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Rethinking Nation-State in the Era of Globalization

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Journal of International Relations, Vol. VI, No. 6, June 2015: 205-220

Rethinking Nation-State in the Era of Globalization

Md. Azmal Mahmud Khan
Muhammad Faridul Alam

Abstract: Globalization usually refers to the idea of worldwide

interconnectedness. Globalization perhaps is the most powerful force which
is challenging the traditional notion of state to state interaction and
reshaping it in various ways. Apart from the relations among states within
the political arena, it also includes economic, social and cultural variables.
Critics point out that the process of globalization threatens to undermine
state sovereignty. As a result, the traditional notion of nation-state is
gradually evolving in the era of globalization. It is also argued that the
globalization process has long been used as a tool to dominate the
developing economies by the developed countries. Globalization thus offers
different opportunities to different economies. Hence, we need to analyze
the impacts of globalization from multiple aspects. This article is an attempt
to analyze the origin of globalization, its impacts on international relations,
impact on state sovereignty using various methods of analysis.

Introduction
Globalization is often understood as a process of economic integration which
presents only the partial truth. In other words, globalization emerges from the
global mechanisms of greater integration with particular emphasis in the sphere
of economic transactions. Globalization is such a process which existed even
during the early period of the human civilization. However, the process was not
as intense as it is now. The process of globalization intensified specially during
the seventeenth and the eighteenth century following the discoveries of new

 Azmal Mahmud Khan is an Assistant Professor at the Department of International

Relations, Jahangirnagar University, Bangladesh. Prior to joining Jahangirnagar
University, he served as an Assistant Professor and Lecturer at the Department of
International Relations, University of Chittagong, Bangladesh. He also served as
Senior Research Associate at the Bangladesh Enterprise Institute. His areas of
interests include international security, foreign policy, and environmental politics.
He can be reached at: azmal.m.khan@gmail.com

Muhammad Faridul Alam is an Assistant Professor at the Department of
International Relations, University of Chittagong, Bangladesh. He received his MSS
degree in International Relations from the University of Dhaka and an MA in Area
Studies from the University of Tsukuba, Japan. He can be reached at:
mfulka@yahoo.com
206 Journal of International Relations, Vol. VI, No. 6, June 2015

naval routes across the globe. The expansion of colonial rules contributed a lot in
the process of globalization. Thus the process of globalization also paved the
avenues of global domination. As a result, the perception and understanding of
globalization has different meanings in different regions with different realities.
Globalization is one of the most intensely debated issues in the
contemporary world. Hence, globalization has many meanings and can be
understood from different points of view. The ascendance of liberal over
mercantilist economics in recent decades forms one standard of complex mosaic
of changes in the world political economy – changes that together are called
globalization (Glodstein 2004). For some, it is a concept for global capitalism and
imperialism and is accordingly condemned as another form of the imposition of
the logic of capital and the market over more regions of the world and spheres of
life. On the contrary, it is also the continuation of modernization, and a force of
progress, increased wealth, freedom, democracy and happiness. The patrons of
globalization depict globalization as beneficial, generating fresh economic
opportunities, political democratization, cultural diversity, and the opening of an
exciting new world. On the other hand, critics of globalization see it as harmful,
bringing about increased domination and control by the wealthier
overdeveloped nations over the poor underdeveloped countries. Thus,
globalization results in increasing hegemony of the ‘haves’ over the ‘have-nots’.

Methodology
The paper is based on qualitative analysis of secondary materials. Available
published materials have been consulted in the preparation of this paper. The
secondary resources include books, articles published in online and offline
journals, reports published by the international organizations as well as various
online sources available.

Objectives of the Paper

Globalization is too immense and complex to be analyzed in a diminutive
framework. This paper primarily looks into the evolving relationship between
globalization with nation-state. The concept of nation-state has gone through
considerable changes since the nineteenth century and it pushed further in the
following times. The primary objective of this paper is to analyze this changing
nature of nation-state in the era of globalization. Moreover, the paper addresses
the debates regarding equality and inequality; justice and injustice; development
and underdevelopment using various methods.

