The In Terms Of Greater Interdependence And Integration Essay Example

the past. They believe open trading and liberal economic relations were prevalent worldwide (Thompson 2000).

There is also considerable debate about nation states' autonomy. Traditionalists argue that nation states still play a significant role, challenging market forces, managing domestic economies, and governing the international economy (Thompson 2000). However, globalists disagree with this perspective, viewing globalization as a significant and novel occurrence.

The traditionalists and globalists have opposing views. The traditionalists claim that trade and capital flows now occur on a global scale, using the East Asia financial crisis as an example of how one country's economic events can negatively impact others. On the other hand, there are different perspectives within the globalist camp. Neo-liberals believe globalization is beneficial, improving market efficiency and benefiting consumers. Conversely, neo-Marxists view globalization as a means for international capital to gain power and exploit globally (Thompson, 2000). The globalists argue that this new global structure has established rules governing nation states, people, and companies.

The globalists contend that nation states have ceded their autonomy and sovereignty to the forces generated by this new global structure. The transformationalists, however, challenge this view and perceive globalization as a novel and consequential phenomenon wherein "new forms of intense interdependence and integration are sweeping the international economic system" (Thompson 2000). They dissent from the globalists by maintaining that nation states still possess economic power. Nonetheless, due to the competitiveness in global markets, nation states face constraints that hinder their ability to formulate independent economic policies. The transformationalists further argue that the traditionalists have underestimated the impacts and ramifications of this emerging global economy. They assert that these effects are intricate, varied, and difficult to predict.

'(Thompson 2000). The

internationalization of economic activity is seen as an unequal process, according to the traditionalists. They would provide the triad as an example of this. Let's further explore the traditionalists' viewpoint, which agrees with the definition and identifies trade growth as a demonstration of interdependency and the impact of international trade between trading countries.

Capital flows are used to demonstrate integration as they indicate the level of international borrowing between economies (Thompson 2000). The objective of traditionalists is to present evidence that contradicts the viewpoint of globalists and transformationalists, who argue that we are currently experiencing a new globalization process. To support their claims, traditionalists utilize several statistical pieces of evidence. Firstly, there is a graph (WTO 1995) illustrating global trends in merchandise trade and merchandising output. At first glance, the data depicts a significant increase in merchandising trade relative to output from 1950 to 1994, which clearly suggests interdependency. However, traditionalists argue that the substantial growth in trade may be attributed to population growth and increased wealth, resulting in higher expenditure on imports. Hence, by expressing the trade figures as a ratio of output, a more balanced assessment of the data is obtained. The subsequent three tables provide more specific information.

The table below displays the same countries and provides specific figures for certain countries at particular historical moments. These figures represent the ratio of merchandise trade to the gross domestic product (GDP) which measures a country's output. The first table (Maddison 1987) shows current prices. It supports the traditionalist view that international trade remains consistent throughout time.

In table two (Maddison 1995), the data is provided. However, this time, it could be argued that the first

table does not take inflation into account, thereby underestimating the true extent of interdependency. Despite the adjustments made, the data still favors the traditionalists at this point. Nevertheless, if we examine the last table (Feenstra 1998), which has also been adjusted for a fair assessment, the figures are presented with the service element of trade excluded, giving us marketing adjusted value added figures. This evidence weakens the argument of traditionalists. While they can identify two out of the five countries as being less interdependent today compared to 1913, globalists and transformationalists would quickly point out that three countries clearly show an increase in interdependency today. However, traditionalists could argue that if a true global economy is present, why is it not evident in the other two countries? Transformationalists could also note that this is where economic activity is unequal. Now let's analyze the evidence for capital investment in a similar manner.

To gain an understanding of this concept, it is crucial to analyze foreign direct investment (FDI), which involves companies borrowing and lending money within a national economy in order to establish economic activities overseas under their direct control (Thompson 2000). These companies are commonly known as multinational companies (MNCs) or transnational companies (TNCs). Although MNCs have production sites abroad, they still fall under the regulation and supervision of their home country authorities (Thompson 2000). Conversely, TNCs lack a distinct home base and actively search for cost-effective production locations globally while maintaining high competitiveness in international markets (Thompson 2000).

The argument of traditionalists is that the presence of only a few TNCs contradicts the idea of a new global economy. However, due to the global production sites

of many MNCs like Honda, Nestle, and Michelin, it is reasonable to argue that this is a result of globalization. Furthermore, data from the Institute of Development Studies in 1998 comparing FDI between G7 countries from 1870 to 1990, as a ratio of their GDPs, shows that while investment relationships have grown, they were higher in the gold standard period of 1913. This suggests that the international economy is not as fully integrated as some claim. Considering the coherence, empirical adequacy, and comprehensiveness of the traditionalist theory, it is convincing.

The evidence provided by the traditionalists is succinct and supports their argument in a rational manner while considering the dimension of time and space in their statistical evidence, demonstrating the comprehensive nature of this theory. Nevertheless, the essay reveals loopholes in their argument. For instance, how can the traditionalists fail to acknowledge the impact of the Asian crisis and its effects on numerous countries? How can they disregard the changing autonomy of nation states, perhaps not to the extent argued by globalists, but certainly to some degree? What about the disparities between the affluent and less fortunate? In summary, the traditionalists present a persuasive argument, albeit to a certain degree.

Despite their failure to acknowledge various significant factors related to economic globalization and its impact on modern society, the traditionalists' theory seems quite naive and simplistic, making them vulnerable to criticism.