effects of globalization to government essay

• Global Governance Institutions in Context of Globalization Words: 1983
• Globalization Concept and Its Impact on the State Words: 1907
• Geographical Conditions’ Affect of Globalization Words: 1389
• Globalization, Its Defenders and Critics Words: 903
• Globalization: Impact and Consequences Words: 599
• History of Globalization and World Integration Words: 1432
• Globalization in a Global Economy Words: 898
• The Impact of Racism on Globalization Words: 4995
• Globalization and Businesses in New Economies Words: 2055
• Issues in the International Politics: Globalization Words: 1444
• Globalization and Its Consequences: Economic Crossroads Words: 3934
• Moving Away From Globalization: Consequences Words: 623
• The Pitfalls of Globalization Words: 568
• Globalization: More Positive Effects Than Negative Ones Words: 1643

How Globalization Affects Governance?

Nowadays the phenomenon of globalization can be described as a dominating power behind major political, business, and sociological developments all around the world. From day to day global economy, politics and culture become more and more autocratic in every land. The process of globalization inevitably affects governance all over the world. In the following paper, the peculiarities of the process of affecting governance by globalization will be addressed in detail. Overall, after the evaluation of facts, it can be stated that under the influence of globalization, the transition of power from national governments to global formations takes place, the opportunities for non-governmental governance increase, and convergence in forms of control is observed.

First of all, speaking about the way globalization affects governance, it is important to note that it causes transition of power from national governments to global formations. Especially, within the period of the past few years the phenomenon of the ‘virtualization of states’ can be seen. Some prominent political analysts make their prognosis regarding the future of virtualization of governments by stating that in twenty years, most governments of the world will offer their major services online. Besides, these political analysts state that very soon power will become concentrated in the hands of leaders of global formations rather than local states. In this vein, the most remarkable point is that even today, much power already belongs to global organizations. For example, according to Kahler and Lake, “the state’s monopoly of familiar governance functions is ending, as governance migrates up to supranational organizations; down to newly empowered regions, provinces, and municipalities; and laterally to such private actors as multinational firms and transnational non-governmental organizations (NGOs)” (1). In these conditions, national governments face a twofold effect, when they both are pushed to guarantee a higher level of democracy to their citizens, and still, are limited in the opportunities for pursuing their local interests. The way this tendency affects lives of common citizens can be seen in the example of global trade unions such as WTO and IMF. In the 2010s, people in the most diversified territories of the world were already exposed to the undesirable consequences of globalizing economical markets. The main problems caused by it were unemployment and deregulation. However, it should be noted that deregulation is rather an ambiguous concept as many specialists strive to prove its positive impact on the Anglo-Saxon capitalism, and many economical critiques express their negative position regarding it using providing evidence to the fact that the economically weak states become harmed as a consequence of external and internal deregulation. In addition, the inhabitants of many countries collide with the raise of prices for certain goods, and their reduction for the other ones. As a result, local economies are weakened, but global corporations win unexampled profits. The other negative consequence of this phenomenon is in lowering the standard of living for citizens of states that have entered global trade and political alliances.

Next, globalization increases the opportunities for non-governmental governance. With industrialization and modernization, societies become more complex, which offers additional power to non-governmental institutions such as business corporations, social organizations, and environmental protection organizations. Market-based governance fosters the development of the global community by means of introducing a number of important policies such as promoting technological innovations, accelerating new sales strategies, establishing new taxation regulations, and providing more convenient conditions for global businesses. The increasing spread and legitimacy of market-based systems for exchange and distribution between the countries and inside them is the power that not only stands behind the speeding up of the process of globalization, but it is also the power that controls lives of millions of people in the world including their job opportunities and economic welfare. Social organizations pass from state level to a globalized one with the purpose of affecting global society by progressive democratic ideas. Environmental protection organizations strive to promote their values in every land all around the globe to prevent the harmful effects of global industrialization and modernization such as global warming, the change of climate, and environmental pollution. The increase of power accumulation by non-governmental organizations supports the idea that very soon the face of the world may considerably change as the transition of authority from states to global organizations of different levels and different spheres of influence will take place (Kahler and Lake 10).

Finally, under the influence of globalization, convergence in forms of control in different countries of the world takes place. This means that political institutions in different nations start adopting similar policies, regulating their work, and for that reason, they appear to be more or less the same in their working strategies and concepts in the most diversified cultures of the world. This tendency is seen as a threat to the well-being of national states in the world by numerous specialists. The following comment by Kahler and Lake explains the reasons why convergence is evaluated as a dangerous development in modern global politics:

Critics of globalization contend that competitive economic pressures will produce institutional and policy homogeneity over time in a direction favored by the most mobile factors of production—footloose capital. It is further assumed that these most mobile capitalists will prefer lax regulation and less government intervention. In this view, the welfare state is placed at risk, and governments are no longer free to adopt policies that respond to the needs of their societies (Kahler and Lake 12).

Thus, global convergence in forms of control is seen as a consequence of globalization that is capable of changing human society to the unexampled state.

In conclusion, it should be stated that as a result of the process of globalization, the shift in the common concept of authority distribution takes place. In this vein, the very idea of governance undergoes significant changes due to the transition of power from nation states to global organizations; the tendency to offer more authority to non-governmental institutions; and convergence in forms of control in different countries of the world. People in many lands come to believe in the model, which can be described by the motto “governing is better together”, which is explained by the fact that they observe the increase in the level of democracy in numerous countries and significant improvements in the financial situation in states with a weak economy. However, political and economical critiques are not so positive regarding the outcomes of globalization for governance in the world. They explain their position by stating that in case the situation with political convergence will continue to develop, human society will undergo unexampled changes, and the notion of state, as it has been perceived for centuries, will become a matter of the past.

Works Cited

Kahler, Miles and David Lake. Governance in a Global Economy, New Jersey: Princeton University Press, 2003. Print.

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Globalization: What Globalization Is and Its Impact Essay

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Globalization is a complex phenomenon that has a big influence on various fields of human life, including economics, society, and culture. Even though trade between countries has existed since time immemorial, in the 21st-century, globalization has become an integral part of the world’s development. While businesses try to expand on a global scale, and countries’ economies are intertwined in the international network, several outcomes occur out of this process. The purpose of this paper is to analyze and evaluate the impact of globalization on the world economy, whether it is good or bad. To achieve this goal, a comprehensive review of the relevant literature will be conducted. The information will be extracted from both primary and secondary sources. The primary sources will include an interview and a chart, while the secondary sources will consist of scholarly articles and books published from the year 2015 forward. The main argument of this research is that even though globalization offers endless business opportunities, it has a number of effects that negatively influence the resources and the economy.

First of all, in order to understand this phenomenon, it is important to define the term “globalization.” Several researchers have conducted a thorough study of this subject. For example, Martell describes globalization as “the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away” 1 . It is a complex and multidimensional mechanism that allows a local business subdivision to integrate into the global economic system. The biggest companies of the 21st century are no longer limited to one country; they have become more multinational: businesses from several countries exchange resources, money, data, and employees. Nowadays, international relations are becoming more intense not only in politics but in the economy as well. Moreover, globalization has a significant influence on the distribution of not only skilled and unskilled labor but of capital and labor as well, both locally and globally. The tendencies of this process were analyzed by experts, for example, in the research by Chandy and Seidel, where they presented globalization trends in the form of a chart (Figure 1).

The chart above demonstrates how the GDP of the U.S. was changing while the global population was also growing. The diagram includes the analysis of foreign capital stock, merchandise exports, and migrant stock. According to it, it becomes evident that even though the world GDP was high during the 1910s, the global economy is more integrated in the 21st century. However, the researchers also point out that the economy of the U.S. is a relatively closed economy, which is surprising. Nevertheless, the study states that “it accounts for only 11 percent of global trade volumes, which is far below its 24 percent share of global GDP” 2 . In addition, despite the attempts to find evidence of the recession of globalization, Chandy and Seidel did not manage to present any. It means that the trend keeps developing as money, goods, and people continue to move around the world.

It is evident that one cannot talk about globalization without mentioning international companies. Global corporations are defined by the fact that they execute business in at least two countries 3 . They conduct various types of economic activities, for example, foreign investment, managing plants in different countries to avoid transaction costs. An example of an international firm that obtains cost advantages through foreign investments in international plants is Apple Inc.

To understand how companies conduct business internationally, several types of multinational corporations must be indicated: economists usually divide them into four categories. The first type of firm is determined by the fact that it has a strong presence in its home country. Another category is characterized by acquiring cost advantage through the means of buying cheaper resources in other countries, despite being controlled by one central office. The third type is a company that is based on the Research and Development of the parent corporation. The fourth and final category is a transnational business, which includes all features that are peculiar to the corporations that were mentioned above 3 . Since global companies generally combine different approaches to business, sometimes it can be hard to distinguish between these four categories. Nestle S.A. may serve as an example of a big transnational corporation that conducts its financial operations in many countries outside of the headquarters.

Since globalization is a complicated phenomenon, many analysts and businessmen have different views on its impact. For instance, the former Director-General of the World Trade Organization, Pascal Lamy, expressed his point of view in the interview, “Can Europe Civilize Globalization?”. Despite the fact that the concerns about European civilization may recede due to this process, he states that he does not see globalization as a threat. Instead, he sees it as a reality that has to be dealt with in a professional way. Lamy explains his opinion by pointing out the fact that some European countries have managed to gain more benefits than others by means of global trade 4 . As examples, he presents Sweden and Germany, which, during the last decades of the 20th century, conducted structural reforms that allowed them to get profit from international trade.

Moreover, Lamy notes that globalization presents new challenges for businesses. They include promoting “more actively global norms in the environmental and job protection, health protection, than the reduction of trade barriers that have been now largely operated worldwide”4. In other words, the ex-director of WTO believes that this process can have a positive impact on Europe’s economy as it provides opportunities for countries to develop and grow their benefits.

As for other researchers, Burlacu, Gutu, and Matei overview both sides of globalization, pointing out positive and negative impacts. For example, the advantages include reducing the economic isolation of poor countries as they are given the opportunity to sell their goods on the global market and participate in the trade 5 . Moreover, as the economy expands, the information does it as well. It means that access to education becomes more easy and available, which increases the number of professionals who are capable of expanding and developing the business even further. In addition, according to the study, globalization “enhances the speed of commercial, financial, and technological operations”5. It can be seen even nowadays as new products and devices continue to appear on the market every year. Furthermore, globalization ensures the efficiency of the entire economic activity on a global scale.

Other researchers have also pointed out several positive aspects of this process. For example, Parente et al. talk about the sharing economy, which is a new phenomenon. Their study indicated that due to internet globalization, some companies managed to perform business online, which helped them to expand around the world and raise funds 6 . Therefore, globalization allowed firms to achieve worldwide success at an unprecedented pace. Furthermore, Martell et al. elaborated on reasons for how exactly the internalization changed economic activities. The reasons included “the speeding up of global interactions and processes as a result of the development of transport and communications”1. In other words, the spread of resources, ideas, capital, and products accelerated, which allowed businesses to develop quicker.

However, aside from positive results that can come from globalization, researchers also indicate some negative aspects to it. For instance, Burlacu et al. Note that harmful effects include an international security deficit and an increased amount of illegal migrations5. Globalization opened borders for a large number of people to move to other countries illegally. Moreover, it allowed corrupt businessmen to employ these migrants and make them work for a lesser wage, which is a violation of human rights. Moreover, economists believe that nowadays, the export of human resources has risen, which means that some countries have lost intellectual potential5. The other downsides include the deterioration of the environment, which is caused by the rapid growth of the economy.

While rethinking the effects of globalization, Broner and Ventura elaborated on the negative consequences that it can bring to domestic markets. The researchers gathered data from other scholars and concluded that “financial globalization, in addition to providing a new, cheaper source of funding for emerging markets, can have indirect effects by affecting the workings of domestic financial markets” 7 . For example, according to them, with the rise of globalization, the incidence of domestic financial crises also grows. In addition, Mamedov et al. discusses the impact on traditional economies, which, according to the study, will reach a new level of their development 8 . It is difficult to say whether such changes are positive or not since some people may be reluctant to abandon the old economic structures.

As it can be observed, primary sources and secondary sources seem to express various opinions about globalization. First and foremost, most of them seem to agree that this phenomenon is relatively new and only recently began to spread. However, then the standpoints start to differ among experts. While the interview with Lamy demonstrates that the former leader of the World Trade Organization seems optimistic about it, such secondary sources as scholarly articles and books differentiate in positions.

Some researchers identify the internalization of the economy as a beneficial process that can create new opportunities for countries to develop and expand their businesses. However, other studies make a link between globalization and several other problems, such as environmental deterioration, security issues, and the increasing number of domestic crises. The last factor is especially interesting since it contradicts the general assumption that increased international trade opportunities can improve the country’s welfare.

Moreover, the recent events that were caused by the outbreak of coronavirus exposed vulnerabilities in the current globalized economy. Since traveling is restricted, the transportation of resources has become difficult. While big international corporations managed to stay afloat, some local firms were forced to shut down, and the suspension of one company factory can lead to a closing of another. Experts argue that such an intertwined international economic relationship is what caused changes in a global supply chain, and overall, stock declines 9 . The current situation provided proof that globalization may not be that good for the world economy.