Understanding Globalization
Globalization refers to processes whereby many social relations become
relatively delinked from territorial geography, so that human lives are
increasingly being played out in the world as a single place (Scholte 1997).
Journal of International Relations, Vol. VI, No. 6, June 2015 207

Although globalization initially was understood as an economic phenomenon,

the understanding is much broader now incorporating many other new issues.
Now-a-days there are numerous issues which are closely associated with the
process of globalization. The spectrum ranges from economic to political and
from cultural to social and a diverse mixture among them. As time passes by, the
bondage is becoming more concrete, diverse, complex and intertwined. Rather
than the economic, financial and political ties, globalization scholars now argue
that the main modern elements for development interpretation are the cultural
links among nations. Undoubtedly, in the contemporary times, one of the most
important characteristics of the globalization is its focus and emphasis on cultural
aspects and their communication worldwide. In this cultural interaction, one of
the most important factors is the increasing flexibility of technology to
connecting people worldwide. The advancement in science has intensely
intensified the swiftness of the globalization process. It has contributed to the
global interaction among different countries, different cultures and so on. Hence,
the key to understanding globalization is conceptualizing it as a product of
technological revolution and the global restructuring of capitalism in which
economic, social, political, cultural and technological features are intertwined.
Thus globalization is a highly complex, contradictory and ambiguous set of
institutions and social relations, as well as one involving flows of goods, services,
ideas, technologies, cultural forms and people (Kellner 2002). Globalization,
conceived of as an accomplished fact, highlights a series of inert-related changes
that may have generated a set of new conditions. The characteristics processes
and conditions of globalization can be seen as instances of timeless and universal
properties of the human condition or specific combination of interest, outlook
and technical possibility (Jones 1999). Globalization refers to the compression of
the world and the intensification of consciousness of the world as a whole. In
thought and action, it makes the world a single place.
According to Giovanni E. Reyes definition on the theory of globalization
(Reyes 2001), the main assumptions can be summarized in three principal points.
First, cultural factors are the determinant aspect in every society. Second, it is not
important, under current world conditions to use the nation-state as the unit of
analysis, since global communications and international ties are making this
category less useful. Third, with more standardization in technological advances,
more and more social sectors will be able to connect themselves with other
groups around the world. This situation will involve the dominant and non-
dominant groups from each nation.

Origins and Evolution of Globalization

The term globalization is one of the most commonly employed phrases in
contemporary social science (Mansoob 2004). The origin of globalization dates
back many centuries. One source says that they may be traced back to the
208 Journal of International Relations, Vol. VI, No. 6, June 2015

sixteenth century, when European imperial expansion began, and that

globalization today is simply a more advanced stage of the same (Robins 1999).
Another source locates the beginnings of the globalization through economic
activity in the European middle ages, when systematic cross-border trading
operation of a private corporate nature were initiated (Hirst 1999). Others see the
real take-off of globalization specifically the economic globalization as occurring
in the modern period with the development of international organizations,
conferences, agencies, trade agencies and so on. Henry Wai Chung Yeung, defined
in his writing that it is during the last two decades that the globalization
tendencies have achieved heightened intensity, driven primarily by the
champions of market mechanism, technological change and time-space
compressor (Yeung 1998a). Today’s notion of globalization, which refers to free
market, was initiated by England in mid nineteenth century to create a free
economic life from social and political control.
Mid-nineteenth century England was the subject of a far-reaching
experiment in social engineering. Its objective was to free economic life
from social and political control and it did so by constructing a new
institution, the free market, and by breaking up the more socially rooted
markets that had existed in England for centuries. The free market created a
new type of economy in which prices of all goods, including labor, changed
without regard to their effects on society. In the past, economic life had been
constrained by the need to maintain social cohesion. It was conducted in social
markets – markets that were embedded in society and subject to many kinds of
regulation and restraint. The goal of the experiment that was attempted in mid
Victorian England was to demolish these social markets, and replace them by
deregulated markets that operated independently of social needs. The rupture of
England’s economic life was produced by the creation of the free market
(Gray 1998).
It is popular everywhere that globalization is a gift from the West to the
world and sometime it is seen as a curse from the Western by blaming them sort
of imposing new form of imperialism over the rest of the world, especially the
poorer countries. Globalization, in fact, is neither new nor necessarily Western;
and it is not a curse. Over thousands of years, globalization has contributed to the
progress of the world through travel, trade, migration, spread of cultural
influences and dissemination of knowledge and understandings including that of
science and technology. These global inter-relations have often been very
productive in the advancement of different countries. They have not necessarily
taken the form of increased Western influence. Indeed, the active agents of
globalization have often been located far from the West. Around 1000 A.D.,
global reach of science, technology, and mathematics was changing the nature of
the old world, but the dissemination then was, to a great extent, in the opposite
direction of what we see today. The high technology in the world of 1000 A.D
Journal of International Relations, Vol. VI, No. 6, June 2015 209

