Globalization

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Author: Milner Helen V
Editors: Bertrand Badie , Dirk Berg-Schlosser , and Leonardo Morlino
Date: 2011
International Encyclopedia of Political Science
Publisher: Sage Publications, Inc.
Document Type: Topic overview
Pages: 12
Content Level: (Level 5)

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Globalization

Globalization refers to the integration of separate nations, regions, or even individuals into a wider global system. It is characterized by increasing the linkages and connections between peoples and countries and by the growing knowledge of these interactions. This integration process can affect the economy, polity, society, or culture; that is, the definition of the process is very general and can refer to economic, political, social, or cultural integration. The question of who is being integrated is also left open, although in political science it is mostly the countries themselves that are at issue. The way in which such integration operates is also variable. The most common form of globalization in the literature involves the economic integration of national economies into a wider global one, usually through international trade, capital flows, labor movements, and global production networks. For some authors, this means the integration of countries into a global capitalist system—that is, one based on private property, limited government intervention, and the use of markets to allocate economic value. Some term this neoliberal globalization. Capitalism, international capitalist groups, and neo-liberal practices all spread throughout the world as globalization proceeds. Whether this is good or bad for countries and individuals greatly depends on a scholar's perspective. Some associate globalization with the homogenization of distinct

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groups; one example is the loss of many local languages and the increasing diffusion of the use of English. Others associate it with the domination of American (or Anglo-American) values, beliefs, and practices. The global turn to liberal democracy is often cited as an example. Globalization is not complete at this point. Countries have different levels of integration into the world system. The extent to which a truly global system—whether economic, political, or social—exists is a point of debate. The causes and consequences of globalization are also debated.

Globalization has both secular and cyclical aspects. For some, the roots of globalization are in technological changes, such as the lowering of the costs of communications and transportation, which make the movement of people, ideas, goods, services, and capital faster and less costly. These changes are irreversible and often increase over time. While countries and their governments may try to put up barriers against such changes, it is very difficult for them to successfully fend off the pressures of globalization. In this view, globalization has been increasing steadily over time as technological change makes the world ever smaller. Sometimes technological change is treated as exogenous—that is, it has sources other than countries' policies or global integration. Other times, globalization itself, especially via trade of capital flows, is seen as having an impact on technology; it usually is conceived of as helping induce innovation and speeding its transfer around the world. Globalization and technological change may then go hand in hand, each encouraging the other.

On the other hand, globalization has been viewed as cyclical; high levels of global integration have been associated with two distinct periods in recent history. In the mid-to late 19th century, a global economy emerged as the European powers, especially the British, forged an open economy using both military power and economic policy. The development of colonies around the globe and the extension of European trade, capital, values, and political power undergirded this period of globalization. In the late 19th century, the world economy attained levels of openness that had never been seen before. In some areas such as the movement of labor, such levels of integration have never been achieved since. This open economy collapsed in the early 20th century with the two World Wars and the Great Depression. From 1914 to 1945, globalization was in retreat. Protectionism became the dominant trade policy for many countries; trade and currency blocs formed regionally, often around one powerful country, and military conflict was prevalent. Nationalism, isolationism, and regionalism marked this 30-year period. Globalization thus declined during this period.

However, after 1945 the United States picked up the mantle from the British and began to forge a world economy through the creation of international institutions, an open economic policy, and an internationalist foreign policy. The global system, however, was divided into at least two blocs with the United States on one side and the former Soviet Union on the other; hence, globalization would always be limited in this Cold War system. The United States pressed ahead with the organization of an open, capitalist economy guided by principles embodied in various international institutions. It worked to encourage democratization in certain regions and then to include democracies in this integration process. The creation of the General Agreement on Tariffs and Trade (GATT) and the subsequent development of the European Community started a process of trade liberalization among developed countries. The Bretton Woods monetary system supported by the International Monetary Fund (IMF) and the World Bank helped countries establish currency convertibility and a fairly stable world monetary system based on the dollar. This stability provided the conditions for the development of private international capital markets, and over time these markets have come to dwarf those for goods and services. The removal of capital controls from many advanced economies in the 1970s and 1980s, after the termination of the Bretton Woods fixed-exchange rate system, opened these economies even more to global markets. While labor flows never became as free from government intervention as those of capital and goods, largely because of immigration restrictions in the developed world, there was some return to the greater mobility of labor that had prevailed in the late-19th-century period of high globalization. The extension of the European Union (EU) to new sets of countries and new issues also characterized this integration movement. By the 1980s, most of the advanced industrial world, except the former Soviet Union and its satellites, had joined the

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world capitalist economy. Globalization was only partial in this period.