While the system offers opportunities for businesses to grow, it also has some loopholes and weak points that seriously damage the economy of not only one country but of the whole world. Moreover, the situation with the pandemic supports the argument made by Broner and Ventura. The outbreak caused domestic market crises in Asian countries, and then in Europe and America, which significantly affected the global economy. Even the help of Widespread Disease Emergency Financing Facility 10 would not be enough to restore all financial damage. As the recession of the international market became apparent, businesses in other countries have also suffered.

In addition, the environmental aspect of globalization is also important since it affects the increasing deficiency of natural resources. While companies are trying to expand their business everywhere, new factories and new plants are built around the world. While new products and new technology continue to appear on the market and the demand grows, more damage is inflicted upon the environment by the constant production.

Moreover, the higher need for transportation means that more fossil fuels are used, causing harm to the climate. There is no doubt that such issues can be resolved with the creation of new technology. However, the process of development is complicated and expensive, which can lead to additional expenditures. It can cause more federal budget deficits and increased government debt; therefore, the economy is also negatively affected by environmental issues of globalization.

For this reason, it can be said that despite all the positive aspects of globalization, it definitely has several downsides. Internationalization brought not only different cultures but the economies of various countries together, allowing businesses to grow and reach financial benefits. Furthermore, it opened opportunities for people to find jobs and expand their profit. Nevertheless, the current system is vulnerable during difficult situations, and if there is a crisis in one country, it tends to spread to others like dominoes, because the economies are deeply connected. Moreover, globalization also causes harm to other fields of human life, which are can also negatively influence not only the financial state of a particular country but the economy of the world as well.

It is evident that more research needs to be conducted as the process of globalization is complex and ongoing. There are several topics that can be further explored while studying the impact of globalization on the world’s economy. For example, one can investigate the methods that can be implemented to minimize the negative consequences of globalization that were described earlier in this paper. In order to obtain the information, one can look through the suggestions of other researchers, analyze them, and select the ones that seem the most effective.

Moreover, as the current situation with the outbreak has a major impact on the international economy, it would be interesting to study the experts’ opinions on how it will affect globalization. A huge amount of relevant information can be gathered from recent interviews, news, and scholarly articles. In conclusion, it would appear that the topic of globalization and its influence is broad and can provide a good starting point for further discussion and analysis.

Chandy, Laurence, and Brina Seidel. “Donald Trump and the future of globalization.” The Brookings Institution , 2016. Web.

Broner, Fernando, and Jaume Ventura. “Rethinking the Effects of Financial Globalization.” The Quarterly Journal of Economics 131, no. 3 (2016): 1497-1542.

Burlacu, Sorin, Corneliu Gutu, and Florin Octavian Matei. “Globalization – Pros and Cons.” Calitatea 19, no. S1 (2018): 122-125.

Lamy, Pascal. “Interview. Can Europe Civilize Globalization?”, The Federalist Debate 28, no. 1 (2015): 60-63.

Mamedov, Oktay, Irina Movchan, Oksana Ishchenko-Padukova, and Monika Grabowska. “Traditional Economy: Innovations, Efficiency and Globalization.” Economics & Sociology 9, no. 2 (2016): 61.

Martell, Luke. The Sociology of Globalization . John Wiley & Sons, 2016.

Parente, Ronaldo C., José-Mauricio G. Geleilate, and Ke Rong. “The Sharing Economy Globalization Phenomenon: A Research Agenda.” Journal of International Management 24, no. 1 (2018): 52-64.

• Sułkowski, Łukasz. “Covid-19 Pandemic; Recession, Virtual Revolution Leading to De-globalization?”, Journal of Intercultural Management 12, no. 1 (2020): 1-11.
• Luke Martell. The Sociology of Globalization (John Wiley & Sons, 2016), 10.
• Laurence Chandy and Brina Seidel. “Donald Trump and the future of globalization.” The Brookings Institution , 2016.
• Lecture on Multinational Corporation (MNC)
• Pascal Lamy. “Interview. Can Europe Civilize Globalization?”, The Federalist Debate 28, no. 1 (2015): 60.
• Burlacu, Sorin, Corneliu Gutu, and Florin Octavian Matei. “Globalization – Pros and Cons.” Calitatea 19, no. S1 (2018): 124.
• Parente, Ronaldo C., José-Mauricio G. Geleilate, and Ke Rong. “The Sharing Economy Globalization Phenomenon: A Research Agenda.” Journal of International Management 24, no. 1 (2018): 53.
• Broner, Fernando, and Jaume Ventura. “Rethinking the Effects of Financial Globalization.” The Quarterly Journal of Economics 131, no. 3 (2016): 1533.
• Mamedov, Oktay, Irina Movchan, Oksana Ishchenko-Padukova, and Monika Grabowska. “Traditional Economy: Innovations, Efficiency, and Globalization.” Economics & Sociology 9, no. 2 (2016): 61.
• Lecture on the World Bank
• COVID-19 and Global Economic Connections
• Changing Global Business Environment
• The Effects of Globalization on the World
• Forms and Effects of Globalization
• Globalization Phenomenon: Development and Social Change
• Guanxi in Chinese Business and Global Economy
• Cross-Cultural Negotiation Analysis
• Intercultural Competencies: Environmental Scan and Analysis
• Uncertainty and Risks Regarding Multinational Corporations’ Functioning
• Multicultural Problems in Organizations
• Chicago (A-D)
• Chicago (N-B)

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globalization

globalization , integration of the world’s economies, politics, and cultures. German-born American economist Theodore Levitt has been credited with having coined the term globalization in a 1983 article titled “The Globalization of Markets.” The phenomenon is widely considered to have begun in the 19th century following the advent of the Industrial Revolution , but some scholars date it more specifically to about 1870, when exports became a much more significant share of some countries’ gross domestic product (GDP). Its continued escalation is largely attributable to the development of new technologies—particularly in the fields of communication and transportation—and to the adoption of liberal trade policies by countries around the world.

Social scientists have identified the central aspects of globalization as interconnection, intensification, time-space distanciation (conditions that allow time and space to be organized in a manner that connects presence and absence), supraterritoriality, time-space compression, action at a distance, and accelerating interdependence. Modern analysts also conceive of globalization as a long-term process of deterritorialization—that is, of social activities (economic, political, and cultural) occurring without regard for geographic location. Thus, globalization can be defined as the stretching of economic, political, and social relationships in space and time. A manufacturer assembling a product for a distant market , a country submitting to international law , and a language adopting a foreign loanword are all examples of globalization.

Of course history is filled with such occurrences: Chinese artisans once wove silk bound for the Roman Empire ( see Silk Road ); kingdoms in western Europe honoured dictates of the Roman Catholic Church ; and English adopted many Norman French words in the centuries after the Battle of Hastings . These interactions and others laid the groundwork for globalization and are now recognized by historians and economists as important predecessors of the modern phenomenon. Analysts have labeled the 15th to 18th century as a period of “proto-globalization,” when European explorers established maritime trade routes across the Atlantic and Pacific oceans and encountered new lands. Integration prior to this time has been characterized as “archaic globalization.”

What distinguishes the process of modern globalization from those forms of global integration that preceded it are its pace and extent. According to some academics, three distinct eras of modern globalization can be identified, each of them marked by points of sudden acceleration in international interaction. Under this scheme, the “first globalization” era refers to the period between approximately 1870 and 1914, during which new transportation and communication technology decreased or eliminated many of the drawbacks to distance. The “second globalization” era is said to have lasted from roughly 1944 to 1971, a period in which an international monetary system based on the value of the U.S. dollar facilitated a new level of trade between capitalist countries. And the “third globalization” era is thought to have begun with the revolutions of 1989–90, which opened the communist Eastern bloc to the flow of capital and coincided with the creation of the World Wide Web . Some scholars argue that a new period of globalization, the “fourth globalization,” is underway, but there is little consensus on when this era began or whether it is truly distinct enough to merit its own designation.

New levels of interconnectedness fostered by globalization are credited for numerous benefits to humanity. The spread of industrial technology and the resulting increase in productivity have contributed to a reduction in the percentage of the world’s population living in poverty. The sharing of medical knowledge has dramatically decreased the incidence of once-feared diseases and even eliminated smallpox. And economic interdependence among countries discourages war between them.

However, the implementation of globalization has been much criticized, leading to the development of the anti-globalization movement. Opponents of globalization—or at least, globalization in its present form ( see neoliberal globalization )—represent a variety of interests on both the political left and right. Labour unions disdain multinational companies’ ability to move their operations to countries with cheaper labour; Indigenous peoples rue the difficulty of maintaining their traditions; and leftists object to the neoliberal character of the new world economy, arguing that the capitalist logic on which they contend globalization is based leads to asymmetrical power relations (both internationally and domestically) and transforms every aspect of life into a commodity. Right-wing critics of globalization believe that it threatens both national economies and national identity. They advocate national control of a country’s economy and rigidly restricted immigration.

Globalization has also produced effects that are more universally worrisome. Expanded transportation networks facilitate not only increased trade but also the spread of diseases. Undesirable trade, such as human trafficking and poaching, has flourished alongside legitimate commerce. Moreover, the pollution generated by the world’s modernization has resulted in global warming and climate change , threatening Earth’s very habitability.

Whether globalization will adapt to these problems remains to be seen, but it is already changing again. For example, globalization began in the 19th century with an explosion in exports, but, even before the COVID-19 pandemic that swept through the world in 2020 resulted in global lockdowns, trade as a share of many countries’ GDP had fallen. It can be argued that the global supply chains today rely more on knowledge than on labour . And services now constitute a larger share of the global economy than goods. A “fourth globalization” might indeed be here—or at least on the way.

Does Globalization Promote Democracy?: An early assessment

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September 1, 2001

• 13 min read

An enduring tenet of the post-Cold War era is that globalization can be a catalyst for democratization. In one formulation, when democratic ideals sweep (or even trickle) across borders into authoritarian states, globalization makes democratization inevitable. Proponents of this view point to the contagion of democratic transitions in the world over the past quarter-century and to the ability of technology to penetrate the most closed societies. Even the Orwellian North Korean government, they point out, has gone gingerly online, though the country’s broader population has no electronic access to the outside world.

But these broad trends cannot yet confirm a strong and direct connection between globalization and democratization. The evidence is mixed and will continue to be so for some time. For every society in which a “people’s power” revolution is helped along by international cheering squads and satellite television, another is daily becoming more cosmopolitan while adhering to traditional (and often authoritarian) practices. The city-state of Singapore, rated as “most global” on the A.T. Kearny/Foreign Policy magazine Globalization Index in terms of cross-border contact between people, has remained resolutely semi-authoritarian for the past 30 years and shows few signs of greater democratization. Moreover, while entire regions, particularly in the former Eastern bloc, embraced economic globalization and more open political processes at the onset of the 1990s, by the end of the decade many new democracies were faltering under the weight of globalization, whether because of unfavorable economic trends or greater transnational crime. It may not yet be possible to make a final judgment about the connection between globalization and democracy, but a closer look will clarify where globalization has helped democratization, where it has inhibited movement toward greater openness, and, assuming an increased pace of globalization, what the greater flows of people and ideas will mean for the world’s governments and societies in the years ahead.

Toward International Norms of Democracy

Perhaps the most tangible evidence of globalization’s impact on democratization has been the infusion of democratic norms, and the principles of human rights that support them, into many international and regional institutions. The principle of accountability for human rights abuse is increasingly unfettered by national borders, as the 1998 arrest of former Chilean President Augusto Pinochet in London demonstrated. The ad hoc United Nations war crimes tribunal that was convened for the former Yugoslavia in the early 1990s was extended to Rwanda in the middle of the decade, presaging a broader move toward international justice. In the coming decade, the establishment of an International Criminal Court will be a watershed in that move.

Democratic principles are also reshaping regional institutions. The European Union, originally an economic community, now requires democratic government as a precondition for membership and promotes democracy in its collective foreign policy. The Organization of American States, once a diplomatic forum for both democratic and nondemocratic governments, now works actively to restore democracy when it is imperiled in member states. The Organization of African Unity, also a traditional diplomatic group, is attempting to forge a regional human rights code modeled after the Helsinki process in Europe.

But the process has its limits. Regional groups adopt codes of democratic practice where a quorum of democracies already exists or where the largest and most economically powerful states are democratic. In these cases, the weight of the democratic majority (and the benefits of membership in the club) are sometimes sufficient to help persuade nondemocratic states to liberalize. But the trend halts abruptly where the political spectrum includes an equal number of democratic and nondemocratic states or where authoritarian regimes are predominant. In Asia, for example, the diversity of political regimes has largely kept democracy and human rights off the table in the Asian-Pacific Economic Cooperation (APEC) group and the Association of Southeast Asian Nations (ASEAN).

A more encouraging but more low-level trend has been the growth of transnational nongovernmental organizations devoted to promoting democracy and protecting human rights. These groups, which usually originate and are headquartered in Western nations, establish beachheads (and nurture local counterparts) in authoritarian nations, although they are seldom able to operate there without significant restrictions. Thus, in regions where authoritarian trends remain strong?most notably in Asia and the Middle East?the only networks dedicated to spreading democratic values and strengthening human rights are nongovernmental. For the foreseeable future, the best chance of building intergovernmental democracy and human rights regimes in these regions will be in a gradual crossover process, as NGO networks pull government officials into “track two” (mixed government and NGO) dialogues and other informal exercises.

