Globalization and internationalization of policymaking for international governments

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This article is written by Asif Iqbal, from Centre for Juridical Studies, Dibrugarh University, Assam. This article discusses globalization, the investment which is volatile compared to the manufacturing sector as it supports the building of businesses which provide job opportunities to people.

Introduction

There is a contradiction in the percentage of Gross Domestic Product (GDP) of different countries in the second quarter reported in negative. The reason behind the contradiction is the shutting down of the manufacturing sector which suffered severely as compared to other sectors. The economy runs through consumption and investment; the latter is the crucial driver which maintains the growth and business cycle of the market. Out of both, it is the investment which is volatile compared to the manufacturing sector as it supports in the building of businesses which provide job opportunity to people.

The government and private enterprises invest roadways, railways, educational institutions but the determination to investment rises or fall and its judgment made subjective. The investment in countries like Mexico and Brasil stagnated to 20 per cent of GDP or less for many years. When the second world war got over; the country like Japan livelihood got ruined because of the nuclear attack over the cities of Nagasaki and Hiroshima on August 6 and 9, 1945. The development which took place in Japan in the 1960s started with the manufacturing of simple goods includes clothing and export of goods to foreign nations. 

Development in the lifestyle of people

The livelihood of farmers developed with their migration from farming in the agriculture sector to laborious act in factories which manufactures goods in urban areas. The development of the manufacturing business escalated from production of clothes to steel, flat television screen, chemicals and vehicles. The lifestyle of the middle class developed with the establishment of restaurants, insurance companies and the account of manufacturing decreased to less than 18 per cent of global GDP which was no less than 24 per cent in the 1980s. The percentage of manufacturing share in the economy varies from 10 per cent to an underdeveloped country to over 30 per cent in a developed country. One of the biggest booms in the part of investment happened in China perhaps it was the biggest which was never seen in the world, the economist from Harvard University, Professor Dani Rodrik shared the “automatic escalator” for development is manufacturing. 

Globalization

The definition of globalization by Stephen Gill, it reduces the transaction costs of goods which moves transborder. The word globalization originated from the word global and the definition of this word defined by the American Defence Institute as “fast and continuous inter-border flow of goods, services, capital (or money), technology, ideas, information, cultures and nations”. It increases the flow of trading between countries, investment by companies in different regions to increase the revenue which caused the migration of people from one place to another. The modern migration of people was the transatlantic slave trade; there were approximately nine to twelve million people from African nations to America in the mid-nineteenth century. 

The migration increased to thirty million between the late 19th Century till the 20th century but there was the first systematic legislation passed in North America to restrain the influx of migrants inside the territory of their country. There is a tendency whenever people move they take culture with them and it is seen that; when nations don’t fight against each other rather they endeavour to manufacture goods of raw materials and sold them in the global market. India opened its market for foreign businesses for investment after the budget passed in the year 1991 by then the Finance Minister of India, Dr Manmohan Singh and economy was in a severe situation at that time. 

The inflation was in double-digit which caused problems in the livelihood of poor as the crisis of the country’s economy was acute and deep which wasn’t seen by people in the history of independent India. The current situation political situation has brought privatization along with crony capitalism which is an essential element of globalization and another is the cause which created separation in the livelihood of people. The estimation projected by the International Monetary Fund (IMF) after the imposition lockdown by several sovereigns was in negative and self-dependence needs to be seen as a mere epithet than policy because countries have become interdependent upon each other. Mainland China has profited because of manufacturing activities integrated with Global Value Chains (GVC) which will help to reap the benefit and supported to become the factory of the world. 

Globalization in the middle-east region

The countries in Middle-East and North African region contain common heritage with vastly different natural resources for the endowment to support the economy. The region enjoyed profit in the 1970s because of the rise in prices of oil; different countries shared this growth through their investment in it. This growth didn’t sustain for the long years as after twenty years it wasn’t unable to generate employment; forced the sovereign to bring new economic policies like an indirect monetary instrument, trading was liberalized and encouraged the foreign direct investment (FDI). There are reasons behind the deficit in the budget of Middle-East and coincide with the emergence of the Arab Spring in early 2012 which affected several countries like Syria and Lebanon along with others. Those reasons are as follows;

  1. Increase in population but productivity was low.
  2. Political reforms weren’t appropriate to gain the confidence of the public.
  3. The education system isn’t efficient to produce skilful people.
  4. Public sector became costly and large.
  5. Trading became restrictive.
  6. The financial market turned undeveloped as compared to western countries. 
  7. Policies for the exchange rate wasn’t adequate to provide growth. 

Because of the outbreak of Coronavirus in 2020, the international policy is necessary to get changed, and it has to less impactful upon the labour class as the probability is higher to be oppressed with time by proletarian. 

Taxation

A report published in the Business Standard about the halt in the expansion of manufacturing in India because of the high tax rate slated by the Central Government of India. It is considered a blow to the current economic policy of Prime Minister Narendra Modi as they have tried to lure several manufacturing companies to invest in the country. The company felt that the taxes are high that it becomes difficult to increase the scale; the manufacturing of the company started in 1997 but the percentage of share decreased from five to 2.6 in August 2020 versus 2019. The tax on four metre SUV comprising 1500 cc engine capacity charges 50 per cent tax by the government in India. Elon Musk criticized the import rate of India as the vehicle of Tesla will become unaffordable by people. 