From the 1980s onward, the rest of the world's countries began opening their markets and borders even more and joining the world economy. The end of the Cold War, the collapse of the former Soviet Union, and the economic reform movement in China all added impetus to the globalization process, as the former communist countries and China all began to integrate their economies into the global capitalist one. In the 1990s and early 2000s, the world's developing countries began joining this world economy and its international institutions in large numbers. Most countries in the world now belong to the World Trade Organization (WTO), the IMF, and the World Bank. Democracy was also spreading throughout much of the world at this time. Countries also increasingly chose to join a wide variety of international organizations and treaty systems. Conventions on labor standards, human rights, environmental issues, and other areas became widely adopted by countries around the world. By 2009, most of the world's countries had become part of a global system that had become increasingly organized around a series of common principles and values governing numerous issues. Economic shocks, such as the 1998 Asian financial crisis and the 2008 financial crisis begun in the United States, spread across the globe rapidly. The second period of globalization had arrived. A major issue is to what extent globalization was purposefully constructed, rather than unintentionally realized. Whether globalization is reversible or not is also at issue.

Globalization has been studied from two general perspectives. On the one hand, the causes of globalization have attracted much attention. Why has there been a movement toward increasing contact and interaction between states and peoples all over the globe? Why has this occurred more at certain times than others? Why have some regions or peoples been more involved in this process than others? Why have certain aspects of globalization such as international trade moved faster than others? Many questions have been raised about globalization as an outcome that in itself needs explanation. On the other hand, the impact of globalization has also received great attention. What effects does this process of increasing contact and interaction among states and peoples have on the economy, politics, society, and culture? Are these effects large or small? Negative or positive? Delineating the myriad effects that globalization might have and developing evidence for these has been central to the literature. Once we understand more about globalization, we can then address the question of how to manage the process and its effects.

The Causes of Globalization

A question of much import has been how globalization has developed, and why it has developed the way it has. If one adopts the secular view of globalization, then its advance can be explained by how fast technological change occurs and spreads. In periods where such change is very rapid and when the adoption of new ideas and techniques is quick, globalization will progress rapidly. Many seem to feel that this was the case in the mid-and late 19th century, when critical innovations such as steam power, railroads, and the telegraph changed political, social, and economic life around the globe. Spread in part by military competition and imperial control, these technologies helped integrate distant regions of the world. Technological change did not stop in the interwar period when globalization was in retreat; indeed, war tends to spur such innovation. But the spread of such technologies in this period was much more limited since many borders were closed and countries guarded their new secrets, which were often tied to war fighting. The development of nuclear weapons is a case in point. The period after World War II has again been viewed as one when rapid technological change was fostered by governments, when the spread of new processes and products was unhindered, and when the adoption of innovations at least in the noncommunist countries was embraced by states. Globalization thus sped up after 1950 because technological change accelerated.

It is important to note that technological change is not just about the economy; such changes have major ramifications for society, culture, and the polity. Electricity, the telephone (not to mention the mobile phone), radio, television, refrigerated shipping containers, automobiles, airplanes, and now the Internet—to name just a few of the major innovations of the last century and a half—have affected social, political, and cultural life in enormous ways. They have all contributed to globalization by

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reducing the cost of transportation and communication among individuals across the globe. In this secular story of global integration, countries can try to impede innovation and slow its spread, but they cannot ultimately halt such change. To the extent that technology reduces transportation and communication costs, technological innovation provides an irrepressible force for globalization. The pace of globalization may be affected but not its forward movement.

In the cyclical view of globalization, other factors are often cited as being of great importance to the changes we see. One theory focuses attention on the salience of having one country lead the globalization process. Hegemonic stability theory (HST), developed in the 1970s and 1980s, argued that a single world leader was necessary for an open, stable world economy. Without such a leader, even technological change would not bring globalization. Two versions of this theory exist. In one, the hegemon, who has overwhelming capabilities in all areas relative to other countries, exercises a benign influence over the rest of the world by organizing and paying the costs for such openness and stability. It plays the role of leader and others benefit from its efforts. The United Kingdom (UK) and the United States are cited as two examples of this in the mid-to late 19th and mid-to late 20th centuries, respectively. The loss of British leadership capacity and the failure of the United States to exert leadership in the interwar period were seen as the leading causes of the closure and turmoil of that period. Without such benign leadership, the world would not be able to integrate and countries would remain in an isolationist stance trying to beggar their neighbors. The hegemon solves the problem of trust and competition for the smaller states and thus allows everyone to emerge better off through its provision of global public goods. It acts as lender of last resort and tries to provide an open market in difficult economic times. By creating international institutions to help countries in difficult times, the hegemon can also promote stability and bind itself to reassure other countries of its benign motives. Globalization requires leadership from the world's strongest power. Some note that perhaps a small group of powerful countries could provide this same leadership, but concerns about disagreement or buck passing within this group have shed doubt on this view.

