During the last three decades (1980-2010) there has been an intensification of international economic exchange both in volume, regions and people involved. The scale and depth of economic integration has raised concerns among scholars that these developments are reminiscent of the era of pre-Great Depression liberalization. Critics of globalization point out that the removal of trade barriers and capital controls would tilt the balance of power towards capital holders and richer economies. Arguably, this undermines state sovereignty, democracy and internal stability. A growing number of scholars have dismissed those concerns pointing out the net benefits of trade and globalization and reduction of world poverty. The paper finds that concerns of the demise of the nation state due to increased economic globalization are exaggerated. Increased liberalization has only served to strengthen the role of governments. However, the net gains from increased economic exchange have not been equally shared domestically nor across trading regions. Countries that have embraced globalization but maintained their breaks over its downsides have made most gains.

1. 18th IFAC Conference on Technology, Culture and International
Stability
The globalization paradox in the 21st century and
its applicability in the analysis of international
stability
Armend Muja, Peter Groumpos, Edmond Hajrizi, Hasan Metin

2. I. Introduction
2

3. 1. Introduction
Summary
Globalization will
undermine nation state
and international stability?
Intensification of international economic exchange in the last three decades has
raised concerns that the international stability and nation state face a challenge
similar to Great Depression. Critics have argued that both eras of globalization have
been spurred by technological revolutions. International trade, international financial
markets and migration will undermine the nation state and the social consensus built
in the aftermath of the Second World War.
The benefits and perils of
international economic
exchange
Central Eastern Europe countries with higher quality of institutions indictor will have
higher levels of economic performance.
Globalization revisited The paper finds that concerns over the demise of the nation state are exaggerated.
However, international trade and financial integration have created winners and
losers both domestically and internationally. Countries that have maintained their
local solutions and adopted a cautious approach from globalization have profited the
most.
3

4. II.Globalisation and its critics
4

5. 2. Globalisation and its critics(1)
Neoliberalism - Dramatic shift in the world order and economy following the fall of communism
promoting increased trade and economic integration has led scholars to draw
parallels between pre-Great Depression globalization and contemporary
globalization
- Open trade promotes the power of corporates at the expense of labour (Scharpf,
2003) and could undermine the social peace in Europe or embedded liberalism
(Ruggie, 1982)
Core-periphery
domination
- The system promotes the domination of rich Western core and the expense of poor
periphery (Wallerstein, 1982). The system creates the basis for endless
accumulation of capital at the expense of labour (Pikkety, 2014).
Technological
delinking and parity
- The order as it has created a technological dependence of the poor countries and
any thought of economic convergence should be based on technological delinking
(Singer, 1988). A fairer and mutually beneficial exchange needs to recognize the
domination trap and move towards fairer exchange (Prebisch, 1985)
5

6. 2. Globalisation and its critics(2)
Trade among nations and
regions has increased
significantly since 1988
- Based on World Bank (2018) global trade patterns, world has generally
seen a steady increase in trade as a share of GDP.
- However, two regions stand out Europe and East Asia and explain much
of the development. Other regions as North America, Latin America, Sub-
Saharan Africa have not registered any significant change.
Global poverty levels have
fallen as trade barriers have
been removed (Bhagwatti,
2004)
- World Bank (2018) poverty database indicate the global extreme poverty
levels have dropped from 18 % in 1981 to a mere 3.3 % in 2016. The
poor have integrated and profited from global economy (Bhagwatti,
2004)
Ills of globalization to culture,
gender relations and
environment
- Globalisation has neglected the detrimental effects and ecological limits
of human economic activity, promoted de-culturalisation and placated
the inferior role of women in international economic system (Fergusson,
2006)
6

