Nations, Politics & Markets
This article will focus on the ways in which globalization effects the interrelationship of nations, politics, and markets. It describes the relationships between nations, politics, and markets as well as the evolving political economy of nations, politics, and markets in the global arena. Examples of international economic governance approaches and practices, including the G-20, financial Stability Forum, the International Organization of Securities Commissions Organization for Economic Co-operation and Development (OECD), and the Basle Committee on Banking Supervision, are described and analyzed. Lastly, issues related to national representation in the development of economic governance practices are reviewed.
Keywords Economic Governance; Globalization; Markets; Nations; Political Economy; Politics
In the twenty-first century, nations, politics, and markets are deeply interconnected units of a global system. Nations—large aggregations of people sharing rules of law and identity based on common racial, linguistic, historical, or cultural heritage—rarely act unilaterally. Nations operate within a framework of international alliances and partnerships. Politics is defined as the art and science of government or governing a political entity and the administration and control of its internal and external affairs. Politics plays a crucial role in economic policy. The term “markets” refers to the social arrangement that allows buyers and sellers to discover and trade information and carry out the voluntary exchange of goods and services within politically defined systems and governmental institutions (Bowles, 1991). Markets are economic and political entities.
The interdependence between nations, politics, and markets has encouraged the development and implementation of global economic governance practices, methods, and standards. National and international economic reforms, such as implementing new financial architectures, market structures, and trade policies, result from political debate—and political turmoil—within countries and regions. The development of global economic governance tools is a complicated and contentious process involving multiple stakeholders with conflicting agendas (Helleiner, 2000). Global economic governance standards and recommendations are made within international institutions such as regulatory commissions, international trade organizations, European Union commissions, and United Nations agencies. Global stakeholders, such as national governments, multinational corporations, parties and public officials, interest associations, and citizen advocacy organizations, shape the new global governance models and related transnational political regimes (Bennett, 2004).
This article describes how the process of globalization impacts the relationships that exist between nations, politics, and markets. The following sections, including Globalization of Nations, Politics, and Markets and the Political Economy of Globalization, will serve as a foundation for later sections summarizing and analyzing economic governance practices developed by international economic organizations including the G-20, the Financial Stability Forum, the International Organization of Securities Commissions, the Organization for Economic Co-operation and Development (OECD), and the Basle Committee on Banking Supervision. Issues related to national representation in the development of economic governance practices are discussed.
Globalization of Nations, Politics,
Nations, politics, and markets have been brought together through the process of economic globalization. Economic and political environments around the world have changed because of globalization. Globalization in its modern form is characterized by the permeability of the traditional boundaries of nations, cultures, and economic markets. Some of the fundamental economic forces and political events influencing globalization around the world include the fall of the Soviet Union; the shift from a global economy based on natural resources to one based on knowledge industries; demographic shifts; the development of global shipping infrastructure; increased liberalization of trade policy; advancements in communication technology; and the threat of global terrorism. The modern trend of globalization, and resulting shifts away from centralized to market economies in much of the world, has created opportunities for increased trade between nations. This includes increases in foreign investment, multinational business partnerships, and access to once closed global markets for developing countries. Global markets are characterized by an increasing mobility in capital, research and design processes, production facilities, customers, and regulators. Global markets, created in part by socio-economic changes, political revolutions, and advanced communication technologies, have no borders.
Economic and political opportunities, including international investments and joint ventures, in the global economy are increasingly tied to alliances, partnerships, and trade pacts such as the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico, the Mercosur trade pact between Argentina, Uruguay, Brazil, and Paraguay, and the Asia Pacific Economic Cooperation (APEC) trade zone. In addition, international economic opportunities for some nations have been created by increasing privatization. Many countries have moved to privatize various state-owned industries and allowed foreign investors to purchase pieces of them through joint ventures. In many places, local operations have participated in these projects. Emerging markets have formed and expanded to capitalize on opportunities in new global economy. The term emerging markets refers to the capital markets of developing countries that have liberalized their financial systems to promote capital flows with nonresidents and become more accessible to foreign investors.
The new global market is based on a capitalist model in which business, and to some degree politics, is responsive primarily to economic forces. Capitalism is a type of economic system in which individuals or companies in the private sector own and control the majority of a state’s means of production. Capitalism applies market principles, such as the concepts of profit incentive and private property, to all aspects of economic activity within and between nations. Capital markets are the financial institutions that channel people's savings from households to business firms for the purposes of productive investments and economic growth. The market capitalism model requires the interrelationship and cooperation of nations, politics, and markets. Issues of government regulation of public sector and private sector activities, property ownership, ethics, investments, corporate behavior, and social well-being between national and international stakeholders in the global economic and political arena are constantly updated and negotiated.
National political arenas and environments, intimately connected to and motivated by economic conditions, are characterized by the regulatory environment, local attitudes toward corporate governance, reaction to international competition, and labor laws. Political environments around the world are continually changing due to the forces of globalization. Economic interconnectedness creates a turbulent global socio-political environment characterized by competing political actors, shifting power relations, and politically driven changes in national economies around the world.
The Political Economy of Nations, Politics,
Political economy is a subfield of economics dating back to the eighteenth-century that analyzes the interactions between political processes and economic variables and policies. Political economy describes how political institutions, the political environment, and market forces and structures—such as capitalism—influence each other. Thus, the political economy of globalization is an examination of the relationship between nations, politics, and markets.
Globalization has created a new model of political economy forged by corporations, communities, markets, and national governments that is characterized by innovations such as participative leadership, client-driven marketing, decentralized structures, entrepreneurship, democratic corporate governance, strategic alliances, deregulation, privatization, and business-government partnerships. The following innovations in the political economy of globalization represent an era of increased competition and cooperation (Hallal, 1990):
- Democratic model of the firm: A large number of companies are now accountable to a variety of stakeholders, including workers, customers, suppliers, distributors, investors, and the public. Some companies operate through collaborative governance rather than traditional top-down, hierarchical governance.
- Research consortia: Corporations are increasingly practicing cooperative research. Companies, including some competitors, often pool resources to undertake collaborative large-scale or highly technical projects.
- Strategic alliances...
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