In a second view, the role of the hegemon is not seen as selfless. Here the global leader seeks to maximize its own interests and uses its superior resources to bribe and coerce others into following it. British and American hegemony is seen as a coercive process by which the country imposes its will on others; the hegemon gains, while everyone else submits. In the British case, imperialism combined with open markets and the dominant role of the pound helped it induce others open their markets and join the international trading and financial system. Even international law as developed in this period served to enable globalization as the European powers used it to force open the colonies. British domination ran into increasing difficulty, however, as other countries grew and became competitors. Once Britain could no longer dictate the terms of engagement with the world economy, regional blocs developed around the strongest powers. Britain could no longer force countries, including the United States and Germany, to follow its preferred practices, such as joining the sterling system or opening their markets to international trade. The decline of British hegemony then ended the period of globalization as powerful rivals developed their own spheres of influence.

In the case of the United States, its dominance in all domains after World War II helped it establish a system of international governance that has maintained American hegemony for over 60 years. Unlike the British earlier, the Americans set up a series of international institutions to embed the U.S. global order. The GATT/WTO, IMF, World Bank, and regional development banks have, among others, been a means for the United States to exercise its domination without having to do so directly. These institutions have pushed countries to adopt capitalist practices, to open their markets to flows of goods, services, and capital, and to follow the so-called Washington Consensus in other economic matters. Allowing or encouraging countries to become indebted and then imposing conditions on them when they are unable to service their debts has allowed international institutions to open the developing world to the global economy. More recently, pressure for democratization has also come from these institutions. Thus, the American method for controlling the global system has differed from the British one, but it has also involved coercing others to join the global economy. The use

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of soft power has been perhaps more evident in the case of the United States. But American military intervention around the world has been plentiful, and this view has served to enforce its global vision. In this view of coercive hegemony, first the UK and then the United States gained much from their exalted position at the center of the global system; ironically, however, in both cases their decline seems to be connected to their leadership role. This view of the malign hegemon is associated with both a realist and a Marxist approach to international relations. Substantial debate exists as to whether the coercive or benign view of hegemony is more evident. This debate includes controversy over the extent to which the countries other than the hegemon have been hurt or helped by this globalization process.

A more constructivist account of the globalization process would focus on the way ideas and norms about the global community and modernity shape state behavior. It would identify the dominant ideas of the past 60 years and how these have been legitimated and spread throughout the system. Beliefs in liberal democracy, human rights, capitalism, and neoliberalism, for instance, have diffused across the globe; these institutions and practices have become legitimated and viewed as the “modern” way to manage a country. Countries thus aspire to introduce and develop them in order to be a part of the global community. International institutions embody and diffuse these ideas, as do norm entrepreneurs from global civil society. The focal effect of these ideas, however, is to reduce diversity and contribute to homogenization. Scholars are often divided as to whether this normative globalization is beneficial or not. Clearly, the spread of some ideas (e.g., democracy and human rights) is seen in a more positive light than the spread of others by some scholars (e.g., capitalism and neoliberalism). There is also debate over how certain ideas come to be dominant. Is it through coercion or inducement by a powerful country, such as the United States, that others espouse these ideas? Is it more the zeitgeist of the time that makes certain ideas fit the situation better? Or is it the impact of international political entrepreneurs who give legitimacy and moral suasion to certain views, independent of countries?

