The term "global economy" describes a multifaceted, extremely complex structure. The interdependence of variables contributes to the system's intricacy by making it possible for negative changes to result from even minor changes in the variables. (Holland 12). The essay will examine the facts regarding the topic of controlling the world economy before examining how the law influences the development of the economy. The complexity of the legislation governing will then be the subject of arguments. The information provided shows that, despite the law's importance in the development of the economy, the issues at the international arena concerning the global economy have spiraled out of control. This is because of state-centrism, which characterizes the activities of this higher level form of economy.
Understanding the Global Economy
To find the evidence of global economy, one does not need to look very far. The clothes we are wearing, the gadgets we use and cars on our roads are likely to be imported from another country. More products continue to be shipped across the borders before their consumption. The locations of the targeted potential customers continue to broaden every day as the market widens. The type of national leaders elected in developed and developing nations depends on the basis of seeing beyond the corporate goals through tapping the benefits that accrue from engaging in the global economy (Jenkins et al. 45-46).
To a section of scholars, the global economy is said to be benefiting the third world nations more than those in the developed world. Some developed nations have been considering the global economy as a threat to their well-established economies. The arguments are backed by the statistics, which show that jobs have been shifting to nations where workers do not demand high wages and salaries. However, there is a need to appreciate that creativity and emphasize on invention, which are key pillars in offsetting these losses (Sassen 79-95). The rule of law is behind the creation of economy, but the attempts to govern the global economy through law proven to be a fruitless endeavor.
The capitalist form of economy in the contemporary world is a significant stepping stone in the establishment of the global economy. This type of economy has roots in the industrial revolution period dating back between the 1750s and 1850s (Goldstone 324). Since this period, the economies in the various parts of the world have been displaying patterns of steady growth, which has had a direct correlation to the growing population in the world. The rise of the global economy views states like Russia and China as one which have become more prominent in the global trade. The global economy impacted on the labor force with effects being felt by individual countries in their unique ways. These impacts depend on whether the given states are able to deal with offshoring or outsourcing.
The United States' position in the global economy is currently under the threat of the BRICS (Brazil, Russia, India, China and South Africa), which are projected to be among the largest economies in the next 50 years (Cheng 143-156). These emerging economies provide cheaper labor than the United States can domestically offers. The threat to the super power is heightened by the highly innovative state of nations like China, which wants to outdo America in terms of foreign investments. To cope with the challenges posed by the BRICS, the United States adjusted to tap the benefits derived from the global economy through various mechanisms. The mechanisms include outsourcing and offshoring the millions of available domestic jobs, which are doable at a relatively cheaper price compared to that in China and India.
The Rule of Law and the Creation of the Economy
The rule of law is responsible for the creation of the economy. However, it should be noted that the Global Economy cannot be governed by the law as will be given later. The rule of law refers to the existence of formal rules as well as their enforcement mechanisms, which in the case set the basic conditions for the growth and the development of the economy. The rule of law, moreover, satisfies the economy with the protection of the individual rights and the correct way of the execution of contracts. Through these provisions, the actions of the people within a given economy become predictable (Helpman 1239-1240). Besides, the steps to be taken by contractual parties and the government are contained within understandable frameworks. In the protection of the property, the law creates a transferable title system, which facilitates the reduction of the transaction cost and ensures the obstacles are facing out to transactions. The law facilitates the system of mortgages and creates room for transparent calculations of the financial transaction to ensure that investment contribution (Cheng 143-156).
An in-depth scrutiny into the concept of the rule of law reveals that it creates room for thriving to capitalism. The latter has been the guiding ideology in the world's economies after the collapse of communism. This workable ideology can only thrive if the agreements in individual states are long-term and, at the same time, predictable. These goals can only be achieved through the rule of law, which does not change regardless of the person who holds the office. This law further guarantees that any party that consents to a given contract fulfills the agreed obligations, and give reasonable recompense for the parties that might be wronged. The provisions, therefore, are key ones in creating room for trade's thriving through instilling an element of confidence, particularly to the buyers who know that they will get a product, which is worth the amount of money paid for. To avoid economy from suffering, compensation is also guaranteed, whenever the parties are not satisfied with the dealings.
