Embedded Liberalism and the Idea of Necessary Compromise Governing the Global Economy Market


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The term “embedded liberal compromise” was first used by John Ruggie, an American political scientist in 1982. Mainstream researchers pronounce embedded liberalism as constituting a compromise amidst two necessary but conflicting objectives. The revival of free trade was the first objective. In this paper, the ‘’embedded liberalism” principles are revisited and describe their relevance to the contemporary worldwide economy. The postwar economic boom (or the post-World War II economic growth), the Gold Age of Capitalism and the long boom was an economic prosperity period which happened in mid-20th century. It started in 1945 after the end of the Second World War and continued till the early 1970s. Markets require to benefit from the social legitimacy as an essential principle because their political sustainability is based ultimately on it. The rise in economic insecurity and domestic income disparity has been of focus to the government. The reason behind this concern from the government is the political implications for future trade liberalization agenda. It is from this principle that we evaluate three present sets of institutions and practices in which the ongoing legitimacy crisis shows the necessity for a renewal of worldwide governance and revitalization of embedded liberalism. They are transnational corporations activities particularly concerning core standards in human and labor rights, the informal norms and formal rules of international organizations and international financial architecture.

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‘What we’re the most significant features of the “embedded liberal compromise”?

Embedded liberalism did not allow for a golden age of capitalism when it was implemented. Instead, it had adverse effects that were widely felt by individuals, government and even markets. These effects can be categorized as direct and indirect effects.

Direct effects

Foremost, America’s economy notably endured small measures of economic growth starting in 1970. On the other hand, the American labor force has rapidly grown to put a huge downwards pressure on wages paid out to the working population. The most directly linked cause to the slow economic growth is owed to the increase in anemic productivity. Other contributing factors include the ever growing foreign competition, demographical changes coupled up with policies and local economic exercises. Recently, there have been economic improvements that have come as a result of huge workforce layoffs and people migrating out of the country (Ruggie, 1997).

Secondly, it led to economic insecurity. According to a study by Gonoi & Ataka, the wages for almost all working categories located in America have been stagnating since the late 1970s. According to statistics collected by the department of labor since the 1970s, the one-year period that ended in September of 1995 the wages grew at the lowest of rates ever recorded in history. The study also unearthed facts that income difference has also increased significantly since this period in the United States and for the past few decades, it has been getting worse. With these facts, no one and nowhere in this globe could achieve a golden age.

Thirdly, embedded liberalism led to the United States outsourcing production of their products to countries with a lower wage allocation despite having higher rates. This outsourcing was done in a bid to save on production costs but in the end led to people losing jobs and the Golden age couldn’t be achieved through this condition.

Additionally, it resulted in a relative shift in power within the labor markets and poor working conditions. This change is owed to Globalization. Globalization renders the work of a tremendous group of employees easier to sustain across nations. This sustenance constitutes the bargaining power of immobile labor known as Capital erodes. It is with the capital erodes where work is forced to live with an even bigger instability and where earnings are based on the hours worked by an employee. Lower wages is the result of readily available labor that is offered. Poor working conditions that were created would not allow for a golden age where economic growth would be favored.

Lastly, Bhagwati proposed a hypothesis based on Globalization. He argues out that globalization narrowed resulting in countries being at an advantage. Industries become weak financially leading to a labor overflow and unemployment as well. This scenario implies poorer earnings for the job and unemployment as well. Without adequate energy, no industry of economy could grow positively or get into a golden age (Dehejia, 1994).

Indirect effects

The policy affects outcomes. During the embedded liberal compromise, systems were made and put into action and resulted in slower economic growths. A comparison made by Richard Harris between wage growth and globalization indicated that the increase of salaries was delayed less in Canada compared to the United States due to policies put in place in the United States. He concluded that policy accounted for the large part of the significant difference that was found to exist (Ruggie, 2003).

Besides, currently, global markets expose countries to newer policy related problems. Before, supervision and regulations systems, as well as accounting and taxation policies, were made based on a nation’s economic landscape. During the embedded liberal compromise, the policies put in place crashed markets and led to more than just job losses in some other countries.

Also, globalization in the fields of production has had a huge effect on local policy making instruments. Studies reveal that it led to interfirm trading. This is the kind of trading that is way less sensitive to policy compared to regular trading. Intrafirm trade reduces the potency of policies hence making it a problem for policy making agencies regulate some factors of business (Little, 1982).

