Transnationalization or globalization of financial markets raises key issues in the analization of politics, public policy and the national state of any given country as it constraints the policy makers. Thus, a number of theories have been conceptionalized to explain globalization; technology, globalism, regionalism, and imperialism among others.
Technology, public policy and the nation-state:
The technological theory views the global economy in the production, trade and finance sectors. Technology has impacted the global economy greatly: It has also led to domination of the world by corporations and the decline in the ability of states to regulate them and protect its citizens wherein the end results has been increased inequality and economic insecurity as a result capitalism in the global financial markets.
This has affected most countries in that instead of trade being nationalized it has been globalised as most developing countries have been forced to encourage foreign investors as to keep in line with changing global market and business. Their effect on public policy is that the state instead of sticking on to the policies formulated by the government to regulate economy, it is forced to adopt foreign policies which are meant to harmonize global economy.
The national economic policies become weakened and are thereby dominated by international ones. Regulation of all the market policies is hampered with as technology happens to take control in areas of financial markets where a standardized exchange rate is to be adopted by all the countries disenabling the nation-state to come up with their own exchange rate tariffs.
Technology has enhanced transmission of information within a short period of time at low costs and decline in tariffs on manufactured goods. Thus the trading countries, both the low income and high income earners, have to reduce their taxes on all their exports as long as they are members and this is controlled by a worldwide system which is advanced, thus no state can come up with its own tariffs.
According to technological theory, for governments to be able to keep in line with this, they ought to maximize flow of technology which is the basis of global economy in their countries through liberalized measures on trade and investment.
Since globalization is as a result of technological change there is need to develop new forms of governance and policies that would lead to the realization of this goal. This can be achieved by lowering taxes on profits as a way of encouraging firms to operate in a single jurisdiction rather than another, security of property rights, having stabilized monetary order together with a disciplined and ready to work low taxed supply of experienced workers with well structured labor relations.
Technology is shaping and improving the world economy at the same time stimulating the growth of global trade since it is the only simpler way of coordinating all the market functions and operations without having to visit all of them. Nation-state policies regulations have to be limited and operate on ones that are meant to be equal to all market operators.
Globalism:
Gobalism as an ideology supports economists and argues that the nation-states are still powerful, in that majority of the production and investment remains at national level and that markets and firms should spearhead the organization of capitalist economies as the states concentrates on its domestic economic developments.
This is policy places the interests of the entire world above those of individual states. It argues that the sole purpose of having a globalised economy is to ensure that market restrictions are to minimized and open trade be encouraged. It places a great interest towards the achievement of this goal as it encourages all the countries to work towards having a globalised economic market where there are no restrictions on the movement of goods across boarders or trading blocs.
In addition, the theory argues that as much as there is need for a globalized production, majority of the production is still carried out by national producers within their own territories. There is the rise of international global firms that produces and sells in the global market whereby they exhibit both the demand and supply sides globally.
However, this argument only remains true to the already developed states as foreign investment is limited compared to the developing ones where most of what is produced is exported to other countries so the state earns little gains.
The reason here is that industrialized countries have stable economies meaning their production at home is high at the same time they seek for investment in other countries that are still developing and the produces taken for market to their countries instead of helping the developing states upgrade their economic output. It has led to emergency of developed imperial capitalist countries that enjoy the benefits of global economy.
According to globalism, most of the global markets are dominated by these capitalists who happen to be the major producers; furthermore they formulate policies which undermine underdeveloped countries on the other hand protecting their interests globally.
As a way of stressing on more partnership in the globalization of economy, they claim the state plays a passive role in decision making on the global market, most of the policy making being those that boost domestic market. The truth is powerful states have opened up markets which are implemented by the international institutions they control for their own benefits, and they have set market regulatory rules which the other states have to adhered to failure to which they are sanctioned.
Regionalism:
According to this theory, “economic integration happens when a number of states within a region integrate to make up an economic union by raising a common tariff barrier against the products of member states while making it free trade between members.
