Impact of Globalizationon - the Welfare State of Pakistan

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now days. O’Rourke and Williamson (2000) point out that the world economy even by the late 20th century standard was well integrated in the beginning of the twentieth century [Kemal (2001)].World economies were tend to move towards globalization after the first world war and the golden years of the 1950s and 1960s.After the second world war WTO(World Trade Organization) is formed in continuation with ITO (International Trade Organization) to help and support liberalism, multilateralism and nondiscrimination. This then shows a tendency towards globalism [KatsuniSugiura (1999)]. In this paper we analyzed Globalization in terms of total trade, imports, foreign direct investment, and financial market integration. The relationship between globalization and the welfare state is highly composite, economic internationalization has greater implications and it needs to be understood for the long-term sustainability of welfare states. This article aims to clarify some of the theoretical and empirical contradictions and also to point out a simple fact that is, arguably, not always acknowledged in the relevant literature. The alliance between globalization and the welfare state is highly unexpected and active, i.e., it changes over time. Welfare state policies must be adaptive with regards to economic internationalization in respective areas of importance like trade, imports, foreign direct investment and financial market integration. Welfare of the state is concerned with large number of policy fields and globalization has affected those fields differently from one another so in order to control the effect of globalization state needs to make relevant policies. Three schools of thought that have dominated the scholarly debate in the past decades are introduced: first, the compensation thesis, they show the result that the globalization has positive effect on the expansion of welfare state, which is totally against the results of efficiency thesis i.e. the negative relationship. Skeptics the third school, they claim that the effect of globalization on welfare of the state is weak or nonexistent as the domestic’s politics and institutions has greater impact.

1.2Problem Statement

What collection of welfare state policies enables us to balance the trash from globalization without harming motivation to work and obtain talent? What is the suitable position of the state in the condition of welfare services? Many Researchers have identified the importance of the topic of globalization impact on welfare of the state, (Naima Saeed 2006) this paper show that it is extremely important to identify the relationship between globalization, economic development and social progress.(Bonaglia et al., 2001) How to incorporate globalization with governance concerning globalization a key unsettled issue. Impact of Globalization on Governance is still a controversial issue and needs to be resolved. Bonaglia et al. (2001) it is argued that an important aspect of governance-globalization nexus is a connection of trade openness to domestic institutions. The state required to liberate authority because of the demands on the state to shift towards globalization and for making business decision state control above the provision of information, communication and to authorize global organizations (Saich, 2000). As the socioeconomic and political implication of globalization is very firm, the debate on this topic is expected to go on for years. Every time when any meeting is held at World Trade Organization, IMF, or World Bank platforms, the discussion is divided into the group and rival of globalization and consent on the effects of globalization remains an unattainable assignment (Akhter, 2004). In the face of this uncertainty, this study is an attempt to lend an empirical support to this ongoing discussion in particular reference to its effects on welfare of the state and quality of institutions of economies, to understand why globalization should affect the quality of state policies regarding public spending, social service provisions, income transfer programs and taxation system in Pakistan. In this paper I use high frequency data to examine the connection between globalization and welfare of the state of Pakistan.

1.3 Research Objective

The objective of this paper is to help improve understanding of the effectsof the globalization on the welfare of the state in terms of government policies related to public spending, social service provisions, income transfer programs and taxation of Pakistan.

1.4 Research Question

Canglobalization be seen as positive or negative for the Welfare State of Pakistan?

1.5 Scope of the Study

The scope of this research is to identify advantages or disadvantages if any of the globalization on welfare of the state in Pakistan. Globalization has had a dual effect on the welfare of the state. Since 1945, in a normative structure of individual rights a part of the state towards its citizens implanted a sense of responsibility.Over a certain region Welfare of the state is the supreme power, by a number of forces operating beyond the nation state this supreme power has been challenged by these forces such as the threat of global terrorism, the challenges of climate change, and the powers of international organizations to influence on the global market, given the impact on thenational economic policy of the global financial crisis. More clearly globalization of economy has been restraining the capability of states to decide their own policy related to trade, economic integration and financial markets.States are forced to cut labour costs, decrease the price of goods and services and reduce tax rates to make their domestic market more competitive, and to shrink the size and scope of the welfare state because of the rising pressure of international rivalry in trade markets as well as the increased mobility of capital and multi-national businesses.

1.6 Limitation of the Study

This research has its limitation of evolving only around State of Pakistan.This has the span of 48 years besides lacking time and budget, data has been collected from the source website of state bank of Pakistan.

Chapter 2

Literature Review