Research International Political Economy & Globalization

GLOBALIZATION IN INTERNATIONAL TRADE AND FINANCE
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Globalization in International Trade and Finance
Introduction
Globalization plays a major role in the aspects of international trade and finance. Globalization possesses transformative capabilities that transcend all sections of the contemporary social lifestyle. The thought generates the notion that the concept comprises of subjective and objective processes that cover multiple dimensions, and which cannot fit in a single definitive framework according to a thematic structure. There are ideological and cultural aspects with symbols, meanings, and stories that describe, define, and analyze the process of globalization. Understanding the ideas within the concept arise from the normative question of whether globalization is a useful or bad concept. Under the argument, a group of theorists applauds globalization for the ability to provide instantaneous access to information and means of communication and deliver millions from poverty. Another group of theorists claims the concept as a destructive force, which will destroy traditional values, and widen the disparity existent in individual wellness in societies. Despite such differing arguments, one cannot ignore the dynamics of power involved in globalization. The paper seeks to expound on the impact of globalization in international trade and finance.
Utility of Globalization
Possession of the description of globalization is imperative in understanding how the concept influences various aspects of the world of worldwide trade and finance. The definition of globalization is the process of consciousness and social relations expanding and intensifying across the times and spaces in the world. Based on the definition, globalization has a basis on two aspects. First is the introduction of social networks, and multiplication of connections that exist in traditional geographical, cultural, economic, and political boundaries. The second aspect is enlargement and expansion of social connections, relations, and activities.[Manfred B Steger, Globalization, 4th ed. Oxford: Oxford University Press, 2017, 15.]
Globalization has proven to be useful in international trade. One way is through the instigation of change in institutions. The observation is evident through the study of medieval trade in Europe and the Atlantic trade. In the medieval European trade, there was a colossal expansion in economic activities in long-distance trade during the period of the Commercial Revolution. During the same timeframe, there were major institutional reforms that later formed the basis of Western Europe. The connection between institutional reforms and the long-distance trade was that the institutions that existed initially enabled the trade to expand. The expansion then increased demand for, and the growth of, institutions to enhance trading activities.[Diego Puga and Daniel Trefler, "International Trade And Institutional Change: Medieval Venice’S Response To Globalization", The Quarterly Journal Of Economics 129, no. 2 (2014): 754.] [Diego Puga and Daniel Trefler, "International Trade And Institutional Change: Medieval Venice’S Response To Globalization", The Quarterly Journal Of Economics 129, no. 2 (2014): 754-755.]
The institutions included rights for property protection, the Law Merchant law, and self-governing bodies. The property rights prevented rulers from preying on merchants. The Law Merchant developed from the Western legal system as a commercial law, which ensured public enforcement and monitoring of business contracts. Self-Governing organizations included business companies. The observations in the Atlantic involve existent political institutions. There were about 1500 such institutions, whose purpose was to regulate activities of the monarchy. The growth experienced in the Atlantic trade resulted in a growth in the power of merchants to the extent that the group had more strength to constrain interference from the monarchy. Evidence of the activity is in the ‘English Civil War’ and ‘Glorious Revolution.’ The two developments discussed included progression in rights on properties, which in turn caused a rise in income and urbanization rates.[Diego Puga and Daniel Trefler, "International Trade And Institutional Change: Medieval Venice’S Response To Globalization", The Quarterly Journal Of Economics 129, no. 2 (2014): 755.]
Globalization has also had an impact on finance. Practical application of the concept in a financial aspect has shown that globalization is beneficial through indirect effect. The argument holds that beneficiaries of the financial developments in globalization are nations with specified characteristics. The indirect benefits include the development of better policies in the economic sector, technological spillovers, stability, and enlargement if financial markets, and deepening of the banking sector. Financial scholars have identified the driving factors of globalization that influence the outcomes as diversification of risk, institutional investors making international investments, and firms that seek financing from abroad.[Sergio L. Schmukler and Facundo Abraham...