Linking Levels of Government: European Integration and Globalization
| Date | 01 March 2000 |
| DOI | 10.1177/0020852300661010 |
| Published date | 01 March 2000 |
| Subject Matter | Articles |
Linking levels of government: European integration
and globalization
Les Metcalfe
Introduction
Globalization is a catch-all term used to describe a combination of trends and
processes that are linking economies, societies and governments around the
world. Although the term has only recently come into common currency the
underlying forces creating global interdependence are not new. Peter Drucker
(1997) suggested that globalization in business has been underway for over three
decades. Recently, however, the pace of change has certainly accelerated and,
with more rapid communication, public awareness of global developments has
increased sharply. The linkages between events around the world have made
larger, and more sudden, impacts on social organization, economic performance
and public policy than have been experienced before. Probably the most import-
ant, and certainly the most-discussed, aspect of globalization is in the sphere of
economics. To a substantial extent globalization is market driven. New forms of
business organization and new patterns of industrial interdependence have over-
ridden national boundaries. National economies are less self-contained and less
buffered from external forces than used to be the case. The emergence of new
economies around the Pacific rim and the removal of old political demarcations
in Europe with the end of the Cold War, have permitted deeper economic inter-
dependence to develop and have brought down barriers to business among
countries previously insulated from international trade and protected from market
forces. With a widening belief in the benefits of deregulation, deliberate policies
of trade liberalization, agreed at a global level through the World Trade
Organization have grown in significance. Further progress in the same direction
has been made through organizations for regional integration such as the
European Union (EU), NAFTA, MERCOSUR, and ASEAN.
While globalization is clearly a major trend, it would be wrong to exaggerate
its extent and pace. For example, external trade in goods by the EU and the
USA is still quite modest in relation to total output. Even if trade in services, and
capital movements are included the picture is still well short of a totally global
Les Metcalfe is Professor of Public Management in the European Institute of Public
Administration, Maastricht, The Netherlands. CDU: 341.231:382(100).
International Review of Administrative Sciences [0020–8523(200003)66:1]
Copyright © 2000 IIAS. SAGE Publications (London, Thousand Oaks, CA and New
Delhi), Vol.66 (2000), 119–142; 011959
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economy. Furthermore the penetration of globalization is patchy. Some sectors
are much more interdependent than others (Castells, 1996; Hirst and Thompson
1996; Tsoukalis, 1998). We are still a long way from a situation in which every-
thing is related to everything else at a global level. Furthermore, there is dispute
about the significance of what is happening. In the debate about globalization
there are sceptics and radicals (Held et al.,1999). Sceptics look at the current situ-
ation and see a difference of degree rather than a fundamental change. Radicals,
looking to the future, see a qualitative shift in the making and raise questions
about what kind of response is needed now in order to steer the process of change.
Even if the sceptics were right, and this seems less and less the case, there is no
room for complacency. The process of globalization poses new challenges for
governance that need to be addressed as a matter of urgency.
Much of the debate about globalization is misleadingly cast in dichotomous
terms of more market and less government. The frequent journalistic assertion
that globalization represents a triumph of efficient (global) markets over ineffi-
cient (national) bureaucracy oversimplifies the issues and distorts perceptions. It
is true, of course, that economic globalization is generating problems that systems
of governance based on the nation state are inadequate to deal with. The power of
national governments in the economic sphere is much more limited and con-
strained than it was up to about the beginning of the 1970s. The days have gone
when national governments could think of themselves as managers of ‘their’
economy and act through the use of Keynesian fiscal and monetary policies to
fine-tune the national economic environment according to their own policy
preferences. As the influence of national governments has waned, the influence
of multinational, supranational or global business corporations has increased.
There is now a widespread recognition that multinational corporations are able to
wield considerable economic power and are prepared to use it unilaterally to their
own advantage against individual governments or collaboratively to exert more
general pressures for changes of policy that fit their interests. Huge international
capital flows can swamp the efforts of national authorities. An illustration of
the consequences of under-estimating the power of international markets is the
reputed US$1 billion made by George Soros on 16 September 1992 from the
collapse of the British pound and its exit from the Exchange Rate Mechanism of
the European Monetary System. Soros was acting independently, but not alone,
to cash in on the vulnerability of the British government as it attempted to support
an overvalued pound. The futile effort to defend the pound is estimated to have
cost more than US$15 billion in foreign exchange reserves (Stephens 1996).
The dominant ideology of trade liberalization and market de-regulation has
certainly weakened the influence of national governments and given priority to
freeing market forces from political constraints. The process of economic global-
ization has been facilitated by the way that national tariff and non-tariff barriers
have been progressively lowered, dismantled and eradicated. Multinational
corporations have fewer obstacles to overcome in moving money, goods or
manufacturing operations from one country to another. However, this is not the
120 International Review of Administrative Sciences 66(1)
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