Globalization of manufacturing poses serious challenges to the central system houses that guided the postwar United States of America’s political economy. According to research done by Cowhey and Aronson, the governments of the day presumed that its job entailed regulating the levels of purchasers’ expenditure, help developments and analyses of new products. Today, it is profoundly hard to know if a product is American or is destined for its markets as a result of the effects caused by Globalization of manufacturing which was part of the embedded liberal compromise. Hence, this fact nullified the possibility of America falling into a golden age after that.

Furthermore, globalization converted some aspects of trade policies to a practical idea. Recently, the same body that comes up with policies on international trade within the United States found itself in a big mess where a company sued them over law and policy they came up with on their own. These laws were supposed to curb American companies from dumping waste in foreign countries they have relocated to for reasons stated earlier in this paper. An American company importing typewriters was sued for allegedly dumping them without proper documentation and for dumping them in the wrong place. The Japanese company that sued proved that after these policies have been made, they are not useful as the bodies that make them break them as well.

The embedded liberal compromise liberated regulations and governments allowed for the surfacing of global capital markets. Both private and public figures have ripped hugely from these markets. Expansion of such markets coupled with their integration have dealt a huge blow on the standard economic policies, and at the same time, they are creating new policy challenges that neither the markets players nor governments are yet to control or comprehend (Ruggie, 1982) completely.

Lastly, the people that pushed for these changes feel that the markets denied the government its privilege to undertake in “unwanted” partaking. On the other hand, the markets have not yet proven that they have the capabilities to smoothly ignore the policies set as well as the governments themselves ignore the set rules that are allegedly imposed by them. All this can be owed to the embedded liberalism that came during the postwar period (Lee, 2010).

Significance of embedded liberal compromise

Among the importance of integrated liberal understanding is the economic insecurity that has raised a lot of concern in the government. This is because of the many political implications that have affected the agenda concerning trade. The job displacement has risen besides enlarging income disparity. Trade liberalization has resulted in detrimental effects on the unskilled individuals in the society hence poverty levels get on the increase. The numbers of people affected by embedded trade liberalism are disproportionately needy even in developing countries. For countries ready to provide business freedom, it is a requirement to give insurance and compensation to the people who are most affected by liberalism in trade. (Lee, 2010)

Another significance concerning liberal compromise was established by Michael 2015. They presented findings that the liberal compromise system emphasized on the use of future and present tenses in their political ideologies. Liberalism was proved to enhance stimulation and self-direction when it addressed political views. It is different from the conservatism ideas that conform the individuals to tradition and promoted conformity to attain security. It is advantageous for liberalism compromise as it endorses openness to vary embedded values very strongly. It indicates a future focus rather than concentrate on the past. Whereas the past makes history, the future is the most important part of a developing society. Liberal compromise is, therefore, a hindrance to a thriving society.

Religion is one of the factors that have been affected by the liberal compromise. The issue of religious pluralism has played important roles in the liberalization of the society. According to Jonathan and Steven (2016), the psychology that envelopes religion has a rich history that involves the study of the relationship between religiosity and its prejudice at a stage of the individual. However, a lot of individuals encounter discrimination at a personal level and systematically based on their liberalization. For better comprehension of interreligious competence, conflicts between inter-religions have to be overcome. To effectively deal with differences between religions, skills, and sensitivity is recommended so as to avoid disputes. Liberal compromise involves the use of psychology that is clinical or counseling in dealing with people. The significance in psychology is the emphasis, the assessment, and investigation of multi-religious groups. It facilitates easy comprehension and accredited programs to educate individuals on liberalism.

Besides religion, intercultural competence has been significantly affected by embedded liberal compromise. Liberalism encourages the high level of awareness of the difference in cultures. As studied by Michael (2015) the awareness of these differences is accessed using a development model of intercultural sensitivity. This program illustrates the process of growth in people as they embrace and experience cultural distinctions.

The first response to Liberalism is the denial of these differences. It is because many people believe that their culture is the only true one. Individuals with this perspective have a difficult time conceiving that concept of multiple cultures. Such perspectives are often manifested in generalizations like “foreigners” or even “immigrants.” Following the denial, these individuals will result in aggression due to their disinterest on cultural differences. It is an impact of embedded liberal compromise.

