The Future of Migration

It is hard to know for what moral failings future generations will hold us to task. If one peruses the pages of “progressive” publications in the US, my impression is that one will find several times more discussion about animal rights than about international labor mobility. Yet millions of people on the planet live less well than domestic animals in the US,22 and these people are trapped into their present and future condition of poverty by the violence that is exerted at national borders. I hope that the future will judge us rather for the extent to which we improve the plight of our fellow human beings, even in the distant parts of the planet, than for our treatment of our pets at home.

Globalization and exchange rate policy

Exchange rates are political. They affect the interests of powerful groups andvof consumers. They affect elections, and are affected by them. International economic integration only heightens their impact and their political prominence.

          As the world economy has become more open—and especially as developing countries have become more open—exchange rates have become even more highly politicized, more controversial, and more subject to mass and special-interest political pressures.

          Those who ignore the political economy of currency policy will make mistakes in developing feasible exchange rate policies. Both analysts and policy-makers would be well advised to pay concentrated attention to political economy factors in exchange rate policy-making.

The future of global financial markets

It is tempting to conclude that global capital markets have reached the point of no return. Capital flows across borders have risen to new heights. This is true first and foremost of foreign direct investment, which has been stimulated by enterprise privatization, the development of global production networks, and the ready availability of finance for mergers and acquisitions. It is hard to imagine a return to significantly lower levels of FDI, since many of the facilitating conditions—the advent of the Internet, for example, which facilitates cheap communication with foreign branch plants, and instantaneous data transfer between cash registers at retail outlets and foreign production facilities—are permanent. The same is true of foreign portfolio investment. All of the advanced countries and a number of developing countries have relaxed or removed their most significant capital controls, and in neither world do policy-makers show any interest in going back. At the same time, policy-makers display more awareness of the dangers of excessive reliance on portfolio capital. Prudential supervision and regulation, corporate governance, and macroeconomic policies have been strengthened to accommodate these changes in the financial environment. Countries have accumulated reserves as protection against capital account reversals. They are more successfully resisting the temptation to expand public spending and acquiesce in a significant increase in private spending in periods when a large volume of foreign finance is flowing in. It is hard to imagine that what has been learned, often at considerable cost, will now be forgotten.

            All this makes it important to recall that this is not the first time that financial markets are significantly globalized; this was also true before World War I. What many contemporaries regarded as a permanent condition was, in the end, only a passing phase. Global financial markets shut down in the 1930s and then took two generations to recover. This resulted from an unfortunate confluence of factors: perverse macroeconomic policies, nationalistic trade policies, poorly regulated financial markets, and the absence of a framework for international cooperation, all against the backdrop of escalating diplomatic and political conflicts.42 Optimists will say that there have been significant improvements in the conceptualization and implementation of macroeconomic policies in the interim. The multilateral trading system is more deeply entrenched; it is institutionalized courtesy of the World Trade Organization. Financial markets and institutions are better regulated. We possess a stronger multilateral framework, starting with the IMF, to facilitate cooperation on the regulation of financial markets and the conduct of macroeconomic policies.

            Pessimists will respond that a nationalist backlash is still possible. The United States, seeing its bilateral trade deficit with China explode, continues to threaten unilateral action. In Latin America, where the benefits of globalization have been slow to trickle down to the poor, populism is alive and well. The privatization of public enterprise that has supported foreign direct investment has uncertain prospects in the wake of Bolivia’s re-nationalization of its energy sector in 2006. The disorderly correction of global imbalances, if it involves sharp shifts in exchange rates and significant increases in interest rates, could again place global financial stability at risk.

            Kurt Vonnegut might have had this set of issues in mind when he wrote that “History is merely a list of surprises. It only prepares us to be surprised yet again.” It will be interesting to revisit this chapter in, say, fifteen years in order to see what the surprises turned out to be.

PENGARUH GLOBALISASI

 

Tiga Faktor Utama Yang Mempengaruhi Globalisasi

Explorations in light of financial turbulence from Asia to Argentina

Combining policies to benefit from globalization: the case of China

For a developing country to benefit from globalization takes a combination of many factors. No single policy can work without many others in place in the same time, and a whole situation can get out of hand simply because one element goes wrong. Offering cheap labor is not enough to make growth happen, and there are plenty of risks in the volatile global market.

