ANALYSIS FROM IPE PERSPECTIVE.docx

7/29/2019 ANALYSIS FROM IPE PERSPECTIVE.docx

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ANALYSIS FROM IPE PERSPECTIVE

NAJLA

016201100032

INTERNATIONAL RELATION 3


2/11

The Global Financial Crisis and the Market Economy

By Stephen Lampe http://www.library.com.br/english/articles/global-crisis.htm

Listeners are by now familiar with the tales of woe coming from around the world with respectto collapse of financial institutions, including banks, investment and insurance companies as wellas the huge declines in the share prices of many companies quoted in stock exchanges. Many

people have lost their homes because of inability to repay loans; others have seen their retirement

savings disappear, while hundreds of thousands have lost their jobs. Virtually all countries may

eventually be affected and the number of victims of this global crisis may ultimately be in themillions, if not billions.

The problem started in the United States of America where, propelled by sheer greed, financialinstitutions made loans to people to purchase homes without due regard to the financial

circumstances of such people. The loan transactions were implemented through sophisticated but

dubious arrangements involving major commercial banks, investment banks, specializedfinancial institutions and big insurance companies. Millions of people acquired homes whose

costs were way beyond their economic situations.

In the beginning those in the chain of lenders made huge profits and the real estate business

became the fastest growing industry. Financial institutions from Europe and elsewhere jumped

on what can only be called the American greed train. However, after a few years, homeowners

could no longer afford their monthly loan repayments. Since repayments constitute thefoundation on which the sophisticated financial arrangements were built, the system weakened as

repayments dwindled. It finally collapsed as many of the institutions in the lending chain became

insolvent and their financial engineering prowess could not save them. Some of them went

bankrupt, others were bought over, and various governments are stepping in to salvage thesituation to avoid the total collapse of the entire economy. What we are witnessing is the price of

financial greed.

Some questions arise: Where were the various governments when greed was flourishing and

unsustainable financial transactions were been aggressively promoted? What in any case shouldbe the proper role of governments in managing the economy? Does the current global crisis

indicate that the market economy (the so-called capitalist system) has failed?

The principles underlying the market economy are sound. The problem is not with the market

economy as such; it is with the fact that the market economy has for long operated in a moral and

ethical vacuum. The present global crisis has arisen primarily because the moral and ethicalfoundation of the market economy has been undermined; restore the ethical foundation into themarket economy and you will have a prosperous and sustainable economy. Adam Smith in his

1776 seminal book entitled The Wealth of Nations defined a limited role for the government,

leaving everything else to individual citizens and groups of individual citizens. Specifically, heidentified three duties of government: first, government has the responsibility to defend the

territorial integrity of the society; second, government should ensure liberty for all, and maintain

law and order within society; and third, government should provide such infrastructure that


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cannot be profitably erected and maintained by an individual or a small group of individuals. In

short, governments have no business doing business! Surely, experience has taught us this; thinkabout NITEL and MTEL in relation to the new privately owned GSM telecommunications

companies.

The principle of the market economy is quite simple and eminently sensible. It is the idea that ifan exchange between two parties is voluntary, it will not take place unless both believe they will

benefit from it. No exchange would take place if one or both parties stand to lose. Thus, if alleconomic activities are based on voluntary exchanges, all the participants in the economy will

benefit. In Adam Smiths conception, the market economy operates in a free society, a society of

perfect liberty (his words) in which each person is free to work for his/her self-interests ashe/she perceives them. He was convinced that the natural behaviour of free people was the best

way to ensure that goods and services were produced in adequate quantity and quality and

distributed in the most efficient manner.

What is almost invariably missing in the discussion and application of Adam Smiths conception

of the market economy are the conditions he took for granted. A quite obvious condition is thatbuyer and seller must have alternatives. If there is only one food producer in the town, the personwho needs food must buy at the price dictated by the producer or starve to death. Thus, Adam

Smith would consider it foolish to speak of market forces or the invisible hand where genuinecompetition is lacking. Related to this is the need for buyer and seller to have a level playingfield for negotiation. It follows that the true market economy has to have a regulatory mechanism

which ensures that items being exchanged are what they are purported to be and that everyone is

able to receive the right amounts of rewards in both quantity and quality for every effort

invested, not less and not more.

