Disadvantages Of Financial Globalization

1. Introduction

Financial globalization is not a new phenomenon however over the past few years economies have become increasingly integrated and there has been a significant increase of international trade and capital across national borders. The focus of international integration of economies is based on the appeal of a free global market with less trade barriers which will allow states to compete with one another. International organisations such as the World Trade Organisation facilitate the free flow of goods, capital and services. According to Heywood (2011: 72) there has been much debate since the late 1980’s about the power and importance of the state in a globalized world. In the past, the state was seen as the dominant actor on the

It can also be defined as the growing weight of finance in the global economy. There are many definitions of financial globalization. According to Arestis and Basu (2003:1) financial globalization is the process by which financial markets of different countries are integrated. This is due to the free movement of finance across national boundaries without there being any restrictions. Heywood (2011:21) defines financial globalization as the process through which sovereign states are undermined by transnational actors. Bhagwati (2004:10) defines financial globalization as a process where national economies are integrated into the international economy through trade, direct foreign investment, short-term capital flows and flows of

The first position is one of hyper globalists. They see the world as being borderless which suggests that national borders and even states have become irrelevant in the global order as states are dominated by transnational forces. National economic strategies are infeasible in a global context. Power is shifted from the state to transnational actors. It can be said that national governments do not have complete control over borders. An example of this is where movies, songs and books can be downloaded anywhere in the world making borders insignificant. Heywood (2011:51) explains that the second position is the sceptics who deny that globalization has altered key features of a state. Sceptics emphasise that sovereign states are primary actors on the world stage and that majority of economic activities take place within the nation state and not across boundaries. According to Heywood (2011: 52) the last position is one of the transformationalists. They argue that there have been distinct changes in the financial world and the sovereignty of the state but these changes have transformed the state instead of reducing or increasing its