The Instrumental Effects of Globalization

In regions lacking a widespread and overt commitment to democracy, Western policymakers and nongovernmental groups trying to promote greater political liberalization have placed their faith in the indirect effects of globalization. In this view, globalization offers a bait and switch. An authoritarian government agrees to a global regime to gain benefits of one sort (usually economic) but is forced to accept the political consequences (greater popular pressure for democracy) that follow. Policies crafted in accord with this theory focus on two aspects of globalization?international trade liberalization and telecommunications. Not surprisingly, the theory also supports two cherished American beliefs: that open markets and democracy are the inspiration and consequence of one another and that the march of technology cannot be stopped.

Thus, for more than a decade successive U.S. administrations have claimed that broadly maintaining trade with China, and specifically encouraging China’s entry into the World Trade Organization, would provide a back-door route to political reform. Adhering to WTO rules would require the regime in Beijing to provide more transparent and accountable government and would strengthen the concept of the rule of law, two fundamentals in modern democratic systems. In addition, foreign telecommunications companies would gain parity with government companies in China, spreading their technology and loosening the regime’s control over contact between China and the outside world, as well as among Chinese citizens themselves.

The logic, compelling in the long run, has short-term limits. In countries with enduring authoritarian regimes, leaders are more likely to accede to legal reform for pragmatic reasons?to improve economic conditions through increased international trade?so long as the reforms are not viewed by the populace as ideological capitulation. Leaders may also consider reforms pertaining to international trade to be easier to contain, because the initial focus is on commercial codes that primarily affect foreign business. Although it is possible to cordon off domestic populations in the early stages of such reform, the consequences of trade liberalization and marketization eventually require the regime to adopt a broader approach. But economic liberalization can also exacerbate problems that seem to outpace legal reform efforts and even encourage popular support for authoritarian or semi-authoritarian government. Russia’s entry into the international economy has, in the minds of many Russians, worsened official corruption and economic crime. As long as these trends are perceived to be stronger than (even impervious to) reform, citizens are likely to tolerate less than democratic rule as a short-term solution.

Moreover, some of the economic powers poised to enter international trade regimes, most notably China, could themselves affect the rules governing those regimes. Thus far, global trade rules have largely been written by Western democracies, whose combined economic power has placed aspiring entrants in the role of supplicants. But the entry of more “mixed” economic powers?governments committed to market reform but not necessarily to Western-style democracy?may change these institutions. At the least, the link between trade preferences and transparent processes may weaken slightly, as may support for overt political conditionality linked to trade, in the mode of the European Union. At worst, global trade institutions could be rent with bloc behavior, not unlike that sometimes seen in the United Nations.

Technology and Political Openness

Technology’s impact on democratization is likely to be more immediate, although not sufficient in itself to effect political change. Weak economies, along with government resistance, have contained the spread of technology in many Middle Eastern and some Asian states and will for the near future. But technology’s advent has added a new dimension to the prospects for political change. The most dramatic episodes of popular resistance against authoritarian regimes in the past decade have featured prominent roles for technology. In Tiananmen Square in 1989, Chinese demonstrators communicated with one another and the outside world by fax. In Bangkok in 1992, Thai professionals, dubbed “mobile phone mobs,” coordinated antimilitary demonstrations with student leaders and one another by cellular phone. In Indonesia in 1998, anti-Suharto resistance was largely directed via the Internet.

But for all these moments of high political drama, technology’s greatest promise in promoting political openness lies in the everyday intercourse of civil and political life. In authoritarian societies, the Internet differs from print and electronic media, because no government-dominated media exist for the regime to use as a counterweight. From its inception, the Internet has been a freer form of communication than any other, at least for those able to obtain it.

Modernizing authoritarian states often wish to expand the use of technology for economic development but also to keep citizens from using it for political purposes. Doing both, however, is increasingly difficult. China’s ambitious plan to build a national computerized information infrastructure has spurred domestic telecommunications industry growth of 30-50 percent a year since 1989. At the same time the government registers all Internet users, is investing in technology to monitor and filter cyber communications, and regulates acceptable topics for online discussion. But Chinese Internet users have learned how to circumvent many of these restrictions using proxy servers, a sign that technology can usually outmaneuver attempts to control it.

Today China’s 17 million Internet users are a small fraction of the nation’s population. But their number is increasing rapidly?growing 75 percent from 1997 to 1998 and then tripling in 1999. More important, political discourse in China has expanded despite state attempts to censor and prevent it. In the medium run, the effects of government efforts to control the Internet will depend in part on whether China can maintain brisk economic growth. If it does, Internet growth is likely to overwhelm attempts to control it. In the long run, the prognosis is favorable. In countries where technology is growing, control of global media may alternate between government and society, but the advantage will usually go to society in the end.

Downsides for Democracy

But globalization can also hand authoritarian regimes an edge. Regimes that accede to economic reforms most often allow openings they are confident they can control. If the immediate impact is favorable?an improved economy, greater access to modern technology and goods?the regime’s popular legitimacy may be strengthened by the perception that it has delivered (or at least permitted) the improvements. Ironically, globalization can thus extend the longevity of the regime, at least in the short run.

Conversely, bad economic times that are attributed, correctly or not, to globalization can also give authoritarian leaders a boost. When disillusionment with economic reform sets in, Western policymakers’ insistence on the link between reform and democratization can be used to authoritarian advantage. In the Asian economic crisis of 1997?98, Vietnam and Laos, which had begun very modest political reforms to accompany marketization, jettisoned these political moves when their trade with the countries hit hardest by the crisis declined. The failure of some of the region’s fastest-growing economies?those linked most closely to the West?was taken as a warning of the dangers of globalization. Hard-liners eclipsed reformers in the early post-crisis years or replaced them altogether in the political structure.

Globalization has also helped sustain authoritarian regimes by feeding nationalism in some non-Western states. During the Asian economic crisis, anti-Western sentiments flared even in countries well on the road to democracy, such as Thailand, when catastrophic drops in currency values were popularly attributed to manipulation by Western traders. In more authoritarian countries such as Malaysia, leaders turned this new nationalism to their advantage by salting their political platforms with anti-Western (and anti-globalization) rhetoric and portraying themselves as national champions.

Technology too has fed the nationalist backlash against globalization. Democracy promoters have long heralded the “CNN effect,” in which television brings world events into the living rooms of people whose leaders would prefer to block such coverage. In Thailand in 1992, when the military government banned reports of Bangkok street demonstrations on government-owned television stations, coverage of the events (and the military crackdown on demonstrators) was transmitted to citizens through satellite television, creating a galvanizing force for resistance. In recent years, authoritarian regimes have used television to their own advantage. In 1999, satellite TV brought NATO’s bombing of the Chinese embassy in Belgrade into the homes of urban Chinese, who were quick to respond with public protests. During that same incident nationalists also made use of the Internet. At the height of the protests, Chinese hackers broke into the website of the U.S. embassy in Beijing, in an eerie modern-day parallel to the 1900 Boxer Rebellion.

New “Global” Elites?

Perhaps the most important impact of globalization on political reform, and one of the most difficult to foretell, will be the way it shapes new political and social classes, particularly in authoritarian countries. In recent decades social scientists have theorized that globalization?in particular its ability to improve economic conditions through trade?will help create new middle classes that will, in turn, increase pressure for democratic reform. There is some truth to this generalization, but it downplays the role of elites in political change. However strong popular pressure for democracy might be, a democratic transition usually requires the approval, overt or tacit, of a significant segment of the ruling order. The key question is not whether globalization can help serve up larger street crowds demanding change, but whether it can change the very nature of elite groups.

Signs are emerging that globalization may be doing just that, with mixed effects for democratization. In countries (whether authoritarian or democratic) that emphasize modernization and economic growth based in part on foreign trade and investment, two developments are reshaping elite political culture. The first is the rise of technocrats, particularly those trained in global economics, in government and politics. In China, for example, technocrats are gradually assuming greater responsibility in the bureaucratic structure.The Communist Party of China has even begun to recruit them to enhance its own legitimacy. Technocrats are not, of course, automatically democratic reformers, but their influence can help make government more accountable and transparent, helping to lay the groundwork for a more democratic system.

A more noteworthy trend is the rise of new commercial elites in the power structures of many authoritarian and democratizing societies. Many made their fortunes in modern commercial sectors that benefited greatly from globalization. Seeking influence wherever they can find it, these new elites often pack the parliaments in countries where the executive branch had traditionally enjoyed exclusive control. In applying new communications techniques (and portions of their fortunes) to connect with voters, they have inspired a modern push for grassroots politics. Although generally considered reformers, they may also epitomize globalization’s lack of regulation. As these new elites have assumed power, indictments for political corruption have increased.

A Realistic Appraisal

Clearly, globalization is not a political panacea. At best a long-term ally in promoting democracy, it provides no automatic solutions. The sanguine correlations offered by some policymakers in the early post-Cold War years?particularly regarding the link between increased trade and democratization?should be reexamined. Although the advanced democracies can prime the pump of globalization, they should not expect to control the outcome or to realize immediate results. Indeed, the more enduring aspects of globalization may take at least a generation to realize. Until then, policymakers should be as ready to recognize globalization’s costs to democratization as they are to laud its benefits.

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September 5, 2024

Effects of Economic Globalization

Globalization has led to increases in standards of living around the world, but not all of its effects are positive for everyone.

Social Studies, Economics, World History

Bangladesh Garment Workers

The garment industry in Bangladesh makes clothes that are then shipped out across the world. It employs as many as four million people, but the average worker earns less in a month than a U.S. worker earns in a day.

Photograph by Mushfiqul Alam

Put simply, globalization is the connection of different parts of the world. In economics, globalization can be defined as the process in which businesses, organizations, and countries begin operating on an international scale. Globalization is most often used in an economic context, but it also affects and is affected by politics and culture. In general, globalization has been shown to increase the standard of living in developing countries, but some analysts warn that globalization can have a negative effect on local or emerging economies and individual workers. A Historical View Globalization is not new. Since the start of civilization, people have traded goods with their neighbors. As cultures advanced, they were able to travel farther afield to trade their own goods for desirable products found elsewhere. The Silk Road, an ancient network of trade routes used between Europe, North Africa, East Africa, Central Asia, South Asia, and the Far East, is an example of early globalization. For more than 1,500 years, Europeans traded glass and manufactured goods for Chinese silk and spices, contributing to a global economy in which both Europe and Asia became accustomed to goods from far away. Following the European exploration of the New World, globalization occurred on a grand scale; the widespread transfer of plants, animals, foods, cultures, and ideas became known as the Columbian Exchange. The Triangular Trade network in which ships carried manufactured goods from Europe to Africa, enslaved Africans to the Americas, and raw materials back to Europe is another example of globalization. The resulting spread of slavery demonstrates that globalization can hurt people just as easily as it can connect people. The rate of globalization has increased in recent years, a result of rapid advancements in communication and transportation. Advances in communication enable businesses to identify opportunities for investment. At the same time, innovations in information technology enable immediate communication and the rapid transfer of financial assets across national borders. Improved fiscal policies within countries and international trade agreements between them also facilitate globalization. Political and economic stability facilitate globalization as well. The relative instability of many African nations is cited by experts as one of the reasons why Africa has not benefited from globalization as much as countries in Asia and Latin America. Benefits of Globalization Globalization provides businesses with a competitive advantage by allowing them to source raw materials where they are inexpensive. Globalization also gives organizations the opportunity to take advantage of lower labor costs in developing countries, while leveraging the technical expertise and experience of more developed economies. With globalization, different parts of a product may be made in different regions of the world. Globalization has long been used by the automotive industry , for instance, where different parts of a car may be manufactured in different countries. Businesses in several different countries may be involved in producing even seemingly simple products such as cotton T-shirts. Globalization affects services, too. Many businesses located in the United States have outsourced their call centers or information technology services to companies in India. As part of the North American Free Trade Agreement (NAFTA), U.S. automobile companies relocated their operations to Mexico, where labor costs are lower. The result is more jobs in countries where jobs are needed, which can have a positive effect on the national economy and result in a higher standard of living. China is a prime example of a country that has benefited immensely from globalization. Another example is Vietnam, where globalization has contributed to an increase in the prices for rice, lifting many poor rice farmers out of poverty. As the standard of living increased, more children of poor families left work and attended school. Consumers benefit also. In general, globalization decreases the cost of manufacturing . This means that companies can offer goods at a lower price to consumers. The average cost of goods is a key aspect that contributes to increases in the standard of living. Consumers also have access to a wider variety of goods. In some cases, this may contribute to improved health by enabling a more varied and healthier diet; in others, it is blamed for increases in unhealthy food consumption and diabetes. Downsides Not everything about globalization is beneficial. Any change has winners and losers, and the people living in communities that had been dependent on jobs outsourced elsewhere often suffer. Effectively, this means that workers in the developed world must compete with lower-cost markets for jobs; unions and workers may be unable to defend against the threat of corporations that offer the alternative between lower pay or losing jobs to a supplier in a less expensive labor market. The situation is more complex in the developing world, where economies are undergoing rapid change. Indeed, the working conditions of people at some points in the supply chain are deplorable. The garment industry in Bangladesh, for instance, employs an estimated four million people, but the average worker earns less in a month than a U.S. worker earns in a day. In 2013, a textile factory building collapsed, killing more than 1,100 workers. Critics also suggest that employment opportunities for children in poor countries may increase negative impacts of child labor and lure children of poor families away from school. In general, critics blame the pressures of globalization for encouraging an environment that exploits workers in countries that do not offer sufficient protections. Studies also suggest that globalization may contribute to income disparity and inequality between the more educated and less educated members of a society. This means that unskilled workers may be affected by declining wages, which are under constant pressure from globalization. Into the Future Regardless of the downsides, globalization is here to stay. The result is a smaller, more connected world. Socially, globalization has facilitated the exchange of ideas and cultures, contributing to a world view in which people are more open and tolerant of one another.

