Globalization

Economic Globalization

Many definitions locate globalization as a phenomenon within the domain of the economy generally and more specifically within the circuits of production, trade, and finance. Thus, globalization is used to describe the increasingly transnational character of economic transactions. It follows that the significance of barriers and distinctions between discrete national economic spaces is diminished significantly. Moreover, the idea of globalization implies that physical distance is of declining importance to the possibility of human (economic) interaction. This last defining facet suggests that globalization is made possible by developments in information and communications technology that, for example, allow instantaneous financial interactions to take place between geographically distant localities. Beyond these broad features, there is significant variation in the precise meaning given to globalization. For some, globalization simply refers to dramatically increased volumes in international trade. For others, globalization is better thought of as global economic integration. Here, cross-border flows of capital, goods, labor, and firms are creating genuinely global markets, which in turn accentuate the permeability of national economic borders. In addition, globalization is sometimes treated as a form of corporate strategy, where firms denationalize the entire chain of production activities and thereby initiate de facto transnational economic spaces. Though these developments are sometimes seen as following the “hidden hand” logic of market capitalism, more often than not, globalization is understood to be prompted and underwritten by one or more of the following three prominent variables:

• The hegemonic role of the United States in the current world system, which acts as both ideological cheerleader and security guarantor for a globalized/globalizing world order.
• The growth of a set of global economic institutions (the International Monetary Fund, the World Bank, and the World Trade Organization) are held to be responsible for creating the formal rules and informal norms within which globalization is made possible.
• The rise to prominence across the world of neoliberal ideas, which emphasize the virtues of unfettered markets, privatization, and the retreat of the interventionist state.

These economistic definitions tend to provoke supplementary observations about the possibilities for economic governance. Sovereign governments, it is suggested, are losing the capacity to exercise effective economic governance over their own national jurisdictions. For example, the colossal volume of unfettered financial flows allows speculative attacks on national currencies. The prospect of these in turn narrows the range of policy choice for governments, which are forced to calibrate domestic economic strategies in accordance with the supposed preferences of global financial market actors. Extensive public expenditure (of the sort usually associated with the construction and maintenance of the European welfare state) is regarded as an increasingly unsustainable growth strategy. Similarly, the selection of national fiscal strategies—particularly in the realm of corporate taxation—is significantly constrained by the capacity of capital (in the form of inwardly investing firms) to relocate with relative ease. States, in both the developed and the developing world, are recast as “competition states” whose raison d'être becomes the adjustment of the domestic political economy to imperatives of a new range of powerful nonstate forces that dominate the contemporary global economy. Autarchic, developmental, and (traditional) social democratic growth models, which require a degree of economic closure, become implausible in an environment requiring market discipline and exposure to global forces.

...