This is a short essay response to the ideas presented by Deepak Lal in "Globalization, Imperialism, and Regulation". It provides an overview of Lal's assertions and the grounds on which to challenge these. Key ideas include globalization as a purely economic occurrence, imperialism, deregulation, American hegemony, and what Lal calls moral hazard.© BrainMass Inc. brainmass.com December 24, 2021, 11:02 pm ad1c9bdddf
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The intention of the article Globalization, Imperialism and Regulation, is clearly to defend the process of globalization. It is the argument of the author that the term globalization has been overused and over-extended and now needs to be defended as it really exists. For Lal, a neoliberal economist, globalization is strictly economic. It is a positive process best measured using economic methodology and is neither ideological nor a form of imperialism. To this end he separates globalization- as he defines it as solely economic- from what he calls "ethical imperialism" (Lal, 2000: 1). He makes this distinction because he believes this ethical imperialism will destroy globalization and that it is also responsible for much of the global homogenization people are challenging when they incorrectly protest against globalization. It is also Lal's argument within this article that two global common goods are not being supplied under today's hegemon, peace and an effective international financial institution. These are discussed as they relate to globalization, one being necessary and the other, not.
Central to Lal's paper is his argument in support of globalization as a positive methodology rather than an ideology. He promotes it as an economically benign process (Lal, 2000: 2) that needs to be examined using a "positive economic methodology" that will allow for an objective assessment of its effects. As an ideology, as it is currently evaluated, it is not surprising for Lal to find that concerns are raised as they relate to the provision of global public goods. As an ideology, too many questions abound with regards to the unbalanced nature of the provision of these goods, for whose benefit they are produced, by whom they are produced and about who controls the processes as well as the very nature of them. A ready example can be found in the "supranational contrivance" developed to maintain globalized free trade and capital mobility, now known as the World Trade Organization (WTO). If the WTO is discussed as a part of an ideological understanding of globalization it is easy to find concerns about the nature of its apparatus, whom it directly benefits and harms, and about how and where decisions are made. These concerns are unfounded, however, since globalization is a process and cannot be seen as a western ideology for a process cannot be ideological (Lal, 2000: 8). As a process it is good because it is creating a greater common economic space for a greater division of labour and thus greater prosperity. In this way, as an economic process, it is doing exactly what it should by making workers and markets more competitive. But as a process, it is also under a great pressure because of the ideological issues being raised and attached to it and because of an American unwillingness to protect it. These last points are the concerns that Lal addresses in his paper.
Lal's discussion surrounding the establishment and maintenance of peace stems from what he recognizes as an historical requirement of peace for prosperity. He outlines that globalization, hardly a new concept, has been achieved in the past through the linking of countries and regions in the flow of goods, services and capital by way of territorial expansion, or empire building (Lal, 2000: 2). This was only possible when the reigning empire protected its interests and expansion with a Pax, a created and enforced peace. In the current global situation, the United States is clearly the dominant world hegemon. The problem, however, is that the United States is proving unable or unwilling to maintain the necessary peace and security that must accompany globalization. It is Lal's argument that in this way the United States is actually a threat to globalization.
After World War I, President Wilson claimed the end of the Age of Empires and a new Age of Nations (Lal, 2000: 3). With this has come an increase in the desire for nations to assert a distinct cultural identity and an increase in the incidence of civil conflict all over the world, commonly along ethnic lines. Both of these factors, along with American domestic politics are making the Pax Americana all the more ineffective or perhaps impossible. World peace is growing increasingly unlikely under these circumstances to which Lal suggests an international collective security such as the United Nations attempts to provide (Lal, 2000: 5). Nonetheless, Lal realizes that the prospects of the provision of peace as a public good remains very uncertain and until there is some renewed level of peace, that globalization will be at risk.
The desire of nations to assert a distinct cultural identity can also be viewed as a reaction to what Lal calls "ethical imperialism", a second major threat to globalization. He defines this as the promotion of American "habits of the heart" and claims that it is these activities that are responsible for international homogenization, not globalization. They include, et alia, western concepts of human rights, democracy, egalitarianism, labour and environmental standards, all of which are the "culture-specific, proselytising ethic of what remains at heart western Christendom" (Lal, 2000: 4). It is Lal's position that by tying their moral crusade too closely to the globalization process, the United States has inadvertently fused the two and is creating a backlash against the otherwise "benign" economic globalization process (Lal, 2000: 5).
