Discuss the reasons for and consequences of social and economic groupings of nations (40)

Discuss the reasons for and consequences of social and economic groupings of nations (40)

Global social and economic groupings of nations contain within them, a vast amount of power, which can influence, under the correct circumstances, the way the world and society functions. Examples of these include the Organisations of the Petroleum Exporting Countries (OPEC), the Organisation of the Petroleum Exporting Countries (OPEC) and the European Union (EU). There are reasons for why they are formed and I will discuss these and their relevant consequences in the following essay.

OPEC, for example, is a producer cartel founded in 1960s, with 12 members in major oil producing countries within Africa (Algeria, Angola, Libya and Nigeria), South America (Ecuador, Venezuela), but also half of them in the Middle East; Iran, Iraq, Kuwait, Qatar, Saudi Arabia and UAE. It's aim is simple; to coordinate and unify the petroleum policies of member countries and ensure the stabilisation of oil markets in order to secure an efficient and regular supply to consumers, to provide a steady income to producers and have a fair return to the capital.

Consequently, there have been positive socioeconomic impacts surrounding their formation, OPEC has control over 2/3rds of global oil reserves. According to the Energy Information Administration in the USA in 2010, the OPEC crude oil production, being such a large organisation has been an important factor which affects global oil prices. It had set production for its member nations and generally, when OPEC production targets are reduced, oil prices increase. Ultimately as they are a large organisation, they have a major influence on the price of oil on a global scale.

While I understand there are positive socioeconomic impacts, I need to highlight the negative consequences, which have arisen fro OPEC. In 2008, for example, Indonesia opted to leave OPEC and succeeded. I feel that this was entirely proportional to the aims in which they proposed, providing a 'fair return' to member states- leading me to question what determines a fair return and who decides what goes back to member states. When they left in 20008, there was a lot of speculation as to why they had left, certain analysts, who spoke on behalf of OPEC's analytical team had stated that Indonesia had left due to unhappiness upon certain OPEC regulations, specifically, their reluctance to increase the output in the face of the price surge in 208- which took the cost of a barrel of oil above $135.

Like other global social and economic groupings, regulations set by these organisations pose problems for member states. Gabon and Ecuador, for example, had left OPEC by 1995, simply because of the $2 million membership fee, as well as wanting to produce more out than was allowed by the OPEC Quota. Personally, I think that OPEC is a cartel, with monopolistic and price controlling power- which brings about consequences, although they have been doing well- despite the demand for crude oil increasing by 45% over the past year.

Other global social and economic groupings, such as the OECD (organisation for economic cooperation and development) have been established and have relevant consequences. It was set up in 1961, and is, essentially, a group of 34 of the richest, most powerful countries, the top 8 are the G8- Canada, France, Germany, Italy, Japan, Russia, USA and UK. Their main objective, was for the organisation to promote free market and trade. Essentially, the OECD members had ambassadors who attend yearly meetings- and have an annual budget of about $10 million.

There have, of course, been criticisms against the OECD, where there is almost a sense of peer pressure from G8 states (particularly UK, USA and Japan- coincidentally the three countries with the three major world cities- London, LA and Tokyo) to improve policy and implement 'soft law; (that which has no legal binding force) in order to get their policies across.

During the setting about of the guidelines of the OECD, it was found that there were no delegates from low income countries- it leads me to question how they can make global decision policies without consulting other leaders in other countries. Membership is entirely proportional to wealth, depending on their GDP- and I feel as though there is a contradiction, because if the OECD members, like UK and USA were really set on protecting the rights of the people in low income countries from "corporate impunity", then they should have at least invited the third world countries to participate in drafting the guidelines.

In my opinion, their 'guidelines' are simply a cosmetic tool for western countries like the UK and USA to try and portray empathy for third world countries, about their fundamental rights, while in reality, these same western countries are major contributors of the profits made by large corporations from investing in third world countries through hook or crook. This is only another example of the consequences of global social groupings on countries.

The European Union, established in 1957, had its main aim to establish a single market. It is an economic and political union of 29 member states in Europe. It was formed to create a single market, and have a free circulation of goods, capital, people and services within it.

There have been positive, political impacts as a consequence of the EU. Firstly, there is a sense of European harmony, EU countries are no longer loggerheads like they were in the past. With the exception of civil war in Yugoslavia (which wasn't in the EU at the time), Europe has managed to heal the divisions which were so painfully exposed in the two World Wars  in the 20th century that they even won the Nobel Peace prize in 2012 for helping promote peace and international corporation.

From an economic aspect, the EU is one of the strongest economic areas in the world. With 500 million people, it has 7.% of the world's population, but accounts for 23% of nominal global GDP. Free trade and removal of non-tariff barriers have helped reduce costs and prices for consumers.

There are benefits of EU membership, the intention behind the cohesion of these member states are that they will reduce the gap between the rich and poor, The EU's regional policy is used to achieve these aims by investing in people. 36% of the EU's budget between 2007-2013 (around 340 billion Euros) will be used to help the poorer regions of development enjoyed across the rest of Europe. There are three sources of funding; The European Regional Development fund (ERDF)- which invests in infrastructure and innovation, the European Social Fund (ESF) which incests in skills training, job creation and support. The Cohesion Fund- invests in the development of renewable energy, environmental and transport infrastructure projects. This is reserved for countries whose living standards are below 90$ of the EU average. Together, these funds are designed to keep the EU attractive for investment, enhance accessibility and provide high quality services. I feel that it has been successful as a whole, particularly in encouraging innovation in the economy.

However, there are drawbacks of EU's policies in certain industries such as the Common Agricultural Policy, which subsidises EU farmers, introduced in 1962. It is, arguable, the most controversial concern surrounding the EU particularly because at its peak, the EU spent around 2/3rs of the EU budget on agricultural production. As of the April 2015 report from the Times Newspaper, the CAP accounts for 40% of EU budgetary expenditure.

I strongly feel that the EU should significantly reduce the amount it spends on agricultural production subsidies- particularly because developing countries cannot compete. Due to subsidies given to EU farmers, the farmers left in developing countries in Africa, such as Uganda and Nigeria, are unable to sell their products to EU countries at competitive prices. The World Trade Organisation has recently released a report in their March blog- that the tariffs that developing countries face prevents the expansion of production, which could have lead to an increase in prosperity for much larger, rural populations, especially in Africa, Uganda and Nigeria being targeted specifically in the blog. EU farmers, on the other hand, are protected because of the subsidies they receive. I feel as though liberalisation of trade between the EU and developing countries could arguably be more valuable than Western aid to the developing world.

Furthermore, when researching statistics, I found that farmers in the EU represent 5.4% of the EU's population- they generate a mere 1.6% of the unions GDP- yet receive 40% of the EU's total budget through CAP handouts. Ultimately, it costs Europe's taxpayers £58 billion in subsidies to this tiny, unproductive minority. It strikes me, that this is still the case, despite times of economic hardship- only making the rich farmers richer, swimming in wine lakes and hiking through food mountains.

Conclusively, I feel that global social and economic groupings do serve purpose in today's global economy- though it is questionable whether the policies of free trade are justifiable in certain groupings as they impact negatively on developing countries that would serve better purposes if they had less trade restrictions, yet, overall, they are important in the running of today's global economy.

COMMENT: 36/40 Needs a better conclusion, possibly more synoptic opportunity to spice it up.