Home > Free Essays > Economics > Globalization > Economic Globalization and the State’s Capacity

Economic Globalization and the State’s Capacity Essay

Exclusively available on IvyPanda Available only on IvyPanda
Updated: Jun 20th, 2020

The relationship between economic globalization and the capacity of the nation-state

Scholars differ regarding how the relationship between globalization and the capacity of the state influences welfare state. Globalization effects may be positive. In this respect, it causes expansion. Countries engage in high-levels of international economic exchange resulting in instability and uncertainty, with fluctuations in economics and trade. Consequently, governments develop social policies aimed at stabilizing the economy and mollify the citizenry. Generous welfare programs and corporatist labor market emerge as a result (Brady et al. 922).

When the influence is negative, this triggers a crisis and subsequent reduction. Welfare states decline as they gradually lose economic autonomy when overwhelmed by global economy. They experience neoliberal reorganization to accommodate suppleness and competitiveness in an emerging, more globalized economy (Brady et al. 923). Consequently, governments reduce expensive welfare programs. The moves re-commodify workers to the bottom with the citizenry getting less social security. In such situations, capital dictates the economy. Subsequently, the capacity of the state to intervene in the economy is reduced.

The influence may be curvilinear resulting in the convergence. In this respect, globalization forces both high and low spenders towards an average level of welfare determination. The result is that globalization coerces large benefit states to decrease comprehensiveness while the least lavish benefit state escalates to a modest level. High spenders retrench while low spenders expand the welfare state to make the state politically viable and consequently expose the economy to international trade.

Globalization may also have no significance on the welfare state. Steinmo (2002) best demonstrated the argument according to Brady et al. (2005). He does not find any substantial proof that globalization weakens the generous Swedish welfare state. Other literatures support the argument by stating that globalization is less prominent than domestic politics. In this view, the national histories, traditions and institutions control the politics of the country’s distinctive welfare state (Brady et al. 925).

‘The state’

The ‘state’ is a regional and physical area confined by international boundaries. In these areas, there is a single administrative unit (the government) with direct responsibility of making and enforcing the rules for the society. These administrative units entail various interrelated bodies that assist the principal unit enforce the rules (Mahutga 3).

Theoretical alternatives

Beyond the claim that globalization is insignificant in view of welfare state, globalization questions can be classified into four main theoretical alternatives. To a certain extent, welfare state models that fail underscoring globalization can be observed as substitutes. First, globalization has conditional influences on specific institutional situations despite lacking general influences on all welfare states. For example, globalization does not threaten the generous social self-governing and corporatist welfare states. However, it weakens uncoordinated liberal welfare states yet does not have general influences across all countries (Brady et al. 925).

Other scholars argue that the most prominent welfare state calamity is happening in Western Europe. They blame globalization alongside other factors. Others argue that world mobility of resources and production in open global economies makes the principal policies of Europe’s social democracy unworkable. The argument concludes that globalization may be a more influential factor in Europe than other countries.

Second, one of the recent outstanding welfare state theory refute that ‘new politics’ administrate social policy. Welfare states, according to the theory, robustly resist substantial retrenchment or crisis. Constitutional structures, supremacy sharing across diverse bodies and the reputation of welfare programs in mature welfare states subdues retrenchment (Mahutga 14). The scope and development of consumer populations of welfare benefits reinforce welfare state’s stability and nurture further expansion.

Third, as a partial rejoinder to the ‘novel politics’ ideology, scholars argued that ‘politics as usual’ drives the welfare state. They further argued that the old-style analyses of welfare spending obstruct how class and biased politics continue to impact the welfare state because the typical reliant variables lack the political action. It is only with more sophisticated procedures of the welfare state that one can identify how biased and class politics affects welfare state disparity and reduction of expenditure.

To illustrate the argument, leftist parties in the 1980s failed to increase the welfare state after their peaks. The leftists caused expansion of the welfare state prior to the 1980s. On the other hand, the right parties initiated retrenchment after 1980s yet the welfare states were institutionally mature. The approach by the parties demonstrates class and partisan politics. In this regard, globalization is insignificant (Brady et al. 925).

Fourth, contrary to the argument that globalization presents either positive or negative impacts, there is an alternative that deindustrialization drives the expansion of welfare states. The weakening of industrial and agrarian employment – the customary sectors of local production – engenders deterioration in long-term steady employment for the working class. Consequently, the deindustrialization generates a huge population that demands more federal services and welfare state spending. Upon considering the weakening of industrial and agrarian employment, the effects of globalization become less relevant (Brady et al. 925). Brady et al. concludes that globalization does not have an absolute influence on the welfare state. In situations where it has effects, the effects are relatively insignificant. The conclusion emerges upon examining the theoretical alternatives.