From all these provisions under the rule of law, it is evident that the economy cannot thrive in an anarchic environment. Therefore, it is advisable for the individual states to ensure the economic practices, which are under the auspices of the law, with subjecting the violators to negative sanctions. Upon the thriving of the economy at the local level, an entity can thereafter join the international arena to compete with other parties. At this stage, the use of the law in governing various states' behavior becomes a difficult task. A deeper scrutiny of the affairs at this higher level reveals the degree of anarchy characterized by individual states trying to satisfy their selfish national goals (Walt 29-46). A scholastic debate on whether law should govern the global economy has emerged.
In some nations, the rule of the law, which guarantees the survival of the economy, is under threat. The latter is coming from the various forms of policies, which are politicizing the manner in which businesses should be conducted, and, thus, negatively affecting the economy. In the United States, the current borrowing policies are criticized for indebting both the citizens and their future generations. The hitch is caused by spending on wealth, which has not been created yet. These are also bad economic policies, which cause a threat to the investment industry. The field of commerce is affected by consumers spending to repay the installments and the interests built up from the government debts. Besides, the government can be inefficient and involved in corruption deals. This is a result of the passion, which drive the moment of political gains. These considerations for political factors are, therefore, evident to be supplanting the profit incentives. These facts prove the rule of law in creating favorable environment for the economy to prosper.
The conflict between the corporations and the governments goes beyond their borders to include other societal factors in a given economy. The rule of law cannot be exercised at the national level effectively without focusing on the individuals and their cultures. Besides, the rule of law can only succeed in democratic nations where the rights of citizens are granted. A good polity should, therefore, create an environment of democratic processes that embraces the problems of the government. Nations should try their best to move away from a culture of debt to a culture that makes savings to thrive.
Regulating the Global Economy
Over the last two decades, the global economy has had good news as globalization boosted by the economic growth, which is evident in various parts of the world. Hyperinflation has made a rarity by the existing sound policies, which controls the economy. Through the global economy, the nations that were previously categorized as being poor have become significant players in the new arena. However, the global economy is being characterized with a situation that is more unequal and to an extent, less governable. This situation has been worsening over the past years, and a projection into the future reveals that the situation is going to be worse. The major reason behind the impossibility of regulating the trade relations at this level has been the inability to be on par with the current trends.
The major threat to the global economy is the balancing crisis. It is widespread in the United States and Europe because of the market collapse of the subprime mortgage. These events have had an immediate negative effect on the financial sector. The United States, as well as the European Union, is composed of large economies, which directly affects others in the world. A slowdown in either of these economies will result in a reduction in the growth rates of other nations like China and, thus, harm the economy of other weaker states. The central bankers and the national governments of the individual states have been looking for solutions to such challenges, but the long-term solution would be looking for effective institutions. However, most of these efforts have failed over the past in the regulation of the international finance.
Despite the efforts to ensure that the global economy brings benefits to all, the inequality across the nations taking part has rendered the goals to be unachievable. This growing inequality is a sufficient prove that global governance is a pipe dream. Attempts to control the global economy started a long time ago during the formation of the World Bank and the International Monetary Fund in 1944 (Sassen 79-95). The major goals behind the formation of these international institutions were to achieve a balanced form of growth, which would alleviate the standards of living, and improve the labor conditions in the concerned states. However, globalization made these objectives to be unattainable and created an unequal environment, which has persisted in various nations.
The global economy takes part in dealing with inequality in the countries, thus, proves it is a difficult task. Before 1950, inequality was on the decline, until the assigned institutions proved otherwise in 1970. The Millennium project, which falls under the United Nation, has proved inequality's rising in the 80% of the world population (Sachs & John 347). The report claims that only 4% of the world successfully fights the inequality. Besides, if the global economy was governable, the gap between the rich and the poor would be narrowed down and the standards of living improved every day. This trend captures the situation in Africa comparable to the third world countries. The choice of the region is explained by the benefits to be accrued from the developing nations, which have positively benefited from the global economy. The share of the world trade in the African nations has been on a stable decline since 1980. Inequality, however, has been a key in determining the countries' benefit with the oil producing nations which as small in number. These are the only few beneficiaries, which can be considered as benefiting from an exercise which is fighting against a reduction in poverty and hence reducing the inequality.
