The Cause of Globalization

Topics: International trade, Economics, Free trade Pages: 96 (18674 words) Published: January 11, 2013

The most important causes of globalization differ among the three major components of international market integration: trade, multinational production, and international finance. The information technology revolution has made it very difficult for governments to control cross-border capital movements, even if they have political incentives to do so. Governments can still restrict the multinationalization of production, but they have increasingly chosen to liberalize because of the macroeconomic benefits. Although the one-time Ricardian gains from freer trade are clear, whether trade is good for growth in the medium term is less certain. In the case of trade, the increasing interest of exporters in opening up domestic markets has had a powerful impact on the trend to liberalization. Cross-national variations in market integration still endure, but these are more the product of basic economic characteristics (such as country size and level of development) than political factors (such as regime type or the left-right balance of power).

Yale University


here is little disagreement these days that globalization is changing the world rapidly, radically, and in ways that may be profoundly disequilibrating. But beyond this already trite cliché, almost everything else concerning the phenomenon is subject to intense debate—in the context of an explosion of interest in and research on the subject.1 This article explores what we know about the causes of globalization. In a follow-up article, I will address globalization’s consequences for domestic societies (in terms of inequality and economic insecurity), national autonomy (with respect to regulation, spending and taxation, exchange rate regimes, etc.), and international governance (International Monetary Fund [IMF], World Trade Organization [WTO], etc.). Throughout, I define globalization somewhat narrowly as the 1. In 1980, there were fewer than 300 articles or books with the word global or globalization in the title. In 1995, the number was over 3,000 (Guillen, in press, Table 2). AUTHOR’S NOTE: Thanks to Stephen Brooks, Michael Dooley, Jeffry Frieden, and Ronald Rogowski for helpful discussions on various aspects of this article. I would also like to thank Alexandra Guisinger, Nathan Jensen, Jason Sorens, Andrew Youn, and especially Nancy Brune for invaluable research assistance.

COMPARATIVE POLITICAL STUDIES, Vol. 33 No. 6/7, August/September 2000 941-991 © 2000 Sage Publications, Inc.




international integration of markets in goods, services, and capital. Other facets of the phenomenon (such as increased labor mobility and cultural homogenization) are surely important, but I leave their analysis to others.2 I examine four contending perspectives on the big picture: What explains the rapid pace of international market integration in recent decades? The first perspective claims that what we are witnessing today is, in fact, nothing new because current levels of market integration are only now returning to those in the last great era of economic internationalization at the turn of the 20th century. This view has been accepted as a statement of fact in numerous influential studies (Katzenstein, Keohane, & Krasner, 1998, p. 669; Krasner, 1999, pp. 220-223; Rodrik, 1997; Sachs & Warner, 1995). I argue, however, that notwithstanding the aggregate similarities between the two periods, core features of the contemporary world economy are without historical precedent. Large-scale portfolio lending to banks in developing countries for purposes other than raw material extraction, two-way manufacturing trade between the north and south, and complex multinational production regimes were simply unheard of a century ago.

The remaining perspectives on global trends debate the...
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