This essay intends to argue whether globalization has reduced the power of governments to regulate the business or not. Based on the critical discussion of the essay, it has been found that globalization has adversely impacted the governing power of the government and it has also created a significant level of inequality in the society.
Globalization has greatly influenced information and communication technology, commercial and transportation sector for the past few decades (Weiss, 2000). It has generated new challenges for government worldwide. Without any deceleration, the global forces have brought changes in the economic and social landscapes of the societies worldwide. It has challenged the traditional assumptions, which are developed for explaining social and economic equality. It has affected the rules and regulations that are created by government to bring peace and stability in a particular economy. Hence, it can be stated that globalization have weakened governance and dominance of government and has also restricted its role for the betterment of the society. The essay highlights on the supporting ideas for the argument “globalization has reduced the ability of the government to govern” (Weiss, 2000).
International Monetary Fund (IMF) have stressed on the growing interdependence of economy worldwide on the increasing volume of cross border transactions of goods or services and widespread transmission of technology. Dr Ismail Shariff has defined globalization as a global process for homogenizing products, prices, wages, profits and interest rates. It depends on three main global forces of development such as role of human migration, rapid movement of capital and international trade and lastly integration of financial markets (Poggi, 1978).
Globalization and power of government
Globalization has been confounded by political and technical instruments such as policies of trade, information technology and financial liberalization. Thus, these instruments are defined as the main drivers of globalization. However, there is a distinguishing feature of globalization, which has been identified by IMF and the World Bank. The feature refers to the wide scope of revenue for the economy that is engaged in cross border transaction. These two institutions have given its decision in the economic affairs and have limited governmental intervention into globalization. Free trade and growing mobility of capital to promote the supranational decision making of the companies have reduced the power of the governments globally. These factors have undoubtedly developed greater economic and social inequalities as globalization brought new realities to the market through its laissez-faire approach (Held, 1991).
Laissez-faire is defined as the economic environment, where transactions take place privately between two parties freely. These transactions are free from any government restrictions, subsidies and tariffs. However, there are adequate regulations for protecting the proprietary rights (Modelski, 1972). Hence, from the term itself (laissez-faire) it can be deduced that there is limited governmental intervention in the process of globalization, which have encouraged the global companies to undertake cross border transactions. The companies have concentrated in shifting the role of government as the supreme authority to the global financial organizations. Hence, the governmental authorities have been restricted by these institutions to make any rule or regulation for the betterment of the economy.