Lal continues on in his support of globalization by challenging the supposition of some that global institutions are necessary in establishing a new global infrastructure, that the international financial system needs a new set of controls, or a regulating body to tame the process. On the one hand, the existing global institutions, the World Bank (WB) and the International Monetary Fund (IMF) have become ineffective instruments themselves but on the other hand, he argues that there is no need to replace them with anything new. Lal supports this claim by pointing to the fact that the current world situation no longer requires an agency like the WB to act as intermediary for developing countries because international capital markets are now open to these countries. It was the fact that these markets were once out of the reach of developing countries that the WB was originally borne. As for the IMF, its role as a lender of last resort is challenged on the basis that any lender of last resort must be able to do two things, "create high-powered money quickly, and distinguish between good and bad "paper" and thus judge the soundness of the banks to which it is extending liquidity" (Lal, 2000: 7). The IMF can not do either of these things effectively. It works too slowly to sufficiently meet the first criteria and has no way to determine a good from a bad loan a bank makes to a third party individual. Lal would like to see the international system operating more along the lines of neoliberal thinking, whereby it would be considered as an extension of national systems and which would follow the same rules- less controls, allowing for markets to regulate themselves (Lal, 2000: 6).
In addition to the above statements, Lal notes another factor that is important in his argument against the need for any global financial infrastructure, that of moral hazard. Moral hazard is the chance that a contract will change the risk-taking behaviour of one of the parties (www.dictionary.reference.com). In a contract each party may be able to gain from acting contrary to principles implied by the agreement. Abuses of insurance, including social programmes are examples. Take for instance banks that count on the fact they will be bailed out in the event of bad loans. They no longer need to be concerned with the contracts they enter into, knowing full well any risk will be incurred by another party. The result is bad loans, the cost of which is deferred to the tax payer. This is a national moral hazard that Lal believes will only become an international one under an international financial infrastructure, exasperating the problem.
For these reasons, Lal makes the point that not only should the existing global structures (the WB and IMF) be dismantled, but that no others should be created to take their places.
Many of Lal's assertions are intriguing if not somewhat problematic at times. First, is economic globalization really good, as he claims it to be? The assumption has always been that with increased prosperity (and productivity), which economic globalization is supposed to facilitate, should come less work and more leisure time. But where has this manifest itself? Americans, for instance, where productivity and prosperity have increased substantially, now work longer hours than their counter parts elsewhere in the industrial world (Warde, 2004: 4). If this is the case, what is the pretext for continuing the globalization process internationally? It may very well be that economic globalization is a good thing for creating a greater common economic space for a greater division of labour but what is the benefit when people work longer and harder?
Second, the idea of the American Pax as not only necessary but desirable should raise some eyebrows. Perhaps it is for the globalization process but not everyone will be thrilled with the idea of a Pax maintaining a hegemonic position, American or otherwise. While this may very well have been the means by which empires historically secured economic integration, in every empirical expansion there has necessarily been a group of people that were controlled. Is it fair to claim that the American Pax needs to be increased and strengthened and if it is, that everyone will be in a better position to benefit from the continued globalization under this protection? Even if the term of globalization has been misused and misunderstood, the ideas that go hand-in-hand with an American Pax, which I would argue are the same ideas that Lal refers to as American ethical imperialism, are well understood and not wanted by many.
A third issue that presents itself in the reading is the position of economics outside of, or above, society. Economics, seemingly, is no longer a part of a larger social context. Now instead, the social context is subservient to economics. Other forms of globalization can not be reduced to the "ethical imperialism" of America and the West either. Globalization issues of health, politics, environmental pollution and so on are at least interconnected with economics but more likely, they are derived from economic globalization, the now dominant actor in the ethical, economic, social context tri-fecta.
Perhaps Lal is correct, perhaps there is an important distinction to be made between the homogenizing effect of "ethical imperialism" and globalization. But at the same time this will be an increasingly difficult proposition when economic activity continues to operate, and increasingly so, in a way that is external to other social activities. If it continues in such a way, it could potentially take over the function of the current ethical imperialism Lal so desperately tries to separate from the globalization process. At such a time, globalization will be correctly looked upon as the responsible activity for international homogenization.
If money really does make the world go round, which is harder and harder to deny with every passing economic crisis, can imperialism, global homogenization, ethical imperialism or the "wrong" use of the term globalization or any related synonym really be dealt with independently from Lal's definition of economic globalization?
Lal, Deepak (2000). Globalization, Imperialism and Regulation. Cambridge Review of International Affairs, Autumn-Winter, Vol. XIV, No.1.
Moral Hazard. Dictionary.com. www.dictionary.reference.com.
Warde, Ibrahim (2002). Smiling Serfs of the New Economy. Le Monde Diplomatique, March, p4.© BrainMass Inc. brainmass.com December 24, 2021, 11:02 pm ad1c9bdddf>