Another reason given for the rise of globalization is much less intentional. The uncoordinated actions of countries over time have simply resulted in an increasingly open and interconnected system. No country desired such a result, but each one acting on its own best interests adopted policies that resulted in a globalized world. This view has support since the reasons for and sequencing of many countries' decisions to globalize were nationally distinctive. The advanced industrial countries liberalized trade and then their capital markets back in the 1960s to 1980s. The EU was a major force for movement in this direction; however, European countries joined and expanded the Union for reasons other than globalization, such as domestic politics or international security. China then launched its economic reform program in the late 1970s and early 1980s for internal reasons, and political reforms have not been forthcoming. The former communist countries only moved toward a more open and capitalist economy after the end of the Cold War and the demise of the former Soviet Union in 1991, and for many of them, joining the EU had important domestic political and international security motivations. In the developing world, democratization often came before economic liberalization. Many poor countries did not liberalize economically until the late 1990s and later. Indeed, the most striking is the different paths that countries have taken since the 1970s. The manner in which and the degree to which countries are integrated into the world system are remarkably varied. While the overall trend has been toward greater contacts and openness, there has been substantial diversity in how states realized this. For instance, English is spoken much more in most countries today than 30 years ago, but the penetration of English varies greatly from country to country. In this view, this uncoordinated process has been driven by different causes in each country. Globalization has developed differently for each; and the fate of globalization lies with the (somewhat independent) decisions of countries. The reactions to the global financial and economic crisis of 2008 to 2009 underline this view since governments have failed to coordinate and have instead responded distinctly.

Consequences of Globalization

In addition to the debates over the causes of globalization, there is much debate about its consequences. There are at least three distinct views in

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the literature: (1) Whereas some see its consequences as negative in all aspects, (2) others see its effects as positive on the whole, and (3) still others stand firmly in the middle and see it as having both costs and benefits. Globalization is said to have many different effects. The approach here is to look at a number of those effects and sketch out the different opinions scholars hold on each. At this stage, there is little consensus on its effects. Substantial literatures exist on whether (and how) globalization has affected economic growth rates, poverty, inequality, democracy, conflict, state capacity, policy and institutional convergence, cultural diversity, volatility and the diffusion of crises, and balance of power between capital and labor. Assessing the impact of globalization implies that one must hold other factors constant, which is a difficult task. Since globalization is an ongoing process, definitive answers to these questions cannot be given. What is striking, however, is the wide range of views and evidence that exists for each of these outcomes.

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Economic Growth

Globalization is alleged to have had a variety of effects on economic growth. Growing integration of national economics into a wider global one has usually been achieved through trade liberalization and the pursuit of foreign investment, and some-times through capital market liberalization. The consequences of these policies for economic growth are still debated. Some research supports the idea that all of the policies increase growth; there is probably more evidence that trade and foreign investment support growth than does capital market liberalization. Research also shows evidence that countries that globalized in the past 30 years grew faster than those that did not. Many expected that the integration of developing countries into the world economy would promote economic convergence—that is, it would make the poorest countries grow faster and hence catch up over time with the richest. There is some evidence that this has occurred in parts of the world—mainly Asia—but not much support for it globally. The North-South divide does not seem to have closed much over the past few decades. In part, this is because the North has had faster growth rates than some developing countries. For a wide range of countries, however, globalization does not seem to have fostered faster growth. Scholars point out that for parts of Latin America and Africa growth rates were higher in the decades before the 1980s than after. The impact of trade on growth for many countries has also been ambiguous; some, especially in Asia, seem to have gained from it. But many others, in Latin America and Africa, for instance, do not. Foreign direct investment has tended to flow to the most rapidly developing economies and so it is associated with fast growth, but this may not be causal. Finally, there is much skepticism that capital market liberalization for developing countries is or has been good for economic growth. Some of the problems associated with globalization, such as inequality and volatility, seem to have affected its capacity to deliver growth.

Poverty and Inequality

A large debate centers on the impact of globalization on poverty and inequality. World Bank data suggest that from the early 1980s to roughly 2005, poverty declined globally. The number of extreme poor (those living on less than $1.25/day) decreased from 1.9 billion in 1981 to 1.4 billion in 2005, which is equivalent to a decrease from 50% of the developing countries' population to 25% hereof (World Bank Annual Report 2009, p. 61). Also, for example, in the East Asia and Pacific regions, the percentage living on less than $2 a day ell from 69% in 1990 to 25% in 2007. Nevertheless, 2.5 billion people in the world still live on less than $2 a day (World Bank Annual Report 2008, pp. 14, 34).