An analysis on the many nations in the world clearly portrays a picture in which an uneven distribution of the benefits if evident. The possible laws that have been made to deal with the problem seem to do very little in the mitigation process. There is, therefore, the need to form institutions to deal with the problems that are evident at this higher level of the union. For a more inclusive form of globalization, the laws to be enacted must successfully deal with the powerful nations or the hegemons in the various parts of the world. Their powers need to be in check and for the benefit of all role players. However, coming up with laws to govern this exercise is something that cannot be easily achievable. The global economy can be said to be operating under laws, which cannot be regulated by a single body because the strong key players cannot be sanctioned for their misconduct. This has been seen through the strong economies like the United States affecting the situation in other nations.
The political anxieties, as well as the fear of risks, have characterized the behavior of nations in the global economy. As opposed to the local economies in the individual entries, which were said to be fairly predictable, the situation at this higher level is different. Countries like China and Russia are thought to be using their economic powers in the pursuit of their geostrategic goals. There have been international forums in charge of dealing with such uncertainties, but their efforts through the formulation of laws to control the situation have all failed. Although attempts to contain the situation over the past have failed, multilateral institutions have been key in dealing with the global challenges that have been caused by a power shift evident in the global politics. The local economies are therefore by far, more accountable and effective compared to the global economy, which is less governable by any rules put in place. The actions at the global level are dictated by the need to have a collective action to achieve the mutually set goals. Besides these goals, anarchy takes over and throws the control of the situation in disarray.
To prove further that the international market is not governable through the use of the law, it is necessary to scrutinize the situation of those institutions, which were previously assigned the role of controlling the state of affairs. The past few years have exposed the loopholes of the key international agencies that overlook the global economy. There have been more failures reported through the collapsed negotiations in trade that were put in place by the World Trade Organization. The collapse has made may key players in the global economy to declare the attempts to regulate the activities at the international level to be dead. With the escalation of oil prices, the wealthy and the poor economies have been equally, affected and the International Energy Agency has been faulted on this (Sachs & John 347). The regulatory body has come out as being ill-equipped in dealing with Oil issues, which threaten the stability and the existence of the global economy, which is not anchored on exploitations. In its membership of 27 states, large economies such as India and China are left out, something that can be interpreted as positioning themselves at an ungovernable state. Beside the failures in the laws to control the behavior of oil producing countries, there is even a great danger when considering generation of the nuclear energy.
The International Atomic Energy Agency has been for struggling for years now in dealing with issues touching on nuclear proliferation. The laid down rules to govern the key players in the global economy, which are producing nuclear energy, have been violated severally. For example, there are set standards that must be observed before the establishment of nuclear plants. The experienced nations on the world on the nuclear issues have overlooked the regulatory framework of the body and have taken into their hands, the responsibility of dealing with rogue states constructing nuclear plants. This case has been recently witnessed in the relationship between the United States and North Korea. North Korea, among other nations in the Middle East such as Iran, has been considered as threats to the world peace. Selfish interest drives the rationality used by superpowers in their justifications for attacking other nations. The United States, for example, might threaten to attack North Korea because of the threat to the world peace but deep within, the mission is driven by different motives. As a result of this, powerful nations can be considered as bypassing the regulatory roles of nuclear control agencies and taking the role of regulation the production of the lethal energy. Thus, the agencies have failed and cannot be relied upon in the formulations of laws to govern the larger economy where might makes the will.
Coming up with laws to regulate the global finance has also been a great challenge. The International Monetary Fund has been facing a crisis over the years resulting to some state entities considering it as irrelevant and thus, illegitimate. These are some nations that are very active in the formulation of policies in the organization but when it comes to the implementation stage, the laid down rules are ignored particularly in situations where they do not serve the interests of the powerful nations. The fee paying clients have emerged as the major parties, which have resulted to the ineffectiveness of the institution (Goldstone 324). The IMF has thus been forced to retrench within its very walls and has come under deep criticism because of failing to give a warning in the recent financial crisis that has hit the various parts of the world.
