The Causes of Globalization

COMPARATIVE
Garrett
/ CAUSESPOLITICAL
OF GLOBALIZATION
STUDIES / August-September 2000
The most important causes of globalization differ among the three major components of international market integration: trade, multinational production, and international finance. The information technology revolution has made it very difficult for governments to control cross-border
capital movements, even if they have political incentives to do so. Governments can still restrict
the multinationalization of production, but they have increasingly chosen to liberalize because of
the macroeconomic benefits. Although the one-time Ricardian gains from freer trade are clear,
whether trade is good for growth in the medium term is less certain. In the case of trade, the
increasing interest of exporters in opening up domestic markets has had a powerful impact on the
trend to liberalization. Cross-national variations in market integration still endure, but these are
more the product of basic economic characteristics (such as country size and level of development) than political factors (such as regime type or the left-right balance of power).
THE CAUSES OF GLOBALIZATION

GEOFFREY GARRETT
Yale University
here is little disagreement these days that globalization is changing

the world rapidly, radically, and in ways that may be profoundly disequilibrating. But beyond this already trite clich, almost everything else
concerning the phenomenon is subject to intense debatein the context of an
explosion of interest in and research on the subject.1 This article explores
what we know about the causes of globalization. In a follow-up article, I will
address globalizations consequences for domestic societies (in terms of inequality and economic insecurity), national autonomy (with respect to regulation, spending and taxation, exchange rate regimes, etc.), and international
governance (International Monetary Fund [IMF], World Trade Organization
[WTO], etc.). Throughout, I define globalization somewhat narrowly as the
1. In 1980, there were fewer than 300 articles or books with the word global or globalization
in the title. In 1995, the number was over 3,000 (Guillen, in press, Table 2).
AUTHORS NOTE: Thanks to Stephen Brooks, Michael Dooley, Jeffry Frieden, and Ronald
Rogowski for helpful discussions on various aspects of this article. I would also like to thank
Alexandra Guisinger, Nathan Jensen, Jason Sorens, Andrew Youn, and especially Nancy Brune
for invaluable research assistance.
COMPARATIVE POLITICAL STUDIES, Vol. 33 No. 6/7, August/September 2000 941-991
2000 Sage Publications, Inc.
941
942
COMPARATIVE POLITICAL STUDIES / August-September 2000
international integration of markets in goods, services, and capital. Other facets of the phenomenon (such as increased labor mobility and cultural homogenization) are surely important, but I leave their analysis to others.2
I examine four contending perspectives on the big picture: What explains
the rapid pace of international market integration in recent decades? The first
perspective claims that what we are witnessing today is, in fact, nothing new
because current levels of market integration are only now returning to those
in the last great era of economic internationalization at the turn of the 20th
century. This view has been accepted as a statement of fact in numerous influential studies (Katzenstein, Keohane, & Krasner, 1998, p. 669; Krasner,
1999, pp. 220-223; Rodrik, 1997; Sachs & Warner, 1995). I argue, however,
that notwithstanding the aggregate similarities between the two periods, core
features of the contemporary world economy are without historical precedent. Large-scale portfolio lending to banks in developing countries for purposes other than raw material extraction, two-way manufacturing trade
between the north and south, and complex multinational production regimes
were simply unheard of a century ago.
The remaining perspectives on global trends debate the causes of this
unprecedented wave of international market integration. The root of the analytic problem lies in the commingling of three secular trends: technological
innovations lowering the costs of moving goods and more notably information around the world, growing international economic activity, and the liberalization of foreign economic policies. What are the causal relationships
among these three trends?
The second perspective, technological determinism, contends that the
shrinkage of time and space has been so dramatic and so pervasive that there
is essentially nothing that can be done to stop it. According to this view, technological changes have propelled international economic activity, and governments have been largely irrelevant. Thus, policy liberalization should be
understood as governments acknowledging the futility of trying to resist
globalization, rather than acting as a prime mover behind market integration.
Management gurus such as Ohmae (1995) have propounded this view, and
political scientists such as Rosecrance (1999) and Strange (1998) use it as the
starting point of their analyses.
The case for a technologically determined view of globalization is far
stronger with respect to international finance than to multinational production or trade. In the era of 24-hour global trading in a seemingly limitless
array of financial instruments, governments can only hope marginally to
influence control cross-border liquid capital movements. In contrast, though
2. See Drezner (1998) and Guillen (in press) for recent reviews of some of these issues.
Garrett / CAUSES OF GLOBALIZATION
943
the Internet creates novel problems, it remains easier for governments to regulate cross-border movements of physical goods and the buying and selling
of fixed assets. Hence, policy decisions to liberalize trade and foreign direct
investment are likely to have been more consequential for international integration in these markets.
The third big picture perspective on globalization takes a more moderate
view of the effects of technological change. Most mainstream economists
(informing the Washington consensus and best-sellers; see Yergin &
Stanislaw, 1999) believe that the potential efficiency gains from international
integration have increased substantially as a result of technological progress
in recent decades. From this perspective, governments can still insulate their
countries from external market forces if they so choose. But the increased
opportunity costs of closure have become sufficiently large to tip the balance in favor of the liberalization of foreign economic policy in country after
country.
It is hard to argue that increasing opportunity costs of closure provide a
persuasive account of the globalization of finance. The hypothetical efficiency gains of openness seem in practice to be at least offset by the costs
associated with the uncertainty and volatility of international financial markets. At the other end of the spectrum, increasing costs of closure probably
have been the major motivation for liberalization in the area of foreign direct
investment (FDI). FDI is an important driver of growth. It provides a transmission mechanism for the diffusion of technological innovations and less
tangible benefits, such as managerial skills. The trade case is less clear-cut.
On one hand, there are clearly important one-time gains from trade liberalization (e.g., in terms of lowering prices). But modern economic theory is
ambiguous as to whether freer trade is beneficial for economic growth, and
the empirical evidence is also inconclusive.
The final big picture perspective on globalization also accepts the critical
role of government policy, but argues that the phenomenon is essentially a
political construct that does not improve the economic condition of society as
a whole. For example, Rodrik has raised numerous eyebrows among his
economist colleagues by claiming that there is no evidence that either freer
trade (Rodriguez & Rodrik, 1999) or capital mobility (Rodrik, 1998) is good
for economic growth. This is grist for the mill of political scientists such as
Helleiner (1994), who propose power and ideology explanations of globalization. On this ideological change view, the roots of contemporary globalization lay in the neoliberal Reagan/Thatcher revolutions. They were spread
throughout the developed world by the European Union (EU) and the Bank of
International Settlements, and extended to developing counties by the IMF
and the World Bank.
944
It is easy, however, to endogenize these ideological changes in terms of