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“The Turn of the Screw”: The Impact of Globalisation on Global Governance

In 2017, Professor Wang Wen of the Chongyang Institute of Financial Studies produced an article for the Financial Times, in which he acknowledged a link between globalisation and increased demands on the process of global governance.  Wen argued that “the engine of globalisation has shifted from developed to emerging economies” (Wen, 2017, online).  Citing Chinese President Xi Jinping’s speech at Davos in January 2017, which charted the path of ‘new globalisation’, he stated that two major issues would need to be tackled going forward.  Firstly, he argued that in order to secure the path to new globalisation, there would be a requirement “to challenge backward global governance concepts”  (Wen, 2017, online).  Wen highlighted the breadth of challenges faced by the current global governance system, which he argued is “incompatible and fragmented” with “rampant terrorism, energy and food security crises and the spread of infectious diseases” (Wen, 2017, online).  Secondly, Wen looked at structural issues.  He stated that “existing global security, trade and financial mechanisms, such as the UN, the WTO and the IMF, are struggling to respond to the ongoing crises around the world” (Wen, 2017, online).  Wen asserted that as a result of a changing global power structure, stemming from the effects of new globalisation, there would be a need to “reshape global governance rules in accordance with the latest international structure,” (Wen, 2017, online) specifically, the better inclusion of developing countries and emerging economies.

Thus, this essay aims to use Wen’s argument as a framework for demonstrating how globalisation has created increasing demands on the process of global governance.  Firstly, it will discuss how globalisation has increased demands on the governance of the “global commons”, in the form of range of challenge, which cannot be addressed by a single state actor alone.  Secondly, it will discuss how new globalisation is accelerating change in the global power structure, so that the institutions and state groupings developed in the immediate aftermath of World War II are neither effective nor legitimate enough to deal with the challenges globalisation brings.  Increasing demands are placed on the very structure and organisation of global governance, thus placing increased demands on the process of global governance.

However, in presenting this argument, it is firstly important to define “globalisation”, “new globalisation”, and “global governance”. Globalisation is viewed by many theorists as a compression of space and time, so that distant communities can, through heightened interconnectedness, interact more rapidly, thus bringing a sense of greater proximity.  According to Karns, Stiles and Mingst, globalisation is “a historical process involving a fundamental shift…in the spatial scale of human social organisation that links distant communities and expands the reach of power relations across regions and continents” (Karns, Stiles, Mingst, 2009, p.4).  These links, or this interconnectedness, has “over the last three decades…become increasingly evident in every sphere, from the economic to the cultural” (McGrew, 2014, p.16).  Importantly, as Karns highlights, globalisation is a process and thus will continue to evolve.  Despite popular sentiment that “globalisation is…in retreat” (Bhattacharya, Khanna, Schweizer, Bijapurkar, online), it could be argued that it is instead developing into a new form of globalisation.  “New globalisation” is defined economically by its “multipolar and fragmented growth” as opposed to being driven by a single country operating as an economic pole.  Politically, it is defined by its limited “convergence on the agendas of the world’s biggest economies”  (Bhattacharya, Khanna, Schweizer, Bijapurkar, online).

Thus, in an increasingly connected world which lacks any central actor, there develops a need for “ordered rule and collective action” (Higgott, 2002, p.20).  Global governance, provides this through “institutions and processes which seek to manage global problems.  Global implies they transcend national and regional borders and involve many countries” (Goldin, 2013, p.4).  Importantly, “it is not a global government; it is not a single world order; there is no top-down, hierarchical structure of authority…” (Karns, Mingst, Stiles, 2009, p.2).  Instead, it involves a number of players who adhere to the “Rules of the Game”, most notably including Non Governmental Organisations, Inter Governmental Organisations and Multi-National Firms.  In this context, “Rules of the Game” can be defined as “basic norms of political legitimacy, war and peace, and commerce” (Paris, R., online).  In other words, the process of global governance including international summits, decision making, and decision application, should adhere to these basic norms.

Having defined globalisation and global governance, the essay will now look to demonstrate in line with Wen’s argument, how globalisation is increasing demands on the “global commons”, and in turn, on the process of global governance.  Goldin defines the “global commons” as “natural assets that are outside national jurisdiction, such as the oceans, outerspace, and the Antarctic” (Goldin, 2013, p.48).  In this respect, “the internet and cyberspace are…a global commons, as is peace and security” (Goldin, 2013, p.48).  These commons place increasing demands on global governance due to the fact the problems that they bring “increasingly render domestic solutions inadequate” (Goldin, 2013, p.48).  There are two commons that the essay shall focus on to demonstrate this: the global environment and cyberspace.

“In the course of modern rapid globalisation, a complex network of world-spanning supply…chains has emerged” (Wenz, online).  Increased industry, production, and travel associated with this, are amongst the results of globalisation that have led to detrimental effects to the global environment, a product of increased emissions.  Goldin argues that globalisation and its resultant effect on the climate has led to a situation which “urgently require[s] global interventions.  No one country can possibly deal with climate change – it requires concerted action at the global level” (Goldin, 2013, p.45).  He states that “in the area of climate change, the gap between challenge and action on global governance is particularly stark” with emissions in “virtually all countries…[continuing] on an upward trend” (Goldin, 2013, p.41).  Thus, the challenge faced is that identified by Goldin, and supported by the Global Carbon Capture Storage Institution, that “the level of carbon dioxide…released into the atmosphere has increased significantly since the beginning of the industrial era” and as a result “the world will experience the effects of climate change” (Global CCS Institute, online).

However, whilst it is undoubtable that reduction of emission in a bid to protect the global environment presents the main challenge, and thus the main increased demand on the process of global governance, there also exists an additional demand.  The leading economies developed at a time of limited or no regulation on their emissions and environmental impact, enabling them to enhance their economies without the requirement to consider any broader impact.  Thus, global governance in respect of environmental regulation now faces the increasing demand of balancing the development and industrialisation of emerging economies with the requirement to manage global emissions.

These two challenges are best illustrated using the 1992 United Nations Framework Convention of Climate Change (UNFCCC), and specifically the Kyoto Protocol which fell under this.  The UNFCCC has been at the core of efforts to reduce global emissions.  Ratified by 195 countries, the Convention is a means by which for “countries to work together to limit global temperature increases and climate change, and cope with their impacts” (European Council, online).  Under this Convention, the Kyoto Protocol was developed.  In brief, the Kyoto Protocol “introduced legally binding emission reduction targets for developed countries” (European Council, online).  Thus, it can be seen that this particular process of global governance attempted to both meet emission reduction targets, and balance this with allowing for the fair development of emerging economies.

However, arguably the demand on global governance to achieve this balance was too great.  In 2007, 15 years after the development of the UNFCCC, global emissions actually increased by 38%.  Within this global increase, the emissions of developing economies, particularly China, increased sharply (Clark, online).  One of the key failures of this process was that the United States, one of the globe’s largest contributors to the emissions total, refused to ratify the Protocol, a result of its lack of binding targets on developing nations.  As demonstrated, this allowed nations such as China and India to produce emissions without recourse.  It should also be noted that the Kyoto Protocol was only finalised “halfway through its ten year life” in 1997.  The demands on global governance had been to act quickly, to limit global emissions within specific targets, and to allow for the development of emerging economies.  Arguably, the UNFCCC and its Kyoto Protocol had only achieved one of these, demonstrating that these increased demands were too great.

The next area that will be focused on to demonstrate the increasing demands globalisation places on the process of global governance, is the internet and cyberspace.  Goldin states that cybersecurity is a “key challenge for local and global governance in the twenty first century” (Goldin, 2013, p.27), but this can be extended to cover the internet and cyberspace in its entirety.  When the internet was initially developed for public use, it was assumed that due to its decentralised nature, the technology would be extremely difficult for governments to regulate (Deibert and Crete-Nishihata, 2012, p.341).  It is this lack of certainty and understanding that has ld to a range of increasing demands on the processes of global governance, which shall be discussed in this section.

The internet has presented a variety of opportunities for criminals and individual or state-backed hackers to operate in ways which could “cause the breakdown of essential infrastructure systems or [cause] significant financial damage” (Goldin, 2013, p.31).  In February 2015, for example, the Russian cybersecurity firm, Kapersky Lab, reported that a single hacking ring had stolen up to $1 billion from over 100 banks in 30 different countries since the end of 2013 (Los Angeles Times, online).  In the absence of a centrally managed global governance institution to address this issue, which clearly lacked geographical boundaries, there existed a governance responsibility gap.  As a result, the banks themselves, coupled with information from the Financial Services Information Sharing and Analysis Centre, were forced to develop further security measures themselves.  As Deibert argues, in instances such as this, “the private sector actors who own and operate the vast majority of cyberspace infrastructure are being compelled or coerced to implement controls on behalf of states” (Deibert and Crete-Nishihata, p.343).  Thus, globalisation has in this area placed increased demands on global governance by arguably forcing different actors, in this case the Banks or multinational firms, to develop processes to address a global governance issue that cannot be met by single state actors or other public organisations.

This leads us to a further demand that globalisation has placed on global governance.  That is, by forcing the development of institutions that can deal with issues than have never previously been faced, prior to globalisation.  Deibert argued in 2012 that “global mechanisms and dynamics of growing cyberspace controls” were “missing” (Deibert and Crete-Nishihata, p.346).  Institutions had indeed been developed for the purpose of internet governance, notably, the International Telecommunication Union (ITU) and the Internet Governance Forum (IFG) amongst others, but early on in their development, these organisations faced outside pressures, particularly political, to develop their process of global governance in a very particular way, emulating the regulations emplaced by certain states.  For example, Russia and some of the former-Soviet States “have adopted a wide-ranging engagement with these forums to promote policies that synchronise with national-level laws” (Deibert and Crete-Nishihata, p.346), reinforcing its sovereign control over national information space.  China has recently highlighted its belief that “global cyberspace should be governed by international institutions operating under the United Nations” (Deibert and Crete-Nishihata, p.346).  Thus, it is apparent that one of the increasing demands globalisation places on global governance in the sphere of the internet and cyberspace, is one of developing institutions that can meet the security need, and satisfy single states across the globe without becoming too heavily subjected to political pressure in an unfamiliar, uncharted environment.

Referring back to Wen’s argument, the second area of global governance that he felt faced increasing demands as a result of the impact of globalisation, was its institutional structure and the processes it followed as a result of adhering to the aforementioned “rules of the game”.  Wen argued that globalisation, particularly “new globalisation”, has precipitated change to the global structure.  Specifically, globalisation has enabled a number of previously underdeveloped states to experience rapid economic growth.  Most notably, an “increased flow of trade, capital, money, direct investment, technology, people, information and ideas across national boundaries” has assisted in the rapid development of Brazil, Russia, India, China and South Africa (BRICS).  Representing over 3.6 billion people with their combined populations, the five nations’ Gross Domestic Product (GDP) represents 22 percent of the world’s GDP (School of Economics, online).  Additionally, “the past two decades have seen the doubling of incomes every eight years in China and robust growth in the other BRICS” (Goldin, 2013, p.167).  The five nations, minus South Africa, formed a grouping in 2006, adding South Africa in 2010 in order to add more weight to their political agendas.  Thus, as a result of globalisation, a rapidly growing economic force has demonstrably become a developing political force.  This structural change has reached such a point that institutions of global governance and the process of global governance face increasing demands.

The first increased demand on the process of global governance is that existing institutions face overt demands from emerging economies against specific policies which those economies view as unfair or detrimental.  There are numerous examples of the BRICS nations, for example, acting overtly against the established western order, but the essay will focus on the establishment of the New Development Bank (NDB) and the impact that this has had on the established process of global governance.  The NDB was established in order to mobilise “resources for infrastructure and sustainable development projects in BRICS and other developing countries to “supplement” the role of the World Bank and other regional financial institutions” (Bhadrakumar, online).  Furthermore, it was established as a means by which to reduce “the continued dominance of the developed countries over…[global] financial institutions” (Bhadrakumar, online), a situation which stemmed from the post-World War II settlement, during which “allied countries gathered at Bretton Woods to create a new international financial order” (Wang, 2016, p.1) upon which today’s order remains largely  built.

There are a number of demands that the creation of the NDB places on the existing process of global governance.  Firstly, it places pressure on the current system to be more inclusive of emerging economies.  It could be argued that “ideally, what the World Bank and the whole network of existing regional development banks would prefer is to continue to use BRICS money and keep the existing pattern of western hegemony” (Bhadrakumar, online), but the development of the NDB threatens this pattern.  Arguably, it creates a situation in which the established institutions of global governance can no longer “use the international finance institutions to prescribe and impose economic policies on the developing countries” (Bhadrakumar, online) in a bid to promote their own economic and political interests.

