Int. Political ECONOMY

• Economics - The social science that deals with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems.

• Macroeconomics - The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors.

• Megaeconomics – It studies the interaction of national economies through comparative analysis of the economic systems.

• International Economics - A branch of economics that studies economic interactions among different countries, including foreign trade (exports and imports), foreign exchange (trading currency), balance of payments, and balance of trade. The study of interational economics focusses on two related areas - international trade and international finance

Changed economic activity of the society

• In our days no one sphere of life, including economic In our days no one sphere of life, including economic sphere can actsphere can act independent and isolated. All processes independent and isolated. All processes and events should be examined and understood in the and events should be examined and understood in the broad sense of economic, political, social, ecological and broad sense of economic, political, social, ecological and demographic context, taking into account their demographic context, taking into account their interdependence. interdependence.

• The area of economic science is already too narrow to The area of economic science is already too narrow to explain all the aspects of the complex and explain all the aspects of the complex and interdependence worldinterdependence world..

Globalization of Economics and Development – Two Sites of One Process

WHY?

• The main spheres of life are inseparable;• Economics is one of these spheres of life;• The technological development fosters the development

of all other spheres;• Simultaneousness development of communication

technologies, culture, education and etc.;• Trends for universality of development;• Economic activity of the society has changed;• The universal and national development are tightly

bounded

Our choice is to examine globalization of economics in the broad context of development !

The Nature of Globalization

• Till 19th century “global” meant “spherical”;• At the end of 19th century “global” meant “the whole

world”;• 20th century “global” meant “definition of capacity and

dissemination of events and processes”

Main key words

About the process:• Universality• Internationalization• Integration• Generality• Worldwide

About the main key players/agents:

• Global companies• International

economic organizations

• Global markets• The state• Communication

technologies

Some special features of Economy in present days

• Growing interdependence of all processes

• Establishing of a global financial-economic area

• Information technologies - WWW

• Change in the state’s functions – vanishing of the national boarders

• Universality of the world – dissemination of the democratic system and socio – cultural values

• “Global” – a new scientific category, which treats the processes and events on a global scale

• “Globalization” – an approach which expands and deepens the economic theory as well as other scientific fields

• Subject of globalizations are:

- MNCs;

- regional structures;

- the state;

- international economic organizations

Evidences • Civilizations – they have originated

independently from one another and have had common standards and rules of life;

• Religions – they have monotheistic character, universality of values and trends towards expansion of ideas;

• Colonizational processes – they have similarity of reasons, forms and consequences: creation of one-sided economic relations;

• From the great migration of peoples till now – there is a tendency for decreasing the uncertainty

Influence of Globalization on different spheres of life

• Economic – the trade roads were built; global companies started their functions; global economy and finance system have been created.

• Political – tribes transformed to peoples, nations and states formed, after that regional unions and finally international authorities of governance.

• Geographical – the great migration of peoples started, new lands were founded, empires created.

• Ideological – unified social ideas spread on huge territories

• Informational – the speech and writing were created, after that literature, finally massmedia and Internet

Definitions of globalization• Globalization is a very high level of

development of the globality of economics and life in the conditions and content of life activity expanding with a tendency for planetarism.

• Globalization is a compression of time and space.

REGIONALISMRegionalism originated along with globalization

and approximately at the same time.

Factors leading to the formation of regional structures during ages:

• Political;• Geographical;• Religious;• Military and defense;• Economical.

REGIONALISM• 40-ties and 50-ties of XX century – new wave of regional

structures in Europe:1948 – Organization for European economic Cooperation;1950 – European Coal and steel Community;1957 – European Economic Community;1959 – European Free Trade Association1949 – 1991 – Council for Mutual Economic Assistance (socialist countries)

New factor for regional integration appears:according to the social system- the world was divided into

two social systems.

40-ties and 50-ties - Economic stabilization was the leading idea

REGIONALISM• 80-ties – economic regional structures with

mutual political, social or military and strategic goals:

- EU;

- ASEAN- NAFTA North American Free Trade Agreement

• 90-ties – the regional structures became even more closed with very clear mutual economic, social, cultural, educational etc. relations.