technological determinism in international finance and increased opportunity costs of closure with respect to multinational production. In the former
case, there might be domestic political incentives for governments to maintain restrictions on cross-border capital movements that are futile in an economic sense. Such policies send negative signals to the financial markets,
however, and many governments may be unwilling to take this risk. In terms
of foreign direct investment, the fact that multinational firms have become
critical drivers of technological innovation, learning, and economic growth
affords them a very privileged position (Lindblom, 1977) in domestic policy debates.
Trade liberalization, in contrast, has not been technologically determined,
and the opportunity costs of closure continue to be debated. Changing preferences and coalitional politics may therefore have played a greater role here
than with respect to international finance or multinational production. One
possible explanation is that exporters have become much more interested in
opening their home markets, mitigating the traditional political bias in favor
of protection, because of fears of retaliation against them abroad and because
many exporters import large portions of the goods they use as inputs in making finished products.
Students of international relations and comparative politics may well
object at this point that my analysis gives short shrift to their central concerns
and insights. International political economists have devoted enormous
attention to cooperative and institutionalized efforts to reduce barriers to
international economic exchange among countries. The bread and butter of
comparative political economy, on the other hand, concerns explaining crossnational differences in economic policies and outcomes.
My general response to these objections is that political scientists tend not
to explore in sufficient detail the economics of globalization before they
move on to analyzing its politics. Moreover, they have an inherent bias
toward assuming both that government policies have real effects and that they
are chosen for political reasons. In the case of the trend toward international
market integration, it is important to problematize both assumptions. Technological determinists believe that government policy is essentially irrelevant to globalization; the increased opportunity costs of closure approach
suggests that governments have liberalized their economies simply because it
is the efficient thing to do. Before asserting that globalization is a political
phenomenon, we should assess the merits of these parsimonious explanations derived from economic analysis.
With respect to international political economy, I do not wish to dispute
either that free rider and coordination problems may hinder international
945
market integration or that international institutions may mitigate these problems. But I am skeptical that this Alexrod-Keohane paradigm gives us much
leverage over the big picture of the contemporary trend to globalization. It
would be hard to make the case with respect to the liberalization of international finance and the multinationalization of productionsimply because
policy liberalization in these areas has not required international cooperation
or international institutions (i.e., the evidence suggests that they are not international prisoners dilemmas or even coordination games).
The prima facie case for the importance of international institutions is
stronger with respect to trade integration. The WTO, North American Free
Trade Agreement (NAFTA), and the EU all contain mechanisms for generating common standards and policing free riding. To argue that these institutions caused trade integration, however, one would have to contend (implausibly, in my opinion) that they were truly innovativethat is, representing
radically new technologies for dealing with the problems of cooperation that
were heretofore unavailable. It seems more reasonable to contend that preference convergence among participating governments was a precondition for
the effectiveness of these institutional solutions (Goldstein, 1997;
Moravcsik, 1998). Thus, we should focus on explaining why this convergence in preferences occurred.
The comparative politics objection to my approach is very different. Notwithstanding the secular trend of ever-greater market integration, there
clearly still are ins and outs in the putative global economy. For globalization
pundits, these differences may be merely ephemeral bumps that will soon be
smoothed over on the road to a truly seamless global marketplace.
Comparativists are likely to demur, arguing that cross-national variations in
international market integration are sticky and well worth exploring in their
own right.
This move to assaying cross-national differences in market integration is
important, but in my judgment it is a second-order move that should follow
analysis of the broader, over-time trend to more integration. A good portion
of the cross-national variation in international integration is certainly
explained by essentially unalterable features of countries, such as their size
and geographic location. There are also well-developed theoretical
approaches to the problem that emphasize the impact of a countrys economic structure on societal preferences and coalitions (Frieden & Rogowski,
1996) and the role of political institutions ranging from trade unions to constitutional systems (Garrett & Lange, 1995).
I offer a brief analysis of these perspectives with respect to three prominent classes of variables: levels of development, the extent of democracy, and
the balance of power between the left and right. The strongest result is that
946
countries at higher levels of development are more likely to open their borders to the international economy, which can be easily explained from a
Frieden-Rogowski perspective. Of course, if growth economists are right that
differences in levels of development must diminish over time (conditional
convergence), this implies that cross-national variations in market integration will diminish over time. The debate would then move on to how long this
might take.
The remainder of this article explores in more detail the causes of the secular trend to more globalized markets in recent decades and of persistent
cross-national differences in participation in the global economy. The first
section lays the foundation for my analysis by describing the landscape with
respect to international economic movements of trade and capital and to government policies concerning these flows. The second section discusses the
case for the proposition that contemporary globalization is nothing new. The
merits of a technological determinist perspective on market integration are
assessed in the third section. The fourth section addresses the issue of
whether the opportunity costs of closure have risen in recent years. The fifth
section explores the causes and consequences of ideological shifts in favor of
liberalization. The sixth section then changes gears to focus on the reasons
for enduring cross-national differences in market integration. The final section briefly summarizes what we know about the causes of globalization and
sketches the implications of this article for analyses of the consequences of
globalization.
THE PARAMETERS OF CONTEMPORARY GLOBALIZATION

