companies that can rashly relocate to other lower-cost areas if that state strictly regulate the economic forces.

Apologists stated that investment of transnational corporation will increase the capital stock and then the income within a country and foreign currency earnings. Generally, the investments making structure on the improvement and modernization of techniques and technologies to increase the production , thus the creation of new jobs and the improvement in the living standard. However, critics argue that TNCs just transfer price between two subsidiaries of the same parent company through trading with each other and so manipulate the price paid for such goods. This trick helps companies to avoid tax payments to nation-states which profits may be claimed in low-tax countries.

Moreover, critics argue that TNCs has undermined governments in the Third World. For example, TNCs takes benefit of the Third World’s willingness to attract foreign investment and so locate to pollution sanctuary, where less restriction environmental controls (Michalowski and Kramer 1987). Thus, transnational environmental crimes are formed by the trade in harmful species, illegal logging and exploitation and trafficking of mineral resources, and the dumping of waste (Wright 2011). All these illegal activities take away a precious resource from local communities that rely on it. Additionally, the effects of some environmental crimes are global in nature like pollutions and green house effect.

In addition, direct investment by transnational corporations is the intermediate vehicles to Imperialism as being centrally related to the managing of accurate form of capital which highly centralized interest- and dividend-bearing money-capital(Chesnais 2007). This form of capital manages in financial markets and obtains financial revenue which needs the prior appropriation of surplus. The development of highly concentrated interest- and dividend-bearing money capital will formed of the particular mechanism of financial accumulation, inspissation and centralisation.

Against this background, the trend and impacts of the transnational corporations are potentially affecting the state and society especially in the Third World countries. Moreover, global of production and capital flows are important roles in an economy and each actor should associate together in order to create a sufficient global economy.

The New Economy

The global interdependence of financial markets is formed by the deregulation of financial markets which allowed capital from all sources to be mobilized; the expansion of technology infrastructure, the new financial products generating market capitalization, and interconnection with the market valuation firm. Thus, technological ability and knowledge generation are fundamental for informational production and competition between firms and countries. Moreover, technological infrastructure access to knowledge creating the new international division of labour. In addition, dominant segments of all national economies are linked into the global web and disconnected from the processes of accumulation and consumption that characterize the informational global economy. Therefore, the global economy was not established by markets alone, but by the interaction between markets and governments and international financial institutions decided what market ought to be and enacted the policies.

However, it is argued that the most significant trading area is the European Union, but the trend toward regionalization of the world economy existed in other areas of the world like North American Free Trade Agreement (NAFTA) and the Asian Pacific Economic Council (APEC). Market for goods and services are increasingly globalized but the real trading units are not countries, but are firms and networks of firms. Their strategic aim is to sell wherever via their linkage with networks that work in the world market. Thus, the process of regionalization has smashed in the multi-layered and multi-networked structure of trade modes, which cannot be categories of countries as units of trade and competition.

Additionally, specialty labour is increasing in the process of globalization. Exceptional labour highly demand around the world and therefore, will not follow the rules and regulation. In contrast, the market for unskilled labour is highly limited by national barriers. Labour without exceptional skills, they immigrant illegally to rich countries to improve their living conditions. Thus, most labour is not globalized, there is raising migration and the emergence of a multilayered set of relationships across borders.

At the same time, the knowledge economy has greatly influenced the processes of globalization (Melnikas 2011). It shows the fundamental qualitative changes in all the areas of economic, political life, social, technological progress, and interaction with nature in order to identify a number of breakings and sallies which critical to all the humankind (Melnikas 2011). Moreover, globalization is reallocating employment opportunities and incomes. This shows that highly educated workers receiving more employment opportunities while workers with lower education facing unemployment prospects and stagnant incomes and therefore, formed of growing big difference in income and employment opportunities across the economy.

Consumer demand is a main force of economic growth (Ionescu 2011). In a growing economy, people are increasingly wealthy and able to consume goods and services that improve their quality of life. Thus, the standard of living is coexisting with economic growth. On the other hand, trade liberalization is causing many destitute countries more harms than benefits(Crãciun 2012). For example, favouritism and bad governance in a corporation are more complicated than imagined and that wealth is allocated unequally and social fragmentation and exclusion have increased in the rich and poor countries(Crãciun 2012). Futhermore, trade liberalization policies are difficult to implement in developing countries because the magnitude and allocation impacts are very large(Yimer 2012).

As a conclusion, the new economy developed by new information technologies, networks of production, capital, and trade to determine methods of value making in the world and link them together. The transformation of the new economy is always updated to solve the weaknesses in the economy and create a better and comfortable life in the future.

The self regulating market and fictitious commodities labour, land & money

The market economy is a self-regulating economic system instructed by market alone. In the market economy, human beings behave to maximize money obtains. It assumes supply of good at a specific price will equal the demand at that price. Thus, production and distribution will be manipulated by prices. Additionally, self-regulation stated that incomes achieve from sales of production. The income known as profit from the difference between the prices of the goods produced and the costs. Moreover, interest is the price of money and formed income; rent is the price of land and formed income ; wages are the price of labour power and also formed income. On the other hand, any interference with the alignment of prices will not alter market conditions but without policy or measure would affect the activities of market. Policies and measures are ensuring the role of self-regulation market in organizing power in the economic field.