7. 7

8. III. Globalization and Nation State
8

9. 3.1 Globalisation and nation state(1)
Democratic deficit resulting from
regulatory supranational
institutions like EC and loss of
autonomy (Hix, 2006)
The prevailing recipe during international and regional economic
integration has been to delegate regulatory functions to supranational
institutions thus circumventing national state authority over managing
national economies. This has gradually eroded national sovereignty
(Caporaso, 1996)
Capital gaining the upper hand over
labour. States competing on the
‘race to the bottom’ and removing
hard fought labour rights in Europe
(Scharpf, 1999)
National Parliaments and labour unions have increasingly become
obsolete (Innes et al, 2003) as they implement and transpose
international legislation into domestic law. Efforts to increase
international economic competitiveness have come at the cost of
breaking the social consensus in Europe. Removing state authority over
macroeconomic policy in an effort to demonstrate credibility has tied
governments’ hands (Alessina et al, 2005).
Precarious symbiosis of democracy
and globalization
State has lost its authority over financial and monetary policy, fiscal
policy and capital control. Difficult to sustain national democracy under
the existing conditions (Scharpf, 1999).
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10. IV.Globalisation Concerns revisited
10

11. 4.1 Globalization concerns revisited
Globalization or Europeanisation? Much of increased global trade since 1960 actually refers to
trading among EU nations (Fligstein, 2006). China’s economic
growth and East Asia could be another notable increase in
trading.
Concerns that globalization will break the
social consensus and cause welfare state
retrenchment are not grounded. Welfare
spending has increased globally
Economic integration has only helped to re-legitimize the
nation state in the post-war period (Milward, 2000) as
governments enjoyed more resources for welfare spending.
The level of government spending has increased steadily
from 20 % as a share of GDP in 1974 to 26 % in 2016 (World
Bank, 2018). This increase can be explained by governments’
efforts to insure labour from economic adjustment (Baldwin,
1997) and overcome opposition towards technological
innovation and productivity (Iversen et al, 2000).
Expected capital flight from rich countries
to poor has not happened. Paradoxically,
The level of financial integration during contemporary
globalization has not achieved the Pre-Great Depression 11

12. 12

13. 13

14. 14
0
20
40
60
80
100
120
140
160
180
200
1860 1880 1900 1920 1940 1960 1980 2000 2020
Cambridge Global Financial Integration Index 1860-2000
(1900 - 100)

15. VI. Globalization Paradox
15

16. 5.1 Globalization Paradox
Data Triangulation
Over-emphasis of globalization and nation
state nexus has missed several side effects
of international economic exchange
including impact of select social strata
Even if globalization has produced net domestic effects,
the scholarly analysis has missed the Stoper-Samuelson
effect of free trade on select industries and workers –
those are immobile and social groups without skills base
to transfer to other industries
Missing side effects of globalization to
other regions including Africa, Latin
America and select countries within
regions
Gains from globalization, trade, international production
and financial integration have not necessarily favored all
regions and nations. Regions specializing in services and
manufactures (North America, Europe, East Asia) gained
the most.
Globalization Paradoxes Capital and FDI moving from poor countries to rich,
governments’ spending on welfare has not retrenched
but increased globally. Globalisation has not reduced the
role of the nation state, it has only transformed its 16

17. VI. Conclusion
17

18. 6.1 Conclusion
18
• Data Triangulation
• Increased international economic exchange has not reduced the role of the
nation state. It has only conditioned its transformation from interventionist to
regulatory nation state
• Tackling the perils of globalization requires moving beyond state-centric
approach and include other non-state actors
• Some of the discontents and critics on the perils of globalization are not grounded. While
there are benefits stemming from international trade, financial integration and international
production, there are also risks that call for an greater international cooperation
• Adoption of uniform regulatory regimes is not necessarily related to tangible gains from
globalization. States that have preserved domestic consensus and maintained their break on
globalization have profited the most
• Despite its net global gains, globalization has produced domestic and international losers.
Technological adjustments will continue to produce further Stoper-Samuelsonn effects
within certain industries and regions. The nation state has a key role to play both to smooth
the negative effects but also join international cooperative efforts to avoid contagion effects
of international financial integration.