Other measures of the quality of life in developing countries have also improved: Literacy rates, life expectancy, and infant mortality, for example, have ameliorated in most regions except where HIV/AIDS has struck hardest. Was this decline due o globalization? Some countries that have low-red trade barriers and promoted foreign investment, such as China, Taiwan, and Vietnam, have experienced significant declines in poverty in the past decades. However, even for these countries, it s not clear that within-country inequality has been educed; the growing rural-urban divide in many developing countries suggests rising inequality. Many other countries have seen little change in

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poverty levels, and inequality has either remained fairly constant or risen.

The World Bank associates greater globalization with increased growth, declining poverty, and falling inequality—especially globally. But other data call this optimistic scenario into question. A number of studies of trade have shown that its liberalization in developing countries does not reduce poverty or inequality. The so-called skill bias associated with trade and foreign investment today often means that more highly skilled workers gain more from international integration than do low-skilled ones, which tends to exacerbate the degree of within-country inequality. Interestingly, inequality seems to also have risen recently in the developed countries. This outcome was not unexpected. Standard models of trade suggest that in rich countries, high-skilled workers should gain the most from globalization and low-skilled ones should be the losers; this is the opposite of what should happen in the poor countries. This seems to have occurred in a number of developed countries, although it has probably been tempered by the redistributive effects of the welfare state. Inequality has thus risen in a number of developed countries.

The more surprising outcome has been that low-skilled workers in the developing world have not done better. While there are now numerous reasons articulated for this result, it is a problem for poverty reduction and equity in the developing world, especially since these countries by and large do not have well-developed welfare states. The impact of financial crises and their diffusion in a global system are also concerns with regard to poverty and inequality. Some argue that such crises are more likely, more intense, and spread more broadly in a globalized world. Others point out that with an open economy domestic and international shocks may balance each other out and actually make the system more stable. There is little doubt, however, that these financial shocks can have negative consequences for countries. The Asian financial crisis of the late 1990s and the recent global financial crisis have both increased poverty and inequality. How governments shape the globalization process in their countries seems to be important in influencing the way globalization affects poverty and inequality. This suggests that countries will have quite different experiences with globalization.

Politics and Democratization

Globalization has also been credited with having effects on politics. Some argue that it has helped spread democracy and put pressure on leaders to democratize. Democracy has certainly increased globally since the 1980s. But has this been due to globalization? Globalization through an open economy or through international pressure generated by international institutions or norm entrepreneurs may induce leaders to adopt more democratic forms of governance if they want to be members of the international system. Some argue the reverse: Democratization was necessary for the change in policies in many countries that led to greater globalization. The causal connection between democratization and globalization is much debated. There is also the difficult question of whether democracy and globalization are compatible. Political regimes practice democracy within their boundaries, and publics see their governments as responsible for the outcomes they experience. But in a globalized world both of these may be compromised. Democracy may have little meaning if the most important outcomes result from global forces and if governments can do little to affect these forces. The supposed democratic deficit in the EU is one manifestation of this problem. The growing number of international institutions may also be a related concern. Many of these institutions are established to facilitate international cooperation and prevent countries from pursuing beggar-thy-neighbor policies. But if they take decision-making power away from governments, they may undermine democracy at home and the public's faith in it. Others have argued that democracy may be enhanced by such international institutions. The spread of democracy and this wave of globalization seem to have gone hand in hand; how countries react over time to a highly globalized world may or may not be propitious for democracy.

Conflict

Globalization may have an impact on conflict as well. The frequency of international wars has declined steadily since the World Wars, but civil wars had risen in frequency until recently. Some research suggests that aspects of globalization can reduce conflict, especially interstate war. Research

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has shown that increased trade among countries, increased foreign investment, and trade agreements are all associated with less international conflict. The so-called international capitalist peace is one example of this argument. International institutions also seem to have a similar relationship: The more of them a country joins, the less likely it is to get into military conflicts. There do not seem to be similar connections for civil war. On the other side of the ledger, however, as countries trade and invest more with each other, they become more likely to have trade and investment disputes. Over time these can exacerbate, if not create, conflicts. Furthermore, as distant countries and peoples are brought into ever closer contact, the potential for misunderstandings and disputes rises as their different cultures, values, and beliefs clash; the so-called clash of civilizations is more likely in a highly interdependent world. As their interdependence increases, countries also become more vulnerable to the actions of other states. International economic ties have the potential to be used as political leverage. An interesting example is the case of China and the United States in the early 2000s. The growth of trade and investment ties between the two countries has resulted in very large and imbalanced flows of capital and trade from China to the United States; these economic linkages can serve as potential political levers for both sides. The relationship has become much more complex and fraught with political stress. Some think that these ties will dampen any propensity to engage militarily; others see them as potential sparks for a future conflict. Globalization may reduce tendencies toward conflict by making it more costly since countries will have to break their economic ties if they fight; or it may induce conflict as they have more and more linkages that can lead to disputes.