Secondly, the development of the NDB places increasing demands on the current process of global governance by potentially undermining its exacting standards.  There exists concern from International Development organisations and the United States Government that new institutions such as the NDB “will play by rules different than those of the World Bank” which could in turn “undermine the existing standards, goals, and values of these institutions” (Wang, 2016, p.8).  Ultimately, in a highly competitive globalised economy, there is concern from some analysts that the development of the NDB “could undermine the ability of…the World Bank to uphold their standards” (Wang, 2016, p.9).  The World Bank’s development of standards “aimed at minimising the harm of projects to vulnerable people and the environment” (Wang, 2016, p.9) serves as an example of this imbalance of standards between existing global governance organisations and the NDB.  Whilst the NDB has stated its intention to “follow high standards in social and environmental protection” it has proved reluctant to publish details of the safeguards it is applying (Wang, 2016, p.9).  Thus, the increasing demand on the process of global governance is one of continuing to adhere to the “rules of the game”, despite the lack of willingness of emerging players to do so.

Aside from direct challenges from emerging economies, the process of global governance faces increasing pressure to justify its legitimacy, in light of the shift in global power and the introduction onto the global stage of a broader range of states, groupings and organisations that wish to have influence.  Guriev argues that the “leading role of the Group of Seven (G7) and, more broadly, of the Organisation for Economic Cooperation and Development (OECD) is no longer undisputed” (Guriev, online).  He highlights that structurally, there is western over-representation in the IMF and World Bank, with the US, Europe and Japan having most influence.  Given the aforementioned economic and political changes that have enabled the growth of the BRICS as an independent force, it could be argued that this western over-dominance represents a failure to ensure representational legitimacy and effectiveness in global governance.  Thus, one of the increasing demands that globalisation has placed on global governance in this respect, is that of ensuring maximum participation and representation of emerging economies, thus ensuring legitimacy and results that positively benefit all states in the global system.

That global governance institutions recognised this increasing demand on their processes is best evidenced by the events surrounding the 2008 financial crisis.  In the early to mid-2000s, the over-extension of lending in the United States in the form of subprime mortgages, coupled with the bundling of these mortgages into Collateralised Debt Obligations (CDOs) which were summarily overrated by United States financial institutions as “AAA”, caused a financial shock around the globe.  “Exponential growth in computing processing power…[had been] exploited to extend the use of derivatives and swaps…into new…territories” (Goldin, 2013, p.15) and as such, banks across the globe were involved in CDOs structured on subprime lending.  When interest rates rose and thousands of individuals defaulted on their multiple mortgages, it was not only the US-lenders who felt the effects (Goldin, 2013, p.13).

With the global reach of the crisis came a requirement for a global response, which had to include states outside of the G7 grouping, not only for legitimacy in decision-making, but also in order to successfully stabilise the global economy.  Thus, globalisation placed the demand of rapid reform on the process of global governance, which in this instance, institutions responded to.  The Group of 20 (G20) was revived, and there followed “proposals to redistribute voting rights in international financial institutions” (Guriev, online) to include the emerging BRICS economies.  This translated into what Drezner terms a “thicker institutional environment”, addressing both the increasing demand of representational legitimacy, but also enabling the process of global governance to “supply needed services during a time of global economic crisis” (Drezner, 2012, p.14).  Thus, the process of global governance at this specific time changed, allowing non-western states to become central players in global decision-making, as a result of increased pressure caused by globalisation.

Thus, to conclude, in line with Wen’s view it is apparent the globalisation indeed places increasing demands on the process of global governance in a range of ways.  Firstly, it creates broad and varying global governance challenges in relation to the “global commons”, that must be carefully balanced with development and advancement.  Additionally, globalisation has allowed for the creation of new “global commons”, such as the internet and cyberspace, with ambiguous and undefined global governance parameters.  This had led to increased demands on certain sectors of the variety of global governance institutions, most notably in the instance of cyberspace, the banking sector and private firms.  However, these ambiguous governance spaces have also opened global governance up to political debate and pressure, all of which have increased demands on the process of global governance to address these legitimately and effectively.  If conducting further study, better understanding of the depth and range of these demands could be achieved by gaining further perspective on the broad variety of global commons that bring challenges to the process of global governance, as a result of globalisation.

Finally, Wen’s “new globalisation” has brought increasing demands of its own.  New globalisation and the fragmentation of the western or centralised global governance system has led to a situation in which emerging economies have the ability to place overt and direct pressure on particular aspects of the process of global governance, but also to highlight the lack of legitimacy surrounding the post-World War II global governance system, and force change.  Thus, globalisation has placed, and continues to place increasing demands on the process of global governance.  

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Written by: Victoria Garrad Written at: Staffordshire University Written for: Anthony Mckeown Date written: January 2018

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The State of Globalization in 2021

• Steven A. Altman
• Caroline R. Bastian

Trade, capital, and information flows have stabilized, recovered, and even grown in the past year.

As the coronavirus swept the world, closing borders and halting international trade and capital flows, there were questions about the pandemic’s lasting impact on globalization. But a close look at the recent data paints a much more optimistic picture. While international travel remains significantly down and is not expected to rebound until 2023, cross-border trade, capital, and information flows have largely stabilized, recovered, or even grown over the last year. The bottom line for business is that Covid-19 has not knocked globalization down to anywhere close to what would be required for strategists to narrow their focus to their home countries or regions.

Cross-border flows plummeted in 2020 as the Covid-19 pandemic swept the world, reinforcing doubts about the future of globalization. As we move into 2021, the latest data paint a clearer — and more hopeful — picture. Global business is not going away, but the landscape is shifting, with important implications for strategy and management.

• Steven A. Altman is a senior research scholar, adjunct assistant professor, and director of the DHL Initiative on Globalization at the NYU Stern Center for the Future of Management .
• CB Caroline R. Bastian is a research scholar at the DHL Initiative on Globalization.

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Does economic globalization affect government spending? A meta-analysis

• Open access
• Published: 17 February 2020
• Volume 187 , pages 349–374, ( 2021 )

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• Philipp Heimberger   ORCID: orcid.org/0000-0001-9874-7345 1 , 2  

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Despite extensive econometric testing, the research literature has been unable to draw firm conclusions regarding the effect of economic globalization on government spending. This paper explores various dimensions of the wide variation in existing estimates of the globalization-spending relationship. By applying meta-analysis and meta-regression methods to a unique data set consisting of 1182 observations from 79 peer-reviewed articles, we find that the evidence rejects theoretical views predicting strong unidirectional effects of economic globalization on government spending. Once we account for publication selection bias, no evidence of a non-zero average empirical effect is found. More importantly, however, the type of government spending matters: while the results are consistent with the view that economic globalization exerts small-to-moderate downward pressure on government spending for social protection and welfare, other spending components are affected less significantly. The meta-regression analysis shows further that several factors influence the globalization-spending estimates reported in the literature, including the choice of the economic globalization indicator, details of the econometric specifications, and publication characteristics.

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1 Introduction

Over recent decades, the relationship between globalization and the nation state has become one of the most pressing social science controversies. Despite a wave of academic research, the exact nature of that relationship remains unclear. How does the growing market integration of international trade and finance affect government spending? To answer that question, scholars have developed and tested various theories, but controversy continues across the disciplines of political science, sociology and economics (e.g., Garrett 1995 ; Cusack 1997 ; Rodrik 1998 ; Bretschger and Hettich 2002 ; Rodden 2003 ; Adam and Kammas 2007 ; Dreher et al. 2008b ; Epifani and Gancia 2009 ; Kwon and Pontusson 2010 ; Leibrecht et al. 2011 ; Wu and Lin 2012 ; Marshall and Fisher 2015 ). On a theoretical level, most of the extant literature addressing the impact of globalization on government spending is framed as a debate on whether the ‘efficiency’ hypothesis or the ‘compensation’ hypothesis holds.

The ‘efficiency’ hypothesis states that globalization puts pressure on governments to introduce tax cuts, as lower tax rates are supposed to prevent mobile capital from leaving a country. As financial market actors threaten to punish deficit spending by demanding higher interest rates, international tax competition eventually leads to expenditure retrenchment, with particular downward pressure placed on social protection and welfare spending (e.g., Garrett 1998a ; Scharpf and Schmidt 2000 ; Adam et al. 2013 ). The ‘compensation’ hypothesis generates the opposite prediction: globalization causes an expansion of government spending and strengthening of the nation state’s social safety net because voters push policymakers to compensate them for greater external risk and its social consequences (e.g., Cameron 1978 ). By voicing skepticism about predictions that globalization has a strong and unidirectional impact on government spending (in one direction or the other), it also has been argued that other factors—such as partisan politics, democracy and the state of the domestic economy—are much more salient than globalization when it comes to explaining (changes in) government spending, although globalization may still have small effects (e.g., Kittel and Winner 2005 ). More importantly, theory does not establish an unambiguous relationship between globalization and different types of government spending. In addition, the existing literature has not been able to produce econometric evidence to resolve conflicting theoretical arguments: prominent empirical evidence is consistent with the ‘efficiency’ hypothesis (e.g., Busemeyer 2009 ), the ‘compensation’ hypothesis (e.g., Rodrik 1998 ; Epifani and Gancia 2009 ) and with the view that globalization is not very important when it comes to explaining government spending (e.g., Steinmo 2002 ; Brady et al. 2005 ). Available econometric findings are divided; while positive and negative globalization-spending effects are reported, several studies cannot reject the hypothesis that the effect is indistinguishable from zero. Against that background, valid generalizations are difficult to draw based on traditional literature reviews of the available globalization-spending evidence (e.g., Stanley 2001 ).

This article contributes to the literature by presenting the first quantitative literature review of the effect of globalization on government spending using meta-analysis and meta-regression techniques (e.g., Stanley and Doucouliagos 2012 ; Schmidt and Hunter 2014 ), allowing us to conduct formal hypothesis tests and to draw statistical inferences. As it is well known that differences in econometric specifications and in the data relied on can have sizeable impacts on empirical estimates, this paper sets out to make sense of the substantial variation in estimates on the relationship between globalization and government spending. We tackle two main research questions. First, what does the existing evidence tell us about the effect of globalization on government spending? Meta-analysis in combination with formal tests of publication selection bias allow us to provide answers to the first research question by means of a comprehensive survey and quantitative analysis of the relevant econometric estimates on the globalization-spending relationship (see Sects.  3 and 4 ). Second, what factors explain the present heterogeneity in reported results on the globalization-spending nexus? We use meta-regressions to address the second research question by exploring the impacts of data structure, econometric specification details and publication characteristics on the reported globalization-spending estimates (see Sect.  5 ).

2 The theoretical background to the debate on globalization and government spending

This section focuses on two main issues for a quantitative literature review of the globalization-spending relationship. First, how can globalization be defined and how does the literature measure that concept? Second, what are the most important theoretical arguments about how globalization may influence government spending?

2.1 How to define and measure globalization?

Definitions and images of globalization vary widely. In this paper, we focus on “economic globalization”, which is a much narrower concept than globalization per se, as the latter is a multifaceted concept consisting of different aspects of the economic, political and social sphere (e.g., Dreher et al. 2008a ; Scholte 2008 ). Clark ( 2000 , p. 86) prominently defines globalization as “the process of creating networks of connections among actors at multicontinental distances, mediated through a variety of flows including people, information and ideas, capital, and goods”. Various students of the globalization-spending relationship have developed a large number of indices to operationalize this multifaceted process of globalization. Herein, we restrict the analysis to the economic dimension capturing trade and financial openness. Brady et al. ( 2005 , p. 922) conceptualize economic globalization as “the intensification of international economic exchange and the label for the contemporary era of international economic integration. Thus, [economic] globalization involves the current economic environment shaping welfare states and the heightening of concrete economic exchanges between countries.“

We follow accepted typologies of available economic globalization indicators, which distinguish between trade globalization, financial globalization and overall economic globalization, such that measures of the latter combine the trade and financial dimension (e.g., Squalli and Wilson 2011 ; Gräbner et al. 2018 ; Gygli et al. 2019 ). By far the most prominent trade globalization indicator is trade’s share in GDP (measured as the sum of imports and exports as percentage of GDP). In the dimension of financial globalization, researchers have adopted measures such as foreign direct investment (FDI) flows and indices for capital account liberalization. Furthermore, the globalization index of the Swiss Economic Institute (KOF) has emerged as the most popular overall economic globalization measure (Dreher 2006 ; Potrafke 2015 ). Our meta-data coding regarding the relevant economic globalization indicators follows the typology developed in Gräbner et al. ( 2018 ) along the dimensions of trade globalization, financial globalization and overall economic globalization (see the appendix for more details). Although our focus is on “economic globalization”, for the sake of simplicity the present paper generally refers to it as “globalization”.