No matter how many different numbers are presented or how frequently
one hears them, the growth of international economic activity in the past 30
years remains staggering. Figure 1 plots the growth of global flows in trade,
foreign direct investment, and international portfolio investment (equities
and bonds). Although the scales for trade and capital are very different, the
trend lines are similar and familiar. International economic activity grew at
increasingly rapid rates over the period, and the rates of growth were faster in
more liquid markets (foreign exchange portfolio FDI trade).3 In 1970,
exports plus imports constituted roughly one quarter of worldwide gross
3. Global foreign exchange transactions increased fully 50-fold between 1980 and 1998 to
reach $2 trillion per day (Finance, 1999, p. 91; Meddling, 1999, p. 96). This outstrips the foreign exchange reserves of all the Organization of Economic Cooperation Development (OECD)
countries combined. The world gross domestic product (GDP) in 1997 was approximately $34
trillion.
947
Figure 1. Global market integration, 1970-1997.

Note: Trade is exports plus imports (World Bank, 1999). FDI is inflows and outflows of foreign
direct investment, and portfolio is assets and liabilities of international portfolios investments
(International Monetary Fund, 2000).
domestic product (GDP). By 1997, the figure had almost doubled to over
45%. Global annual flows of international portfolio investments (in bonds
and equities) and FDI constituted around 0.5% of world GDP in 1970. In
1997, the figures were approximately 5% for portfolio flows and 2.5% for
FDI flows. In 1998, the global stock (i.e., accumulated flows) of FDI is estimated at $3.4 trillionroughly 10% of global output (Mallampally &
Sauvant, 1999, pp. 34-35).
Figures 2 and 3 show a strong correlation between the growth of international economic flows and the liberalization of foreign economic policies
around the world. The correlation between global trade flows and (unweighted) average taxes on trade (revenues from tariffs, duties, etc. as a percentage of total trade) between 1973 and 1995 was 0.89. The reduction in
tariff-type barriers was to some measure offset by increasing use of nontariff
barriersin the Organization for Economic Cooperation and Development
(OECD) at least (Garrett, 1998a, p. 811). Moreover, although trade taxes
more than halved over the period, they still averaged 8% of total trade revenues in 1995. Nonetheless, the global trend line is surely indicative of the fact
that global trade flows and trade liberalization around the world have moved
in lock step in recent decades.
948
Figure 2. Trade policy, 1973-1995.

Source: World Bank (1999).
Note: Trade taxes are unweighted annual averages for all countries. Correlation = 0.89.
Figure 3. Capital flows and capital account policy, 1970-1997.

Source: Open capital accounts as defined by International Monetary Fund, Exchange Arrangements and Exchange Restrictions (various years).
949
Figure 3 reveals a similar pattern with respect to international capital

