From Globalization to National Fiscal Stimulus

This global financial sector is the main steering of the world economy. These days the global financial sector has been in great problems which have turned shape of the world economy. Different policies of protectionism are enforced in the western countries to protect national economies from the deepening recession. Developed economies have restricted their banks not lend to money to any of their foreign clients because of credit being dried in developed economy.
There has been a transformation from globalization to national fiscal stimulus plan in order to boost national economies. This transformation has also witnessed in the European countries. Declining demand in the imports are falling in United States and European countries which has lead downfall of the foreign trade. The growth of the industrialized sector of the developing economies has stopped due to declining demand in the international market in this sense china will be suffering huge loss as economies has transformed themselves from globalization and focus more on nationals industries.

The developed economies have shifted their focus from developing economies because of the uncertainty present in the global market. The investors have pulled their hands from foreign investments and even multinationals who were supposed to open new ventures in developing economies are thinking thrice. Some assistance has been witnessed from the developed economies to developing nations but that assistance is in the form of aid whose sole purpose is to strengthen weak economies. China says, the only way it can help global economic situation is through supporting pulling their economy out of recession. Global efforts are being made to strengthen economies of the world, before the globalization resumes and to return it back to normal till there will be complete pause in the globalization.

Due to the severe downturn in the globalization one thing is apparent that there has been serious decline in the foreign investments. Government has been focusing on their national fiscal stimulus rather than investing outwards. Western countries have free markets in their region or boundary but have restricted foreign investment and trade in variety of ways.

Over the last three decades the shape of globalization was defined by the west and the entire trade and investment was in control of western financial markets through unregulated structure which has now almost collapsed. This collision has brought serious learning for the international financial markets that there is a need for proper structure of trade and investments. This structure should be heavily regulated in a way that it should help process of globalization to grow further.

Now the situation has taken 180 degree turn in the international scenario, it is now very difficult or could be said it is impossible for western countries to accumulate the world`s financial resources at their hubs and distribute to the developing countries in the name of Aid to fulfill their cruel and narrow interests.

Due to the excessive printing of dollars in the 1970`s changed scenarios of the global financial markets which is now very difficult to change. The system has been shattered by greed of the policy makers and also because of faulty policies. But the situation of worry is not the old policies but still people from same school of thought are pinning those same policies in hope they may work in the world interest but the fact those policies are triggering the world agony as they have seen its repercussion in the past as well. The world is changing, shape of things have changed and are still changing future belongs to those who have determined themselves to change and meet their pace with changing situations and adjusting with the global financial situations.

This changing scenario in the international environment has left different learning dimensions for the Pakistan. Now, there is need to look inwards and taking measure accordingly rather than looking at foreign assistance. They have to realize their own potentials and to put their efforts to vitalize their own resources because there is hardly or no hope for any exports or foreign investments in short or medium term.

Looking at the current scenario it will be difficult for the developed countries to assist the developing nations. They will be focusing more on their national stimulus plan rather than multilateral stimulus program. There could be one possible condition where multilateral assistance is possible when developing economies shows improvement in their economic conditions and show their ability to pay back till then assistance looks like a dream to me. Foreign inflows are the catalyst of improvement in the economic order of the developing economy but these inflows will help slighter. These countries have to find out way and make such policies in which they may not make budget in a hope of foreign assistance. These policies should have the reason to be self reliant.

Self reliance always occurs when domestic markets are available for the international competition, where a country has more of exports oriented policies than import oriented. However this process is a gradual process it could not be implemented overnight. These markets should not be regulated or driven by some donors or lenders but by the national consensus body in order to avoid any downturn in national economic situation caused due to global economic downturn.
The economic fate of Pakistan has always been decided by the international forces. They come to Pakistan live in five stars hotels and make policies they are not aware of the absolute situation present in the country. This blame does not only remain on these foreign policy makers but also the officials from Pakistan who failed to explain their situation. The policies suggested by the international financial partners it not be adopted as it is but they should be tailored accordingly. The conditions lies between the lines of policies (suggested) and they are the root cause of economic demolition within a country. Every country has different situations different demands and every policy should be made in that context to build national self reliance.

In last ten years (Musharraf Era) Pakistan received huge foreign capital either through privatization or any multilateral aid but the rulers of the time failed to build any productive capacities in the country. That money were either spent on some sectors to support them or it was mis-utilized some way or other the foreign capital didn’t benefit much for Pakistan because faulty and weak national policies. In order to curb the dilemma of balance of payment the FDI was not properly utilized in to export oriented industries but it was more utilized in import oriented capacities. The last breath of the economy agriculture and industries also saw the face of distress when emperors of the time grow service sector at the cost of two. Service sector is need of time but balancing focus is necessary.

Pakistan has been ranked in the list of African countries where human development index is actually decreasing. The level of poverty is rising day by day.. Foreign investment is attracted by the purchasing power of middle class but the catastrophe is purchasing power is going down and it is entirely due to rising level of poverty. The downside of national economy is it has not integrated with regional markets which could bring some foreign investments in those ventures to cater regional markets.

It is left hand rule before investing anywhere look at the condition of the portfolio how it is performing in the market. Same is the case with foreign investors they will look and analyze the economic condition of the country and then they will put money in the markets. Even local people will find it convenient to invest money in those ventures whose health are better and will grow in future. There has been over reliance on the foreign assistance to correct the loopholes in the economy and allow it to grow. On the other hands domestic banks prefer to invest their capital in the T bills rather than giving loans to commodity producing sectors.

