Economic globalization and developing countries

Author: Tan Shizhong, Wang Yaoyuan, Jiang Shixue, et al.
Publisher:
Publishing Date: 2002-02-01
Features: Since the mid-1980s, the economic globalization that people have been discussing has mainly referred to a trend in the world economy where trade and capital flows have rapidly expanded on a global scale, and the production of goods and services has become increasingly internationalized. A significant indicator is the rapid growth in world trade volume, the increasing dependence of national economic growth on trade, the emergence and expansion of the global trade system represented by the World Trade Organization, the expansion in the amount of international capital, and its accelerated flow in various forms, such as direct investment and short-term speculative capital, which have a growing impact on the economic growth and stability of countries worldwide. The production of goods and services by enterprises, especially multinational corporations, has become increasingly internationalized, and the vertical and horizontal international division of labor in production fields has become more widespread. Economic globalization is a new stage in the development of economic internationalization. Compared to the past, today's economic globalization is broader and deeper in content. In the past, economic internationalization was primarily reflected in trade, and international division of labor was mainly limited to the relationship between colonial powers and colonies. Today, under the conditions of economic globalization, not only has the development of international trade far exceeded previous levels, but economic internationalization has also been widely and deeply integrated into financial and production sectors. Even the division of labor within multinational corporations has become internationalized. The intereconomic dependence between countries (or economies) worldwide and between enterprises has never been as close as it is today. The formation of the trend of economic globalization has profound background, being a comprehensive result of the development of world productivity and the dramatic changes in the international landscape. On one hand, driven by the world technological revolution, the tremendous development of science and technology, especially transportation and communication technology, and information technology has reduced the cost of international transportation and provided convenient and fast means for international economic exchanges. On the other hand, the end of the Cold War has dismantled the barriers between the two ideological camps, opening up broader opportunities for more extensive economic exchanges between countries worldwide. These two major changes have made the further integration of the world economy possible. The practical development of economic globalization has also led to its theoretical recognition. Although major theories still have significant disagreements in their evaluation of the nature and role of economic globalization, they do not deny the existence of this new reality. Marxism has profoundly explained the causes and nature of economic globalization. According to Marxist theory, economic globalization has a strong material foundation in the development of productivity. The capitalist mode of production itself has the demand to break through national and regional limitations and expand globally to pursue profit maximization. Economic globalization is precisely the manifestation of capital's global expansion. Marx and Engels pointed out in the "Manifesto of the Communist Party" that "the bourgeoisie, by opening up the world market, has made the production and consumption of all countries into a world affair." Marx also pointed out that "no social formation will be destroyed until all the productive forces it can contain have been fully developed." Currently, world capitalism is still developing and continuously adjusting itself, so the phenomenon of economic globalization is not surprising. The choice of the field for transformation is essentially the choice of a breakthrough point for integrating into the international process. Appropriate field selection and alignment with international standards can facilitate this process to some extent. Russia first chose the price sector as the breakthrough point for its transformation. This was successful. The speed at which prices were aligned with international standards was remarkable. However, when Russia implemented financial liberalization, it did not consider the difficulties of aligning with international standards. At the same time as liberalizing prices, the operational mechanisms of the financial sector and the level of financial institutions were still completely incompatible with international standards. As a result, large amounts of international capital, especially speculative capital, flowed in, while international capital flowing into production sectors and high-tech fields was scarce. Foreign capital disrupted Russia's financial order, playing a role in exacerbating the financial crisis. The choice of national economic security is also a standard for the appropriateness of transformation and integration into globalization. As is widely recognized, economic globalization is a double-edged sword. Americans also believe that transforming an economy into a global one does not necessarily mean universal rapid development; it is more likely to lead to an increase in relatively stagnant economies that are already in weak and unfavorable positions. While economic globalization brings benefits, it also creates insecurities, including issues of partial sovereignty cession. During Russia's efforts to integrate into the world economy, its domestic economy lacked competitiveness, and its economic structure remained outdated like that of the Soviet era. Western countries occupied many sectors that were critical to Russia's economic lifeline. Russia has recognized this issue and has raised the threat to national economic security in its national security concept. Russian scholars and officials emphasize the need to eliminate factors that hinder national economic security, including accelerating economic restructuring, while establishing a modern economy and developing relations with the West, without compromising national economic security. The choice of crisis prevention mechanisms for transition countries is crucial for a smooth integration into the global process. Transition countries, especially those undergoing social system transformation like the former Soviet Union and Eastern Europe, have recently escaped from planned economies and institutional frameworks, leaving behind accumulated problems and new emerging issues that are difficult to resolve. There are many potential crisis factors, and without attention to exploring and establishing crisis prevention mechanisms, it would be extremely dangerous. In the system of crisis prevention mechanisms, correctly handling the relationship between aligning the financial market with international standards and establishing a financial crisis prevention mechanism is particularly important for transition countries. The Russian financial crisis that broke out from late 1997 to August 1998 was partly affected by the Southeast Asian financial crisis, indicating that Russia's bond market had reached a considerable level of alignment with international standards, but it had not established corresponding risk prevention mechanisms. Moreover, its policies contained many crisis-inducing factors, such as an excessive proportion of short-term bonds and excessively high speculative interest rates. From Russia's perspective, under the international conditions of massive amounts of speculative capital, rapid movement, uncontrollable flow direction, and strong sudden impact, solely pursuing alignment without establishing practical risk prevention and response mechanisms would actually hinder the process and effectiveness of aligning with international markets. In the long run, gradually and comprehensively aligning with international standards while continuously improving risk prevention and response mechanisms is the fundamental approach to resisting financial crises. Focusing solely on prevention without alignment is not feasible, nor is focusing solely on alignment without establishing prevention mechanisms and