included: paper, the printing press, the crossbow, gun-powder, the iron-chain
suspension bridge, the knit, the magnetic compass, the wheel barrow, and the
rotary fan. A millennium ago, these items were used extensively in China – and
were practically unknown elsewhere. Globalization spread them across the
world, including Europe. A similar movement occurred in the Eastern influence
on Western mathematics. The decimal system emerged and became well
developed in India between the second and sixth centuries; it was used by Arab
mathematicians soon thereafter. These mathematical innovations reached Europe
mainly in and began having an impact in the early years of the last millennium
playing an important part in the scientific revolution that helped to transform
Europe (Sen 2002b).

The Globalization Debate

There are different arguments regarding globalization. In broad social terms,
globalization has been conceptualized as a ‘process whereby the population of
the world is increasingly bonded into a single society’(Kilminister 1997). Some
argue that globalization greatly enhances the opportunities to those who have the
skill and mobility to flourish in world markets. It can help poor countries to
escape poverty. Globalization is a part of a broader trend we may call
marketization. Receding government, deregulation and the shrinking of social
obligations are the domestic counterparts of the intertwining of national
economies.
At least five general usages of the word ‘globalization’ can be distinguished.
For example, the word has often been taken to mean internationalization, that is,
an intensification of cross-border interactions and interdependence between the
countries. A second usage has treated globalization as liberalization, that is a
process of removing government-imposed restrictions on movement between
countries in order to create an ‘open’, ‘integrated’ world economy. A third
conception has viewed globalization in term of universalization, that is, the
spread of various objects and experiences to people at all corners of earth. Forth,
many people (especially critics of cultural imperialism) have defined
globalization as westernization, especially in an Americanized form. Still others
have defined globalization as deterritorialization, that is, a shift in geography
whereby territorial places, territorial distances and territorial borders loss some
of their previously overriding influence (Scholte 2001).
Furthermore, globalization involves a series of flows – of ideas, goods,
images, people, and so on– which traverse the planet; flows that very often
threaten or endanger people but also attract and gratify them. There is an
increasing structural differentiation of these goods and assets that has spread
across traditional political borders and economic sectors, and has resulted in the
greater influence of political and economic changes. By now almost all the
inhabitants of the world know, or at least have a vague idea of the benefits
210 Journal of International Relations, Vol. VI, No. 6, June 2015