This years high hopes have been planted on the service and agriculture sectors for gearing the GDP growth. Whereas manufacturing sector has been declining at a rapid pace which clearly indicates that it is not an integrated approach where one sector is growing and other is going down. If sincere economic development has to be witnessed in the country balancing approach has to be indentified.

The Government should devise a new policy structure where it can reshape its priorities. The first priority of the economy should be it should attain level of self sufficiency in food grains on the other hand through a proper integrated structure industries and service sector should also prosper where as financial sector provide a sustaining role.

“It has been said that arguing against globalization is like arguing against the law of gravity” Kofi Anan

Apart from affluent laissez faire capitalism, communication outburst and a stunning augmentation in international travel and cultural interactions, “Globalization” is a phenomenon distinguished by the western conception that “liberal democracy” is the best political system and it should triumph in the world because of equality and justice to all. Looking at the scenario from theoretically point of view, this has apparent insinuation for Islam which rejects the western notion of popular sovereignty; and precincts the lawmaking and law implementing authority of the state within the limits prescribed by “revelation” which is Holy Book. From liberal democracy to social progressiveness, the distance is too petite and therefore, it is considered to be a prospective threat to Islamic culture and societal system. It would be insincere or biased to say that the Muslim majority states have legislative system based on the Principles, values, codes and ideals of Islam. On the contrary, in the majority of cases they are the terrible examples of despotism and denial of social and economic justice. No wonder that after the downfall of communism and the disintegration of the Soviet Union, the focal point of the western think tank transferred to the daunting question how to deal with Islam, which the western consensus generally perceives as irrational, retrogressive and intrinsically violent.

It was the time when communism was loosing battle in Europe, Francis Fukuyama in his landmark articles “The end of History”, published in the national interest (summer, 1989), stated:
“what we may be witnessing is not the just the end of the cold war, or the passing of a particular period of post war history, but the end of history as such, that is, the end point of mankind`s ideological evolution and unversalization of western liberal democracy as the final form of human government.”

According to Fukuyama, “History” was to end not in terms of chain reaction of events but in the manner that liberal democracy was fated to emerge triumphant on the whole than any other political systems. From the beginning of the nineteenth century many states had been adopting or advancing towards liberal democracy more progressively whereas an assortment of diverse variety of dictatorship and totalitarian indulgence, including fascism and communism had been disgraced. In Fukuyama`s view, Islam as an ideology did not pose much problem, for it had little intellectual or emotional appeal outside the Islamic heartland. Not surviving temporary setbacks or relapses, eventually liberal democracy was to coup, overcoming all pockets of resistance.

Bernard Lewis, the renowned historian, did not approve to the views Fukuyama. In his book “The Roots of Muslim Rage”, published in The Atlantic Monthly (September 1990), he referred to a “mood and a movement” in Islam that far risen above the level of concerns and politics that the governments in Muslim states pursued. He viewed at this occurrence as “a clash of civilization”. By that time the so called fundamentalist, extremist or in more apparent term the Islamic militant had taken a visible shape in several regions of the world like Afghanistan, Algeria and Egypt, Lewis spoke of the “irrational but surely historic reaction of an ancient rival against our judeo- Christian heritage, but our secular present and the world worldwide expansion of both”
Samuel P. Huntington pierced into the debate with his highly controversial article titled “The Clash of Civilization”, published in Foreign Affairs (Summer 1993); to enlarge the thesis that in post-cold war world, the essential source of divergence would not be primarily ideological or primarily economic but that “the great divisions among humankind and the dominating source of conflict will be cultural.” Huntington emphasize that the civilization differences curtailed from conflicting cultural and religious values and argued that, even though the clash of civilizations was predictable, it was not obligatory that it should be violent in nature. Huntington recognized some seven to eight major nations that included western, African, Latin America, Hindu, Japanese, Islamic, Slavic orthodox, and Confucian. According to him, although the liability lines between various civilizations had the potentials to provide as battle lines, the west and Islam were more likely to collide because the Islam had universal values unlike others. Huntington warned the American government (Washington consensus) against the development of linkage between the Islamic-Confucian civilizations and recommended it to thwart expansion of military and economic collaboration between Islamic and Confucian states by take advantage of possible differences between two.

Captivatingly, Lewis and Huntington both agreed in their thesis that the west should avoid conflicting with Islam. In his article cited above, Lewis stated: “It is critically important that we on our side should not be provoked into equally irrational reaction against the rival.” On his part Huntington challenged that the values of the western civilization were not universal but unique. If the west aims universalism, the others would resent and distinguish it as imperialism. In his opinion, “Western universalism is dangerous to the world because it could lead to a major inter civilization war between core states.” In other words, no premeditated efforts should be made by the west to obliterate cultural uniqueness of different civilizations.

The response of Islam to the west’s effort at supremacy is an ample proof and evident that there is no “End of History” in sight, for Islam is a formidable philosophical and cultural force that rejects to submit to the west. The west must control enticement to implant its cultural values and political system in Islamic states. Instead, to shun negative fallout of globalization and to ensure international peace and security, there is a authentic need for inter civilization dialogue guided by the principles of peaceful co-existence and non-interference in each other`s affair.