Globalization and national Policies

With revolution in information technology the world has become a global village. Globalization is fast dissolving the distinction between the international and national especially in field of economics. New information technology has enabled individuals, corporations and nation states to reach around the world faster, cheaper and deeper. Globalization driven by the big international financial actors is manifested in a shift from a world of distinct national economies to a global economy. Since 1990 globalization has become a key economic factor .Globalization is creating a new paradigm at the national and international level. No country can retreat behind the curtain of national sovereignty and prosper. Not only at the governmental but at the non-governmental level there is increasing interaction and networking. Hence no policy is devoid of international influences these days.

International factors can influence domestic policies in four ways. Firstly it can infuse the beliefs and values of actors within the national state. Secondly it may influence domestic political actors and public opinion. Thirdly government and policy makers may also use international obligations as a pretext for some unpopular policy decision. Fourthly the international political or economic actors might put pressure on a country to adopt or change a policy to their biddings or face the consequences. Conditions imposed by international financial institutions to force countries to open their economies under WTO, United Nations sanctions imposed on different countries and threats of use of power are examples of such international interventions.

International demands and pressure are more effective in case of poor developing countries like Pakistan. Even one phone call is enough to induce a policy u- turn. It is widely believed that Pakistani government changed its policy towards Taliban due to pressure from US government after 9/11 bombing.

Privatization derive of 1980s in Pakistan was mainly a result of international financial institution’s pressure. “Pakistan primarily started the process of globalization and integration, like many other countries, in response to external pressures.” (Noshab F) Under pressure from the World Bank and the IMF the government of Pakistan embarked upon a comprehensive liberalization and privatization plan. Liberalization resulted in unprecedented devaluation of Pakistani rupee without accompanying rise in exports. Foreign currency regime was liberalized without any safety measure. Again in 1998 the foreign currency accounts were frozen under international pressure and refusal to give loans.

Internationally imposed policies may not be suited to national environment of host countries. International actors often recommend ‘one size fits all’ sort of policies. Neo-classical economic policies are recommended by the international financial institutions for countries around the world. These policies presuppose existence of many institutions as rule of law, free economy, democracy, good governance. These are institutions are important for creation of enabling environment in which recommended policies can prosper. In countries where these institutions do not exist or are weak these policies add to the existing economic mess. Internationally sponsored privatization of state owned assets in Pakistan in 1990’s is one example of such policies. Privatization of state owned assets in Pakistan can be divided into three phases. Firsts was the outright sale of small manufacturing units. Up to middle of the 1996 over 70 units were sold to the private sector. The privatization process was dubious and non transparent. There were vast charges of corruption nepotism and bribery. Monopolies were created and national assets were sold at throw away prices. There was almost 60 per cent reduction in employees in privatized units. Hence first phase of privatization in Pakistan cannot be regarded as successful owing to vested interests, poor judgment of the market and above all, the absence of regulatory bodies. Simply reducing the degree of government involvement through liberalization and deregulation and leaving the economy to the whims of immature market may not necessarily lead to efficiency. However second round of privatization had produced much better results. Assumptions behind the privatization derives is that it will improve the quality of services and products. But without proper regulatory framework and accompanying institutions of market economy private sector is more prone to unethical corporate practices as compared to state owned companies. Private sector did not necessarily make enterprises more efficient. It should have been better to privatization on case to case basis and with in view of Pakistan‘s special needs and circumstances. Same can be said about other economic policies recommended by the international financial institutions. There is no ‘one size fit all’ solution to national economic problems. Policy makers cannot work in isolation oblivious of international policy factors. Lesson learning from best international practices is advisable but at the same time adaptation of these lessons according to national environment is necessary.