The economic importance of this is to form free trade zones by creating common markets and coordinating economic strategies and furthermore, implementing policies to create bigger economic zones with an objective aim of enhancing interregional trade” (Welfens 1999, 23). This theory has had enormous effect on the economic environment of nation-states who are members in a sense that it has put in place “regulatory measures on corporate laws, competition policies and policies involving labor” (Gerny 2009, 80).
The theory stresses on the use of the indigenous factors of production so as to stimulate economic development to the devoid of the exploitation by the capitalist states. Regionalism best captures the complexities and contradictions of globalization, in that it restricts sovereignty of member states thus making it easier for the integration of the states into a global economic system.
It has also led to the “increased specialization and realization of economies of scale through pooling of resources and markets, access to a wider range of markets together with increased competition on goods and services in the global markets” (Bascom 2009, 87).
Regionalism happens to be even more valuable to the world economy as it enables those states that cannot be able to cope with world market policies operate on an integrated regionalized type where formulated policies happen to favors all the members within that region. At the same time for it to thrive it will call for full participation of the members by following stipulated strategies that are meant to boost it as it will be the basis for globalization (Berberoglu 2003, 65; Usher 2003, 106).
The importance of globalization is to benefit all members so the issue of having dominant members controlling the market should be discouraged and also the issue of placing sanctions on those that do not meet the required regulations be extinct as the economic and political development systems are not similar in all states. There should be an export oriented development strategies as well as increased integration of countries into a global production networks and this can be achieved through trade openness.
Imperialism:
According to the imperialism theory, some nations take control of the economic market at the expense of others due to their developed economies. These nations act as the main policy formulators which are to be followed by all the members since most of world markets are found within their territories (Caporaso & Levine 1992, 32).
The concentration of production and capital has developed to such a high level that it has created monopolies that play a decision making role on economic matters. There is the territorial division of the whole world market amongst the biggest capitalists what has resulted in the formation of international monopolists association which means the global market is not open to all countries but there are boundaries.
Devas (2009, 123) argues that imperialism is eliminating barriers to economic development globally making trade more open and free and thus, more importance in driving all the national economies forward. Furthermore, it has led to the explosion of global financial flows which have created one world since the central banks of individual countries are not able to control the exchange rate as it is mainly driven by the whims of the markets itself.
There is also the development of portfolio foreign investment in a way that individuals can buy shares in firms abroad without taking control and the issue of foreign direct investment which happens to driving forces behind the world economy and that only the surplus is value is taken abroad (Paul 2008, 97).
By inviting foreign investment into the country, it will be creating opportunities for the vast growth of the state economy at same time contributing greatly to the world economy. Since the world market cannot be controlled by all the players, and that most of these markets are situated in states that happen to more developed and appear as capitalist, it means control of all the trade managed properly leading integration of all the countries towards a common market that will result into an economic globalization.
As much as imperialism contributes to global economy the capitalist ought to reduce the sanctions that are placed upon the states that are not able to meet the market regulation policies as a way of encouraging its growth at the same time creating ways for competition (Held & McGrew 2007, 245; Jevons 1998, 65).
References
Bascom, J. 2009. Political Economy. New York: BiblioBazaar LLC.
Berberoglu, B. 2003. Globalization of capital and the nation-state: imperialism, class struggle, and the state in the age of global capitalism. New York: Rowman & Littlefield.
Caporaso, J. A. & Levine, D. P. 1992. Theories of political economy. London: Cambridge University Press.
Devas, C. S. 2009. Political Economy. New York: BiblioBazaar LLC.
Gerny, P. G. The dynamics of financial globalization: Technology, market structure, and policy response, Vol. 27. Helski: Kluwer Academic.
Held, D. & McGrew A. G. 2007. Globalization theory: approaches and controversies. Washington DC: Polity.
Jevons, W. S. (1998). Political economy: Science primers. New York: Forgotten Books.
Paul, B. 2008. National currencies and globalization: endangered specie? Vol. 24. London: Routledge.
Usher, D. 2003. Political economy. New Jersey: Wiley-Blackwell.
Welfens P. J. 1999. Globalization, economic growth and innovation dynamic. Hong Kong: Springer.