enjoyed by the inhabitants of the more advanced countries, and in many cases
yearn for those benefits themselves. Global economy today has become more
functionally integrated and interdependent than ever (Hirst 1999). It is defined as
because of this increasing integration and interdependence of national economies
at a global scale, it is now fashionable among the business personals,
international economists and liberal politicians to assert that the world is
‘borderless’. In such a ‘borderless’ world, the fortunes of individuals, firms,
industries and even nation-states are so intertwined with the ongoing events in
the global economy that it becomes almost impossible to define the nation-states
without referring to the broader economy (Yeung 1998b).
On the other hand, those who oppose the notion of ‘globalization’, argue
that – national governments have been seen to be losing control over their
economic domain. The formation of global economy outreaches the control of
any single state; multi and transnational corporations, stockbrokers and
international money and securities dealers make production and investment
decisions that affect the economic well-being of states and people without being
accountable to them. In a world of global interconnectedness both people’s
sovereignty and state sovereignty have been challenged since the concept of
globalization reached to the nation states. National communities by no means
exclusively make and determine decisions and policies themselves, and
governments by no means determine what is right or appropriate for their own
citizens. Global communication and interconnectedness together make it difficult
for governments to control the flow of information and its disseminations.
Globalization is also generally conceived of as an historical process in which state
or national institutions, authorities, actors and so on are increasingly bypassed in
the course of interactions around the world, especially in the economic sphere.
A truly global economy is claimed to have emerged or to be in the process
of emerging, in which distinct national economies, and therefore, domestic
strategies of national management are increasingly irrelevant. The world
economy has internationalized in its basic dynamics, it is dominated by
uncontrollable market forces, and it has as its principle economic actors and
major agents of change truly national transnational corporations that owe
allegiance to no nation-state and locate wherever on the globe market advantages
dictates.

Connection between Globalization and the Nation-State

It is believed that despite the often harmful impact globalization processes on the
poorest regions of the planet, development is by now a global problem, and as
such it must be addressed with equally global strategies (Caselli 2004). Very
often, in fact, the main obstacles against the development of a country – starting
from the invasiveness of multinationals or certain of their policies – cannot be
removed by that country on its own, but instead require coordinated effort on a
Journal of International Relations, Vol. VI, No. 6, June 2015 211

wider scale. It is principally for this reason that the option of disengaging from
globalization processes is not a viable one for a country. Development which
must be more than mere economic growth (UNDP 1990) – transcends the
national dimension, for there is no country that can imagine achieving this
objective without forming relations with other states. Moreover, the specific
aspect of the sustainability of development – and more generally of the
sustainability of the lifestyles of contemporary societies – is unequivocally a
global question, besides being probably one of the most concrete examples of
what globalization is. The capitalist states must perform certain functions in
order to enable capital accumulation, which in turn legitimizes its own existence.
It is also claimed that globalization does not obviate the need for the capitalist
states. According the ‘capital-logic’ school, the state is seen as ideal collective
capitalist, and hence is subordinate to the laws of motion of capitalism. It is
trapped within capitalist mode of production and cannot escape from its
contradiction and crisis (Yeung 1998a).
Another debate we observe now-a-days regarding the state sovereignty in
the age of globalization. It is often argued that the state sovereignty has been
compromised due to overgrowing influence of globalization. Even the very
concept of sovereignty is embracing various meanings. According to Stephen D.
Krasner, ‘Sovereignty was never quite as vibrant as many contemporary
observers suggest. The conventional norms of sovereignty have always been
challenged. A few states notably the United States, have had autonomy, control,
and recognition for most of their existence, but most others have not. The polities
of many weaker states have been persistently penetrated, and stronger nations
have not been immune to external influence. China was occupied. The
constitutional arrangements of Japan and Germany were directed by the United
States after World War II. The United Kingdom, despite its rejection of the euro,
is part of the European Union'. In a nutshell, we see that globalization is
challenging the sovereignty from different perspectives like politics, economy
and culture.
As we see today, sovereignty has limited due to overwhelmed growth of
economic activities across the globe. Capitalist approach and the catalytic role
played by globalization together have reshaped the traditional notion of state
sovereignty. The bulk of capitalist activity is more “trilateral” than global, being
concentrated in the three regions in the advanced “North”: North Europe, North
America, and East Asia. These contain over 85 percent of world trade, over 90
percent of production in advanced sectors like electronics, plus the headquarters
all but a handful of the top hundred multi-nationals (including banks) (Mann
1999). Since capitalism is viewed as global phenomena, Western Europe has gone
more transnational, sponsoring a unique degree of continental economic
integration. Here lies a genuine single market a movement, which has ended by
introducing a single currency (in its core) “Euro” – rather than national attempts
212 Journal of International Relations, Vol. VI, No. 6, June 2015