2.2 Competing hypotheses on how globalization affects government spending

A general consensus exists that “[w]e can no longer understand politics within countries—what we still conventionally call ‘domestic’ politics—without comprehending the nature of the linkages between national economies and the world economy, and changes in such linkages” (Milner and Keohane 1996 , p. 3). In that context, academic researchers have proposed three competing theories. First, globalization may lead to substantial retrenchment in public spending. Second, globalization may cause government expenditures to expand markedly. Third, globalization nevertheless may have small (although not unidirectional) effects on government spending, but domestic factors may be more important determinants of public expenditures.

The first theory—globalization causes spending retrenchment—has been called the ‘efficiency’ hypothesis. In its simplest version, it stipulates that globalization reduces public expenditures because international competition effectively triggers a ‘race for the best location’ across nations, which fosters tax competition and leads to expenditure retrenchment as the more complete international integration of financial markets also penalizes deficit spending (e.g., Sinn 1997 ). The logic for capital mobility is that the greater potential for capital flight across borders has rendered financial market investors the ultimate arbiters of fiscal policymaking, as they effectively can ‘punish’ governments by selling-off government bonds (e.g., Streeck 2014 ). Hence, the simple version of the ‘efficiency hypothesis’ predicts that governments respond to globalization by introducing substantial cuts in public expenditures.

An extended version of the ‘efficiency’ hypothesis is more complex in the sense that it makes clear predictions about what kind of government expenditures will be affected negatively by globalization: here, the prediction is that globalization puts particular downward pressure on public expenditures for social protection and welfare, since the welfare state comes under attack owing to concerns that redistributive fiscal policies may hamper international ‘competitiveness’ (e.g., Alesina and Perotti 1997 ). While welfare spending is subject to globalization-induced fiscal consolidation pressures, the extended version of the ‘efficiency’ hypothesis concedes that other components of government spending nevertheless could be expected to respond positively to increasing international market integration; for example, public infrastructure or education spending may increase in response to globalization as governments try to make their locations more attractive to foreign investors, thereby ensuring international competitiveness (e.g., Schulze and Ursprung 1999 ). As different components of government spending can be expected to respond differently to globalization (in particular: spending on social protection and welfare vs. public infrastructure expenditures), it is not possible to test the extended ‘efficiency’ hypothesis by looking only at total government spending. Our meta-analysis will, therefore, consider different types of government spending.

The second theory—globalization causes expanding public spending—can be called the ‘compensation’ hypothesis. It makes the theoretical prediction that more trade and greater financial openness lead to larger public sectors. The argument basically is about political incentives for expansionary spending policies, as citizens demand that policymakers compensate them directly for the increases in external risk and social polarization that are associated with international integration. Integration of international trade and financial markets may increase economic inequality and insecurity. In that context, governments have strong incentives to recompense their citizens. In his seminal paper on the ‘compensation’ hypothesis, Rodrik ( 1998 , p. 1019) argues that “[i]f government spending played a risk-mitigating role, we would expect to see this primarily reflected in income transfer programs and in social security and welfare spending.” Hence, while the simple version of the ‘compensation’ hypothesis does not make specific predictions about which types of government spending will be affected by globalization, the extended version states that governments respond to globalization by building stronger safety nets and engaging in additional welfare spending. Both the ‘efficiency’ as well as the ‘compensation’ theory assigns special roles to social spending, although their extended versions clearly make opposing predictions regarding the unidirectional impact of globalization on social spending.

The third view is skeptical about theoretical claims that globalization produces strong and unidirectional effects on government spending, as suggested by both the ‘efficiency’ and the ‘compensation’ theory. Such skepticism rests mostly on theoretical arguments according to which other factors are more important determinants of government spending than globalization. A comprehensive survey would go beyond the scope of the present paper, but the third view generally stresses the importance of each nation’s own history in terms of institutions and culture (e.g., Navarro et al. 2004 ) as well as of the structure of the welfare state and the political system (e.g., Cusack 1997 ; Kim and Zurlo 2009 ). Empirical studies zooming in on the domestic determinants of government spending focus on explanatory variables such as partisan politics and democracy (e.g., Garrett 1998b ; Kittel and Obinger 2003 ), fiscal decentralization (e.g., Rodden 2003 ; Ha 2008 ), the changing age structure of the population (e.g., Razin et al. 2002 ; Shelton 2008 ) and the state of the domestic economy (e.g., Stephens et al. 1999 ; Kittel and Winner 2005 ). Nevertheless, it is important to note that recognizing domestic influences on public spending does not necessarily imply that globalization has no effect at all: the impact of globalization on various components of government expenditures still may be non-zero, but smaller than suggested by either the ‘efficiency’ or the ‘compensation’ hypothesis and, moreover, not unidirectional across countries.

Numerous contributions to the literature have tried to test the foregoing competing theories of how globalization affects government spending—with inconclusive results (e.g., Rodrik 1998 ; Kittel and Obinger 2003 ; Brady et al. 2005 ; Busemeyer 2009 ; Epifani and Gancia 2009 ; Marshall and Fisher 2015 ; Chuaire et al. 2017 ). Thus far, academic research has not made an effort to synthesize and explore the published estimates of the globalization-spending relationship; the present article closes that gap in the literature by applying meta-analysis and meta-regression tools.

3 Constructing the meta-study dataset on the globalization-spending relationship

Based on the widely used KOF globalization index (on the index’s construction, see Gygli et al. 2019 ), Panel A of Fig.  1 shows for a sample of advanced countries that economic globalization expanded markedly from the 1980s to the mid-2000s, but has stagnated over the past 10 years. Given the substantial overall growth in economic globalization since the 1980s, research interest in studying the effects on the public sector also has risen. Panel B of Fig.  1 plots the average relationship between the KOF economic globalization index and total government spending over the 1980–2016 period. The plot does not show much of a systematic relationship: the economic globalization index explains only about 3% of the variation in total government spending. However, if one were to conduct a detailed analysis of how globalization affects government spending, the picture could change; several aspects of the relationship need to be considered: the choice of the globalization measure (overall economic globalization as in Fig.  1 or sub-indicators for trade and financial globalization?), the composition of government spending (total government spending or different sub-components of it?), the time dimension of the data, the composition of the country sample (include developing countries?), the structure of the data (cross-sectional or panel?), the functional form of the model (in levels or first differences?), the estimator (OLS with fixed effects or GMM?), and so on.

Economic globalization and government spending in advanced countries. Data for the KOF economic globalization index were obtained from Gygli et al. ( 2019 ). Data on total government spending were downloaded from the World Bank. The economic globalization data in Panel A depict an unweighted average of the 27 advanced countries that were also included in panel B

As the following meta-analysis will show, a large number of studies have generated independent estimates of the relationship between economic globalization and government spending. However, no single study is able to provide a valid basis for drawing conclusions about what we know about that relationship: reliance on “best studies” or qualitative literature reviews does not resolve the problem of conflicting research findings (Schmidt and Hunter 2014 , p. 19). The advantages of meta-analysis are well known, and this paper utilizes them: we integrate the findings across the empirical literature on the globalization-spending relationship (see Sect.  3 ) and correct for the distorting effects of several data artifacts that may produce the illusion of conflicting findings. In doing so, we identify the extent to which the particular choice of methods, empirical designs and data structures affect the results reported in the globalization-spending literature. We thereby contribute to explaining wide variation in existing estimates. Like all other statistical tools, however, meta-analysis has its own downsides and weaknesses (e.g., Stanley 2001 , p. 146). This paper addresses potential problems with our use of meta-analysis in the following ways. First, disagreement exists over which study characteristics to include in a meta-analysis of the globalization-spending relationship. The issue of what study characteristics are important, however, can be examined statistically (see Sect.  5 ). Second, a problem arises when meta-analysis weights relevant reported estimates equally, because it then risks overweighting the “lower quality” results. That point, however, can be addressed by using a properly weighted estimator (see Sect.  5 ). Third, a problem of publication selection bias arises, as statistically significant effects could be more likely to be published, which would distort the findings. We can address that issue, however, by accounting for potential publication selectivity (see Sect.  4 ). Fourth, the criteria adopted for including and excluding studies may be opaque. Our approach, therefore, is to be transparent about the criteria for inclusion.

3.1 Search strategy and criteria for inclusion

The systematic search and review of the literature for this paper began by tracking down all relevant journal articles addressing the relationship between globalization and government spending. By doing so, we included papers from a variety of academic fields, most prominently political science, sociology and economics. To search for papers, we first accessed (1) Google Scholar, (2) the EconLit database and (3) the Scopus database. We included the following keywords in the search process: “globalization + government spending”; “openness + government spending” Footnote 1 (we also substituted “government spending” by “public expenditures” and “government expenditures”, respectively). Furthermore, we followed up on the references cited in empirical studies and reviews of the relevant literature by screening article reference lists. The criteria for including existing studies in the meta-analysis sample are as follows:

Government spending as the dependent variable and globalization as explanatory variable As a condition for being included in our dataset, articles use a measure of government spending as the dependent variable and at least one measure of globalization as an explanatory variable. Studies had to report estimates of some variant of the following generic econometric model (note that we ignore subscripts for the purpose of simplification):

where GOVSPEND as the dependent variable is a measure of government spending, EGLOBAL is a measure of economic globalization, Footnote 2 Z is a vector of other explanatory variables, and \(\varepsilon\) is the error term. For example, articles adopting a measure of tax rates or tax revenues as the dependent variable (e.g., Cameron 1978 ; Swank 1998 ; Adam et al. 2013 ) as well those using globalization measures that do not consider the dimension of economic globalization exclusively but in combination with political or social dimensions (e.g., Potrafke 2009 ) had to be excluded.

Reported econometric estimates Only those empirical studies that presented regression results were considered. That restriction excluded numerous papers that reported descriptive statistics or qualitative reviews only.

Published in peer - reviewed journals We included only the empirical estimates that were published in peer-reviewed English-language journals prior to October 2018. Footnote 3 We excluded other works on the globalization-spending nexus (e.g., working papers and book chapters). First, peer-reviewed journal publications can be considered to have passed a certain “quality” check by referees and editors. Second, it is difficult to track down all potentially relevant book chapters and other non-peer-reviewed documents that touch on the globalization-spending relationship. Therefore, the restriction to peer-reviewed journal articles contributed to ensuring that the coding process remained transparent and manageable.

Offered relevant statistics In order to be included in our sample, an article had to fulfill certain reporting standards: the requirement was that the paper offered statistics (e.g., correlation coefficients and standard errors or t-statistics) from which standardized measures of the impact of globalization on spending could be computed (see Sect.  3.2 ).

Seventy-nine journal articles fulfilled the four criteria, yielding a total of 1182 estimates for the meta-study dataset. In the accompanying appendix, we present a table listing all of the 79 included studies. The estimates compiled from those studies comprise our total population of the relationship between globalization and government spending.

3.2 The globalization-spending nexus: comparable effect sizes and their standard errors

Not all of the relevant coefficients found in the globalization-spending literature are directly comparable, as the variables entered into the regressions are measured on different scales. For example, if some estimates are based on log-transformations of the underlying variable, but other estimates are not based on such a transformation, the size of the coefficients is difficult to compare. To illustrate the magnitude of the effect of globalization on government spending, we therefore need to make all estimates comparable. In the context of the present paper, partial correlation coefficients measure the strength and direction of the impact of globalization on government spending, while holding other factors constant. The two main advantages of the partial correlation coefficient are: first, it can meaningfully be compared across articles because it is unit free and bounded between − 1 and 1. Second, it can be calculated for a much larger set of estimates than other effect size measures. Formally, the partial correlation coefficient is given by:

where t is Student’s t -statistic associated with the relevant regression coefficient and df denotes the degrees of freedom for that t -statistic (Stanley and Doucouliagos 2012 , p. 25). The standard error of the partial correlation coefficient (ser) is given by \({\text{ser}} = \sqrt {\frac{{1 - r^{2} }}{df}}\) , where r again is the partial correlation coefficient and df denotes degrees of freedom. Summary results for the partial correlations and associated confidence intervals (e.g., Schmidt and Hunter 2014 ) are available in the accompanying appendix.

4 Is the globalization-spending literature characterized by publication selection bias?

Publication selection bias could be a severe problem for economic interpretations and statistical inferences (e.g., DeLong and Lang 1992 ). Indeed, it has been argued that the empirical literature on the globalization-spending nexus is characterized by a certain asymmetry in favor of the compensation argument with the consequence that “most of the more recent innovative theoretical work has concentrated on the ‘compensation’ argument by alluding to the need to provide a better understanding of the political underpinning of the compensation logic” (Busemeyer 2009 , p. 457). If that were true, it may imply a publication selection bias in favor of results that support the ‘compensation’ hypothesis, according to which globalization increases government spending to offset the risks associated with international market integration. In this section, we test formally whether such a concern is indeed valid.

Publication selection refers to a process in which results are chosen for their statistical significance (e.g., Brodeur et al. 2016 ; Andrews and Kasy 2019 ). The tendency of journal editors to publish only those results that reveal statistical significance, the researchers’ willingness to take the presence of statistically significant effects based on accepted theory and the general predisposition for treating statistically significant results more favorably than “insignificant” evidence may lead to a distorted picture of the underlying empirical relationship.

