Chapter 2: Key Concepts and Issues since 1991: Globalisation
Choose the correct option.
Some of the important changes that occurred in the economic sphere in the age of globalisation are:
The term ‘socialist market economy’ is used to describe the system in
Find the odd one out.
Suggest appropriate concept/word.
The international agency dealing with international trade -
Solution:
The international agency dealing with international trade - World Trade Organization (WTO)
The companies that operate in several countries -
Solution:
The companies that operate in several countries - Multi-National Companies
State whether the following statement is true or false with reason.
Globalisation brought in the concept of the market economy.
Solution:
This statement is True.
- (1) During the Cold War, the economic systems followed by countries, depended upon their ideology. For e.g., most West European nations and the USA were free democracies and followed a capitalist economy.
- (ii) In the era of globalisation there is only 'market economy. However, the nature of the market economy is determined by the country's ideology for e.g., China has a socialist market economy, West European nations are described as 'welfare market economies' and the USA is considered as 'capitalist market economy'.
- (iii) In most countries, the State has withdrawn from economic activities and the private sector and profit motive have propelled the economy.
Non-state actors have become irrelevant in the age of globalisation.
Solution:
This statement is False.
- (i) Good governance and the participatory State focus on the role of the civil society which includes non-state actors such as NGOs.
- (ii) International relations today, are not only between States but also include non-state actors. These sometimes also pose a challenge to the position of the State. Globalization has made non-state actors relevant. This includes organizations which are beneficial e.g., NGOs working for humanitarian issues as well as threatening organisations e.g., terrorist outfits.
Explain the co-relation between the following.
Globalisation and culture
Solution:
Globalisation refers to the rapid spread of goods and services, technology and information, ideas and culture, trade, and interactions across the world. It is the connection of different parts of the world resulting in the expansion of international cultural, informational, economic, and political activities. Events in one part of the world have an impact on other parts of the world. Changes have taken place economically and culturally.
Today a global cosmopolitan culture has emerged i.e movement of people across the world and public awareness of global issues. This is noticed in matters like values e.g. secularism, clothing food choices, ways of celebrating festivals, etc. There is international awareness of India's rich cultural and historical heritage. Similarly, westernisation and urbanisation have influenced Indian society e.g. the breakup of the traditional joint family and the rise of individualism and materialism in the country.
GATT and WTO
Solution:
The General Agreement on Tariffs and Trade (GATT) was signed on 30th October 1947 by 23 countries with the purpose to promote international trade by eliminating trade barriers such as tariffs or quotas. It came into force on 1st January 1948. It aimed to boost economic recovery after World War II through reconstructing and liberalizing global trade. It introduced the most favoured nation principle. GATT was refined over 8 rounds of negotiations, leading to the creation of the World Trade Organization ( WTO) which replaced GATT on 1 January 1995. WTO covers services and intellectual property also. It is the international agency overseeing the rules of international trade i.e., it promotes free trade agreements, organizes trade negotiations, settles trade disputes, etc. Its headquarters are in Geneva. It has 123 member States. The WTO dispute settlement system is faster, more automatic than the GATT system and its rulings cannot be blocked.
Express your opinion of the following.
Participatory State is beneficial to the society.
Solution:
Participatory State advocates more involved forms of citizen participation and greater political representation than traditional representative democracy. It goes beyond traditional democratic practices wherein decisions are made by the majority. In a participatory State, all sections of the society are involved in the making of policy. Participatory State is beneficial as it gives citizens a central role in public policy through public discussion, negotiations, voting, etc. It emphasizes the importance of making citizens aware and providing for a form of communication that promotes political dialogue.
Answer the following.
What are the positive and negative aspects of Globalisation?
Solution:
Globalisation refers to the rapid spread of goods and services, technology and information, ideas and culture, trade and interactions across the world. It is the connection of different parts of the world resulting in the expansion of international cultural, informational, economic and political activities. In the early 1990s, the term globalisation was used to include economic, political, socio-cultural, technological and ideological changes that occurred in the world in the post-cold war era. The world has become more interconnected due to advances in technology and communication. Events in one part of the world have an impact on other parts of the world. Changes have taken place economically and culturally.
The Positive aspects of globalisation are -
- (i) It creates more employment opportunities.