at protectionism. Here “national champion” corporations are becoming “Euro-

champions” assisted as much by EU government as by the individual nation-
state. The USA also has been influenced by capitalist transformation.
Competitive pressures from the two other northern geo-economies have been
most visible in the creation of NAFTA, a free trade area embracing the US,
Canada, and the Mexico, with some prospects for its eventual extension to other
stable economies in Central and South America. US hegemony in the continent
also makes NAFTA unique – and very different to the European Union. East Asia
at present is dominated by a single nation-state. Though Japan is not a military
superpower, Japanese political economy differs from the North American and
Europeans, with far more coordination between the state and capitalist
corporations, which is called “governed interdependence”. All the mentioned
countries also have political stability, and an advanced civil society, which is
stable, literate, and broadly honest. They have also experienced phenomenal
growth at least up until the mid 1990s. Hence, we see that the rising interaction
among the countries to some extent not only has limited the sovereignty of the
state but also fostered economic development. The connection between
sovereignty and development is thus reciprocal.
Globalization thus has both positive and negative impacts on the states. One
the one hand it fosters development and on the other is promotes regionalization.
It contributes positively to the overall development of the already developed
economies and also paves the way to exploit the underdeveloped by the
developed ones. On the positive note, globalization increases accountability of
state-laws, increase awareness and serves world peace-interdependency. On the
contrary, globalization makes states more fragile, erodes state sovereignty and
makes the national economies more fragile (Burak 2011).

Nation-State, TNCs/MNCs and Globalization

Now-a-days, it has been witnessed the changing roles of capitalist states from
merely a ‘policing’ role to more proactive role in the global phenomena. Some of
these state functions are not new at all, but represent dynamic strategies of the
capitalist states in a globalizing era. Because of its legitimizing role, states
sometime intervene in the behavior of the domestic capital (home-country TNCs)
when an investment or production decision affects national interests.
Alternatively, the state may extend its help to domestic capital so that it may gain
a better position in the global competitive market. For example, when the
geography of the global competitiveness in the semiconductor industry was
increasingly transformed in favor of Japanese TNCs during the 1980s, the US
government faced severe pressures and legitimating crisis to act on behalf of
American firms. The implementation of a strategic trade policy was the tangible
response of the US government to the challenge of globalization. States also
continue to provide necessary conditions for the growth of domestic capital
Journal of International Relations, Vol. VI, No. 6, June 2015 213

globally. Japanese TNCs have outgrown their Western counterparts since the
mid 1970s, became the major competitor in the global economy.
During the period between 1975 and 1990, the rapid growth and
internationalization of large Japanese TNCs in automobiles and electronic
industries, both of which are crucial industries in the new, high-tech global
economy was the single most important change. Several studies have found that
the unique competitive advantage and capabilities of many of these Japanese
TNCs are enhanced by their national economic and political institutions. The
state is directly engaged in transnational economic activities to become a
‘collective capitalist’. Ownership of major domestic TNCs is another way in
which the capitalist state influences the transnational corporate arena. State-
owned TNCs are not new phenomena. The East India Company, for example,
was largely controlled by the imperial British government. The main difference
in today’s state-owned TNCs is that they are established largely for strategic
economic reasons. Some capitalist states realize that the private sector alone is
unable to compete successfully against TNCs that are linked to their respective
host-country governments. The outcome of this dynamic competition between
capitalist states is the rapid emergence and growth of state-owned TNCs in
today’s corporate arena.
The interaction between the state and the TNCs has grown manifold in the
age of globalization. It is worthy to note that, global trade is at present largely
controlled by the TNCs whereas it was dominated by states in the past.
Globalization has brought much fortune to the transnational corporations in
terms of conducting business and maximizing profit. Hence, we bump into the
debate whether globalization promotes equality or increases the gap between the
developed ‘North’ and developing ‘South’.