In issues pertaining liberalism in the global sector, ICTs have been used for development. ICT comes with the negative and positive impact on the society according to Nazir and Taruvinga, (2015). The use of ICT especially in the education system has affected the global economy. As studied these effects are well established mostly in the African countries. Despite liberalism, any countries in the third-world continually depend on developed countries for funding. All this is as a result of certain factors as lack of employment, rising levels of malnutrition, diseases, and starvation. Liberalism, in this case, outlines the need for development. It is of utmost importance to note that social, economic and political developments are not aligned with local and cultural development. Liberalization compromise does not, however, pertain any of this development because liberalization facilitates development in such a way that people can fully realize their potential and act on their personal upgrade. It is indeed preceded by attaining knowledge of the people’s fundamental human rights.

ICT is, therefore, an important tool in facilitating education which is one of the human rights. It is necessary for the interaction and participation in the global economy. This study goes ahead to state that ICT should also be included as a human right (Nazir and Taruvinga, 2015). The notion is currently an assertion because the lives today are enveloped in ICT, hence making social, political and economy fundamental human rights. Therefore access to ICT is essential to all people regardless of the country’s development status. Liberalization compromise is, therefore, an inhibiting factor in the ICT development process especially in the third world countries.

Regarding the study done by Zhang on the liberalization of China from the United States, liberalization has indicated some advantages (ZHANG, 2016). Foremost, the country can dominate its economy constitutionally. Secondly, the state is treated equally among the other world powers regardless of the material and normative power possession. Thirdly, the country enjoys exclusive prerogatives power and particular interest bestowed on them. The fourth advantage is that the legalized hegemony becomes an essential part of the legal order. Liberalism compromise would have prevented the benefits of real power.

Liberal pluralism encourages legal equality and determination. The state gets informed in the first institutions concerning global international society. These include the authority that liberalism bestows on a state besides outstanding responsibilities. The sovereignty of a state is enhanced in addition to territorial integrity that is non-interfered in its activities. It is now possible for China to build a great self-defense system and also maintains its sovereignty. Most importantly it has the sole power to meet challenges of international security and peace.

In conclusion, liberal compromise is an alarming issue that hinders social, political and economic progress. Political ideologies are properly laid out in the presence of liberalism. It is, therefore, important to understand the terms that pertain liberalism for its orientation within a state. Reliance on external rules and decision makers are a major drawback to liberalism. (Solon and Andrew, 2016) It is possible to focus resources and energy on a liberal society compared to a liberally compromised society. Liberalism encourages preservation of values and voluntary implementation of fundamental human rights. For the development of a particular society, freedom is inspired to overcome arising challenges in the future and the current society.

Why did golden age” of capitalism end

Neoliberal offensive: By lifting the gold bond of the US dollar in 1971, a bridge is created that allows for the transition between Keynesian and neoliberal form of capitalism. Before this, the greenback functioned as a world currency, and it firmly couples to the United States gold reserves. Other types of currencies of the OECD remained in the fixed exchange rates category to the dollar (Solon and Andrew, 2016). According to ZHANG (2016), the western industrial nations viewed money as a sign of gold. In the 1960s, the US covered the costs of the Vietnam War by raising the value of the dollar. They printed more dollars, and this caused the Nixon administration to rebuke the gold backing of the United States dollar. The fixed exchange rates to the dollar by other leading countries was soon after, canceled.

The financial markets take off: Billions of tax relief for corporations and the rich caused a high loss of industries that were low on profits. Societies that were doing well flowed on unregulated markets where profits were higher. It affected the smaller businesses and made the economy tougher for the poor.

The financial explosion: Creation of new activities like assumptions of currency market and commodity exchange, fraud with options together with the takeover of businesses by banks caused a financial explosion. The new creations lead to uncontrolled expansive use of credit hence a higher percentage of debts on the citizens (Stent, 1969)

Economic Wonderland: An inner expansion happened after the world war, and this caused the uprising of new societies and new markets. Janson (2000) found that these developments went a long way in revolutionizing housework by the household appliance industry. The entertainment, food, aircraft and tourism sectors widely expanded bettering lives.

In conclusion, the embedded liberalism had significant features and effects in the golden age. Its impacts and significance were both direct and indirect as highlighted in the essay. For example economic insecurity and narrowing of globalization. The embedded liberalism did not enhance ‘The Golden Age’ of capitalism. It attempted to reduce inflation, increased political unrest and high rates of unemployment’s in America.

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