If publication bias is not an issue, the partial correlation coefficient and its standard error will not show any systematic relationship. However, if published results are biased, we will find a statistically significant relationship (Egger et al. 1997 ). Footnote 4 It has been argued that the “simplest and most commonly used method to detect publication selection is an informal examination of a funnel plot” (Sutton et al. 2000 , p. 1574). Here, the funnel plot represents a scatter diagram consisting of all econometric estimates of the globalization-spending relationship in our sample and the precision of those estimates, where precision is calculated as the inverse of the standard errors of the partial correlation coefficients (see Fig.  2 ). The most precise estimates of the globalization-spending nexus are shown at the top; they are the least affected by publication selection bias because their high precision makes it rather unlikely that they are statistically insignificant. In the absence of publication bias, the funnel plot should be symmetric—implying that the most precise estimates are close to the true effect, while low-precision estimates are characterized by large standard errors. As a consequence, if publication selection bias is absent, the scatter plot should be shaped like an inverted “funnel” (Sutton et al. 2000 ). The visual inspection of Fig.  2 suggests that the reported estimates are characterized by large variation Footnote 5 : negative, positive and close-to-zero estimates are reported. However, the right portion of the funnel seems to be “heavier” than the left portion, which could be an indication of publication selection bias.

The distribution of globalization-spending estimates. The figure plots estimates of the partial correlations against the inverse of the corresponding standard error

We continue by applying the funnel-asymmetry precision-effect test (FAT PET), which allows us to formally test the presence of publication selection bias. We estimate the following model:

where \(r_{ij}\) is the estimated partial correlation i from study j , \({\text{SE}}_{ij}\) is its standard error and \(\varepsilon_{ij}\) is the random sampling error. In Eq. ( 3 ), the term \(\beta_{1} {\text{SE}}_{ij}\) allows for publication selection bias. The hypothesis test of \(\beta_{1}\) (H 0 : \(\beta_{1} = 0)\) can be called the funnel asymmetry test (FAT). If \(\beta_{1}\) equals zero, we find no evidence for publication selection bias (Egger et al. 1997 ). At the same time, testing the hypothesis that \(\beta_{0}\) is zero (referred to as the precision-effect test, or PET) allows us to test whether an empirical effect remains after accounting for potential publication selection bias. The reported empirical estimates, however, come from different datasets with various sources of heteroscedasticity, and they must be expected to have different variances. To address that issue, we estimate Eq. ( 3 ) by Weighted Least Squares (WLS) with the inverse of the variances as weights. Footnote 6

We start by reporting the precision-weighted average, obtained from regressing the partial correlation coefficients on a constant term by applying WLS (see column (1) of Table  1 ). Without correcting for publication selection bias, evidence of a positive and statistically significant impact of globalization on government spending emerges. Note, however, that according to the guidelines in Doucouliagos ( 2011 ), which suggest that a partial correlation below 0.07 can be considered to be small, the (precision-weighted) average partial correlation estimate reported in column (1) is very small. Column (2) of Table  1 then accounts for potential publication selection bias. It reports the results based on Eq. ( 3 ). The FAT results in column (2) indeed provide evidence of publication bias: the association between the partial correlations and their standard errors is positive and statistically significant. The PET results in column (2) offer no evidence of a genuine empirical effect once we correct for the upward publication selection bias. A potentially important drawback of using the partial correlation coefficient is that its distribution is not normal when its value is close to − 1 or + 1 (Stanley and Doucouliagos 2012 , p. 25). In our case, though, departure from normality is unlikely to be a problem, since only a few partial correlations are anywhere near the − 1, + 1 bound (see Fig.  2 ). Nevertheless, we implement the most common solution for that potential problem, which is to use Fisher’s z -transformation (e.g., Dunn and Clark 1969 ). As can be seen from column (3) of Table  1 , the FAT PET results prove robust when Fisher’s z -transformation is applied to the partial correlations. Footnote 7

Overall, the FAT results reported in columns (2)–(3) of Table  1 provide evidence that the reported estimates are selected in part for statistical significance in favor of the ‘compensation’ hypothesis. But does the extent of publication selectivity make a practical difference? To answer that question, we exploit the fact that the FAT coefficient \(\beta_{1}\) is a unit-free measurement, which makes it possible to rely on it for assessing the magnitude of publication selection bias. Doucouliagos and Stanley ( 2013 ) argue that when the FAT is statistically insignificant or if | \(\beta_{1} |\)  < 1, then selectivity is “little to modest” (Doucouliagos and Stanley 2013 , p. 320). In our case, the FAT coefficient is statistically significant, but it is much smaller than one: while some evidence of publication selection bias is found, the bias is small and thus should not make too much of a practical difference in the interpretation of the literature’s empirical results. This conclusion is consistent with visual inspection of Fig.  2 : although the right portion of the funnel is a bit “heavier” than the left one, the dispersion of the estimates is relatively wide and symmetric, which does not indicate strong publication selectivity.

However, the findings reported thus far are subject to three major limitations. First, the literature review in Sect.  2.1 has established that different dimensions of economic globalization (trade and financial globalization, respectively) might have different impacts on government spending. We have not yet accounted for that important point. Second, the literature review in Sect.  2.2 has shown that, based on theoretical considerations, different components of government spending can be expected to respond differently to globalization (especially spending on social protection vs. public infrastructure). Addressing that aspect of the relationship is essential because the extended versions of the ‘efficiency’ and ‘compensation’ hypotheses can be put to thorough test only by accounting for different types of government spending. Third, other sources of heterogeneity (e.g., data characteristics, estimation details and publication characteristics) might explain some of the diversity in the published empirical results. To address those three points, the next section investigates heterogeneity and publication bias simultaneously in a multivariate meta-regression analysis.

5 What factors explain the heterogeneity in reported globalization-spending estimates?

What factors contribute to explaining the heterogeneity in the reported empirical results on the globalization-spending relationship? We continue by identifying the likely sources of heterogeneity.

5.1 The multivariate meta-regression model

In line with standard techniques for meta-regression analysis (e.g., Stanley and Doucouliagos 2012 ), we adopt the assumption that the i th estimate of the globalization-spending partial correlation coefficient from study j , denoted r ij , is influenced not only by sampling error ( \(\varepsilon_{ij}\) ), but by a vector of variables ( \(Z_{kij}\) ) consisting of characteristics that capture differences in the underlying effect of globalization on government spending. The meta-regression model can thus be written as follows:

By estimating Eq. ( 4 ), we can account simultaneously for publication selection bias (the standard error SE is still included) and for the factors that might explain excess heterogeneity. We estimate Eq. ( 4 ) by WLS with the inverse of the variances as optimal weights. Stanley and Doucouliagos ( 2017 ) argue that the WLS estimator is preferable to other standard estimators that can be applied in meta-regressions. WLS is preferred since the estimates do not have the same variances and because it is important to assign more weight to those estimates that are more precise. However, we also will conduct robustness checks based on applying different estimators. As most of the studies in our meta-study database report several estimates, we also correct for potential within-study dependence by clustering the standard errors obtained from the meta-regression model at the study-level.

5.1.1 Measures of the dependent variable (government spending)

Recall that the dependent variable in the meta-analysis is a measure of public spending (see Eq.  1 ). We account for differences in the dependent variable by distinguishing estimates that use total government spending, government consumption, public investment, social spending, education spending, health spending and other (unspecified) types of spending (i.e., variables consisting of mixes of spending categories), respectively (see Table  2 ). By considering differences in the measures of government spending, we are able to test the extended versions of the two competing hypotheses regarding the impact of globalization on public expenditures introduced in Sect.  2.2 (‘efficiency’ vs. ‘compensation’).

5.1.2 Measures of economic globalization

As explained in Sect.  2.1 , numerous indicators have been applied in capturing different aspects of globalization. We follow the typology of economic globalization indicators in Gräbner et al. ( 2018 ), distinguishing between trade globalization, financial globalization and overall economic globalization indices; the latter combine both the trade and financial dimensions (see the appendix for more details).

5.1.3 Data characteristics

We consider whether a study relies on cross-sectional data rather than panel data. Additionally, Rodrik ( 2011 ) suggests something special about the period of ‘hyper-globalization’ during the 1990s. Including a continuous variable for the mean year in the various published samples is an approach for testing whether the time dimension of the data matters.

5.1.4 Country composition

The globalization-spending relationship could be influenced by the underlying country sample (e.g., Rudra 2002 ). We thus control for whether an estimate is based on advanced countries, developing countries or a mix of the two. To distinguish between the three country groups, we make use of the IMF’s ( 2018 ) classifications.

5.1.5 Econometric details

We test formally whether the functional form of the econometric model makes a difference, as suggested by a number of contributions to the relevant literature (e.g., Garrett 2001 ; Kittel and Obinger 2003 ; Kittel and Winner 2005 ). We distinguish between estimates that specify both the dependent variable and the relevant globalization regressor in levels and other functional forms of the globalization-spending relation. We identify specifications in first differences on both side of the empirical model (ChangeChange), specifications that regress the level of government spending on first differences in the relevant globalization variables (LevelChange), and specifications that regress first difference in government spending on the level of globalization (ChangeLevel).

We account for differences in the empirical estimators by coding a variable for GMM, OLS, Random Effects and other estimators (such as Instrumental Variables and Seemingly Unrelated Regressions), respectively. We also check whether differences emerge in the reported results when estimates control for unobserved country heterogeneity (CountryFixedEffects) and time-varying shocks affecting all countries (TimeFixedEffects). Furthermore, we consider whether the regression model entered an interaction term between globalization and some other variable.

5.1.6 Publication characteristics

We account for various dimensions of the publication process: differences between economics journals and other types of journals, whether a study’s primary focus is the globalization-spending relationship as opposed to entering globalization merely as a control variable, and whether the author(s) of a study previously received comments or feedback from other authors who have contributed to the relevant literature. Footnote 8

5.1.7 Macroeconomic, political and institutional control variables

Finally, we consider whether the inclusion of potentially relevant control variables has an impact on the reported relationship between globalization and government spending. Several studies account for macroeconomic factors, represented by GDP growth and the unemployment rate, respectively. We also check whether studies control for income levels (proxied by GDP per capita). Some authors have argued that government spending plays an important risk-reducing role, particularly in economies that are exposed to substantial external risks (e.g., Rodrik 1998 ; Epifani and Gancia 2009 ); hence, we consider whether the sampled studies control for terms-of-trade risk. An important argument is that demographic change affects government spending, with particular importance for an aging population (e.g., Shelton 2008 ); we thus check whether it matters whether or not the share of the aged population is accounted for. The political science literature has emphasized that the identities of the parties running the government matter, since their ideological leanings may lead to quite different spending policies, even in the context of globalization (e.g., Cusack 1997 ; Belke 2000 ; Kittel and Obinger 2003 ). We thus also ask whether entering controls for partisan politics affects reported partial correlations. The political science literature likewise highlights the salience of labor’s institutional powers in the context of government spending regressions (e.g., Iversen and Cusack 2000 ). Finally, democracy potentially is a relevant moderator variable, as more democratic political systems may be generous government spenders, especially on social security and welfare. One explanation for that relation could be that the median voter prefers redistributive policies, providing incentives for governments to cater to those preferences (e.g., Meltzer and Richard 1981 ).

5.2 Multivariate meta-regression results

A few preliminary remarks are in order regarding the interpretation of the coefficients in the estimates of multivariate meta-regression models presented below. The models always omit one category (as the reference category) from each group of mutually exclusive and jointly exhaustive dummy variables (e.g., government spending or economic globalization measures). That is necessary to avoid perfect multicollinearity implying that the intercept \(\beta_{0}\) cannot be interpreted as the “true” effect of globalization on government spending because it incorporates the effects of the reference groups. Other specifications would yield different estimates of the intercept term. Our specification provides an estimate of the impact of trade globalization on total government spending, based on data from advanced countries only—with all variables entered in their levels.

Note that the choice of the omitted (reference) categories in no way influences any of the other estimated coefficients, but it shifts the empirical model’s intercept \(\beta_{0}\) . Footnote 9 Hence, the coefficients of the moderator variables from each group of mutually exclusive and jointly exhaustive dummy variables allow us to make predictions regarding the impact of economic globalization on government spending based on the chosen reference categories. For example, the estimated average partial correlation of social spending compared to total government spending (which is the reference category) can be predicted by adding up the value of the intercept \(\beta_{0}\) and of the social spending coefficient. Also be aware that we adopt a general-to-specific estimation approach, which is the suggestion of prominent guidelines for meta-analysis (e.g., Stanley and Doucouliagos 2012 , p. 105). In particular, we eliminate the variable that returns the largest p value when all coded moderators in Table  2 are entered and repeat that step until the p values of all variables are smaller than 0.1. Footnote 10 The advantage of the general-to-specific approach is “that model construction proceeds from a very general model in a more structured, ordered and (statistically valid) fashion, and in this way avoids the worst of data mining” (Charemza and Deadman 1997 , p. 78).

