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Globalization’ Economic and Political Dimensions Term Paper

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Updated: May 7th, 2019


Globalization, in the contemporary era, is often regarded as revolutionary to political, social and economic structures globally. It has caused a “power shift” from the traditional nation-states to global institutions, a trend, which, according to some researchers, has created “virtual states” (Rosecrance, 1996).

Nation-states are slowly losing their political power to supranational organizations, regional non-governmental organizations (NGOs), devolved units and multinational companies. In this regard, globalization shifts political authority to different international institutions causing state institutions to converge under uniform international policies. Despite the power shift, political devolution can enhance the democratization process by facilitating the convergence of governance institutions.

Critics of globalization urge national governments not to relinquish governance functions such as immigration, national security and criminal justice to supranational agencies (O’Brien et al., 2000). They argue that if nation states lose these crucial governance functions, they become ineffectual and unpopular among its publics. Also, the power shift or deregulation enhances the power of non-governmental actors in public intervention areas, including environmental issues and humanitarian aid.

In major cities, such as Washington D.C. and Seattle, emerging political movements oppose the deregulation of international market and instead agitate for the protection of the local market (O’Brien et al., 2000). To understand the effects of globalization, this paper defines globalization, surveys its range and dimensions, and analyzes its pros and cons in the contemporary world.

Definition of Globalization

Keohane and Nye (2000) define globalization as “the expansive networks that span intercontinental distances (p. 105). Thus, globalization covers many aspects of global politics, from the diminishing political power of nation-states (political globalization) to the homogenization of culture, trade policies, consumption and living standards (economic globalization).

Analysts attribute these changes to the elaborate transportation and communication networks. In this view, globalization encompasses linkages that lead to political and economic interdependence globally.

One important element of globalization is global economic integration. Economic integration, though not yet complete, has led to reduced trade barriers among nations, increased labor mobility and led to a more interconnected global economy. It is on this basis that Friedman (1999) defines globalization as “the inexorable integration of markets, technologies and nation-states, enabling corporations, people and nation-states to reach the rest of the world” (p. 7).

Friedman implies that globalization, though largely economic, also has a political dimension. It is the political decisions of nation-states to remove trade barriers in order to promote international trade and facilitate transportation and communication, which leads to globalization. Therefore, to understand the pros and cons of economic globalization in the U.S., understanding the role of political governance is important, as the two are intertwined.

Political Governance and Globalization

Nation-states often exercise sovereignty and have legitimate authority within a country’s borders. They are controlled by one central governance unit, which has sovereign authority in the nation-state. In contrast, international trade corporations, supranational agencies and NGOs are part of the larger global governance system, i.e. international governance.

This shows that globalization has links with political governance of nation-states. Within nation-states, these links have three dimensions (Rosecrance, 1996): the centralization vs. the devolution of governance; political accountability; and the divergence or convergence of policies.

Typically, governance can be devolved or concentrated in a central authority. In a centralized governance structure, power is vested in one unit, which has exclusive authority to rule. In contrast, in dispersed governance, many devolved units exercise limited power within the nation-states. An example is the United States’ government; the state government has some level of jurisdiction within the specific state. In a multi-level governance structure, authority is transferred or delegated to other units (Rosecrance, 1996).

Globalization affects governance with regard to international disputes. In resolution of disputes, nation-states often delegate their sovereign power to a third entity to serve as an arbiter, with a pledge to comply with its determination. Therefore, globalization affects governance in nation-states through delegation of power.

The second dimension, political accountability, is related to the delegation of power. Accountability requires political actors to govern transparently and responsibly. Democracy within nation-states entails political accountability, whereby the elected leaders are mandated to act on behalf of the citizenry.

Keohane and Nye (2000) note that democracy, unlike accountability, does not extend beyond the borders of a nation-state. Although, democratic accountability is applicable to financial institutions such as the IMF, most NGOs associated with globalization lack internal democracy. Therefore, globalization affects governance through political accountability and democracy.

Globalization also affects governance through convergence or divergence of policies. Although globalization may not completely erode the roles of the state government, it may create countries that have more or less similar policies and governance structures.

Opponents of globalization argue that a globalized economy will force nation-states to adopt homogeneous policies and establish similar institutions (O’Brien et al., 2000). Also, globalization may lead to reduced government intervention in matters affecting its people. This may affect democratic accountability within nation-states.

Pros and Cons of Globalization

Economic Effects

The effect of globalization on the economies of nation-states can be explained using the efficiency-based approach. The common economic policies of many countries are geared towards creating wealth; they entail opening up the markets to international investors.

