Describe the role of the State in the globalisation context

Introduction

While increasingly reduced barriers regarding international commerce and communication are sometimes seen as a potential threat to nation-states, these trends have existed throughout history. Air and sea transportation that made same-day travel to other continents possible and greatly expanded trade among countries did not abolish the sovereignty of individual nations. Instead, globalization is a force that changed the way nation-states deal with one another, particularly in the area of international commerce.

Globalization Favors Westernization

One commonly recognized effect of globalization is that it favors Westernization, meaning that other nation-states are at a disadvantage when dealing with the Americas and Europe. This is particularly true in the agricultural industry, in which second- and third-world nations face competition from Western companies. Another potential effect is that nation-states are forced to examine their economic policies in light of the many challenges and opportunities that multinational corporations and other entities of international commerce present.

Describe the role of the State in the globalisation context

Multinational corporations, in particular, challenge nation-states to confront the unique issue of foreign direct investments, forcing nation-states to determine how much international influence they allow in their economies. Globalization also creates a sense of interdependence among nations, which could create an imbalance of power among nations of different economic strengths.

Describe the role of the State in the globalisation context

The role of the nation-state in a global world is largely a regulatory one as the chief factor in global interdependence. While the domestic role of the nation-state remains largely unchanged, states that were previously isolated are now forced to engage with one another to set international commerce policies. Through various economic imbalances, these interactions may lead to diminished roles for some states and exalted roles for others. Economic globalization is mainly characterized by the rapid expansion of international trade, foreign direct investment and capital market flows. The last 50 years have seen trade expand faster than output by a significant margin, increasing the degree to which national economies rely on international trade in overall activity (WTO, 1998, Annual Report)

Describe the role of the State in the globalisation context

The decline in transportation costs and technological innovation, in particular the Internet, have contributed to an increase in the volume of trade, financial flows and accelerated economic transactions by decreasing the time and methods of delivery and payment of goods and services. Developing countries received about a quarter of world FDI inflows in 1988-1998 on average, though the share fluctuated quite a bit from year to year (World Bank, 2000, World Development Indicators)

Describe the role of the State in the globalisation context

Between 1980 and 1997, private capital flows to developing countries as a group soared to US $140 billion from US $12 billion. The main problem is that flows to developing countries have been so far concentrated among a relatively low number of countries. The report on financing for development prepared for the UN Secretary-General notes that, during the period 1993 to 1998, 20 countries accounted for over 70 per cent of all FDI inflows to all developing countries. It further notes that the majority of low-income countries have been largely bypassed by private finance from abroad – least developed countries as a group received 0.5 per cent of world FDI inflows in 1999. On the other hand, firms from developing countries themselves increasingly invest abroad.

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