They form the new structure of the world

REGIONALISMEconomical aspects:

• Similar economic development;• Common priorities;• Forming common economic model;• Regional competitiveness and comparative advantages in a global arena;• Common reaction to the risks of the environment

The role of technological factor

• Technologies are a product of science.• Technologies are materialized reality of science.• Technologies are socially neutral and all the

conflicts that occur in society does not relate to technologies.

The effect of and role of technologies in life depend on the way of application and the goals pursued.

Technologies – the main source for development

• 17th century – scientific revolution – scientific knowledge was applied and machines were invented.

• 18th century – the beginning of the industrial revolution.

• 19th century - intensive application of science in the material production.

• 20th century – inventing the computer and its using, replacing some functions of the machines

Technologies – the main source for development

• 21th century – expansion and development of the functions of technology. Technology acquires also some social characteristics - new technologies can reproduce biological and mental functions.

The effects of technologies are:• A possibility and necessity for public production

to go out of the national-state frames;• A possibility and necessity for the management

of the society to be performed by means of information technologies and communication networks;

• Acceleration of the synthesis between the results of R/D and the transfer of technologies;

• Formation of a new type of consumer demand which can not be shut off within the frames of national markets

IndustrialIndustrial revolutionrevolution created the global marketcreated the global market

TechnologicalTechnological revolution revolution createdcreated the global societythe global society and the global economyand the global economy

Negative tendencies

• Technological competition;

• Technological dictate;

• Technological determinism;

• Technological imperialism;

• There is no free movement of technology

Global media and communication• Modern communications and their basic form –

media are a product of the new technologies and major circumstances which have given rise to globalization.

• They ate total global structure with universal effects.

• They have organizational transformation on a company level:– At first a process of uniting in communication and

media complexes began;– Then their merger into huge industrial and financial

corporations.

Economics - Culture• The common feature between them is that both

follow the overall development of the society;• The development of culture is not always

following the development cycle of economics;• The cultural specifics of a nation, state or region

is much more clear then their economic or political specifics;

• Cultural processes are determined by the national and state differences.

Culture - Globalization• The cultural processes gain the importance of

major conditions of life and effect each human activity;

• Culture is turning into one of the basic factors of economic growth, while cultural product is among the new strategic resources of society;

• Culture became a specific sphere of entrepreneurship;

• Culture, education and science form “new economy” - knowledge economy

Is their Global Culture?• The early 70-ties the French Ministry of

Culture introduced in the scientific space the concept “cultural imperialism”;

• 80-ties and 90-ties the theses of “war of cultures”, “conflict of civilizations” were very popular;

• Later appear the concept of “Americanization of world culture”

Some conclusions

• The very globalization of economics, science and technologies requires a very high degree of development of cultures.

• The concept of “glocalization”, introduced in Japan in 1996 a combination of “global” and “local”, expressing the need for globalization to be carried out in compliance with the specifics of the individual countries.

• The main contradictions of culture in the global world is between its economic form of realization and its esthetic and artistic nature.

Democracy and politics• Democracy means that peoples and their

parliaments should be sovereign judges in their own countries. They should choose the national model of development and solve the main problems of organization and functioning of the national economics.

• In practice – the decisions are taken at the head offices of the global corporations and are implemented in the individual countries. This is how the issues of the structure of production, of investment and technological policy, of strategic marketing are solved.

• After 11th September 2001 the world is not the same:

• Unstable political relations and political systems;• New “paradoxes of democracy” appear:

– New wave of religion expansion;– Terrorism;– Using weapons to solve problems and conflicts

“Economics of war” opposes the humanism and subordinates the world order to corporative interests.

Globalization• Globalization comes in contradiction with

human rights and with the very principle of individualism, which along with competition, is the fundament of capitalist system.

Globalization in contemporary conditions is an unevenness

• Deepening gap between the economies of the developed and developing countries;

• Intensified struggle for additional access to resources and markets;

• Ecological asymmetry;

• Poverty and polarization of men;

• Uneven location of people;

• Continuing international debt crisis

ECONOMIC CHALLENGES FOR PAKISTAN

The Pakistan’s economy is currently passing through the most difficult phase of its economic history.

