Macropolicies In The Era Of Globalization

Explain how macro policy can promise economic growth in the era of globalization

Introduction

Nowadays, democratic governments that are elected through the voting process have to achieve certain economic indicators so they have the people’s content or the popularity needed to stay in power, elongating their 4 year or 8 year periods. Having this notion in mind, the policy that is made inalmost a majority of countries benefits the economy of a nation in the short-run, giving fast results to today’s generations leaving no space to make policies that will give better standard of living to the future ones. Promises then are given in the short-run rather than thinking in the economy results in the long-run.
However, there are some macro policies that exist, and that governments can benefitfrom them, if they are used in the right way and thinking on the long-run and wellbeing of a nation. At the macro level, the goal of economic policies is to maximize social welfare in an equitable, sustainable development and growth.

In addition, in the era of globalization international flows allow a nation to have benefits or might become a heavy weight to handle to countries that have badstructural policies, weak institutions, and corruption.
The three common macro policy tools that governments use to stabilize the economy are fiscal, monetary and exchange rate policy. However, there are diverse opinions about the effectiveness of each of these instruments. For example, some economists argue that fiscal and monetary policies are ineffective in all countries. Others say they areimportant policy instruments, although its effectiveness depends on the conditions in the economy.
Having this in mind, this paper is divided in 4 parts. The first one is a general description of globalization and its effect in macroeconomics policies and then the three other points explain and analyze how the different macro policies can be used to stimulate economic growth in the era ofglobalization.
The three major macroeconomic policies that this paper will be addressing are:
* Fiscal and Monetary Policies
* Reducing Unemployment
* Capital Accumulation


Globalization

It is said that globalization can be described as ‘…a widening, deepening and speeding up of worldwide interconnectedness in all aspects of contemporary social life, from the cultural to the criminal, thefinancial to the spiritual’ (Held and McGrew 1999: 2).
Globalization takes place in the activities related to international trade, investment and foreign direct investment among others less common ones.
International trade is the cross-border trade in goods and services. On the other hand, Investment is the conversion of money into some form of property from which an income or profit is expected tobe derived. Finally, Foreign direct investments (FDI) are flows of money into a country that purchase a lasting stake in an enterprise for a foreign investor. These investments are direct in the sense that the investor purchases ownership rights in a specific company, rather than in a portfolio of stocks held by a broker, say.
This activities can affect a country in a positive way or in anegative one depending on the supervision given to the transactions and the transparency of the institutions related to their activities.

An example how globalization has affected country’s economic growth in a positive way, can be observed in the countries that are members of the G-20. “Market opening measures leading to greater flows of goods, capital, and knowledge have created greater prosperityand higher living standards for G-20 members, which have become more integrated with one another and the broader global economy over the past 20 years. Tariff rates have been cut, and cross-border capital flows have increased. As trade and investment have risen, international specialization has increased, productivity has grown, real economic output per capita has increased, and basic social...