The market economy moreover presupposes a society of perfect liberty, in which people must

be free to pursue their legitimate self-interest and in doing so they must not interfere with theright of others to pursue their own self-interest. There must, therefore, be mechanisms in place to

ensure that individuals, as they exercise their Free Will, do not interfere with the right of others

to exercise their own Free Will. This is to say that there is a definite role for the government inthe market economy; the legislative and executive branches making and enforcing laws to

protect the integrity of the system (competitiveness, individual freedom of action, fair rewards,

transparent operations including honest accounting, etc.) and the judicial branch adjudicating.Therefore, the market economy should be characterized more by right regulation than

by deregulation. Capitalist countries such as the United States have hitherto

overemphasized deregulation at the expense ofright regulation. Most governments have been

guilty of not putting in place appropriate regulations or have not effectively enforced existingones for various (often political) reasons. Thus, what they have practiced cannotbe rightly

described as the market economy! It is anarchic economy, which must come to ruin, and is

coming to ruin.

Another implicit assumption of Adam Smith was that in seeking their self-interest people would

behave ethically and with conscience. With respect to the ethical factor, it should be noted that

Adam Smith was a Professor of Moral Philosophy at the University of Glasgow. In those daysand for a long time, the subject of economics was seen as something like a branch of ethics. He


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published a revised version of his famous book entitled The Theory of Moral Sentiments in 1790,

about 14 years after his landmark treatise on the market economy. Adam Smith never supposedthat human beings are driven solely by self-interest in a material sense but presumed that for

most people self-interest would include spiritual interest. He presumed that they would

reckon with the natural law that whatsoever a man sows that shall he reap. In other words,

Adam Smith took for granted that people would exhibit the values and virtues of Christianity(the predominant religion and cultural influence of his place and his time).

The importance of higher values and virtues in the market economy remains undisputed.

Professor Amartya Sen won the 1998 Nobel Prize for Economics in part for bringing ethical

considerations into economic analysis. He asserts that a major deficiency of contemporary

economic theory arises from interpreting Adam Smiths view of human beings as beingexclusively self-interested in a material sense. This theoretical deficiency in turn leads to bad

policy recommendations by economists and a bad name for the market economy.

Analysis in International Political Economy Perspective

When economic and political issues connect into one unified synergy then it will producea much more important issue. Various international economic issues facing each country into oneof the important things that must be kept in mind other countries. The end of World War II, is a

milestone that brought awareness to many countries think stabilities political relevance and

implications for their economies. Attitudes are interdependent or when the period of global

economic interdependence begins shows that countries in the world have a much strongerrelationship than before.

In the 1970's many changes when the global economic order penetrated the politicalaspect as one of the important indicators. The strong interdependence atmosphere that emerged

in 1970's led to a lot of possibilities as well as declining economic situation of a country affect

the survival of other countries. Interdependence is what causes mass production which thenindicates the progress of one of the existing economic system. This progress also indicates the

existence of collective progress on the international economic system. Is also in line came the

implications of togetherness may include negative effects that may occur as the global financialcrisis. The collapse of the Bretton Woods system of the proposed United States suggests a desire

to rule the United States. But the collapse also brought the world economic order more closely

on the liberalization of capital markets including the financial and monetary system changes

(Pauly, 2008:242).

The role of politics and entered into a new economic system. Departing from the

progress of the economic system that brought the United States and accepted by virtually theentire world with instant and forced (third world country) then began the period of mixed

economy with strong political implications. Unstable economic circumstances allow the

emergences of a state of fear of insecurity surrounding the economic game is performed byactors who make investments. Distrust by investors and consumers are also producers triggered

the decline in capital investment resulting in a crisis (Pauly, 2008:243).


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Factors such as economic stability, the state social security, income, and non-inflationary

growth are the factors that affect the foreign trust to the power spectrum of future investmentsmade in the country. The legitimacy of the government and has developed quite large, can be

seen from the ability to manage a variety of things that affect investor confidence. In the 1970s

also built a system that shows help to avoid a global economic crisis, and in the end will help the

performance of the government to maintain economic stability in the country besides the trafficdistribution of capital is also one of the things of concern by the state government (Pauly, 2008:

247).

When the 1919 and the crisis is taking place, the world realized that it needed a special

system that helps the traffic control capital. Capital that is not visible does not mean safe journeyif not set spreading. Various countries have experienced a crisis due to this turnover. Mexico

peso crisis with their own horror stories about the crisis and its currency. Tequila experienced

Crisis Mexico is an example of the instability caused by the currency crisis. Back on travel crisis,

the United States had become the world's savior when he brought his country to become a forcetrying to stabilize the market hegemony. However, differences in ideology and political issues

and end systems fixed exchange rates into floating rates that affect exchanged dollar and goldproduces an unstable economic situation. Many other sectors and actors rather than states also

influencing in the recovery period after the crisis. Therefore, the governments, domestic savers,investors, governments in other countries, creditors, and the banks have a significant role and

contributed to the crisis recovery period (Pauly, 2008:249).