  • Corporate Taxation 

The Government in the 20th Century required money but the Government in the 21st Century seeks a lot of money because of the demand of people as the population has increased and skills need to develop as to support productivity. The tax rates have increased after second world war but tax erosion and avoidance increased amongst business owners in different sectors of the market. Although India joined the culmination of liberalization of the market which started in the 1970s as the information of technologies, communication and transportation started developing because support was given for transferring of goods produced. Deep essential function decreases governments’ strength to battle toward competitive rate-cutting.

Every opportunity toward contentious corporate rate reductions remains inadequate because each method regarding financial alliance that strengthens antagonistic influences toward corporate levying further steals underdeveloped nations about the totality of their significant alternative origins concerning income, the commerce cost. Ebbing commerce rate incomes expand each monetary addiction approaching corporate taxation and the ineffectual range executes laborious to rearrange upon specific assets approximately to widespread devastation tax because to draw adequate international immediate stake near under developing countries. These conquerors manage to remain meagre, wealthy, and well-governed republics. Some underdogs manage to hold huge homelands that exist both dictatorial or feeble along with they are governed poorly.

The democracy is the nation of people and the policy will have to be with an interest towards people along with providing necessary subsidies in the welfare of the whole society. The Autocratic State manages to serve elite; they can remain in power until and unless they provide schemes which benefit elites over the general public of the society. Hence, the government whose presence in a democratic state will have to have a sensitive approach towards the public in taxation policy but the autocratic government will have lesser tax rate supporting the welfare of the larger public as compared to the elite class. 

Affect of globalization in tax design 

The financial expenses from boosting rate revenue remain expressly worrisome against a context within which authorities bear notable requests covering their means. Attempts over rate motor-activated commercial enterprise incite versatility to include creating financial perversions since marketing pursuits, resources, including employees, continue reallocated concerning burden preferably than potency discernment. Complicated demand restraint for fiscal including another method diminishes this income potential regarding extraordinary rates on income levying; besides, contribute to protecting these economic costs regarding dues. Charges against property interest collapse significant inter-temporal allocation concerning consumption because of the compounding regarding active rates on tax which are additional extent. The rate of import and export have increased in the world with an average of six per cent a year which reflected upon the economy of the world.

The distribution because of globalization brought deficit in the income distribution of people in the United States of America (U.S.A) which brought undue pressure upon the federal along with state government to invest for the welfare of people. The many notable sectoral transformations concerning contemporary terms implies that growing section regarding public means dedicated upon wellness spending.

The economic incongruity of the marginalized community

The community is vulnerable to suffer through the imposition of lockdown by the Central Government in the way to flatten the curve and acquire time to provide essential medical requirements to support the patient suffering through Coronavirus or COVID-19. It has been expressed in several economic reports for the inclusion of women and marginalized communities as they can support the manufacturing sector which has been propelling for last few years, whether it is India or Scandinavian countries. The basic human rights of individuals are violated when the communities of LGBTQIA+ are denied equal participation in society. A report by Professor M.V. Lee Badgett to the panel of World Bank in October’14 discussed the impact on the countries like India due to the discrimination against Homosexuals and Transgender which lead to the reduction in consumption causing poverty due to the lack of availability of education along with healthcare as it is essential to the development of individuals. Perhaps, their economic lifestyle is meagre that some earns below $ 70 per month and 28% have suffered physical abuse by relatives. It suggests the lower estimate in labour-related loss is $ 1.2 billion compared to the higher estimate could be around $ 7.7 billion but the estimation in the health sector is $ 712 million and higher estimation is $ 23.1 billion as per the year 2012, must have amplified in this existence. 

                    

The Policymakers of developing and developed countries who have allowed enterprises to invest in different sectors but couldn’t bring reforms to restrict the bullying performed on the individuals belonging to LGBTQIA+ community leads to mental health issues. The study performed by the World Bank wrote about the economic loss suffered by India up to $32 billion each year in output sector. The education should be considered as the primary setting to acquire the human capital in which skills, health, knowledge and ability are assimilated to support to increase the percentage of productivity and economic growth. , the discrimination leads to underutilization of human capital in various sectors which supports the Gross Domestic Product (GDP) of a country. Many countries including India has released stimulus to support sectors like Micro, Small and Medium Enterprises (MSME’s) and others due to pandemic and the situation has been regarded by the International Monetary Fund (IMF) will lead to a recession which may be worse than the Great Depression occurred in the 20th Century.

Conclusion

The Government will have to bring development in land reforms along with rates in taxation to enhance the interest of manufacturing investors in different countries of this world. The investment needs to be made in the sector of education along with healthcare because the 21st century will continue to make countries depended upon each other. The Government should bring legislation which isn’t divisive rather unifying which permit minorities to have a fair share in the market’s growth. 

References

1.https://www.ippapublicpolicy.org/img/wysiwyg/Raadschelders%20Verheijen%20February%202017_1.pdf

2.https://www.researchgate.net/publication/271444184_Globalization_and_Tax_Policy

  1. https://sci-hub.tw/https://www.jstor.org/stable/10.1086/597056

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