Table  3 shows the general-to-specific modeling results from the multivariate meta-regression analysis. Footnote 11 Column (1) applies WLS with the standard errors clustered at the study level. The social spending variable returns a negative and statistically significant coefficient, indicating that—compared to estimates entering total government spending as the dependent variable (which is excluded as the reference category in the group of government spending measures)—estimates that model social spending alone report larger negative effects of globalization on total government spending. Indeed, our model predicts that globalization has a small-to-moderate negative impact on social spending of − 0.1 (obtained by adding the social spending coefficient to the intercept). While the finding of a negative and statistically significant coefficient on the social spending variable in column (1) clearly contradicts the extended version of the ‘compensation’ hypothesis, which predicts that globalization has a differential impact on various components of government spending and, in particular, will push up spending on social protection to compensate for the greater risks associated with international market integration (e.g., Rodrik 1998 ), it lends support to the extended version of the ‘efficiency’ hypothesis, which predicts the opposite, namely that social spending will be under more pressure from globalization than other components of public expenditures (e.g., Schulze und Ursprung 1999; see also Sect.  2.2 ). Notably, however, the size of the impact of globalization on social spending predicted by the model estimated in column (1) is small-to-moderate when its interpretation is based on the guidelines proposed by Doucouliagos ( 2011 ), which suggest that a partial correlation coefficient between zero and 0.07 must be considered to be small. In other words, the regression results do not predict a large negative impact of economic globalization on social spending, on average, but rather small-to-moderate downward pressure.

In fact, no government expenditure variable other than social spending carries statistical significance. The coefficients of the financial globalization and the overall economic globalization variables, however, are both positive and statistically significant. Those findings suggest that, compared to models that control for trade globalization, models that include financial globalization or overall economic globalization report larger (i.e., more positive) relationships between globalization and government spending. The meta-regression results suggest that the choice of the economic globalization variable indeed does matter and the ‘compensation’ effects reported in the literature tend to be stronger when the dimension of financial globalization is considered.

Furthermore, the results in column (1) of Table  3 indicate that, on average, estimates that rely on samples of developing countries find stronger relationships between economic globalization and government spending than those based on samples of advanced countries. That finding supports the argument that the composition of the country group moderates the impact of globalization on government spending in the sense that the ‘compensation’ mechanism, on average, is stronger in developing countries than in advanced countries. Note again, however, that the average ‘compensation’ effect in developing countries predicted by the model estimation in column (1) is rather small. Based on our categorization of reference groups, the model predicts that globalization has a small positive impact on total government spending in developing countries (− 0.05 + 0.12 = 0.07).

Furthermore, the results in model (1) of Table  3 suggest that the choice of functional form influences the reported partial correlations. The omitted reference category is the level level specification, i.e., when the spending and globalization variables both are entered in levels. It can be seen that estimates using functional forms other than level level report larger negative relations between globalization and government spending. Garrett ( 2001 , p. 21) argues in favor of “an important analytic difference between the extent to which a given country is integrated into international markets in a given period of time (i.e., the level of integration) and the rate at which integration has increased between two periods (i.e., changes in market integration). The changes measure is much closer to conventional understandings of globalization, but the levels measure has been used in the best econometric work on the globalization and government spending relationship around the world.”

Our meta-regression analysis shows that the evidence reported in the existing literature indeed leans meaningfully more towards supporting the ‘compensation’ hypothesis when both the government spending and the globalization variable are specified in levels. In particular, the model in column (1) of Table  3 predicts a medium-sized negative impact of globalization on total government spending (–0.05 + –0.11 = –0.16) when the model is specified in first differences, which rejects the predictions of the ‘compensation’ theory clearly.

Several additional findings from column (1) of Table  3 merit highlighting. First, estimates based on OLS estimators lean more towards supporting the ‘compensation’ hypothesis than other econometric specifications. In contrast, the estimated coefficients for Random Effects and other estimators (e.g., IV, seemingly unrelated regressions) are statistically insignificant. Second, entering country fixed effects moderates the impact of globalization on spending: if country dummies are included, the reported partial correlation tends to lean more towards the side of zero. Third, we find that estimates published in economics journals report stronger (i.e., more positive) relationships between globalization and government spending. In other words, the economics literature reveals a tendency for reporting positive globalization-spending effects. Fourth, scholars who have contributed to the relevant literature previously report partial correlations that tend to be more negative. Fifth, three regressors seem to moderate the impact of globalization on government spending. On the one hand, the two macroeconomic controls (GDP growth and unemployment) return statistically significant coefficients, suggesting that empirical researchers wanting to model the relationship between globalization and government spending should pay particular attention to macroeconomic controls. On the other hand, estimates based on models in which terms-of-trade risk also is controlled for report larger negative effects of globalization on government spending. The coefficients on democracy are significant in three of the four models reported in Table  3 . Finally, we can ask whether the evidence for publication selection bias reported in Table  1 is confirmed when we control for additional moderator variables. Indeed, the standard error coefficients in Table  3 have the same signs as the coefficients reported in Table  1 ; the size of those coefficients is similar. That finding can be interpreted in the sense that the multivariate meta-regression analysis confirms that some publication selectivity bias exists in the globalization-spending literature, but the magnitude of the bias is relatively small (Doucouliagos and Stanley 2013 , p. 320). Finally, our meta-regression results do not find substantial evidence for time-varying effects in the globalization-spending relationship: the general-to-specific approach eliminates the continuous variable capturing the mean year of the data’s underlying structure because the coefficient on that variable is estimated to have very low precision. Footnote 12

In columns (2)–(4) of Table  3 , we test the robustness of the meta-regression results reported in column (1). We do so both by applying different estimators and by transforming the dependent variable. More specifically, the Random Effects model in column (2) introduces an additional between-study variance term to account for differences in the globalization-spending estimates that go beyond sampling error and differences captured by the moderator variables (e.g., Schmidt and Hunter 2014 ). The robust regression estimator applied in column (3) downweighs observations with larger absolute residuals and, hence, is less fragile to the influence of outlier observations. Finally, column (4) uses Fisher’s z -transformed partial correlation coefficients to account for the distribution of the partial correlations potentially not being normal when their values are close to − 1 and + 1. The results reported in columns (2)–(4) show that our baseline results largely remain unaffected when those robustness checks are introduced. The sizes of some of the coefficients and their standard errors are subject to variation. However, two cases arise in which a variable whose coefficient was estimated to be significant in column (1) turns out not to be significant in all three additional models: the coefficients on both overall economic globalization and democracy lose their significance when we apply robust regression methods. Besides that, the results in columns (2)–(4) of Table 3 indicate robustness.

6 Conclusions

By applying meta-analysis and meta-regression methods, this article has analyzed the literature addressing the impact of economic globalization on government spending. Based on statistically independent estimations (e.g., Rodrik 1998 ; Busemeyer 2009 ), some exercises in econometric replication (e.g., Kittel and Winner 2005 ) and qualitative reviews of the evidence (e.g., Brady et al. 2005 ), the previous literature has been unable to resolve conflicting theoretical arguments about whether the effect of globalization on public spending is either negative, positive, or much smaller than suggested by the two prominent rival theories (the ‘efficiency’ vs. ‘compensation’ hypotheses). Furthermore, the question whether different components of government spending are affected to different extents has so far not been answered rigorously. The present article contributes to the literature by providing the first quantitative analysis of the accumulated evidence and by exploring the possible sources of the wide variation in existing empirical estimates.

The meta-analysis presented herein suggests several main findings. First, the overall empirical evidence is inconsistent with strong unidirectional effects of globalization on government spending. Indeed, once we account for the (small magnitude of) publication selection bias in favor of the ‘compensation’ effects of economic globalization on government spending, no evidence is found of a non-zero average effect. That finding rejects both the simple version of the ‘efficiency’ hypothesis, which predicts sizeable negative effects of globalization on government spending as well as the simple version of the ‘compensation’ hypothesis, which predicts the opposite result.

Second, looking at different components of government spending is essential for testing the extended version of those two competing hypotheses, as both of them place special emphasis on the role of spending on social protection and welfare (e.g., Rodrik 1998 ; Schulze and Ursprung 1999 ). In that context, we find evidence rejecting the ‘compensation’ hypothesis in favor of the ‘efficiency’ hypothesis: our preferred meta-regression model predicts that globalization has a small-to-moderate negative impact on social spending. While our regression results clearly do not predict a large negative average impact, we find evidence that is consistent with the view that economic globalization exerts small-to-moderate downward pressure on social spending.

Third, while we find that the effect of interest depends on how government spending is measured (not all types of government spending are affected to the same extent by globalization), the meta-regression results also indicate that the choice of the economic globalization variable is relevant: the effects reported in the literature tend to lean more towards the ‘compensation’ hypothesis when the dimension of financial globalization is considered (rather than trade globalization only). Fourth, the meta-regression evidence suggests that the composition of the country group moderates the impact of globalization on government spending: developing countries, on average, have leaned more towards compensating citizens for the risks associated with economic globalization. Finally, our results indicate that at least some of the variation in the published globalization-spending results is the product of measurement and specification differences. What is most important, we confirm previous suspicions that the functional form of the empirical model’s specification makes a significant difference and, hence, should be given prominent attention when it comes to interpreting the estimates of the globalization-spending relationship (Garrett 2001 ; Kittel and Winner 2005 ): the effect of globalization on government spending tends to be negative when we look at changes in market integration only (with the strongest negative effect being on social spending), but positive when both the globalization and government spending variables are entered in their levels.

Where do the results from the meta-analysis point in terms of defining a future research agenda on the globalization-spending relationship? First, researchers who provide statistically independent estimations could pay attention to the variables that we find to be significant moderators of the impact of economic globalization on government spending. Second, in future research it might be interesting to uncover the mechanisms that underlie our finding of an average globalization effect that is statistically indistinguishable from zero. Not all governments behave in the same way, and additional analyses that study specific countries could shed more light on why certain governments tend to compensate more vigorously for the greater employment and income risks associated with globalization by increasing spending (e.g., Steinmo 2002 ; Wu and Lin 2012 ; Saenz et al. 2013 ), while other governments cut certain types of spending and, thereby, help verify the ‘efficiency’ hypothesis. In particular, a substantial literature has argued that each nation’s own history in terms of institutions and culture, the structures of the welfare state and of the political system (e.g., Navarro et al. 2004 ; Kim and Zurlo 2009 ) are important for understanding changes in government spending. Additional research could shed light on how specific national histories help explain the meta-study finding of a zero average impact of economic globalization on government spending. Third, future research could aim at developing meta-analyses exploring the effects of other institutional variables (e.g., partisan politics) on various components of government spending. Fourth, it might be fruitful to take onboard the recent influential debate about globalization and the emergence of populism (e.g., Rodrik 2018 ). Does globalization fuel populism and populism in turn drives (changes in) government spending? That aspect of ideology currently is missing from the econometric literature reviewed for our meta-analysis, and it might be interesting to study it in the context of how globalization may lead to “partisan political business cycles” (Belke 2000 ). Finally, various theories in the social sciences literature suggest that globalization may affect all sorts of other policy-relevant phenomena directly, including economic growth, income inequality, the tax structure and so on. Extensions of and adaptions to the meta-study approach proposed in this paper arguably are useful for addressing many other research questions on globalization’s effects.

We also used the British English version (“Globalisation“) as a keyword in our database search.

Note that we only coded estimates that adopted government spending as the dependent variable and an economic globalization variable as regressor. Beyond that, the studies included in the meta-study dataset typically do not consider the issue of reverse causality, i.e., that the level of government spending could drive a country’s exposure to globalization.

Note that we also included papers that (up to September 2018) were accepted for peer-reviewed publication, but not yet assigned to an issue of the respective journal.

In our case, the significant relationship between partial correlations and standard errors would need to be positive if there is publication selectivity in favor of the “compensation” hypothesis, and negative to be consistent with selectivity favoring the “efficiency” hypothesis.

Additional information on the distribution of the partial correlation coefficients is available in the accompanying appendix.

It has been shown that the inverse of the partial correlation coefficients’ variances are the optimal weights (e.g., Cooper and Hedges 1994 ).

We did not estimate the PESEE (precision-effect estimate with standard error) specification, which would use the variance (instead of the standard error) in Eq. ( 3 ). The reason for sticking with the FAT-PET is that when no true effect exists, the model with the standard error is correctly specified and provides a less biased estimate of the precision coefficient (e.g., Stanley and Doucouliagos 2012 , p. 66).

The information on the variables “Primary“and “CrossAuthor“can be collected from footnotes in the relevant studies.

See Gechert and Rannenberg ( 2018 , p. 1168).

Note that we do not exclude dummy variables from groups of variables (i.e., “Government spending measures”, “Economic globalization measures” and “Country composition”) even if they are statistically insignificant. The reason is that by excluding variables from those groups, the interpretation of the respective coefficients relative to the omitted reference category would not work properly anymore.

Regression results based on entering all the coded moderator variables are available upon request.

The appendix reports a robustness check concerning the finding that the time dimension does not seem to significantly contribute to explaining heterogeneity in existing globalization-spending estimates.

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Acknowledgements

Open access funding provided by Johannes Kepler University Linz. Financial support by the Chamber of Labor Vienna for a project titled “Fiscal policy in European context” is gratefully acknowledged. The author thanks Mario Holzner, Robert Stehrer, Stefan Jestl and three anonymous referees for very helpful comments on earlier drafts of this paper. All remaining errors are mine.

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Heimberger, P. Does economic globalization affect government spending? A meta-analysis. Public Choice 187 , 349–374 (2021). https://doi.org/10.1007/s11127-020-00784-8

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Received : 13 December 2018

Accepted : 11 February 2020

Published : 17 February 2020

Issue Date : June 2021

DOI : https://doi.org/10.1007/s11127-020-00784-8

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