Mahutga’s conclusions on the potential impact of a country’s position in the world-system and political ideology

Mahutga takes a different perspective of addressing globalization and the effects on welfare state. In doing so, the author focuses on both poor and rich countries to investigate whether or not global economic integration makes state bodies converge across countries. He argues that macroeconomic and industrial policies determine the industry that emerges in a country. Additionally they determine the competitiveness vis-à-vis other countries.

The macroeconomic policies include fiscal policy, monetary policy, and welfare state provision. According to Mahutga (2014), the tax policy and public expenditure influences the demand. When the government spends on programs such as education and infrastructure, it attracts more investors within and across its borders. However, globalization influences the economy of the welfare state when the government does not ably demonstrate how increase in taxes and public expenditure benefits the welfare state. The result is a reduction in investment, credit rating and devaluation of the currency. The growth of the economy hence has a direct link with welfare state spending (Mahutga 6).

The characteristics of a nation-state influence the impact of globalization differently. To illustrate the argument, the strength of a nation-state influences the connection between globalization and the intervention of the government. Stronger countries possess increased capacity to intervene on the impact of globalization compared to weaker states. Weaker countries are more affected by globalization and other allied factors and consequently the welfare state.

For example, the impact of globalization is less felt in the United States compared to Mexico. The economic position (world-system position) of the nation-state determines the level of state welfare spending and indicates the involvement of the government in the economy. Core states in the world-system position have considerably higher government spending than non-core (semi-peripheral and peripheral states). The outcome is that the influence of globalization on the economy of the core states is minimal compared to the counterparts. Globalization influences all nation-states. However, the degree of influence on the economy depends on the strength of the country. Subsequently, globalization has a waning impact on government intervention among core nation-states (Mahutga 8).

Political ideologies influence the government spending and the extent of government intervention against globalization in welfare states. Some nation-states are more susceptible to intervene in the economy than others. The variation in state ideology has a link to globalization. When a government perceives that globalization is significantly impacting its economy, intervention measures are implemented to mitigate the impact of globalization on the domestic economy.

In nation-states where small micro enterprises (SMEs) are more ideologically susceptible to intervene in the economy, a weak connection between globalization and state cutbacks in the SMEs develops. In nation-states with LMEs ideology, there is a strong connection between globalization and state retrenchments indicating the world-system positions and governmental interventions. In such countries, labor movements require invoking legal procedures as part of tactical range or risk sanctions (Kay 719).

In view of labor internationalism arising from globalization, workers in different countries recognize their common interests irrespective of national borders. Consequently, governments have limited capacity to intervene. The situation arises when the workers in different nation-states have similar or converging labor power, living standards and working conditions (Silver 5).

Works Cited

Brady, David, Martin Seeleib-Kaiser and Jason Beckfield. “Economic Globalization and the Welfare State in Affluent Democracies, 1975-2001.” American Sociological Review 70.6 (2005): 921-948. Print.

Hay, Collin. Globalization’s Impact on States, Oxford, UK: Oxford University Press. 2008. Print.

Kay, Tamara. “Labor Transnationalism and Global Governance: The Impact of NAFTA on Transnational Labor Relationships in North America.” American Journal of Sociology 111.3 (2005): 715-756. Print.

Mahutga, Matthew. 2014i. “Globalization and the Nation State.” Lecture, World-Systems and Globalization. Print.

Mahutga, Matthew. 2014l. “Globalization and Labor.” Lecture, World-Systems and Globalization. Print.

Mahutga, Matthew. 2014m. “Globalization and Labor Internationalism.” Lecture, World-Systems and Globalization. Print.

Silver, Beverly. Forces of Labor, Cambridge: Cambridge University Press. Print.

This essay on Economic Globalization and the State’s Capacity was written and submitted by your fellow student. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.
Removal Request
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda.
Request the removal

Need a custom Essay sample written from scratch by
professional specifically for you?

801 certified writers online

Cite This paper
Select a referencing style:


IvyPanda. (2020, June 20). Economic Globalization and the State's Capacity. https://ivypanda.com/essays/economic-globalization-and-the-states-capacity/


IvyPanda. (2020, June 20). Economic Globalization and the State's Capacity. Retrieved from https://ivypanda.com/essays/economic-globalization-and-the-states-capacity/

Work Cited

"Economic Globalization and the State's Capacity." IvyPanda, 20 June 2020, ivypanda.com/essays/economic-globalization-and-the-states-capacity/.

1. IvyPanda. "Economic Globalization and the State's Capacity." June 20, 2020. https://ivypanda.com/essays/economic-globalization-and-the-states-capacity/.


IvyPanda. "Economic Globalization and the State's Capacity." June 20, 2020. https://ivypanda.com/essays/economic-globalization-and-the-states-capacity/.


IvyPanda. 2020. "Economic Globalization and the State's Capacity." June 20, 2020. https://ivypanda.com/essays/economic-globalization-and-the-states-capacity/.


IvyPanda. (2020) 'Economic Globalization and the State's Capacity'. 20 June.

Powered by CiteTotal, free essay citation creator
More related papers