Question of Equality and Inequality

There are lots of debates about globalization that it creates gap between the rich
and poor, advanced and less advanced states. This assertion is elegant in its
simplicity, but it ignores a lot of other factors. The level of income disparity in an
economy might have more to do with history, economic growth, price and wage
controls, welfare programs, and education policies than it does with
globalization and trade liberalization (Yester 2009). Underdevelopment is a
product of misuse of natural and human resources which will forcibly depart
regions from economical expansion and avoid social changes needed to join
human groups in an integrated economical system. Underdevelopment and
hunger can only be eliminated from the face of earth through a global
development strategy which will mobilize production means in the interest of the
community.
One of the greatest mistakes was to consider that the process of
development everywhere should be equal to the model of the rich Western
214 Journal of International Relations, Vol. VI, No. 6, June 2015

countries. A sort of ethnocentrism made development scholars base their theories

on classic economy, which ignored regions with different social-economical
realities from those of western capitalist economies; ignored a growing socialist
economy and a supply and sales network everywhere else in the world.
Whatever remained was left to sociologists and folklorists.
These immense social differences between people divided the world
economically in two: the rich world and the poor world; the world of well
developed and industrialized countries and the world of the proletariat and
underdeveloped countries. This economical gap splits humanity in two groups
that are unable to understand each other: the group that does not eat made of
two-thirds of the world's population and that lives in the underdeveloped areas
and the group made of the remaining one third, in the rich countries, that do not
sleep, afraid of the uprising of the hungry. In both the cases, the role of
globalization to guarantee equilibrium among the world population remains
questionable and unresolved.

Discrepancy between Developed and Underdeveloped Countries

One of the most constant and permanent facts of the terrible social tension
predominating these days is the economical imbalance with its many
consequences on social injustice. One of the greatest threats to world peace is the
economical difference between economically well developed countries on one
side and insufficiently developed countries on the other. This discrepancy
becomes greater each day, intensifying social unconformity, giving way to
restlessness and uneasiness and contributing largely towards political and
ideological conflicts.
Underdevelopment is not exclusive for many countries. It is a universal
matter which can only be solved with universal approach. To live in wealth while
two thirds of the world is plunged in misery is not just dangerous - it is a crime.
The social tension experienced today is mostly a result of social injustice, for the
dominated people became aware of the social-economical reality of the world.
We are living through a special period in human history. A period of explosive
changes; where the psychological explosion of the exploited population is almost
as dangerous as an atomic explosion.
It is pressing that a new economical balance be established in the world, for
the gap has to be closed. Without this, it will be very difficult to reach a true and
reassuring peace among the nations. There is no other international task as hard,
but on the other hand there is nothing as promising for the world's future then
the economical development of the areas where geographical and natural
resources are relatively unexploited. More than ever world peace depends on
economical balance. Social security is more important than traditional notion of
national security.
Journal of International Relations, Vol. VI, No. 6, June 2015 215

