4.4 Globalization and the role of the government in economic management
Even before the recent efforts of official bodies for international cooperation, private sector initiatives have long been an important driving force behind international economic Integration. Globalization implies the expansion of economic activities across politically defined national and regional boundaries through the increased movement of economic agents and resources such as firms, capital, and other economic factors. But how will globalization change national economic policy making? Primarily, preferential and discriminatory policies will become increasingly ineffective under an economic environment that is moving towards globalization. Economic agents and resources subject to unfair treatment by the government policy will move away to a more investor-friendly environment. In this way, government-led economic development strategies and policy instruments will also become less effective. It is easy to see how direct regulations to promote or protect targeted industries would eventually constitute obstacles to further economic development. Generally speaking, globalization ensures that economic policy making and implementation will be guided on principles of non-discrimination and market mechanisms The implementation of an industrial policy similar to those adopted by the successful East Asian economies such as Japan, Taiwan, and Korea seems to have become very popular with other late-developing governments. This tendency is even more conspicuous when dis cussing the possible policy response to the so-called unlimited competition' resulting from globalization. An increasingly common view is that government should help firms compete successfully in the international market and that the government should intervene, to a large extent, in adjusting the industrial structure to the globalized com environments. Yet the basic stance concerning the role of government taken in this chapter supports concept diametrically opposed to this new trend of industrial policy. Globalization is a diversified and sometimes conflicting phenomenon that has different economic implications depending on the context. Therefore, it is especially difficult for government to design a particular industrial structure that will be optimal for its economy in all circumstances. In this sense, one can further conjecture that the economists' search for an alternative Industrial organization among the so-called American Fordist, German Craft, and even the lean and flexible production systems will not yield any definitive, single structure of Industrial organization. 6 Instead of adopting an active interventionist industrial policy that requires a tremendous volume of information and is not guaranteed to produce the correct solutions, an effective response to globalization may be to allow the market order to prevail in discovering an optimal business and industrial structure. This entails giving the private sector maximum freedom to make structural adjustments in response to the globalization
4.4 Globalization and the role of the government in economic management
Even before the recent efforts of official bodies for international cooperation, private sector initiatives have long been an important driving force behind international economic Integration. Globalization implies the expansion of economic activities across politically defined national and regional boundaries through the increased movement of economic agents and resources such as firms, capital, and other economic factors. But how will globalization change national economic policy making? Primarily, preferential and discriminatory policies will become increasingly ineffective under an economic environment that is moving towards globalization. Economic agents and resources subject to unfair treatment by the government policy will move away to a more investor-friendly environment. In this way, government-led economic development strategies and policy instruments will also become less effective. It is easy to see how direct regulations to promote or protect targeted industries would eventually constitute obstacles to further economic development. Generally speaking, globalization ensures that economic policy making and implementation will be guided on principles of non-discrimination and market mechanisms The implementation of an industrial policy similar to those adopted by the successful East Asian economies such as Japan, Taiwan, and Korea seems to have become very popular with other late-developing governments. This tendency is even more conspicuous when dis cussing the possible policy response to the so-called unlimited competition' resulting from globalization. An increasingly common view is that government should help firms compete successfully in the international market and that the government should intervene, to a large extent, in adjusting the industrial structure to the globalized com environments. Yet the basic stance concerning the role of government taken in this chapter supports concept diametrically opposed to this new trend of industrial policy. Globalization is a diversified and sometimes conflicting phenomenon that has different economic implications depending on the context. Therefore, it is especially difficult for government to design a particular industrial structure that will be optimal for its economy in all circumstances. In this sense, one can further conjecture that the economists' search for an alternative Industrial organization among the so-called American Fordist, German Craft, and even the lean and flexible production systems will not yield any definitive, single structure of Industrial organization. 6 Instead of adopting an active interventionist industrial policy that requires a tremendous volume of information and is not guaranteed to produce the correct solutions, an effective response to globalization may be to allow the market order to prevail in discovering an optimal business and industrial structure. This entails giving the private sector maximum freedom to make structural adjustments in response to the globalization
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