State Capacity to Govern and International Cooperation

Questions have arisen about the impact of globalization on state capacity. That is, does globalization weaken countries and erode their capacity to govern? States are often judged by their capacity to manage their economies, to respond to crises, and to provide public goods such as health care, national defense, and education. As they become increasingly intertwined in a global economy, states may lose the ability to manage their economies. The smaller the national economy relative to the world economy, the more likely is this outcome. Countries will experience the externalities of other countries' policies but will often be unable to manage these negative consequences. Losing control over monetary policy, especially if a country opens its capital account and lets its currency float, is a well-known example of this. Tax competition among states in a globalized world is another concern, since taxes provide the resources for governments to provide public goods. The race-to-the-bottom phenomenon in general that is associated with globalization can signal a country's increasing loss of control over its economy and perhaps its polity. As noted above, for democracies this loss of control can be especially worrisome as it may induce a loss of public faith in the government and in democracy overall.

On the other hand, international cooperation and international institutions may help states alleviate the problems associated with globalization. State behavior can create negative externalities for others even in a system that is not very globalized. But without globalization it may be very hard for states to cooperate to address these externalities. Globalization may awaken states to the need for organized cooperation. It may induce the creation of international institutions that help states deal with these externalities and thus provide greater political capacity than otherwise. One can think of the EU in this light. The states within the EU may now have greater capacity as a group to affect their economies than they did before joining the EU. Individually they might not be able to manage the pressures of globalization but with an institutionalized cooperative regime they may be much better able to do so. The recent interest of countries such as Iceland in joining the EU after the 2008 financial crisis suggests such an outcome. Globalization no doubt creates or exacerbates problems that do not respect national borders, but it may also contain pressures that allow countries to better respond to those problems.

Convergence Among States

Globalization has also been associated with policy and institutional convergence among states.

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Some have suggested that as countries open their economies they become more likely to adopt similar policies and institutions. This convergence process can be driven by different pressures. Some attribute it to the power of the world's hegemon; some, to the increased vulnerability of states to the pressures of international institutions; some, to increased competition among states; others, to a learning process undertaken by countries. Whatever the cause, this convergence seems to have occurred in economic policy and institutions. The widespread adoption of neoliberal policies, or the so-called Washington Consensus, has been notable since the late 1980s. Other examples are the decisions by many countries to create independent central banks and to allow their currencies to float. This process has been remarked in other areas, from the creation of bureaucracies to deal with science and technology issues to the turn to democracy itself. Globalization may narrow the choices that states have and pressure them to adopt similar institutional forms and practices. To the extent that these forms and practices result in better outcomes, this process may be welcomed. However, if they are not productive for states, then this convergence process may be a negative for governments everywhere.

When this convergence pressure extends to cultural and social life, it is often seen as a negative force. Losing the cultural and social diversity that are associated with distinct regions, ethnic groups, languages, and nations is an often remarked effect of globalization. The disappearance of many languages and the increasing use of English are two such examples. For some, this is a benefit since transaction costs are greatly reduced if all people speak the same language, and the dream of a common global language has a long history. The pressure on countries or peoples to curtail certain practices and rituals that are not considered “modern” or “civilized” is said to be growing as well. Debate rages over whether countries have the right to condone all types of practices within their borders or whether there exist certain minimal standards that all countries must follow. And the end of some practices, such as slavery, has been widely applauded. The decrease in both communication and transaction costs in a globalized world has obviously helped intensify such convergence. External pressures to conform to global norms may be stronger today than ever but such pressures have always existed. Today they are less likely to be imposed through the use of force or conquest but that does not mean these pressures are less powerful.

Scholars also worry that a global system is an increasingly interconnected one where problems in one country or region can spread more rapidly, forcefully, and widely than in a less interconnected environment. The increasing ease of transportation, for example, makes the spread of disease much faster and perhaps deadlier. The communications revolution does much the same for new ideas and fads. Information cascades are more likely in such systems. This means that instability may be greater as well. Small changes to the system radiate out in all directions and can lead to large consequences. There is a concern that crises are also more likely and more contagious in such a globalized world. The Asian financial crisis of the late 1990s and the recent global financial crisis of 2008 to 2009 are two such examples. Some have argued that the world's largest economies have experienced a “great moderation” since the 1970s with a dampening of business cycles and decreasing inflation due partially to greater international exposure. Others see an international economy beset by rising volatility over time, as crises multi-ply and spread. Globalization may stabilize a system by spreading problems out and bringing counterbalancing forces to bear, but it may also destabilize a system by creating a network of linkages among all countries and across all sectors that transmits and magnifies problems.