However, Karl Polanyi stated that the commodity characterization of labour, land, money is totally fictitious. Labour is used for a human activity that cannot be detached from the rest of life, land is from nature which is not generated by man and money is purchasing power which comes through the institution of banking or state finance. Thus, none of them is generated for sale.

On the other hand, Karl Marx argues that labour power is the commodity generated by workers (Mann, 2006). The worker who puts his or her labour-power on the market is producing that labour power, instantiated in material acts of labour however freely (Mann, 2006). Thus, this is not fictitious, at least not in any sense that does not require any argument about false awareness.

Self-regulating society is governed by a double movement of market expansion with its counter-movement and social protectionism (Drahokoupil, 2004). The main principle of social protectionism is control market activities with protecting the market of labour, land, and money. The issue states that this movement is unstable and social protectionism cannot exist with the self-regulation market system itself. Its protective legislation method is restrictive association like unions (Drahokoupil, 2004). At this point, Karl Polanyi argues the intervention of the protectionist institutions in the market society such as trade unions and the legal regulation of factory conditions are according to the requirements of the economic mechanism, however, interfered with its self-regulation will damage the system.

Moreover, regulations in market economies are not only for ensuring the basic human needs but also often sought out and facilitated by large businesses themselves (Etzioni, 2009). For example, they will observe their patent rights and to protect that their trade secrets not be leaked to the competition (Etzioni, 2009) . They prefer zoning regulations to keep that no one can marketing the same production in the same area among many other regulations. In contrary, the regulations are not actually good. Anti-regulation ideologies stated regulations is being fabricated by power-hungry politicians or civil servants who seek for their own aggrandizement (Etzioni, 2009). Moreover, the private sector often exploits the government by establishing regulations for its profit-making objectives and interfering with the government’s work.

Nowadays, self regulating market does not exist in the world economy. This is because human being needs policies to control themselves and take responsibilities for the environment. However, regulations can bring both positive and negative impacts to the market and the people. Therefore, regulations should implement suitably and reasonably in the economy but not misuse it.

The Globalizing of Modernity

Basic institutional dimensions of modernity consist of capitalism with the capital accumulation in the competitive labour and product markets. Surveillance is linked with the development of modernity, to manage information and social supervision. Moreover, nature of military power control violence in the industrialization of war in the modern period. Industrialism refers the transformation of interaction of human beings with nature in terms of modernity. Additionally, modern industry shaped by the alliance of science and technology.

Moreover, modernity is associated with the process of time-space distanciation. The concept of time-space distanciation is intricate relations between local involvement and interaction across distance. Additionally, globalisation refers virtually to the stretching process, in connection between different social matters or regions become networked across the whole globe.

On the other hand, capitalist economy classifies four-fold of the institutions of modernity. The main power in the economy is capitalist states which their institutional organisation maintains an isolation of the economic from the political. Many forms of regulation of these states in the domestic and international economic policies. States are the main factors of territoriality and manage of the tricks of violence. Industrial corporations are not military organisations and therefore, cannot create themselves as legal forms in rule a territorial area. Thus, all modern states have a monopoly of means of violence within their own territories. Next, industrial development is the expansion of the global division of labour which differentiate industrialized areas in the world. This led to development in the worldwide allocation of production and the deindustrialization of some regions in the developed countries.

Regards the trend of improved technologies and the development of national economies to global trade, population movement also increased in forming different communities, expanding cultural exchanges, and creating a multiplicity of stages for human relations (Machell & Espena 2011). Time, space and distance emerge to be negligible and are not anymore seen as resistance for political , economic , social, and cultural relations. Ideas, goods, and people are readily delivered from one destination to another. Therefore, migrant communities appeared all around the world (Machell & Espena 2011).

Modernization theory exists to determine and explain the issues of underdeveloped countries, and to create solutions to them with the experience of Western countries (M.D.Litonjua 2012). Thus, modernization involved with the internal factors of traditionalism, poverty, and underdeveloped countries. Modernization theory, therefore, find up the industrialized countries to offer the funds and technical expertise, to launch policies and programs that would cause economic risen in underdeveloped countries and finally lead to modernization (M.D.Litonjua 2012).

The modernization in economic liberalism argues that developing economies taking advantages from economic linkages with superior economies through trade, foreign investment (Mihalache-O’keef & Li 2011). Thus, developing countries will obtain access to export markets, technology , and capital for development. Developed economies also benefit from receiving low costs raw materials, opportunities for investment, and new markets for their products. As a result, this process has the ability to uniform development levels, actual wages, and price of input around the world (Rostow 1980:360 cited in Michalache-O'keef & Li 2011).

As a conclusion, modernity is leading to a globalizing economy and very important in the developing countries especially the Thrid World to transform from a traditional economy into a modern society. Thus, recognizing problems and opportunities is the fundamental factors to form modernity.