- (ii) It encourages free trade.
- (iii) It leads to a better choice of goods and services to the consumer.
- (iv) It leads to wider investments in developing countries.
- (v) It enhances the efficiency of the tertiary sector i.e., banking and finance.
- (vi) It increases the purchasing power of citizens and enhances their standard of living.
- (vii) It increases labour productivity and reduces capital-output ratio.
- (viii) It helps to increase efficiency in the production system.
The negative aspects of globalisation are -
- (i) Globalization promotes technological adaption to increase productivity but has also resulted in the loss of jobs.
- (ii) Local/small scale industries cannot withstand competition from the MNC's and maybe bought off or shut down.
- (iii) Less developed countries may become dependent on the technologically superior countries.
- (iv) It has caused specialization of labour and so there are few employment opportunities for unskilled labour.
- (v) It has led to an increased gap between rich and poor nations.
- (vi) It may lead to overexploitation of resources and negatively impact the environment.
- (vii) It leads to the harmful effects of consumerism.
- (viii) It may lead to a reduction in social welfare schemes in both developed and developing countries.
Difficult Words & Meanings
- Globalisation: The process by which businesses, ideas, and cultures start operating on an international scale, making the world more interconnected.
- Finance Capital: Money used by businesses for investment and to fund their operations.
- GATT (General Agreement on Tariffs and Trade): An international agreement signed in 1947 to reduce trade barriers like tariffs and quotas between countries. It was the predecessor to the WTO.
- Transnational Companies (TNCs): Large companies that operate in multiple countries, often with a headquarters in one country and branches or subsidiaries in others. Also known as Multinational Companies (MNCs).
- Intellectual Property Rights (IPR): Legal rights that protect creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce. Examples include patents, copyrights, and trademarks.
- Socialist Market Economy: An economic system, notably used by China, that combines aspects of a market economy (where prices are set by supply and demand) with state ownership and control characteristic of a socialist system.
- Market Economy: An economic system where decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand.
- Capitalist Economy: An economic system characterized by private ownership of the means of production and their operation for profit.
- Welfare Market Economies: Market economies where the state plays a significant role in providing social welfare services like healthcare, education, and unemployment benefits (common in Western European countries).
- Non-state Actors: Individuals or organizations that have significant political influence but are not allied to any particular country or state. Examples include NGOs, multinational corporations, and international media.
- Civil Society: The "third sector" of society, distinct from government and business, encompassing non-governmental organizations, community groups, and other citizen-led initiatives.
- NGOs (Non-Governmental Organizations): Non-profit, voluntary citizens' groups organized on a local, national, or international level, working towards various social or political goals.
- Humanitarian: Concerned with or seeking to promote human welfare and reduce suffering.
- Cosmopolitan Culture: A culture that is familiar with and at ease with many different countries and cultures, often reflecting global influences.
- Secularism: The principle of separation of state from religious institutions, or the belief that religion should not be involved in the organization of society, education, etc.
- Individualism: A social theory favoring freedom of action for individuals over collective or state control; a focus on self-reliance and personal goals.
- Materialism: A tendency to consider material possessions and physical comfort as more important than spiritual values.
- Tariffs: Taxes or duties imposed by a government on imported goods.
- Quotas: Limits set by a government on the quantity of a good that can be imported or exported during a particular time period.
- Liberalizing (Global Trade): The process of reducing government restrictions and regulations on international trade to encourage free trade.
- Most Favoured Nation (MFN) Principle: A principle in international trade law where a country promises to grant to another country the same trade advantages (like low tariffs) that it grants to any other country.
- Participatory State: A concept of governance that emphasizes the active involvement of citizens in decision-making processes, beyond just voting in elections.
- Representative Democracy: A system of government where citizens elect representatives to make decisions and pass laws on their behalf.
- Ideology: A system of ideas and ideals, especially one that forms the basis of economic or political theory and policy.
- Tertiary Sector: The part of the economy that provides services, rather than producing goods (e.g., banking, tourism, healthcare, education).
- Capital-Output Ratio: The amount of capital needed to produce one unit of output; a measure of productive efficiency.
- Consumerism: The preoccupation of society with the acquisition of consumer goods; the theory that an increasing consumption of goods is economically desirable.