Table of Contents
Globalization is the process through which the social, economic, political, cultural and technological aspects of countries are increasingly loosing territorial boundaries and independence as they get infiltrated with other foreign influences from other countries or international organizations. International organizations such as World Bank, World Trade Organization, and the International Monetary Fund have significantly enhanced the spread of globalization (Deacon, 2007). Through these international bodies, nation states are increasingly losing their territorial boundaries with regard to the economic and social policies. This paper argues that these bodies have significantly challenged the ability of nation states to shape their economic and social policies independently. Focus will thus be directed in exploring the extent to which this claim is true especially in the wake of the strong influence of globalization.
World Trade Organization and Domestic Economic and Social Policies
The World Trade Organization (WTO) has significantly influenced the economic and social policies of nation states especially among the developing countries. This international organization advocates for liberalizations of trade policies and laws among the member countries so as to cultivate an environment supportive of international trade (Deacon, 2007). Therefore, the countries are prevailed upon by the laws of WTO to liberalize their economic and trade policies and promote an open multilateral trading system. Nation states must thus review their trade and economic policies and laws to be in harmony with these requirements to foster economic development through multilateral trade among the member states. This international body therefore sanctions the governments of nation states to commit themselves to a liberal trading and investment environment. In this manner, the WTO seeks to influence nation states to formulate investment policies that are supportive of its overall aim (Shahabadi, 2007).
The World Trade Organizations has greatly influenced nation states’ governments in their socioeconomic policies. For example, the member states are required to support and implement socioeconomic policies that are supportive of trade and investment activities from the foreign nations. Shahabadi (2007) cited that trade tariffs and other trade related policies and laws that regulate multilateral trade are therefore increasing becoming liberal and open to cultivate international trade. In some instances, the developing countries have cried foul especially with regard to their inability to limit the influx of foreign products into the country through trade barriers and tariffs since they are signatories to the World Trade Organization. Deacon (2007) cited that the consequence of such liberal multilateral trade and economic policies is that the nation states have been unable to support the development of national industries. This is because the domestic market is flooded by foreign goods and services that are relatively cheaper than the domestic products.
Most countries have been totally unable to reap the gains of international trade through the global bodies such as the WTO and are instead resorting to regional trade agreements (Shahabadi, 2007). This illustrates the extent to which the nation states have increasingly lost their sovereignty in terms of developing and implementing independent socioeconomic policies as a result of their embership and loyalty to the policies and multilateral laws of the World Trade Organization. Deacon (2007) cited that the organization is prevailing upon nation states to review the economic and social policies to integrate poverty reduction programs within their economic development planning. Most countries are therefore required to invest on export-oriented economic activities. Such measures are the requirements that are put for countries that are seeking to be registered as member states within the nation state. As a result of such measures most economies, especially within the least developed countries have suffered a rise in food insecurity (Deacon, 2007).
Agricultural production is biased towards cash crops. On average, the countries’ imports are higher than the exports leading to foreign exchange deficits. The WTO policies and economic sanctions implored upon member states has thus shaped the social, economic and trade policies and laws which have generally been fruitful to the most influential and industrially developed countries and not the other nation states especially among the least developed countries. Mahon & McBride (2008) cited that trade agreements which are founded on legally-binding provisions have thus become important vehicles for the dissemination of economic and social policies globally. Nation states are thus losing their ability to independently shape their economic and social polices without integrating the requirements of the WTO for socioeconomic development through multilateral trade.
World Bank and IMF influence on Domestic Economic and Social Policies
The World Bank and IMF have had influence on the nation states’ economic and social policies. This is because of the funding that they issue to countries’ infrastructural and economic development. As the largest source of development finance globally, these bodies lend countries money to execute broad structural and socioeconomic changes. Most of the funding targets development, poverty alleviation, and to spur economic development especially in the least developed countries (World Bank, 2010). The World Bank and the IMF have therefore influenced countries’ economic and social policies through their demands such as the Structural Adjustment Programs (SAPs). When countries seek financial lending from these bodies to avert imminent economic crises, they are lent the money on condition that they tailor their economies towards reforms.
The IMF insists on economic reform characterized by free-market, debt repayment, market liberalization, and privatization of state corporations. Among Structural Adjustment Programs given as aid conditionality is the cut in public spending. Buira (2003) cited that the governments in the developing countries in a bid to comply with aid conditions of the IMF cut their spending social amenities such as health, education and housing. These social services became very unaffordable especially through the privatization of the state corporations that offered the services. Besides, requirement for the privatization led to labor layoffs. Cuts in salaries and wages led to demonstrations and prolonged stalling of the economies in the developing countries as workers demanded better employment and working conditions (Mahon & McBride, 2008).
The focus on industrial and export-oriented economies as IMF aid condition led to decline in the production of food crops in the developing countries. Much of the investment focused on the prodduction of cash crops. The social welfare policies especially those relating to poverty eradication and enhancement of food security were thus greatly challenged as the governments complied with the requirements of IMF (Buira, 2003). The social polices therefore changed in most countries with self-reliance being prioritized. This explains why most countries do date have privatized the education, transport, health and other service sectors. The IMF has thus significantly influenced the economic and the social policies of the nation states since the governments have to comply with the aid conditions.
The IMF and the World Bank have implored the national governments to liberalize their economies for multilateral trade. This explains why the Structural Adjustment Programs have led to the rise of Small Medium-sized Enterprises and other multinational corporations (World Bank, 2010). The economic and the social policies of nation states have been greatly influenced by the IMF and the World Bank to contain these new approaches. Through this corporations and investment opportunities, these international financial bodies assert that the developing countries will be able to enhance efficiency in service provision, productivity, and reduction in the employment rates. The existence of these multinational corporations and the continued persuasion of countries to liberalize their trade, economic and social policies to liberalize these opportunities is thus the evidence that the World Bank and the IMF are championing the course of globalization through social and economic policies (World Bank, 2010).
The World Bank and the IMF shape the economic and the social policies of nation states through voice and influence in determining the ability of the nation states’ to repay their debts. Buira (2003) cited that since these countries are looking up to these international financial organizations to fund part of their annual fiscal budget, they have little alternative but to comply with the policies set by IMF and World Bank. This leads to lose of sovereignty in terms of social and economic policies. Failure to comply with the aid conditionality would virtually render the countries unable to get loans from the private and the public financial institutions across the globe. Since all these financial institutions are controlled by the World Bank and the IMF (Buira, 2003). They thus have to restructure their economies to comply with the IMF and the World Bank guidelines. The World Bank and the IMF have thus continued to constrain the ability of the national government to tailor their economic and social policies in their own direction. This reality is likely to continue as long as the nation states still look on the IMF and the World Bank for financial bailouts.
In conclusion, the WTO has strong influence in the way in which the economic and the social policies in the nation states are formulated and implemented. The national governments are therefore contained by the legal and the policy requirements of the World Trade Organization that their economic and social policies be very liberal enough to enhance multilateral trade across the globe. The IMF and the World Bank have also influenced the domestic economic and social policies especially because of the financial aids they offer for infrastructural development and economic growth in the developing countries. The international organizations have effectively put globalization into context especially through their influence on the domestic policies of the nation states.
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