allowing spontaneous regulation. The choice of social stability during the transition period is closely related to the integration into globalization. For countries undergoing social system transformation, the process of globalization is also a process of secondary social, political, and social issues. Although the core and basic connotation of globalization is economic globalization, for countries undergoing social system transformation, globalization extends far beyond this scope, including the transplantation of social systems, values, and culture. In Russia, there is significant debate among political parties and social forces on how to implement social system transplantation, and the process of transplantation has also become a process of social division in Russia. Society lacks a unified understanding and recognition of the transition. Under these circumstances, laws and policies aligned with international standards may not be recognized by the people, and social processes may remain in a state of poor management for a long time. At the same time, aligning the economy with international standards has also given rise to some social issues. However, Russia has not implemented measures to address these social issues during the transition and integration into the world economy. Economic globalization is an objective reality in the process of the world economy, and it will inevitably drive the integration of the global economy. People have various understandings of what "globalization" means. However, if globalization is seen as a "global collective action" and if it is considered the evolution of global institutional rules, where developed market economy countries extend their institutions and rules to the global stage and to developing countries, then in the process of aligning with the global economy, countries must actually accept institutional practices and rules that are at least similar to those of developed countries. Moreover, in the process of economic openness and integration, due to the highly developed information technology, the widespread dissemination of networks and media, and the mutual penetration of cultures and ideologies, the institutional rules of developed market economies, including laws and institutional constraints in the form of contracts and agreements, have become the common behavioral norms of an increasing number of countries. One practical outcome of economic globalization is the extension and expansion of market economy rules to countries worldwide, leading to the globalization of market economy rules, including their evolution in some poor and underdeveloped countries. From the perspective of the global evolution of the market economy, the global extension and expansion of market economy rules not only force developing countries to accept the basic institutional rules of the international economy but also serve as an important driving force for institutional reform in developing countries. In this sense, for developing countries, economic globalization first manifests as a form of institutional alignment. On the other hand, the institutional and rules of economic globalization lag behind the development of global economic integration, failing to meet the needs of world economic development, which also calls for the innovation and reform of the global economic institutional system. The development of globalization has brought many new issues to the international community, such as the erosion of national boundaries by globalization and the weakening of some traditional capabilities of nation-states. However, while national sovereignty is weakened, new rules and institutions have not been established. Existing international economic institutions, such as the United Nations, the World Trade Organization, the IMF, the World Bank, and some regional cooperation organizations, are unable to fulfill their responsibilities in maintaining world peace and promoting economic and social development. These international institutions either lack the necessary authority and operational capacity or are dominated by developed countries, focusing solely on promoting liberalization on a global scale. These international organizations either pay little attention to or are powerless to address urgent issues such as poverty and marginalization. Organizations like the International Monetary Fund and the World Bank have also failed to prevent a series of financial and fiscal crises since the dissolution of the Bretton Woods system in the 1970s. The global financial turmoil of 1998 further exposed the shortcomings of existing international financial institutions and mechanisms, necessitating necessary reforms. In fact, many reform proposals have been put forward to address the issues exposed during the crisis, such as establishing a global central bank, a global credit insurance company, and a global financial regulatory agency, as well as improving and strengthening existing institutions. In the issue of establishing a new international economic order, current developed countries and developing countries are primarily engaged in struggles and competitions over formulating rules within the world economic system. The current struggle dynamic is that countries like the United States, as powerful capitalist nations, seek to maintain existing international rules or formulate new rules favorable to them, leveraging their existing advantages and the favorable timing of many countries still undergoing transitions after the Cold War, to integrate all countries into an international economic and political system dominated by them. Developing countries, on the other hand, demand the removal of unreasonable factors in the existing international order, the cessation of developed countries' practice of attaching conditions to economic aid and imposing their institutions and rules on others, and the opposition to the manipulation and monopoly of international affairs by a few countries. The "Southern Commission," a group of scholars and officials from dozens of developing countries led by former Tanzanian President Nyerere, submitted a report titled "The Challenge to the South." The report, in addition to reflecting on the internal obstacles to development and the limitations of development strategies in developing countries, once again confirmed that the main external obstacles to the economic development of developing countries come from the post-World War II liberal international trade and financial systems, which have severely neglected the interests and needs of underdeveloped countries. The report argues that developing countries must continue to engage in determined struggles to gradually improve the existing world economic system. Constructing a global set of rules and institutional systems has two main theoretical paradigms in terms of approach and nature. One is where a strong power or a group of strong powers extends their domestic rules directly into international rules, primarily providing institutions for the global stage, with the resulting institutional system referred to as a hegemonic or hegemonic-subordinate system. The other is where countries coordinate with each other, generating new international rules based on the integration of domestic rules from multiple countries, with the result being that countries jointly provide global institutions. This is based on the absence of an absolute hegemon and relatively balanced power among countries. The international rule model produced under this basis can be referred to as a coordination system or symmetrical system. The existing international economic institutional system is fundamentally a hegemonic system led by developed countries, primarily the United States. Under this system, the new international economic order must inevitably have major defects such as injustice, inequality, and instability, and the globalization under this order can only be a one-sided capitalist globalization. A reasonable and just new international economic order should be based on equal consultations among countries and the safeguarding of common interests, capable of promoting world peace and the relative balance, stability, and smooth development of the global economy. In this sense, striving to establish a new international economic order in the form of a symmetrical system is a more ideal choice and a long-term goal for the international community.