Abstract

It is the economic buzz-word of the 1990s, it destroys our jobs, it hollows out the decision-making power of governments, it even threatens the nation-state as the central institution of western type democracies — `it' is globalization and we are only at the beginning of it. Whether all of this is for good or ill is a topic of heated debate. One positive view is that globalization is an unmixed blessing, with the potential to boost productivity and living standards everywhere.This is because a globally integrated economy can lead to a better division of labour between countries, allowing low-wage countries to specialize in labour-intensive tasks while high-wage countries use workers in more productive ways. It will allow firms to exploit bigger economies of scale. And with globalization, capital can be shifted to whatever country offers the most productive investment opportunities, not trapped at home financing projects with poor returns. In fact, the arguments in favour of globalization differ little from the arguments in favour of a free market in a closed economy.Critics of globalization take a gloomier view. They predict that increased competition from low-wage developing countries will destroy jobs and push down wages in today's rich economies. There will be a `race to the bottom' as countries reduce wage taxes, welfare benefits and environmental controls to make themselves more `competitive'. Pressure to compete will erode the ability of governments to set their own economic policies. The critics also worry about the increased power of financial markets to cause economic havoc, as in the European currency crises of 1992-93, Mexico in 1994-95 and South-East Asia in 1997-98. And “chaos theorists” have even predicted a clash of civilizations, as Western norms and values attempt to impose themselves on other societies through the medium of globalization.But despite all the buzz about globalization, or rather because of it, globalization has turned into a notoriously difficult concept to define. It is an inflated term that is employed so loosely that almost anything can be used to illustrate its operation. This limits the analytical usefulness of the concept. In what follows, we shall introduce a more precise definition and point out the political consequences of this type of globalization