Domestic Economies

In addition to the question about which countries gain and lose from globalization, there is the issue of which groups gain and lose domestically. Many see globalization as strengthening the hand of capital owners and right-wing political parties as opposed to labor owners and left-wing parties. With a global economy where capital can move relatively freely, it becomes advantaged domestically. Globalization changes the domestic balance of power between business and labor. When owners of capital do not like a government policy or fear labor has become too strong, they can often move to a new political environment that is more

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accommodating. This process can then generate race-to-the-bottom pressures as governments try to retain capital in their country by deregulating and adopting more business-friendly policies. Some claim that globalization has helped undermine labor unions and other forms of labor market organization. This process can then influence the political system. If right-wing parties represent business interests more, they may be strengthened by globalization. Leftwing parties and their programs may seem increasingly unattractive as they “scare” capital away and perhaps slow down growth. Evidence for this effect is mixed. Some claim that left-wing parties and governments actually do a better job wooing capital and thus are not disadvantaged by globalization; they may even make better partners for international business than right-wing parties. Some scholars see no effect of globalization on domestic politics; they claim that domestic political institutions filter and shape such external pressures so that their ultimate effects are a function of domestic politics. Preexisting domestic institutions and practices then govern whether and how globalization affects internal politics. The impact of globalization on political power within and between countries is a topic of debate and great importance for future research.

Limits of Current Research

The consequences of globalization could thus be widespread. They might affect economics, politics, society, and culture. Existing research points out that globalization has affected economic growth rates, poverty, inequality, democracy, conflict, state capacity, policy and institutional convergence, cultural diversity, volatility and the diffusion of crises, and balance of power between capital and labor. But it provides little consensus on the direction or magnitude of these effects.

Globalization and the Future

Given the many consequences that globalization might have, one question that is often raised is whether countries can manage its impact. This is especially important to the extent that globalization has negative consequences. Many types of problems that have been endemic to countries for centuries have taken on a new perspective in a globalized world. Problems that were national have become transnational. The ability of countries to realize many of their basic goals has become more and more tied to the actions of other countries. Economic prosperity domestically often depends now on international trade and capital movements around the globe; national security from all sorts of threats depends on the behavior of other countries and nonstate actors; environmental conditions rely on the behavior of other agents globally; and public health relies more and more on transnational factors and the behavior of international agents. Countries have always faced such problems; it is just that their impact and resolution depend more and more on agents outside the state itself. Globalization is intimately connected to this process. By increasing contacts and interactions among countries and peoples, it helps make many issues transnational in character, rather than national.

Given that governance is largely the domain of nation-states, is there anything that can be done to address these transnational problems? One country can rarely dictate another's economic, environmental, security, or public health policy, for example. But to deal with transnational problems, coordination of policies may be the best way forward. In particular, cooperation where countries coordinate their policies to arrive at mutually preferable outcomes may be essential. Globalization may facilitate cooperation; it may make the costs of failing to cooperate so high that countries are more willing to try. But it may also make the stakes of cooperation much higher and thus render it less likely.

International institutions may be one way to address these concerns. In a globalized era, some see such institutions as essential for dealing with transnational problems. Countries alone cannot successfully deal with them; they require changes in the behavior of other states. International institutions that states voluntarily join and comply with may help them. Such institutions may help states realize cooperative outcomes; they may provide transparency and lower transaction costs for negotiating solutions to transnational issues; they may embody global norms and practices that allow states to identify focal points for cooperation and/or help them enforce compliance with international

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norms and cooperative agreements. These are the potential benefits of global institutions. They may have costs as well. Not all international institutions function adequately; some have serious internal defects that cause them to operate poorly. Others are deadlocked by internal divisions. Some are dominated by one or two states that coerce others to adopt their preferred norms and practices even if these are not very beneficial for the others. International institutions cannot be seen as a costless and efficient solution to all transnational problems. But many of them have shown some ability either to prevent transnational problems for worsening (e.g., the WHO and the WTO in times of crisis) or to allow states to cooperate in order to better manage problems in a globalized world (e.g., the EU).