From the crisis, the emergence of effects that occur was very diverse, and dangerous. For

example, unemployment, rising taxes, to increase the crime rate is a side effect of the crisis.

Countries - developing countries and it is natural to progress but was afraid to developthemselves if they see the effects that may be experienced failure in the global economic order.

The openness of the financial markets of developing countries owned by Pauly is a prime

example of the steps taken developing countries now - today. Opening the way for private capitalflows is that both are examples of the steps taken by developing countries to open themselves to

enter the global competition. The number of attitudes - attitudes like nationalization in Venezuela

is an example of economic policy reforms in the country a country. This is another clear example

facing developing countries in order to show its presence in the global economy as it is now. Sothe path - the path of economic cooperation are selected country - this country can be justified as

a crisis intervention steps can be selected. So anyway if the crisis in the country, the impact will

not be as good as it runs on its own economic system (Pauly, 2008: 252-258).

The conclusion that can be drawn is at the present role of the state has become quite

important amid the emergence of many other economic actors. Either a stable economic systemor a system of government regulation are both equally good - is needed to maintain economic

stability in the country. The economic crisis the United States of 2008 is an example of the

collapse of the banking system in the flow of capital. It is also reminiscent of the Bretton Woods

System of a strong but failed due to lack of anticipation of possible crises that lurk. Either strongor developing countries, especially in the global era like now have the same chance in the crisis.

Therefore, it is not only good regulations and guard against the dangers of the crisis but also the

readiness of the government as a policy of liquidation or a bail-out to be one of theconsiderations will be the recovery after the crisis.


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Transforming the World Bank

15th October 2012 - Published by Al Jazeera

This is why the World Bank is so valued by the US government and Wall Street: because it is

instrumental to expanding the sphere of Western capitalism, a role not dissimilar to that whichcolonialism once played for Europe. This may be a good way to overcome flagging corporate

profits and to stop stagflation at home, but it does not count as a serious strategy for global

poverty reduction.

We have to face up to the fact that the World Bank will never be an effective tool in the fight

against poverty without fundamental changes in its power structure.

First, developing countries need much more control over decisions that affect them. Power in the

World Bank is presently apportioned according to members' shares, just like in a corporation.

Major decisions require 85 per cent of the vote, and the United States, which holds about 16 per

cent of the shares (and controls the presidency), wields de facto veto power. The same is true of

the IMF. Developing countries together hold less than 50 per cent of the vote, which is shockinggiven that the institution supposedly exists to promote their welfare.

Second, development aid should be delinked from corporate bonds. This would take WallStreet's interests out of the equation, eliminate the pressure to siphon wealth from debtors and

allow the Bank to evaluate its performance on the basis of poverty reduction outcomes instead of

loan volume, as is the current practice.

These two interventions would open the door to other changes that critics have demanded for

decades, such as: forgive third world debt on the grounds that it was imposed in bad faith; get rid

of the blanket structural adjustment conditions associated with development loans; and eliminatethe Bank's "sovereign immunity" status, which presently allows it to avoid responsibility for the

perverse outcomes of its policies.Kim probably won't be able to accomplish these reforms because they would run up againstenormously powerful economic interests. Real change will require rebuilding the global justice

movement by linking together organisations that have been working on these issues for decades.

As neoliberal policy has ravaged the lives of hundreds of millions of people around the world,there's a lot of anger out there ready to be mobilized. A revolution lies waiting in the wings; we

have only to call it forth.


Emerging countries with large capital and strong economic foundation presents certain

polemic in order to bring the world a new era. Countries such as Europe and North Americasince the beginning of the formation control of the world after the war. While third world

countries is nothing more than followers who want the welfare of the freedom they seek. Sought

independence seems yet strong looking to bring in a welfare state. Then appeared the party that


7/11

offered assistance in a legal version of the international organizations that aspiring noble ideals.

"Our dream is a world without poverty" is the motto of the trust appointed to penetrate a thirdworld country. They also put in a new type; underdeveloped countries as a term that describes

the content has not advanced and require a helping hand from a more prosperous country.