Once a robust economy, with economic growth over 6% of

GDP, now it has been transformed into a fragile economy, due to serious economic challenges, the most important being our country’s frontline role in ‘War on Terror’ and the persistent ‘Power and Energy Crisis’ which has crippled our industrial sector.

   

what the IMF Mission, which recently visited Pakistan in October 2012, says in its Report :

“The Pakistan’s economic situation is deteriorating and Islamabad urgently needs to address deep problems in its energy sector while boosting growth to meet a rapidly growing population”.

 

The IMF Mission further goes on to say that:

“The country’s GDP in 2012-13 is likely to grow at the annual rate of 3% to 3.5%, not enough to provide jobs to the growing labor force. Decisive and far-sighted action is needed to address this challenging outlook”.

The IMF Mission Report points out that ENERGY PROBLEM is the largest single impediment to higher

economic growth for Pakistan and a major factor behind macroeconomic imbalances. For this, it has outlined a

comprehensive approach to reform to tackle these problems.

Pakistan offers huge potential and opportunities for trade and investment to both foreign investors and the local economy.

Pakistan is world’s 2nd largest producer of water, buffalo meat and milk

Pakistan is world’s 3rd largest producer of cotton

Pakistan is the 4th largest goat meat supplier

Pakistan has 5th largest Coal and Gold reserves

Pakistan is the 7th largest wheat grower

Prospects and Economic Revival Efforts

The economic growth of Pakistan stood at 3.7% in FY 2012 which is higher than 3% realized in previous year, but less than the target of 4.2 percent. The State Bank of Pakistan in its third quarterly Report ‘State of the Economy” says that this performance is notable, given the following challenges: Considerable damage to cotton crop due to floods Ongoing energy shortages; Rise in international oil prices; and Security concerns.

The State Bank comments on the economy recovery prospects as follows:

“Although Pakistan’s economy has shown some recovery in terms of GDP growth, the key macro indicators still remain weak. Persistent inflation and pressure on the fiscal and current accounts, remain the key challenges for the economy”

Like IMF, the State Bank of Pakistan also pinpoints that “Low investment and energy shortages have direct growth implications. Other areas that poses challenge and major risk to the macro-economy is the ‘persistently high fiscal deficit’

Pakistan must overcome its economic challenges as it has vital role to play to bring

economic prosperity in SAARC RegionSAARC region has potential of becoming a vibrant region in the world given its enormous resources in manpower, technology, agricultural and mineral assets, its history and civilization. Pakistan must take immediate measures to meet its present economic challenges as it has a more vibrant role to play for the regional cooperation in the SAARC region.  Pakistan could play an important role in bringing the people of SAARC together by promoting investment, trade and people to people contacts.

The Existing Potential in the South Asian Region

South Asia is the second fastest growing region in the world and it has the potential to be an economic power by the year 2025. Many in South Asia, however, still face extreme poverty, especially the SAARC countries.

South Asia is home to half of the world’s poor, with 40% of its population living on less than $1.25 a day.

South Asia accounts for only 2.5% of GDP 2% of world exports, and 1.6% of world Foreign Direct Investment .

SAARC countries have common economic goals and economic challenges

Significant challenges and barriers still exist which continue to restrict the economic growth and integration in the SAARC region.

What is required is a firm commitment by the SAARC countries to move towards prosperity by placing stronger emphasis on economic development through REGIONAL PARTNERSHIPS as they share common economic goals and challenges.

Key Challenges for SAARC Region

While SAARC countries continue to make efforts for economic development and intra-regional integration, their progress is curtailed by a continuing sub-set of systemic issues and challenges common to all member nations.

• Political Mindsets and Issues

• Abject Poverty

• Low Intra-regional trade

• Low- Intra-regional or cross-border Investment

• Poor Transport Network or Infrastructure to facilitate trade

• Sizable Sensitive List, Para Tariff and Non-Tariff Barriers

• Food Security issues

• Climatic Change Issues (floods and natural disasters)

• Under-utilization of renewable energy resources

• Stringent visa requirements

The above challenges need to be dealt on preferential basis by the SAARC countries, especially the two big nations – PAKISTAN and INDIA.