flows (combined portfolio and FDI) and the portion of countries in the world
with open capital accounts (i.e., no significant restrictions on cross-border
capital movements according to the IMF).4 There is, however, one interesting
divergence in these trends evident in the figure. International capital flows
took off in the mid-1980s (fueled largely by mushrooming portfolio flows),
with a brief blip down during the international recession at the end of the
decade. But the trend to open capital accounts postdates the takeoff in capital
flows by about 5 yearsit was only in the 1990s that countries in large numbers opened their capital accounts.5 This suggests that flows preceded policy
change, consistent with the technological determinism thesis.6
As Rodrik (2000) and Wade (1996) have emphasized, one should not conclude from the steep growth curves on international economic flows and policy liberalization that a truly seamless worldwide market is emerging. Table 1
summarizes flows and policy data for all the countries for which data are
available in the 1990s (see the appendix for the national-level data).7 The first
thing to note about this table is that the standard deviations for the different
measures of globalization on the whole world sample (the bottom panel)
were typically larger than the means on these variables, implying considerable cross-national variation in market integration. The coefficient of variation (i.e., standard deviation/mean) was in fact only substantially less than
one for trade flows. The variations in trade taxes may seem surprising given
4. International economists are quick to point out that increased international capital flows
are not necessarily indicative of capital market integration (i.e., the absence of obstacles to international capital flows). But there is no consensus as to the extent to which capital markets are
integrated these days. Feldstein and Horioka (1980) argued in a seminal paper that because
national savings drove national investment in the 1970s OECD countries, there must have been
considerable barriers to international capital movements. This result has been replicated many
times (with some modifications) in the subsequent two decades. Frankel (1993) and Marston
(1995), in contrast, use the relevant (covered) interest rate comparisons to argue precisely the
oppositethat OECD capital markets were highly integrated by the late 1980s. Extending these
analyses outside the OECD is fraught with difficulty, and preliminary results are inconclusive
(Montiel, 1995).
5. Though systematic data are not readily available, this liberalization trend in the 1990s is
also apparent with respect to the regulation of foreign direct investment. For example, United
Nations Conference on Trade and Development (UNCTAD) reported that in the 1991-1994
period there were 373 significant changes in foreign direct investment (FDI) regulations enacted
in countries throughout the world, and all but 5 of these were in the direction of fewer restrictions
on inflows and outflows (UNCTAD, 1995, p. xx).
6. Also note that even in 1997, more than half the countries in the world still imposed significant restrictions on the capital account.
7. Note that these means are unweighted averages for all countries. Hence, the flows data
are not comparable with the global flows statistics reported in Figure 1.
950
Table 1
Cross-National Variations in Globalization in the 1990s
Economic Flows
Trade/GDP (%)
High-income OECD
M
SD
High-income other (oil exporters and tax havens)
M
SD
Upper-middle income
M
SD
Lower-middle income
M
SD
Low income
M
SD
World
M
SD
FDI/GDP (%)
Economic Policy
International
Portfolio
Investment/GDP (%)
Trade Taxes/
Total Trade (%)
Open Capital
Account
(years in 1990s)
67
37
3.3
2.1
7.2
6.9
0.9
1.3
7.5
2.8
165
95
5.6
4.7
5.7
4.4
20.4
22.4
3.7
4.6
98
50
3.7
3.1
1.9
1.7
14.2
13.3
2.9
3.9
87
36
3.2
3.2
1.6
3.2
19.9
14.4
2.2
3.2
66
34
1.4
1.4
0.3
0.4
25.7
13.8
0.7
1.6
83
48
3.0
2.8
3.0
4.5
16.3
15.2
2.6
3.6
Source: Income categories from World Bank (1999).

Note: GDP = gross domestic product, FDI = foreign direct investment, OECD = Organization of Economic Cooperation Development. High-income OECD:
1997 gross national product (GNP) per capita > $9,656; other high income (e.g., oil exporters and island tax havens): same as OECD; upper-middle income:
$3,126 to $9,656; lower-middle income: $786 to $3,125; and low income < $786. Data are unweighted averages for all countries in each category. See the
appendix for the complete data set.
951
the spate of regionally and multilaterally coordinated efforts at trade liberalization in recent decades. But although customs unions like the EU impose
common external trade barriers on nonmembers, the General Agreement on
Tariffs and Trade (GATT)-WTO regime continues to allow for more flexibility. For example, data collected by Finger and his World Bank colleagues
(Finger, Ingco, & Reincke, 1996, p. 67) show that the standard deviation of
national average applied Most Favored Nation tariff rates for a sample of 53
countries after the Uruguay Round was 9.2% (with a mean of 10.6%).8
Table 1 also examines market integration in countries at different levels of
development (and in the case of high-income countries, distinguishing the
stable industrial democracies of the OECD from other well-developed
nations). Comparing the means for the OECD countries with those for the
lowest income nations (1997 gross national product [GNP] per capita < $786,
comprising almost all of Africa and the worlds two most populous countries,
China and India) provides simple and stark evidence that there are ins and
outs in the purportedly global economy. Mean trade flows in the two groups
were comparable (though the composition of these flows was clearly very
different, with the poor category relying disproportionately on the export of
natural resources). This probably reflects the fact that, as standard gravity
models show, factors such as country size and proximity to neighbors (which
have nothing to do with level of development) have marked bearing on trade
volumes.
The high- and low-income groups differed dramatically, however, on
every other dimension of market integration. FDI flows were more than twice
as large in the OECD as in the low-income group, international portfolio
investment was almost 25 times as large, trade taxes were less than 1/25 as
large a portion of trade volumes, and capital accounts were more than 10
times as likely to be open.
Even within the OECD category, however, considerable differences in
market integration remain. At one end of the spectrum, Belgium and the
Netherlands are the OECDs most globalized economies. There are also
numerous instances of relative nonintegration. The United States and Japan
are very small traders (at least relative to the massive sizes of their economies), and FDI flows are scant in Japan. Even after a decade of radical market
opening in the 1980s, Australia, Canada, and New Zealand remain considerably more protectionist than the OECD norm (based on trade taxes on manufactures); Greece and Spain only liberalized their capital accounts at the end
of the 1990s.
8. Note also that for these countries, the correlation between applied tariff rates and the
trade tax measure used here was high (r = 0.75).
952
Table 2
Trade and Capital Flows in the 1990s
FDI/GDP
Trade/GDP
FDI/GDP
Portfolio/GDP
Trade taxes/trade
0.40
Portfolio/
GDP
Trade Taxes/
Trade
0.15
0.27
0.16
0.12
0.08
Years With Open