Globalization as Substitute of State-Welfare Mechanism

The changing normative status of sovereignty has led to the understanding of
nation-state as ‘welfare-state’. At the most basic level, the welfare state is taken to
encompass a range of public policies undertaken by governments to provide
social security, a safety net to the citizens of that state (Wall 2012). Globalization
is meant to be beneficial for the world’s poorer nations. Participation in
international trade and reforms aimed at attracting foreign finance will narrow
the gap between rich and poor nations, and pull the chronically poor population
of the world up by their bootstraps. This might be expected that as the states
develop themselves they will be able to deliver more services to the citizens.
Countries with more open policies towards trade and finance grew faster than
countries that did not. Moreover, given that the world’s two most populous
nations, China and India, have been successful in globalization, their size and
population-weight biases the results in favor of globalization with poverty
reduction though not eradication. In India controls were lifted steadily, and only
after growth commenced. In China, a huge state-owned sector survives till today,
property rights are unclear and governance far from transparent, features that
would make any proponent of globalization and neo-liberal reform blush
(Murshed 2004).
At present, it seems that the heads of the governments may be the last to
recognize that they and their ministers have lost the authority over national
societies and economies that they used to have (Strange 1996a). It is widely
accepted that state power is declining. It is less effective on those basic matters
that the market, left to itself, has never been able to provide - security against
violence, stable money for trade and investment, a clear system of laws and the
means to enforce it, and the sufficiency of public goods like drains, water
supplies, infrastructures for transport and communications (Strange 1996c).
‘Capitalism’, now become global, transnational, post-industrial, informational,
consumerist, neo-liberal and restructured, is undermining the nation-state, its
macro-economic planning, its collectivists welfare state, its citizens’ sense of
collective identity, its general caging of social life. Globalization is seen as a
fundamental transformation of human geography. On the eve of the twenty-first
century, world affairs have acquired a (rapidly growing) global dimension
alongside the territorial framework of old (Scholte 1997). In a formal geographic
sense, capitalism is now more or less global. Capital had never allowed its
aspirations to be determined by national boundaries in a capitalist world
economy (Wallerstein 1974). In this regard, two great geopolitical events
permitted massive extension. First, decolonization largely ended the
segmentation of the world economy into separate imperial zones. Second, the
collapse of the Soviet Union opened up most of Eurasia to capitalist
penetration. Only Iran, China, and a handful of smaller communist
countries now maintain partial blockages, and these eventually are declining. It is
216 Journal of International Relations, Vol. VI, No. 6, June 2015

well-known to everywhere that the authority of the governments of all states,

large and small, strong and weak, has been weakened as a result of technological
and financial change and of the accelerated integration of national economies
into one single global market economy. Their failure to manage the national
economy, to maintain employment and sustain economic growth, to avoid
imbalances of payments with other states, to control the rate of interest and the
exchange rate is not a matter of technical incompetence nor moral turpitude or
political maladroitness. They are simply, the victims of market economy (Strange
1996b).
The ultimate aim of a state is to promote human welfare in the broadest
sense, and trade policy is only one of many instruments governments use in
pursuing this goal. But trade policy is nevertheless very important, both in
promoting growth and in preventing conflict. The building of the multilateral
trading system over the past fifty years has been one of the most remarkable
achievements of international cooperation in history. The system is certainly
imperfect—that is one of the reasons why periodic negotiations are necessary—
but the world would be a far poorer and more dangerous place without it. Many
countries that managed to become industrialized (for example Japan, Korea,
Singapore, Taiwan, Western Europe, Australia, or New Zealand) did so by using
protectionist economic regimes that nurtured domestic industries, and only
started liberalizing once domestic industries became strong enough to penetrate
foreign markets and compete effectively against new foreign entrants in the
domestic market. Benefits from liberalization accrued only to countries whose
industries can gain trading advantage over foreign competitors due to strong
domestic base.

Globalization and the Third World

As already stated, globalization implies increased international economic
integration (Murshed 2004). In recent history, the interdependence among
nations has grown manifold. Despite the changing world, sovereignty remains to
be the central concern in international affairs. As nation-state conduct their
affairs, traditionally their primary concern has been for the independence of
their statehood or sovereignty. Modern developments, however, emphasize
global concerns placing globalization at the forefront and national sovereignty
in peril. With increased globalization of the world community, the efficacy
and, consequently, the validity of the individual nation is greatly weakened
unless it acts in concert with other nations. There are six benefits of services
liberalization:
Journal of International Relations, Vol. VI, No. 6, June 2015 217

1. Increased Competition
Opening domestic markets to foreign services and suppliers increase
competition, which brings many benefits. It tends to improve efficiency in the
short and long term, lowering prices, improving service quality, increasing
consumer choice and encouraging productivity gains. It is also often a more
effective means of curbing the monopoly power of dominant suppliers than
regulation or break-up.