Economic indicators are offered as part of the standard of living of a country led to theemergence of organizations such as The World Bank. Given the purpose, The World Bank,

based manufacture of Bretton Woods stated that The World Bank has a lot of tasks, such as:helping the development of less developed countries are assessed on a scale that defined the

World Bank, helped to promote investment in the country by the private sector, help secure the

balance of payments of its member countries by means of investment promotion or providingloans, escorting displacement crisis after the war in the realm of economic peace. Capital

invested by the member states of the World Bank will be processed in a variety of economic

activities in the form of loans, investments and more. The World Bank promised profit sharing in

the success of the program for the state investor.

A further problem occurs when there is a shift in the meaning of poverty or poverty. Eachcountry has its own poverty phases with poverty indicators based on a different basis - also vary.Besides criticism refers to the vagueness of the World Bank in choosing which countries are

included in the poor countries, less developed countries, developed countries and other

categories. The World Bank so it is not considered appropriate in the show itself as an agencythat can be trusted by colleagues and members. A large flow of funds to make The World Bank

also has other major responsibilities. Heavy flow of funds, but with poor traffic regulation

therein loan made The World Bank questioned. So that led to a revision. In 1980 and the early

1990s the World Bank changed course back into neo-liberal economic intervention in the marketwith built in harmony by the state. Besides the World Bank's support to good governance, it is

also expected to minimize the problems of poverty, education and debt reduction.

Finally, the development of these organizations led the World Bank to another form, namely the

International Monetary Fund (IMF) in the hope of helping stability in monetary terms members.

Although the principle of the process is different but they both lead to significant economicprogress despite many who doubted them because of the hegemony of the United States. In

closing, The World Bank suggests its existence as an organization that is open to the realization

through the World Bank annual report that contains the data set as well as the achievement of thetheme - a specific theme in the country - countries in the world. This arrangement also indicates

that the agenda to eradicate poverty The World Bank has a seriousness that needs attention. Two

great powers of both the World Bank and IMF led to a contradiction in the eyes of the author. If

The World Bank is working through a very lengthy development process such as the IMF capitalprocurement with fast track, but at risk of dropping state if one put regulations. The appearances

of the IMF sometimes get closer to mastery of foreign assets that normally complicate the

country when the collapse occurred. Countries that are not ready will directly fall on the foreign

debt and state assets are missing. The World Bank itself has another track that feels better writer.The problems appear to determining who more in need is and who is supposed to help. It is

difficult, especially if there is an economically strong country, but still considers himself in the

country should be helped.


8/11

Multinational Corporations Strive To CompeteOxford Analytica, 08.31.10, 06:00 AM EDT

Multinational corporations (MNCs) are facing an increasingly competitive landscape. An

uncertain economic outlook, as well as cultural and regulatory differences, creates a challenging

scenario for such firms. International expansion has a number of advantages for corporations,

including higher growth potential and access to cheaper resources and labor. However,

organizational theorists have drawn attention to the challenges associated with the management

of MNCs. For example, cross-cultural differences create important barriers to intra-firm

communication, negotiations and product standardization.

Business environment. MNCs are facing a much more turbulent, dynamic and heterogeneous

business environment than was the case not long ago:

--Global growth patterns.Developing countries are no longer merely a source of cheap labor.

With their vast pool of consumers with increasing purchasing power, emerging markets offermore attractive opportunities for growth compared with OECD economies.

--Developing countries. A number of suppliers in developing countries have upgraded their

productive capabilities. As a result, they are climbing up the value chain, offering more complex

and technologically sophisticated products and services.

--Financial crisis. Investors remain cautious and financial markets relatively illiquid. More

importantly, the attitude of investors toward risk has changed. In the post-crisis period, financiers

realize that unexpected events with a high impact may occur more frequently than normal

probability models suggest.

--Regulation. Although some organizations, such as the E.U., advocate globally homogeneous

regulatory frameworks, little progress has been achieved beyond the area of international trade.

In fact, there is a trend toward increased heterogeneity as national governments devise

idiosyncratic responses to deal with the aftermath of the financial crisis.


The practice of international political economy cannot be separated from the long history

of the development of the international economy. Starting the emergence of a strong system of

production with the use of machines plants have a close relationship with the ownership of

capital as a starting point that determines the plant itself to expanding the market for goods

services into virtual money market. After World War II, the United States emerged as the party

was not bankrupt and is still strong in financing the economy. Deployment of highly dynamic

capital was held there so I wonder if the ability to do a production with technology that continues
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to evolve into an easy thing. Triggers are also likely to bring the United States holds influence in

the practice of international political economy impacting the other countries. High current on

demand goods and increased production capabilities the United States bring the conception or

MNC Multinational Corporation to be something big and influential. Itself as a form of MNC for

its production branch in another country is a major advance in international political economy.