Capital Accounts
0.22
0.09
0.02
0.33
Note: FDI = foreign direct investment, GDP = gross domestic product. Figures are correlations
among countries based on data in the appendix.
But soothsayers would probably want to highlight instances of high and

growing market integration among the poorest countries as harbingers of the
world of tomorrow. China, for example, was a major recipient of FDI inflows
in the 1990s. Moreover, Indonesia resembled OECD norms on most of the
basic indicators of globalization in the 1990s. But it would simply be inaccurate to portray these as more than isolatedthough clearly important
exceptions to the rule that the worlds poorest countries remain largely disconnected from the international economy. For example, whereas popular
commentary might lead one to believe that software engineers working for
Microsoft and Sun Microsystems and telecommuting from Bangalore and
Hyderabad to Seattle and Silicon Valley are the norm in the Indian economy,
on most basic indicators the country remains an essentially closed economy.
At the other end of the spectrum, Table 1 also highlights the distinctiveness of the small, wealthy, non-OECD countries that are typically conduits
for trade and international finance (Hong Kong and Singapore), small oil
exporters (Kuwait and the United Arab Emirates), or tax havens (the Bahamas and the Cayman Islands). Very high levels of trade and capital flows,
higher indeed than even the most integrated OECD nations, characterize
these countries.9 Ohmae (1995) and Rosecrance (1999) believe that these
region states or virtual states are the wave of the future. But it is hard to
see how Brazil or China could ever become Singapore or the Cayman Islands.
Table 2 asks a different question about developments at the national level
in the 1990s: Did different facets of market integration go together? There is
some relatively weak evidence in the affirmative. As most modern economists believe, it does appear that trade and FDI are complements rather than
substitutes (the correlation between the two was a moderate 0.40). The correlation between FDI and international portfolio investment was weaker but
9. Note also that the tax havens make up for imposing no burdens on capital with very high
trade taxes.
953
still positive (0.27). Countries that imposed fewer trade taxes also were somewhat more likely to have open capital accounts (correlation = 0.33).
But Table 2 also suggests that the policies governments pursued with
respect to openness or closure to trade and international capital were essentially uncorrelated with international economic flows. One possible explanation for these weak flows-policies cross-national correlations (as opposed to
the strong over time ones in Figures 2 and 3) is that policies affect flows only
at the margins. For example, standard gravity models of trade demonstrate
that smaller and wealthier countries tend to be bigger traders. To control for
these effects, I estimated a simple regression equation that included these
variables and trade taxes (TRTAX) as predictors of trade volumes (TRADE),
TRADE = 0.20TRTAX + 32.75lnGDPPC** 15.33lnGDP** + 158.09,
(0.31)
(5.74)
(2.26)
where GDPPC is GDP per capita and GDP is national GDP, both expressed as
1990-1997 averages in constant dollars (ordinary least squares [OLS] regression with robust standard errors, R2 = 0.40, 108 observations, and ** is statistically significant at the .01 level).
Surprisingly, the equation lends no more support to the view that countries
that impose higher trade taxes tend to reduce trade flows. This is a strange
finding because trade taxes must deter trade at the margins. It may well be the
case that better econometric specifications (e.g., the use of panel data and
more control variables) would delineate this effect (Guisinger, 2000).
I also ran a similar regression for the partial correlation between capital
account openness (OPENCA) and capital flows (CAPFLOWS),10
CAPFLOWS = 2.65lnGDPPC** 0.22lnGDP + 3.11OPENCA* 13.06,
(0.49)
(0.20)
(1.61)
which is more consistent with the proposition that capital account openness
promotes international capital flows (OLS regression with robust standard
errors, R2 = 0.35, 128 observations, * is statistically significant at the .10
level, and ** is statistically significant at the .01 level).
Of course, at this point I should reiterate that the simple analyses presented in this section are not intended to be definitive. They do serve the use10. The data do not allow me to conduct the same exercise on a global sample with respect to
the partial correlation between capital account openness and capital market integration (using
covered interest rate differentials or savings-investment correlations). For the OECD countries,
however, Frankel and MacArthur (1988) demonstrated that even in the 1980s capital account
openness was strongly positively correlated with greater capital mobility (measured in terms of
smaller covered interest rate differentials).
954
ful purpose, however, of highlighting two things. First, there is something