A related issue is concern over globalization's future. If one adopts the secular view of it, then little chance exists that the increasing contact and interactions among peoples and countries can be reversed. Indeed if there is technological progress, there is likely to be increasing globalization; more and more contact and interaction are inevitable as technology brings people in the world closer together. On the other hand, the more cyclical view suggests that globalization comes and goes in waves depending on political, economic, and social reactions. We may now be experiencing the height of this period of globalization. Forces for a backlash against the pressure exerted by increasing contacts and interactions among peoples and states may be gaining strength. The economic and financial crisis of 2008 to 2009 may be a prelude to this type of backlash. In this view, governments can respond in ways that curtail or reverse globalization; they can protect their economies, close their borders, end participation in international institutions, and take other steps that seal them off from the rest of the world. The period between 1914 and 1945 is one example of this. The question, of course, is what would be the costs and benefits of such a course of action and would governments be able to achieve any kind of meaningful autonomy or autarchy, given the technologies we now have and the public expectations about their connections to the rest of the world. Whether globalization is reversible or not is a question of great import; the costs of doing so would be a key factor. More realistic, perhaps, are questions about whether globalization can be slowed down or managed in ways that are better for all concerned.

In conclusion, debate rages about globalization. A number of theories exist about its sources. Technological change, international political hegemony, global normative convergence, and/or independent country reactions have all been cited as major causes of globalization. Globalization's effects have been debated in even greater intensity and breadth. Substantial literatures exist on whether globalization has affected economic growth rates, poverty, inequality, democracy, conflict, state capacity, policy and institutional convergence, cultural diversity, volatility and the diffusion of crises, and balance of power between capital and labor. Agreement on the nature of its effects on any of these is scarce. For some, the balance of its impact has been negative in almost all domains; for others, it is seen as largely positive, especially in the economic and political areas; and for yet others, it has costs and benefits that are hard to calculate and summarize overall. One fact not in doubt is that globalization is an important feature of our world these days; it seems to have consequences for all domains of economic, political, social, and cultural affairs. How to manage it in order to make states, peoples, or the world better off is thus of central importance.

Milner Helen V.
Princeton University
Princeton, New Jersey, United States

Further Readings

Bhagwati, J. (2004). In defense of globalization. New York: Oxford University Press.

Cox, R. W. (1987). Production, power, and world order: Social forces and the making of history. New York: Columbia University Press.

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Eichengreen, B. (2008). Globalizing capital. Princeton, NJ: Princeton University Press.

Frieden, J. (2008). Global capitalism. New York: W. W. Norton.

Garrett, G. (1998). Partisan politics in the global economy. New York: Cambridge University Press.

Greider, W. (1997). One world, ready or not: The manic logic of global capitalism. New York: Simon & Schuster.

Hirschman, A. O. (1980). National power and the structure of foreign trade. Berkeley: University of California Press. (Original work published 1945)

Hoogvelt, A. M. M. (1997). Globalisation and the postcolonial world: The new political economy of development. Houndmills, UK: Macmillan.

Keohane, R. O., & Milner, H. V. (Eds.). (1996). Internationalization and domestic politics. New York: Cambridge University Press.

Kindleberger, C. P. (1973). The world in depression. Berkeley: University of California Press.

Milanovic, B. (2007). Worlds apart: Measuring international and global inequality. Princeton, NJ: Princeton University Press.

Polanyi, K. (1957). The great transformation: The political and economic origins of our time. Boston: Beacon Press. (Original work published 1944)

Robinson, W. I. (2004). A theory of global capitalism: Production, class, and state in a transnational world. Baltimore: Johns Hopkins University Press.

Rodrik, D. (1997). Has globalization gone too far? Washington, DC: Institute for International Economics.

Stiglitz, J. E. (2002). Globalization and its discontents. New York: W. W. Norton.

Strange, S. (1988). States and markets. London: Frances Pinter.

Wolf, M. (2004). Why globalization works. New Haven, CT: Yale University Press.

Woods, N. (2006). The globalizers. Ithaca, NY: Cornell University Press.

World Bank. (2008). The World Bank annual report 2008: Year in review. Washington, DC: Author.

World Bank. (2009). The World Bank annual report 2009: Year in review. Washington, DC: Author.

Source Citation

Source Citation   

Gale Document Number: GALE|CX4190900233