          The larger the gaps, and the more the world is globalized, the more difficult is development for the developing countries, and the more “conditional” the convergence between them and the developed countries.

          It is surely urgent for the international community to take development as the top priority on the global agenda. But the developing countries must do the right things themselves to make progress.

          In the case of China, there are still many great challenges, and further challenges are emerging—such as the conflicts with existing economic powers in the areas of trade and resource supplies. But hopefully, China may provide a case of successful development in the era of globalization. At least, as one of the most difficult cases, China’s example may encourage other developing countries to face their own special challenges and overcome their particular difficulties

Bangladesh: development outcomes and challenges in the context of globalization

The foregoing discussions highlight the importance of many global economic issues in Bangladesh’s development challenges. While most low-income countries depend largely on the export of primary commodities, Bangladesh has made the transition from being primarily a jute-exporting country to a garment-exporting one. The transition has been dictated by the country’s resource endowment, characterized by extreme land scarcity and a very high population density, which makes economic growth dependent on the export of labor-intensive manufactures. The issue of access of labor-intensive manufacturing exports from developing countries to the major global markets is, therefore, of utmost importance for Bangladesh. Given the important role of workers’ remittances in its economy, Bangladesh is also greatly concerned with the issue of freer movement of temporary workers across borders.

            It is not easy for a least developed country like Bangladesh to specialize in manufactured exports, which currently account for more than 90 percent of the country’s export earnings. Having low wage costs can hardly compensate for its relative disadvantage in marketing skills and infrastructure (including transport, ports, product standards, and certification facilities). Moreover, its existing and potential exports are likely to have low domestic value-added contents because of their heavy dependence on imported raw materials and intermediate goods; this makes it difficult for Bangladesh to satisfy the so-called “rules of origin” in getting preferential access for its exports in the markets of the developed countries. Thus, while Bangladesh stands to benefit from the European Union’s decision to allow duty-free import of “everything but arms” from the least developed countries, it would like to see a relaxation of the “rules of origin” in order to benefit even more, and it would also like to see other industrialized countries, particularly the US, replicate such trade concessions.27

            Bangladesh also needs to worry about non-tariff barriers such as those relating to environmental or labor standards. Possible anti-dumping actions against its exports are also an important latent threat. Besides, tough sanitary and phytosanitary trade regulations are an impediment for diversifying into prospective agro-processed export items. Clearly, the so-called trade-related assistance sought by the least developed countries like Bangladesh under the WTO arrangements needs to address these issues in a comprehensive manner.

            Bangladesh’s export base remains low as the impressive success in garment export has yet to be replicated in other industries. Indeed, its experience with the garment industry has demonstrated the limitation of relying on enclavetype arrangements to facilitate export growth in a specific activity, while postponing institutional reforms for improving the investment climate generally. Lack of a favorable investment climate is also reflected by the fact that, in spite of very liberal policies, Bangladesh has yet to become a favorite destination for foreign direct investment.

            Bangladesh’s development experience also brings into focus the issues surrounding the role of foreign aid, such as in meeting the funding needs for achieving the Millennium Development Goals and providing support to absorb economic shocks. Foreign aid currently received by Bangladesh is much lower compared to the average of low-income countries both as a proportion of GDP and in per capita terms; and this disparity has been increasing over the years.28 One explanation for this lies in the perceived low “aid absorptive capacity” of the country due to weak governance. Donors are concerned about the possible misuse of aid funds, given the governancechallenged environment in Bangladesh. But there is ample evidence that part of the problem also lies with the donors insisting on unrealistic project design and aid conditionalities (Mahmud 2006). In a recent review of its aid operations in Bangladesh, the World Bank, for example, has admitted the need for finding a “good local fit” for its projects and for engaging in a wide range of critical sectors rather than waiting for reforms to occur (World Bank 2006b). Given Bangladesh’s record in reducing poverty and improving social development indicators, the international donor community faces the challenge to find ways of helping the country to achieve its development goals.