behind all the globalization hoopla. The global trend toward international
market integration and policy liberalization has been rapid in recent decades.
Second, significant cross-national differences in integration remain, some of
which may well be attributable to differences in foreign economic policy
choices. Let me now explore the causes of these two phenomena, beginning
with the secular global trend to more internationally integrated markets.
THE UNIQUENESS OF
CONTEMPORARY MARKET INTEGRATION
Economic historians have been quick to point out that on many basic indicators the world economy is no more globalized today than it was 100 years
ago.11 From this perspective, the big story of the 20th century was the dramatic reduction of international economic activity in the middle decades.
Obstfeld and Taylors (1997) summary judgment is representative of the
nascent conventional wisdom:
The era of the classical gold standard, circa 1970 to 1914, is rightly regarded as
a high-water mark in the free movement of capital, labor and commodities
among nations. After World War I, the attempt to rebuild a world economy
along pre-1914 lines was swallowed up in the Great Depression and in the new
world war the Depression bred. Only in the 1990s has the world economy
achieved a degree of economic integration that . . . rivals the coherence already
attained a century earlier. (p. 1)
The staggering costs of the 1914-1945 period are certainly a central fact of
the 20th century from which we no doubt still have much to learn. But is it
appropriate to portray the contemporary era as merely a return to the preexisting equilibrium level of globalization? There is already a revisionist economic history claiming that, despite apparent similarities, international market integration today is qualitatively different than it was 100 years ago.
According to Bordo, Eichengreen, and Irwin (1999), for example, facile
comparisons with the late 19th century notwithstanding, the international
integration of capital and commercial markets goes further and runs deeper
than ever before.12
11. Much of this work relies on and was inspired by the pathbreaking empirical research of
Maddison (1995).
12. See also Baldwin and Martin (1999) for a similar argument.
955
The evidence in support of this view seems straightforward. In the 18701914 period, the bulk ofand the fastest growth inworld trade was in raw
materials (agriculture and minerals), as the industrial revolution reduced the
costs for the first industrial nations of extraction and transportation from their
colonies. Today, international trade is dominated by manufactures, not only
among the OECD countries but both ways between north and south as well.
Trade in services was unheard of 100 years ago, but it is of considerable and
rising importance these days. The nature of international capital movements
also clearly differs between the two epochs of internationalization. Most
international lending in the earlier period was directed to raw material extraction and transportation to market, particularly in developing countries. In the
contemporary period, international finance supports the gamut of production
activities around the globe.
The uniqueness of the contemporary international economy is nowhere
more apparent than with respect to the multinationalization of production.
The basic features of todays multinational firmscaptured in management
jargon such as breaking up the international value chain and global strategic
allianceshave no historical parallels.13 One clear indication of the proliferation of multinational production is the estimate that intrafirm trade (i.e.,
among international affiliates of the same firm) comprises roughly one third
of all global trade (Jones, 1996, p. 56).
One need not embrace all the hyperbole of international management
gurus to accept the fundamental point that there does indeed seem to be something new and distinctive about the contemporary era of international market
integration. But this only raises the questions of what has caused the mushrooming of international economic activity in recent decades.
TECHNOLOGICAL DETERMINISM
The core question addressed in this section is, If governments wish to
restrict cross-border economic activity, can they do so?14 The analytic difficulty in answering this question is that one cannot draw any firm conclusions
about the feasibility of closure from the extent of government interventions
designed to insulate domestic markets from international activity. The global
13. For summaries, see Brooks (2000, chap. 4) and Dunning (1993, 1997).
14. I consider the issue in the context of individual governments versus market actors. If there
were evidence that individual governments are powerless to stop globalization, this would raise
the issue of whether international cooperation would be more effective. I will address this question in a follow-up article, The Consequences of Globalization.
956
trend to declining barriers could be the product either of a voluntary choice by

governments to liberalize or of their resignation that they cannot affect crossborder trade, production, and capital movements even if they try. On the other
hand, countries that persist with protectionist barriers might do so not
because they actually affect economic behavior, but because they send signals of support to constituencies adversely affected by market integration.
INTERNATIONAL FINANCE
The technological determinism thesis regarding international finance is