A section of scholars, however, think that some changes can be made to the World Bank to make it great again. According to these scholars, governing the global economy is gradually being achieved, and the world should not expect big strides in few decades. The World Bank should gear its efforts towards conducting researches to come up with more than just pragmatic policies. The international body should also focus more on addressing the global constraints, which fall out of control of the individual government. Such issues include the aid disbursement, the prices of commodities, and the climate. Proponents of governing the global economy also argue that the World Bank has effectively shifted the focus that goes beyond policy and is being deeply rooted in liberalization and deregulation (Stiglitz 590). The structural adjustment policies were good indicators to achieve the deregulation, liberalization and eventually achieve growth. However, considering the current state of affairs, the arguments presented by these scholars in portraying a promising future seems to face great challenges to the extent that the global economy is left to be regulated by fear.
Whenever there is a stalemate in the international negotiations on trade, all countries are affected, either directly or indirectly. If effective multilateral agreements are not in place, relatively weaker economies in the global economy will find themselves preferring the bilateral forms of negotiations. The negotiations are further not beneficial to the weaker states, which in one way or another stand at a position to loose. The big economies can also have strong interests in the multilateral associations. The bilateral deals are rarely struck by significant trading partners such as India and China. Whenever the multilateral deals have failed, the large economies narrow themselves down to bilateral deals, which are struck with willing entities. This results in a non-uniform operation of affairs in which a closer look of the form of association reveals that selfish interests are the core. The hegemons in the global economy have been trying to outdo each other in maximizing the profits outside their borders. These activities have revealed that there is no control mechanism to regulate their behavior. The weaker nations are however in deep problems as imperialistic capitalism take over the global economy. In this form of relation, the nations that achieved independence recently particularly those in Africa have been forced to produce goods that boost the economy of their former colonial masters.
The various reform proposals to solve the crises witnessed by governments have been considered as crippled. Although achieving some goals in improving the situation in the global market, the World Trade Organization has failed to effectively create a platform where poor nations can benefit in aid and trade expansion. Various discussions have been previously held on the best ways to give the relatively poor nations in the third world a voice to be heard. These nations have often been overlooked particularly when considering their decisions. However, it should be noted that all entries have an element of competition at would go an extra mile to tap more benefits in the international trade. For these reasons, the attempts to create for balance should be given a third eye through a profound analysis. The bigger economies might be using the weaker states to keep them at the top position despite the situation looking different at the surface. Every action and decision made on the global economy is two-sided with the dangers of exploiting some entities being sugarcoated to the extent of blinding the losing parties.
The entire proposal that have been presented to create a promising global economy for the benefit of all have revealed otherwise. The legitimacy of the global institutions, which regulate the behaviors of individual states, has been compromised over the years. Although there might be hopes for the future to come up regulatory mechanisms to control the global economy through various laws, the situation over the past decades has proved otherwise. This has been clearly brought out in the paper where the World Trade Organization, the World Bank, and the International Monetary Fund. However, this is not to say that some achievements have been made in ensuring that the global economy prospers.
Conclusively, the fact that governing the global economy is an exercise in futility has been proven. Although the rule of law is responsible for the creation of the economy, the control of the economy at the international level cannot be achieved through the use of the law. Rather, the behavior of the states at this higher level is dictated by the need to achieve collective goals. Anything beyond that seems to fall under the satisfaction of the goals of the individual states. Attempts to come up with laws to govern the behavior of the hegemons will always be thwarted as these strong entries strive to maintain their position through suppressing any possible threat, which in this case refers to competing states. It is, therefore, true to argue that the global market is characterized by an element of anarchy, which is at the core of the key players, but will never be brought out for the system to be cohesive. Although there could be more efforts geared towards formulations of laws to regulate the behavior of states at the global economy level, the parties involved should appreciate the fact that the whole idea is moot, thus, worth not considering.
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