Thus, according to Friedman (1999), internationalization of markets influences countries to adopt “neoliberal policies that promote international openness, reduced government participation and increased private investments” (p. 8). Therefore, one disadvantage of globalization is its larger control of the economic benefits, through reduced government role in nation-states’ economy. The international organizations dominate the local economic spheres limiting the societal issues the government can act on.

Globalization also causes a shift in power from the government to supranational and regional bodies. When this happens, resolution of transnational problems provides an avenue for the supranational authorities to expand their authority; an example is the EU and the North American Union. Also, regional institutions can position themselves strategically to protect their interests through transnational cooperation.

Such economic integrations influence the policy preferences of the nation-state political actors. According to Rosecrance (1996), economic globalization may cause trading countries to adopt similar trade policies; a phenomenon that has far-reaching implications on bilateral relations between states. Nevertheless, globalization expands opens up national and regional markets by disintegrating local monopolies in favor of international competitiveness.

Political Preferences

Rosecrance (1996) argues that economic integration facilitates free flow of labor and capital across the borders and fosters specialization and division of labor in the global arena. In a free economy, some countries may lose or gain in the wake of economic globalization. However, the aggregate benefits in the long run would compensate for the costs associated with globalization. Rosecrance (1996) further shows that free trade policies affect many factors of production.

For instance, labor and capital flow in the tourism industry will tend to favor certain trade policies in a trading bloc. Globalization also increases the number of players in favor of particular policies including activists and environmentalists, which ensures quality goods or services. However, marginalization of certain groups may arise and spillover into national politics leading to a struggle whereby the losing parties will attempt to derail integration while the winners will press for greater integration.

Proponents of globalization have a preference for particular policies and models that encourage economic openness. Also, some integration players prefer certain forms of governance more than others.

For example, in the United States, most NGOs prefer some level of regulation (consumer protection and labor regulation) at the national level rather than at the state level (Frieden, 1999). Integration critics argue that actor preferences for institutions such as the International Labor Organization tend to favor more stringent regulation of firms, which may affect their performance.

Besides policy preferences, convergence of cultures often leads to a homogenization of cultures, values and lifestyles. Critics argue that globalization erodes national cultures and creates new societal norms (Frieden, 1999). Thus, due to globalization, the consumption culture, market competition, education and public goods may become homogenous across nation-states. Such a scenario may ultimately influence policy preferences whereby policymakers prefer decentralized policies to centralized and localized policies.

Global Institutions

Most global institutions advocate for policies that favor particular interest groups. As Frieden (1999) notes, international institutions such as the UN influence the interactions at the international level, which affect economic and political outcomes. One way in which institutions affect globalization is through policy preferences. Influential political entities that favor a particular economic model would establish institutions to promote their ideals.

For instance, before 1914, the gold standard agitated for an open economy by removing barriers to international trade in the 19th century; it, however, faced much domestic opposition from the American populists (Frieden, 1999). Thus, decentralized institutions can foster economic openness if they have political support.

The stability of a country’s governance also influences policy choices and investment decisions by international organizations. For example, countries with unstable governments will have fewer external investors willing to invest there as political instability is often associated with ineffective economic policies. Thus, under conditions of political instability, perceptions held by global and regional organizations such as the NAU, WTO or the EU will influence investment decisions of international corporations.

However, policy credibility can be enhanced if such governments sign bilateral treaties with stable governments. For instance, Mexico’s ratification of the NAFTA treaty reinforced its policy credibility at the international level (Frieden, 1999). Thus, regional and global institutions influence the local economic policies in a way that sustains a market economy and competitiveness.


Globalization has two dimensions; economic and political dimensions. Governance has links with globalization with regard to political institutions, cultural values and societal norms. From a cultural perspective, globalization erodes cultural values and norms through the convergence of cultures. Also, due to the interconnectedness of the different economies, financial crises in one part of the world affect the economies of other countries.

However, globalization promotes cultural tourism through the convergence of cultures and promotes competitiveness and democracy. Also, globalization, through supranational governance influences financial and monetary policies of nations and regional trading blocs resulting in greater economic benefits to member states. Overall, the phenomenon of globalization has far greater benefits for nation-states than disadvantages.


Frieden, J. (1999). Actors and Preferences in International Relations. Princeton: Princeton University Press.

Keohane, O., & Nye, S. (2000). Globalization: What’s New? What’s Not? (And So What?). Foreign Policy, 118(4), 104-109

O’Brien, R., Goetz, A., Scholte, J., & Williams, M. (2000). Contesting Global

Governance: Multilateral Economic Institutions and Global Social Movements. New York: Cambridge University Press.

Rosecrance, R. (1996). The Rise of the Virtual State. Foreign Affairs, 75(4), 45-61.

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