Abstract

Globalization involves technological, economic, political, and cultural exchanges made possible largely by advances in communication, transportation, and infrastructure. Globalization is the system of interaction among the countries of the world in order to develop the global economy. Globalization refers to the integration of economics and societies all over the world. It promotes the reduction of all forms of trade restrictions that prevent the economic and monetary integration. Along with an economic globalization, there is a globalization of law resulting from redefinition regulatory framework of main international organizations. International financial market, its impact on the real economy and its regulatory activities, are combined within the processes of international trade liberalization, financialization and progressive sovereignty transfer to international economic organizations (such as International Monetary Fund - IMF, World Bank and World Trade Organization - WTO).

Globalization and World Economy

From the point of view of the economist, globalization is the penchant of the economy to become global. The economy becomes transnational thanks to activity between geographically distant subjects. International trade, therefore, together with the Foreign Direct Investment (FDI), is one of the fundamental parameters to understand economic globalization. After World War II it has grown at a faster rate, increasing the international degree of openness of national economies. This trade openness is calculated as the ratio of the sum of exports (X) and imports (T) on Gross Domestic Product (GDP):

Open= X+T/GDP (1)

A high openness of the domestic market to international trade provides the country with a higher availability of inputs, but exposes the country to the same economic crises hitting the other States. Convergence towards a more global economy is also evident thanks to the policies, in the eighties, for the reduction of restrictions on foreign direct investments (FDI) in the countries of Organization for Economic Cooperation and Development (OECD), as shown in Table 1:

Source: UNCTAD.

The increase in the flow of goods, capital and services is also due to technological innovation (see new economy), the reduction of transport costs and to the collapse of planned economies after the late eighties. This contributed to easing the physical distances, making it easier to contact the economies with considerable diversity in the delivery of inputs. In particular, the reduction of transport and communication costs can facilitate the productive specialization, the international movement of production factors, and makes it easier to offshoring. International economic openness exposes countries to external shocks. National economies become more interdependent, and any reduction in economic activity in one of them is easily transmitted to other economies, through their international links (see the subprime crisis). In addition, the international trade between developed and developing countries implies an increase of wage differentials between skilled and unskilled workers (as stated in the Stolper-Samuelson theorem). Globalization is not a uniform process. Significant segments of the world population are not affected by globalization (i.e. those not subject to competition). This also has obvious effects on income in terms of distribution.

For some academics, this phenomenon is not new but is in fact a return to the period before the First World War, characterized by a progressive globalization of markets, production and finance (see Gilpin 2009).

Financialization

Economic globalization can be divided into two distinct areas. The first is real globalization (relationship between real goods, services and factors), the second concerning the financial globalization (relationship between financial assets). Other than the increase in trade of goods and fFDI, international movements of financial capital, bank capital and international transactions in bonds and shares have soared. Financial globalization allows a faster ad cheaper possibility to transfer assets in other markets. While real globalization protagonists are essentially companies (mainly multinational companies) and consumers, in financial globalization the protagonists are identified in banks, investment funds, financial advisors and financial institutions. The literature argues that financial globalization promotes behaviour of public authorities based on efficiency. According to this view, the market rewards the virtuous countries and rejects economic and institutional systems not operating perfectly (see the Greek public debt crisis of 2010).

At the international level, the government willingness to promote financial stability in a global perspective, involves the gradual transfer of governance to transnational bodies such as the Financial Stability Board. Since 1992 the financial integration of the European Union began at the regional level, with a progressive loss of decision-making autonomy of national governments in monetary policy (see Fiscal Compact and Italian Stability law).

Globalization of law and regulations

Globalization is changing the contours of law and creating new global legal institutions and norms. The increased interdependence in the economic and financial relations between national economies around the world has also effects on the redefinition of its regulation and the concept of global public good (such as common standards, common currency). The need for States to govern the economic changes and the simultaneous demand for deregulation of markets, in a normative system consisting of international actors from different regulatory frameworks, involves the development of atypical patterns of negotiation. The different political systems shall conform with a gradual transfer of powers to transnational institutions. The harmonization of legislation promoted by acts to reduce international trade barriers, in the late nineteenth century, represented a further incentive to creation of global market. Regional initiatives, such as European monetary integration (see Community directives relating to banking, the EU directives on financial intermediation), the conclusion of bilateral agreements, the liberalization in regional bodies (EU, North American Free Trade Agreement-NAFTA), the results of some multilateral negotiations (OECD and Uruguay Round), represented a further drive to globalization.

For these reasons, globalization makes it unsuitable the traditional idea of ??society as a social unit, territorially defined and institutionally organized. It question traditional apparatus of State power and national sovereignty.

Different interpretations of globalization

According to liberal analysis, the globalization develops a qualitative and at the same time positive change in current international system. It is transported to a new socio-economic system marked by the fall of national divisions. The transnational character of globalization, according to the liberals, allows the maintenance of peace in the world, as each nation derives economic benefits from the strong performance of other nations. For these reasons, a nation is not willing to wage war against other economies. According to this interpretation, economic globalization is a positive process for the sharing of liberal values ??such as individualism and freedom, maximization of global wealth that brings economic benefits to all and enables all individuals to increase their choices.

According to mercantilism schoolⁱ, globalization is only a quantitative change in trade flows and, therefore, is not a new event. The reasons of these theories focuses on data on trade flows and openness of national economies before the First World War. Finally, globalization is a kind of economic interdependence intensified.

According to the Marxist analysis, globalization is both intensified interdependence and, at the same time, the last stage of capitalism. As liberals, Marxists argue that globalization presents new elements but contrary to the liberals, the Marxists ruling is negative. Globalization is a new form of State exploitation as a result of unequal process where economic power is concentrated in the main industrialized countries. This is attributed to the increasing of multinationals importance in world economy. They promote the shift of production from industrialized countries to developing countries, allowing free zones in which human rights are not guaranteed.