The process of intensification of interconnectedness, however, does not come about without certain underlying socioeconomic conditions and policy mechanisms. Globalization, thus, needs to be understood not merely in terms of greater interconnectedness or of creating a single global economic space but also in terms of the underlying context that has made it possible, as well as the institutional arrangements and policy instruments that serve as mechanisms for promoting it. A brief examination of some of the most important changes that have precipitated globalization over the last two or more decades helps shed some light on what constitutes globalization's broader conception.
One major change in the global system that facilitated globalization was the reconfiguration of the distribution of power at the global level and the emergence of the United States as the sole superpower following the collapse of the Soviet Union. This reconfiguration of the distribution of power has largely eliminated (at least for now) the contest among competing powers for global dominance and leadership. It would be unlikely for the global system to move in the direction of forming a single economic space when there are contending superpowers. From this angle, the view that globalization is essentially a U.S.-dominated global system seems to be compelling. This view also implies that globalization emerges from a single, unchallenged configuration of power and that the process would be reversible if another center of power should emerge to counteract the hegemony of the United States.
Another underlying factor that facilitated globalization is the restoration of the global hegemony of capitalism and of the market system following the collapse of the Soviet economic system. Contending economic systems and visions would be incompatible with the process of creating a single economic space. The rise to prominence of the neoliberal ideology and the absence of a serious competition between different economic visions has created a conducive environment for globalization.
With the establishment of the identified underlying conditions, various policy instruments, crafted along the lines of neoliberal doctrine, have been developed to serve as mechanisms of globalization. New multilateral institutions have also been created and older ones have been retooled to promote and manage globalization mechanisms. The World Trade Organization (WTO), the International Monetary Fund (IMF), and the World Bank are among the key institutions. Policy mechanisms crafted along the lines of the neoliberal ideology have also been developed to foster globalization. Such mechanisms include the retrenchment of state involvement in economic activity (including its regulatory measures) and institutional changes such as privatization, restriction of trade barriers, and liberalization of capital mobility. These mechanisms have been promoted in much of the developing world through the IMF and World Bank–sponsored structural adjustment programs.
Two main reasons may help us explain why globalization entails homogenization of economic policy along neoliberal lines. The first is that it would be almost impossible to conceive of an integration of national economies into a single space dominated by a hegemonic power where states are unrestrained from exercising their own power to unilaterally design economic policies in a manner that corresponds to their specific circumstances. Another explanation is that the identified underlying changes represent a shift in the balance of power among social classes in favor of capital at the global level. This shift, in conjunction with U.S. hegemony, has created a condition for the consolidation of capital's vision of the global economic system. The vision entails liberalization of trade and the flow of capital and the deregulation of labor markets in line with the interests of big capital. Liberalization of the flow of capital across borders, together with advances in communication technology, have, in turn, reinforced the surge in the power of capital by giving it the power of mobility. By contrast, labor's ability to organize and to maintain collective bargaining has been weakened by deregulation of the labor market (and capital mobility) and by technological advances, which either replace labor or reorganize work.
In light of the identified underlying changes and the globalizing mechanisms, globalization can be defined more comprehensively as a process of intensification of interconnectedness among national economies with the vision of creating a single economic space, largely corresponding with the interests of capital, and spearheaded by a hegemonic power and promoted through various institutional arrangements and policy instruments.
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