straightforward (Bryant, 1987). Nowhere is globalizations ballyhooed
shrinkage of time and space more apparent than in international finance. Ever
faster and bigger semiconductors, fiber optics and the Internet have radically
cut the costs of transmitting information in the past 20 years. Financiers can
literally operate wherever and whenever they like, cutting deals in whatever
financial instruments they can dream up. It is the specter of truly footloose
liquid capital that generates images of hapless governments seeking to regulate yesterdays financial instruments within their borderswhen the essentially homeless market makers they are trying to control have already moved
on to newer and more exotic types of transactions.
The first piece of evidence cited to demonstrate the difficulty of regulating
international financial flows predates the information technology revolution.15 The euromarkets (financial transactions in a national currency that
occur outside the home country) became central to international finance in
the mid-1960s when the U.S. government responded to the weakening of
Americas balance of payments by imposing various policy restrictions on
cross-border capital flows. In response, American banks moved their operations to London to avoid the new regulations.16 When faced with the enlivened euromarkets that it had unwittingly created, the U.S. government had
little choice but to do away with its capital controls, which it did in the early
1970s.
There were significant costs to offshore operations in the 1960s in terms of
moving the relevant information halfway around the world (e.g., a 3-minute
New YorkLondon telephone call cost more than $30). Nonetheless, Ameri15. For a clear and concise discussion of this case, see Krugman and Obstfeld (1991, pp. 605-608).
16. Of course, this would not have been possible had the British government mimicked the
American regulations. They had little incentive to do so, however, because Britain couldand
didgain by becoming the world center for offshore financial transactions. Moreover, the British government must have known that there would have been many others willing to offer an
unregulated environment catering to the offshore activities of American banks.
957
can bankers thought that the benefits of evading domestic regulation outweighed these costs. Today, of course, even individual consumers pay less
than 50 cents for the same international call. This is why the predicament of
governments trying to regulate international capital flows seems even more
parlous than was the case 30 years ago. Thurow (1997) describes an infamous
1990s analog of the euromarkets story:
The Japanese government tried to prevent the trading of some of the modern
complex financial derivatives that depended upon the value of the Nikkei Index
in Toyko. As a result, the trading simply moved to Singapore, where it had
exactly the same effects on the Japanese stock market as if it were done in
Toyko. This was dramatically brought home to the world when a single trader
for Barings securities in Singapore (Nick Leeson) was able to place a $29 billion bet on the Nikkei Index and lose $1.4 billion when the index did not trade
within the ranges that he expected. (p. 72)
More generally, very few economists these days believe that governments
can effectively control capital outflows (Krugman, 1999 is a notable exception). The situation is more complicated with respect to capital inflows.
Dooley (1995) concluded from an extensive study of the empirical literature
on the 1980s that capital controls did have real consequences for cross-border
economic flows. More recently and visibly, key policy makers with exemplary credentials as academic economistsincluding the IMFs interim managing director, Stanley Fischer (1998); Joseph Stiglitz, former chief economist of the World Bank; and Alan Blinder (1999), former vice chairman of
the Board of Governors of the Federal Reservehave all argued that one
clear lesson of the Asian crisis is that capital controls can and should be used
to mitigate the adverse affects of volatility and uncertainty in international
financial markets.
Much of the optimism about the effectiveness of capital controls is based
on Chile in the 1990s. Chile is a darling of neoclassical development economists because of its manifestly successful efforts radically to reduce government intervention in the economy in the past two decades. But one area in
which the Chilean government violated neoclassical principles concerned the
imposition of capital controls. In 1991, the government imposed the requirement that all (nonequity) foreign capital inflows be accompanied by a non
interest-bearing 1-year deposit equal to 30% of the initial value of the investment.17 Because the deposit was only for 1 year, it was essentially a tax whose
effective cost to investors declined the longer their money stayed in Chile.
17. These controls were ultimately lifted in the aftermath of the Asian crisis.
958
Instead of trying to fight the losing battle of stemming capital flight once a
crisis hit, the Chilean controls were designed to reduce the prospect of a
financial crisis by steering capital from shorter term to longer term investments. According to the Chilean central bank, this policy was very effective
in channeling capital flows from investments with shorter term to longer term
maturities. In the first year after the controls were introduced, Banco Chile
estimates that capital inflows with maturities of less than 1 year declined from
almost three quarters of total inflows to less than 30% (Edwards, 1999, p. 74).
Other economists are considerably more skeptical as to the effectiveness
of even this type of smart controls in the information technology age.
According to Garber (1998), A system of reserve requirements that penalizes short term inflows in favor of longer term investments can be evaded
through offshore swaps with call features; an apparently long-term flow can
thereby be converted into an overnight foreign exchange loan (p. 30). Furthermore, Edwards (1999)arguably the leading expert on capital controls
in Latin Americaconcludes that the Chilean controls were remarkably
ineffective.
Edwards (1999) argues that the Chilean controls clearly failed with respect
to two of the governments stated objectives. They did not slow down currency appreciations caused by capital inflows, nor did they allow the government to fight inflation by maintaining higher domestic interest rates. But
Edwards even goes so far as openly to dispute Banco Chiles claims about
long-term investments. He argues that the portion of short-term foreign loans
in the Chilean portfolio in the latter 1990s was no smaller than in those of other
comparable countries with open current accounts (Edwards, 1999, p. 75).
Rogoff (1999, p. 35) seems sympathetic with Edwardss conclusion and
argues that the prerequisites for making Chilean-type capital controls work
are very exacting. Rogoff reasons that to be effective, domestic banks must
be prevented from writing offshore derivative swap contracts with foreign
holders of long-term Chilean debt. But this is exceedingly difficult given the
multiplicity of potential offshore transactions. Rogoff continues, By including suitable margin and call conditions, such contracts can effectively make a
Chilean bank the true holder of the long-term income stream, and the foreign
bank the holder of a short-term loan.
It is probably premature to declare that capital controls are wholly ineffectual. Nonetheless, few would disagree with the more tempered proposition
that the information technology revolution has made it much harder for governments to control international capital movementseven if they want to
for economic or political reasons.
959
TRADE AND MULTINATIONAL PRODUCTION
No one would deny that technological change has significantly affected