Developments owned by the investor to the growing needs of consumers, generating a lot

of capital that rotates from one region other than to add value and number of economic

expansion as well as new forms of international trade turnover in terms of capital or capital.

Turnover or the so-called capital flow that later became the capital essential for capitalism to

survive economic liberalization. Various kinds of capital in production factors such as money,

machinery, land, or human resources then become one of the rapidly developing. In the subject

of machine, for example, the addition of many new industries grow in terms of the machine as

well as the increasing demand for goods in the community. In terms of raw materials or raw

materials there are differences as well as the number of requests plus the number of production to

be done in the end shows the number of materials needed. Something interesting came later

when the seeds - seeds of capitalism appears that many developing replace feudalism. Feudalism

is suppressing the proletariats that too much work for the owners of capital. The 16th century

was a time when capitalism emerged replaces the existence of feudalism (Magdoff, 1978: 166).

The new form in economic control is being transformed into a form that is more' refined '.

If the feudalism rose in the form of economic control that tends to deplete the physical then in

capitalism, is used way more ease. What's interesting is when indirectly, with all the

conveniences of capitalism brought even tend to be much more excruciating than usual

feudalism. In the context of socio-political, feudalism closely with the capital owned by royal

families or people in power generation to generation, while in the capitalist system more visible

that the centralization of capital is no longer tied to the matters of power, but private parties in

the world now referred to as large industrial or form in fact a MNC / multi-national corporation.

Economic expansion effect must then be accepted when capitalism becomes an option in

the liberal economic order. MNC as an agent that allows all actors can participate in the order

further expand the possible spread of capital and a broad range of economic expansion. Until the

19th century when there is the fact that capitalism is increasingly expanding anchors. Investment

as one point in determining economic growth has been accelerating capital drainage pathways.

Especially with the addition of technological advances, the number of large-scale production

processes, as well as the supply of raw materials is increasingly growing. The three key factors

are the rapid flow of capital produces a cruel world economic order to the left and beneficial for

those who have the power anchor.

Investments of foreign and foreign loans into one state by Magdoff, it is because many

capitals centered on a particular economy. With the concentration of capital is also going to add

a long list of effects - effects that can be caused, for example the fact that in the 1970s some


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MNC and U.S. companies controlled 50% more foreign capital world (Magdoff, 1978:170).

Interestingly enough when the time was still the United States and Britain are mastered. But

when the German, Japanese and Chinese into play the fight capital of the world becomes more

competitive. Development of MNC's past rather than inflicting the same opportunity to grow

closer to generating more opportunities quickly dropped the other competitors through

investments, mergers, and acquisitions. History of the world economy and eventually catapulted

the United States as the most powerful owners of capital cannot be separated from the revival of

confidence in the company's United States Bretton Woods.

So it is difficult to conclude that the development of MNC ultimately forms of economic

development that is getting better. Opportunities for countries in the world are different as well

as the capabilities and range of the problem. But start that starts liberal capitalist country with a

strong economy requires a new country must take up running after the construction of the state

held strong. A contradiction when MNC that actually should get closer to equality and equity

development, with a more secure economic base on the more of stability, sometimes on the

contrary that trap the participators of MNC.


11/11

References

http://www.stwr.org/multinational-corporations/

http://www.stwr.org/imf-world-bank-trade/

http://www.library.com.br/english/articles/global-crisis.htm

Magdoff, Harry. The Multinational Corporation and DevelopmentA Contradiction?,

Imperialism: From the Colonial Age to the Present, New York: Monthly Review Press, 1978,

pp. 165-197

Pauly, Louis W. (2008). The Political Economy of Global Financial Crisis. John

Ravenhil: Global Political Economy

Peet, Richard. 2003. The World Bank, Unholy Trinity: The IMF, World Bank and WTO.

London: Zed Books, pp. 111-145
http://www.stwr.org/multinational-corporations/http://www.stwr.org/multinational-corporations/http://www.stwr.org/imf-world-bank-trade/http://www.stwr.org/imf-world-bank-trade/http://www.library.com.br/english/articles/global-crisis.htmhttp://www.library.com.br/english/articles/global-crisis.htmhttp://www.library.com.br/english/articles/global-crisis.htmhttp://www.stwr.org/imf-world-bank-trade/http://www.stwr.org/multinational-corporations/

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