2. Price Reduction
The evidence that services liberalization leads to lower prices is compelling. In
Britain, prices in the long-distance call market plummeted after British Telecom's
monopoly was abolished. In the local residential call market, where there is still
little competition, prices have fallen much more slowly. In the US, call prices fell
dramatically after AT&T was broken up in the 1980s. A study by Macquarie
University in Australia found that the entry of foreign banks into the Australian
market led to lower interest rates and banking charges.

3. Faster Innovation
Countries with liberalized services markets have also seen greater product and
process innovation. The explosive growth of the Internet in the liberalized US
market is in marked contrast to its slower take-off in many Continental European
markets where monopoly telecoms firms still dominate. Similar contrasts can be
drawn in financial services and information technology. Because these sectors are
the backbone of the economy, this innovation spills over rapidly into efficiency
gains for the economy as a whole.

4. Increased Employment
Economists are generally wary of claiming that trade liberalization creates jobs,
but in the services sector there is strong evidence that this is the case. A study of
telecoms reforms in 26 Asian and Latin American countries by the International
Telecommunications Union and the World Bank, prepared in 1990-94, found that
employment in telecoms rose by 20% in markets where competition was allowed,
but by only 3% in monopolized markets. In the UK, after an initial fall in
employment following the de-monopolization of British Telecom, employment in
the sector has risen substantially as more than 40 new suppliers have entered the
market.

5. Better Transparency and Expectedness

A country's commitments in its WTO services schedule amount to a legally
binding guarantee that foreign firms will be allowed to supply their services
under stable conditions. This gives everyone with a stake in the sector—
producers, investors, workers and users—a clear idea of the rules of the game.
218 Journal of International Relations, Vol. VI, No. 6, June 2015

That allows everyone to plan for the future with greater certainty, which
encourages long-term investment.

6. Transfer of Technology
The most important technological innovation is information that allows for the
profitable production of small batches of customized goods by small firms whose
workers continually learn new techniques(Dunn 2000). Services commitments at
the WTO help to encourage foreign direct investment (FDI). Such FDI typically
brings with it new skills and technologies that spill over into the wider economy
in various ways. Domestic employees learn the new skills (and spread them
when they leave the firm). Domestic firms adopt the new techniques. And firms
in other sectors that use services-sector inputs such as telecoms and finance
benefit too.

Concluding Remarks
Globalization is a historical process that has offered an abundance of
opportunities and reward in the past and continue to do so today (Sen 2002a).
Economically and culturally, the modern world system already existed nearly
five centuries ago. Others point to the late nineteenth century as a period of
intense globalization, when millions migrated, trade greatly expanded, and new
norms and organizations came to govern international conduct. At the beginning
of the twentieth century, such scholars would stress, the movement of the people,
goods, and finances across national borders was at least a free and significant as
it is today. Today there is scarcely a square inch of the earth’s solid surface that
isn’t part of, or under the control of, a sovereign state (Lawson 2004). Today’s
meaning of globalization, the most obvious is that it puts limit on the power of
the government (Micklethwait 2000). Society no longer regards poverty as
natural, the punishment of God, or one’s ‘Karma’. Because people generally
believe that poverty and its consequences are created by mankind (Gilpin 1987).
Today there are lots of debates regarding globalization, for example, it is often
argued that the rich are getting richer and the poor are getting poorer which
encircles the debate of equality and justice. Nonetheless, it should also be taken
into consideration that states have a broader role to play in order to achieve the
benefits most from the process of globalization. States therefore, might
require extensive institutional reforms. Underdevelopment is the result of misuse
of natural and human resources. Globalization in many cases offers the
opportunity to reduce the misuse of resources and promotes it’s efficient
use. However, at the end of the day, proper development still remains in the
hands of the people and the states whereas the process of globalization can be
the ultimate catalyst.
Journal of International Relations, Vol. VI, No. 6, June 2015 219

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