Writer and importance
The article is written by Robert A. Schupp and Richard L. Ohlemacher who represent the journal of international affairs. The relevance of the article is to demystify certain issues related shadow economies. It covers the socioeconomic aspects of shadow economies inclusive of the themes that arise from them and the implications on the general masses. The role of consumer and corporate strength of rich nations in the growth of shadow economies is stated and its changes due globalization critically analyzed. The issue of informal economies and connotations used in relation to them are explained and their applicability to the understanding of these economies is indicated. To further understand the problem of shadow economies, the relation between the informal and formal economies and depletion of the state’s financial resources is determined.
Several case studies such as India, Scandinavia and Peru are used to illustrate the changes that can be made on the state resources so as to empower these country’s societies. The article is also meant to identify the relevant government legislations that profit the developing and the developed nations. Lastly, the article investigates the effect of commercial interests on solution of shadow economies; similarities between capitalism and informal economies; understanding of the informal economies and the role of the civil society in resolving complications of the shadow economy. All the above information is based on the views of Noam (Scupp & Ohlemacher, 2000, pp. 1-15).
Supported international relations theories
Based on the questions, asked the author of the article supports realism. According to this theory, power politics run everything in the economy of the nation. Decisions on the problems of solving the shadow economy rest entirely on the government policy options. The author supposes that the government of India should legalize the illegal economic activities in order to benefit from the shadow economy. Moreover, the author says that shadow economy denies the government financial resources necessary to better its services for the people. This seems like defense of realism (Scupp & Ohlemacher, 2000, p. 9).
Key points of the article
The article makes several points related to the already mentioned topics. First the article states that current literature on shadow economy only makes a retail analysis of it rather than tackling it in a wholesale perspective. The instabilities in the prices of commodities play a great role in the eventual farming of illegal commodities. Corporate power influences the shadow economies when organization such as United Nations Conference Trade on and Development (UNCTAD) intervenes in an attempt to stabilize the commodity prices and thus protect the interests of the peasant farmers. It points out that the shadow economy has been affected by the globalization particularly as relates to the predicted fiscal flows, the short-term fiscal flows and the spread of production all over the world. It states that the shadow economy contributes to the depletion of the state funds since tax evasion is a common practice in such an economy and marginalizes the public in certain instances.
Moreover, it states that the creation of opportunities in the Indian market is the only solution to the problems of the existent shadow economy rather than the bringing of illegal activities under government legislation. Government policies such as implementation of UNCTAD suggestions profit the developing or developed countries in the long run. In addition, informal economies relate more closely to capitalism than the formal economies do. In addition it states that the issue of informal economy is least understood due to its technicality. Finally, the article indicates that the civil societies have a role to play in the determination of the solutions due to the shadow economy. Their role is mainly to empower the people by allowing them to have a say in the decisions that affect them directly (Scupp & Ohlemacher, 2000, pp. 1-15).
Theme and summary of the article
The theme of the article is shadow economy. It shows how the shadow economy is affected by politics. For instance, when the government increased the quantity of imports in Columbia, it caused peasant farmers to plant coca which had higher demand and stable prices. It looks at the effects of consumer and corporate power on such an economy and the changes that have characterized it due to globalization such as the entry of politics in the decision making process. Moreover, it explores the usefulness of connotations such as underground market and black market in the understanding of informal economy. All violations of the legislation meant to benefit the powerful leads to a shadow economy. Informal economies deny the state its rightful income and end up marginalizing the citizens. It suggests that what the Indian economy lacks is opportunity which has led to increased shadow economy. Noam proposes certain government policies such as price stabilization that could help both developed and developing countries avoid such an economy. The civil society on the other hand has the role of empowering the people to enable them contribute in decisions that affect them.
International relation theories supported by the article
From the responses, the article advocates for liberalism and institutionalism. This is evidenced by how the author advances positive effects of institutions and the need for the civil societies to empower people to be participative in the formulation of decisions that affect them. Objection is raised against the modification of the legislative structures to help end the shadow economy in India. According to the arguments raised in support of liberalism, this theory seems workable in the modern society (Holsti, n.d, p.3-10).
Critic of the article
The article’s claim on majority of the issues such as the role of consumer, corporates in rich countries and the shadow economy are well supported and could therefore be the truth. The main causes of a shadow economy are usually summarized as taxes, regulations, prohibitions and corruption. The article’s explanation for the lack of availability of information on the details of such activities such as drug dealings, to be the wealth of the participants is a form of corruption. The change of occupation by the peasant farmers due to policy alterations falls both under regulation and taxes. The decisions that led to increased imports in Columbia serve as prohibitions. Therefore, the article implicitly states the causes of a shadow economy.
The later assertion that the government plays a part in the push of people towards shadow economies is entirely true. All the factors that cause shadow economies are under the control of the government except corruption. Though not wholly, the government may also play a part in big corruption cases that end up denying it the required funds through tax evasion. Moreover, for one to gain a clear understanding of the informal economy, all other confusing and related terms must articulately understood. The article clearly states the necessity of comprehension of the related terms such as shadow, gray and underground markets. These are terms closely confused with informal economies. However, the claim that the unstable prices in food crops propel the shadow economy may not be entirely true. Sometimes the farm products may have few returns even when they uphold stable prices but the allure of the good returns from drugs still compel people to engage in these activities.
Other contradictory international relation theories
Constructivism
According to this theory, decisions and choices are made on the logic of obligatory actions. People make their decisions based on what is expected by the normative actions. For instance, when a doctor is confronted by any situation he makes his decision based on what would be expected of a doctor in the present environs (Goldgeier & Tetlock, 2001, p.82). Constructivists make analysis of the international relations by striking a balance between the targets, the threats and social identities of the community in question. This theory can be misleading since it is more conservative. While the liberalism advanced by the article relies on the present knowledge of the beneficiaries pertaining to that issue, the constructivism depends on what has been historically correct. In the long run constructivism causes people to limit themselves to their present situations.
Beneficial advances may be hindered by the sole reason of rejection by the society in question. However, certain social aspects may act as guidelines in establishing the right regulations. For instance, detest of drugs due to their negative effects may help reduce the buildup of the shadow economy in societies that have a negative view drugs negatively. Since, the shadow economy is affected by globalization; it demands solutions that change with globalization which is not characteristic of constructivism (Zehfuss, 2002, p.259).
References
Goldgeier, J. & Tetlock, P. 2001. Psychology of International Relations Theory. Web.
Holsti, O. n.d. Theories of International Relations. Web.
Schupp, R. & Ohlemacher, R. 2000. Marginalizing the masses.
Zehfuss, M. 2002. Constructivism in International Relations: The Politics of Reality. Cambridge: University Press, pp.1-289.