Question: How do the strategies and actions of multinational corporations, governments, international organizations, and financial institutions shape global economies? Discuss with specific examples...

Question: How do the strategies and actions of multinational corporations, governments, international organizations, and financial institutions shape global economies? Discuss with specific examples and consider the potential benefits and challenges associated with their influence. (250 words)














1. Ruppel, Oliver Christian, and Kam Yogo Emmanuel Dieudonné. “International Trade, Environment, And Sustainable Development.” Environmental Law and Policy in Cameroon towards Making Africa the Tree of Live, Nomos, Baden-Baden, 2018. The role of trade for sustainable development and the reduction of poverty in Africa17 Human rights and good governance have an impact on the domestic investment cli- mate, which contributes to growth, productivity and the creation of jobs, all factors essential for economic growth and sustainable reductions in poverty. The furtherance of economic development, reduction of poverty and the promotion of human rights in fact go hand in hand. The aforementioned relationship has grown closer over the past few years due to increasing discussions in the world community on related matters and issues. The connection can be seen as a two-way relationship insofar as econom- ic development is obliged to respect human rights in a democratic society. Converse- ly, human rights can be given more effect through economic growth, as a possible outcome of economic growth is the increasing availability of resources, resulting in the reduction of poverty and a higher standard of living.18 Both human rights and good governance have an impact on the investment climate, which again contributes to productivity and the creation of jobs, all essential for economic growth, sustaina- ble development and the reduction of poverty.19 The evidence of African poverty and growth rates leaves little room for doubt about the need for financial assistance and an improved trade climate. China, for ex- ample, is providing substantial funds for investment and development in many Afri- can countries. China follows a ‘purely capitalist’ approach, not attempting to assist in the facilitation of social or political change through the pursuit of wealth and alt- hough this approach seems appealing to many African leaders,20 it is questionable because it does not attempt to improve social welfare in the targeted countries.21 Far more than any unconditional investment and development aid, trade can prove to be the catalyst, given favourable conditions, to uplift millions of people from pov- erty. African countries could gain disproportionately from further global trade reform but it is widely acknowledged that a level playing field does not yet exist in the cur- rent world trade system, at least not to the required extent. Developing countries still face numerous hurdles, including high tariffs against their exports and subsidised compe- tition. Nevertheless, the participation of developing countries in the global trading system is the most effective way of encouraging development and helping to allevi- ate poverty. A key objective of the on-going round of WTO negotiations, the Doha Development Round, is to assist developing countries more fully to reap the benefits of international trade. The liberalisation of agriculture in particular is hoped to pro- vide significant benefits to developing countries in Africa.22 In this light, free trade agreements (FTAs) can bring about economic benefits by reducing barriers to trade and investment between participating parties. They can open markets faster than would otherwise be possible through the WTO and build on the commitments al- ready agreed in the WTO. Over two-thirds of WTO members are developing and least-developed countries. Members could gain access to a range of special provi- sions and assistance contained in the rules of the WTO. The WTO’s Committee on Trade and Development and its Sub-Committee on Least-Developed Countries moni- tor the implementation of provisions designed to assist developing and least- developed countries. The committees also monitor the substantial amount of training and technical assistance provided to developing countries by the WTO.23 Yet, the de- sign of the multilateral trade regime needs to shift from one which overemphasises a market access perspective to one which prioritises enabling (or at least not disabling) the domestic policy space available to developing countries to make a range of di- verse, including unorthodox, policy choices and pursue the concomitant strategies. It should also not be evaluated on the basis of whether it maximises the flow of goods and services, but on whether trade arrangements, current and future, maximise possi- bilities for human development, especially in developing countries. An implication is that multilateral trade rules will need to adjust ‘one-size-fits-all’ solutions that really only suit a few powerful members. The global trade governance framework requires additional asymmetric rules in favour of the weakest members. In the long run, such rules will be beneficial for both developed and developing countries. Trade rules therefore have to allow for diversity in national institutions and standards. Countries should have the right to protect their own institutions and development priorities where necessary, and no country has the right to impose its institutional preferences on others. In order to create a trade regime friendly to poverty reduction and human development, governments must have the space to design appropriate policies. 2. Siddiqui, Kalim. World Review of Political Economy, vol. 7, no. 4, 2022, pp. 424–450. Winter 2016, https://doi.org/10.13169/worlrevipoliecon.13.3.0297. The theory of comparative advantage is provided as support for worldwide trade liberalisation. The theory claims that free trade is beneficial for all countries. It is further said that free trade will automatically lead to the realisation of various other benefits. For example, once the poor countries open up their markets and join free trade, living conditions will improve. The WTO argues that economic welfare can be maximised through free trade. However, comparative theory rests on assumptions that there are no trade imbalances between countries (Bhagwati and Krueger 2001; WTO 2013). The theoretical support for free trade rests on David Ricardo’s theory of comparative advantage. In his 19th-century proposition, he argued England and Portugal could engage in mutually beneficial exchange of cloth and wine, regardless of respective productivities and prices. However, in the 20th century Heckscher-Ohlin-Samuelson (H-O-S), while primarily basing his view on Ricardo’s theory, said that countries must export products based on inputs they have in abundance and import products based on inputs that are scarce. However, the trade pattern does not confirm such a claim, as most trade occurs among countries that possess similar endowments. To explain this, Paul Krugman (1987) put forward a new trade theory that justified policy intervention such as tariffs and subsidies. In fact, the difference between the economies of developed and developing countries does have an impact on trade. For instance, suppose the developing countries specialise in sectors for which they have abundant supply, as recommended by the H-O-S module. This would mean developing countries would focus on primary products that have little added value. Moreover, prices of primary products tend to decrease compared with manufactured products, and manufacturing plays a very important role not only in expanding areas for employment, and also in raising overall productivity in the economy, including the agriculture sector. Earlier, the World Bank study predicted welfare gains in 2015 of US$96 billion (one-fifth of 1% of the world’s GDP). Developed countries stand to gain US$80 billion (82%), compared with US$16 billion (18%) for the developing countries. However, a major proportion of the developing countries’ share would go to countries such as China, India and Brazil, US$1 billion each, whereas African countries would be net losers of US$3 billion (Anderson and Martin 2005). While Polaski (2006) found that global gains from further trade liberalisation would be 0.2% of the world’s GDP, even if the Western market were more opened, most gains would go to China, India and Brazil. Paul Krugman argues that trade patterns could be explained by increasing the returns to scale and imperfect competition. On trade theories, he complains that “Since mainstream trade theory derived its power and unity from being stated in formal general equilibrium terms, alternative views were relegated to the foot- notes” (Krugman 1987, 133). Trade theory places much emphasis on relative prices and costs in explaining international trade. However, recent experiences of the developing countries show that this is not the case. In fact, a number of studies have shown that price levels have accounted for very little in explaining international trade. And as such Ricardo’s comparative advantage theory seems to be inadequate due to a number of assumptions such as perfect competition, full employment, homogeneous goods and empirical irrelevance (Barker 1977).