Globalization and the World Bank Essay

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The role of the state is subject to considerable debate, with respect to the forces of globalization. Some feel that the state will become obsolete. Certainly, the role of the state has evolved over time -- identities and the idea of sovereignty are subject to this evolution (Mozaffari, 2001). Stiglitz (2007) has argued that the expansion of globalization has outpaced this evolution of the nation-state. There is a good case to be made for this, certainly at present. Large-scale trade agreements are enforced through tribunals that are superordinated to national government justice systems, but that also lack transparency. Such tribunals are a recent development in globalization, but they have the power to render judgements to which a state is bound. Investor-state dispute settlement mechanisms (ISDS), as these extra-judicial bodies are known, essentially place corporate entities as the legal equivalent of a state, and given that the panels lack the transparency of state entities, and that they are typically comprised of industry interests, arguably ISDS represent an evolution in the structure of globalization that clearly diminishes the power and role of the state going forward (Baker, 2012).

The key to the argument of those who feel that the state will become obsolete is that ISDS and other, similar recent developments that undermine state power are part of a larger trend in the direction of reduced state power. ISDS alone do not eliminate the state, but they are a step in the direction of reduced state power, building on prior steps in that direction that have already occurred. The next trade agreements, or new text to existing ones, is expected to continue the trend, with the ultimate end being that states will lose so much power that they become irrelevant. The state then would not be useful enough to justify the cost of its own existence.

Rodrik (2012) argues that this trend need not happen, and there are others who also take the view that states can and should survive. Rodrik makes the case that the state is the one entity with enough power to act as a check to corporate interests. The concern, of course, is that states are willingly reducing their own power. They are signing trade agreements that explicitly bind themselves to ISDS. Rodrik argues that states have to continue to serve their national interests, and that these national interests will often conflict with the interests of globalization. Signing something like the TPP is done with full knowledge that there are trade-offs, but ultimately states need to understand and respect the role that they play in the world, and maintain their ability to enforce the interests of their nations. The promise of some magical economic growth incremental to a trade agreement, however enticing to a politician or his/her supporters, should not commit that politician to abrogating his/her duty as a democratically-elected official to serve the fuller, broader interests of the public that elected him/her.

Peet (2009) argues that the architects of globalization are entering a time of crisis. That crisis -- Peet was writing at the depths of the "Great Recession" -- has all but passed today, but he makes good points about the role that structural inequity plays in globalization. Peet's core argument is that the current neoliberal economic structure of globalization is unstable and ungovernable. This puts the process of globalization at risk. There are two valuable points here. First, while the crisis during which Peet wrote has abated, the system is still in place and still prone to future crises. These crises will create opportunity and need for reform. The second point is that the reform will ultimately have to come from the states. It is the states that have the power to structure globalization in a way that represents their interests. There is presently a view that state interests are aligned with corporate interest, but future crises will put that view to the test.

State interests are much more complex and varied than simply the pursuit of economic growth. Economic growth is one interest, but there are others, and to the extent that the public in a democracy understands and recognizes the points at which their interests intersect and do not intersect with those of the forces of globalization will be a critical point at which states are mandated to restore their power. States serve the interests of all of their constituents, in theory, and the current crisis in state power alludes to the willingness of states to reduce their own power.

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The skeptics argue that the state will remain essential in a globalized world, but they can only remain essential if that a role that states accept. The trend that is worrying is that some of the people who hold positions of power within state structures seem to have come to the view that states are an impediment to progress, as though the only possible progress in this world is unstructured economic growth. So the role of the state most certainly remains critical, and would be critical even if states were to cease to exist altogether, but whether states are willing to accept their role, and fulfill it, is entirely in doubt. The present trends are more favorable to the transformationalists, but there is hazard is extrapolating a trend that is but fifteen or twenty years old too far into the future. The influence of different actors tends to be cyclical in nature, and if the state's influence is waning now, it will not necessarily continue to wane forever. The state needs to choose, however, whether it will fulfill its role as a check on the unelected sources of power that are presently shaping and driving globalization. Stiglitz is correct that the pace of globalization has been more rapid than the development of the state. States are slow in their pace of change, but they will need to accelerate their response to globalization while they still have the power to do so, in order that they can avoid the slide into irrelevance that is presaged by the transformationalists.

Q2. The World Bank has largely forged a position with respect to the ideology of development as a right-wing entity, one that promotes the idea that by financing investment in communities, that those communities can be better equipped to improve their economic statuses. This supply side position juxtaposes against other organizations that are oriented less towards the facilitation of economic activity (Joshi & O'Dell, 2013).

The World Bank has always been conservative in nature, and initial loans were met with conditions that included balanced budgets, an orthodoxy that remains controversial among economists to this day. However, into the 1970s the bank started a policy of lending to Third World countries, and promoting tactics like waiving debt for developing countries. However, an ideological shift occurred in the 1980s away from funding development, and more towards encouraging Third World countries to balance their budgets, a focus that harkened back to the early days of the bank but also reflected widespread concern among developed countries over the rapid rise in Third World sovereign debt. The move towards using the World Bank as an instrument of globalization came in the 1990s, but continuing the idea that the World Bank could contribute intellectual capital to developing countries by telling them how to restructure their economies (Ngcwangu, 2015).

The World Bank has moved towards this type of intervention from a stance that was more oriented towards offering money to financially-strapped governments. The money was intended to solve short-term problems through investment, but would invariably be tied to specific economic reforms. The World Bank, along with the IMF and other groups, would essentially hold a nation hostage. If the nation needed money, it would have to move towards the sort of economic system that the World Bank favored -- free market capitalism -- whether that government and society were truly ready for it or not (Easterly, 2009). When such measures prove too much and the country collapses, its people suffering from policies that were not designed with their interests in mind, backlash can occur. The World Bank has earned itself a negative reputation in many parts of the world for its insistence on tying aid money to these types of economic reforms (Easterly, 2009).

Part of the issue with this particular ideology is the notion that development can be imposed from above (Easterly, 2009), that the World Bank can dictate some economic terms and an economy will begin to hum along nicely. Reality has shown that development model to have some fairly significant flaws. The World Bank did not always adopt this form of development ideology. In recent years, it may be reverting back to its older ideologies. Initially, the World Bank served to provide development funds, but as the idea of globalization started to take hold, the World Bank began to see itself more as an organ of that particular form of neoliberal development. Chowla (2012) notes that most of this form of development.....

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