international trade in recent decades. But the case for a technologically determined view of trade liberalization is weak. The simple reason is that moving
physical goods across national borders is a relatively transparent activity that
governments can therefore monitor and slow down if they so choose. To be
sure, national borders are long, and smuggling is an age-old strategy for circumventing barriers to trade. But illegal trafficking in goods such as narcotics
is the exception rather than the rule. Moreover, whereas trade in services is
obviously less transparent, this does not seem an insurmountable obstacle to
government regulation in countries with reasonable accounting standards.
There is, however, one scenario in which technological change might significantly decrease the feasibility of trade protectionism. The Internet is digitizing some heretofore physical goods. In the world of e-commerce, it is not
only possible to buy music, movies, and books online; the goods can also
be shipped via the Internet. It is hard to see how such trade could be regulated using traditional policy instruments. There must be a limit, however, as
to how much goods commerce can be morphed into bits and bytes. A popular
statistic today is that about half the Americans buying cars use the Internet for
some part of the process. But no one is suggesting that the cars will be delivered electronically anytime soon.
One can undertake a similar thought experiment with respect to whether
information technology makes it harder for governments to regulate the
activities of multinational firms. Buying a lasting stake in foreign assets or
building new plants abroad are perhaps even more transparent activities that
are easier for governments to regulate than moving goods across borders.
However, the information technology revolution has been intimately connected with the rise of international strategic alliances among firms, the key
feature of which is that they do not entail transferring any equity. One could
thus paint a scenario in which multinational firms could evade government
restrictions on their activities by forging informal alliances rather than swapping equity. But as Williamson (1975) pointed out long ago, there are good
corporate governance reasons why alliances tend to be for specific purposes
rather than ongoing management structures for the broad range of firms
activities, and it is hard to see the balance being radically changed by the
Internet.
960
SUMMARY
The case for a technologically determined view of globalization is strongest with respect to international finance. There is a credible argument that
since the onset of the information technology revolution there is essentially
nothing governments can do to stop global financial flows. On such a view,
there is no mystery to the spate of national-level moves to capital account liberalization in the 1990s; if capital controls dont work, why risk sending negative signals to the financial markets by persisting with them?
The case for technological determinism is considerably weaker with
respect to trade and the multinationalization of production. Governments that
wish to impede the movements of goods across national borders can do so;
they can also regulate the ownership of domestic firms and the external behavior of their multinationals. This may change somewhat in an era of mature
e-commerce, but it is unlikely that the ability of governments to regulate trade
and multinational production will be wholly emasculated any time soon.
THE COSTS OF CLOSURE

Anyone who has taken an introductory international economics course
knows the logic behind the mantra that removing barriers to cross-border
economic activity is always welfare improving. But a more complicated
picture emerges if one reads cutting-edge research on the costs and benefits
of international openness. The potential benefits of capital mobility in terms
of the efficient allocation of investment are clear, but these gains may often
not be realized because of the incomplete information problems that are
endemic to international financial markets. Freer trade certainly gives consumers lower prices and allows economies to exploit comparative advantages
and scale economies. But there are sound theoretical arguments that trade liberalization can hinder economic growth in cases of imperfect markets or positive externalities from domestic production, and the empirical evidence on
the subject is inconclusive. Indeed, foreign direct investment is the only case
in which economists universally endorse the basic neoclassical approach to
market integration.
TRADE
A simple answer as to why we have seen so many moves toward freer trade
in recent decades is that the opportunity costs of closure have increased as a
result of rapid technological change. To take the classic example, the advent
of superfreighters led to a decline in sea freight unit costs of almost 70% from
961
the early 1970s to 1996 (World Bank, 1997, p. 37). More generally, the portion of national economies that are considered nontradable has decreased
dramatically in recent decades.18 Indeed, this is a direct reflection of technological progress because something is nontradable by definition if the difference between the local and the international price is greater than the cost of
bringing it to the domestic market. A simple corollary of the increasing proportion of national economies that are tradable is that the deadweight losses
associated with protectionism have increased apace.
It is important to note, however, that these oft-cited benefits of freer trade
are in essence one-time gains. Once the price for a product in a domestic
economy is as low as the world price, that is the end of the story. Development
economics, however, has been concerned with a dynamic issue: whether freer
trade stimulates economic growth in the medium term. In the 1950s and
1960s, the conventional view was that protecting infant industries from international competition was the appropriate development strategy for most
countries. After all, it seemed to have worked not only in postWorld War II
Latin America and Western Europe, but also in the antebellum United States.
Import substitution industrialization has fallen into disrepute since the
1970s. The Washington consensus has moved firmly to support the view
that freer trade is good for growth.19 Influential articles using large n statistics
claim to show empirically that there are large positive growth effects to freer
trade around the world (Balassa, 1985; Sachs & Warner, 1995). The theoretical justification for the purported dynamic gains from trade comes from new
growth theory in which technological innovation is endogenous. In these
models, freer trade could increase innovation by creating scale economies in
export sectors that allow for higher research and development expenditures,
by speeding up technological diffusion in import-competing sectors, and by
giving domestic firms access to the best and cheapest intermediate inputs.
The trade is good for growth argument, however, is subject to important
criticisms. Theoretically, it is easy to construct models in which freer trade
retards growth. Strategic trade theory is a well-known example, but its relevance is limited by the fact that it only claims benefits of protection in sectors
with extremely high startup costs and very large minimum efficient scales of
production (commercial aircraft and pharmaceuticals are exemplars;
Krugman, 1987). Of more potential importance is the argument (which in
many ways formalizes the intuitions behind import-substitution industrial18. Moreover, lower transportation costs also increase the gains from specialization and
from scale economies, because the costs of importing a countrys comparative disadvantage
decrease.
19. See, for example, the former vice president of the World Banks presidential address to
the American Economics Association (Krueger, 1997).
962
ization) that freer trade leads to the undersupply of beneficial production

externalities in import-competing sectors (Bhagwati, 1968).
Consider the following simple example. At t0, a country can import widgets more cheaply than it can produce them. But if it goes ahead and produces
these widgets (by protecting the infant industry), a number of other things
will happenthe technology used in widget production may be useful in
other sectors, for example. At t1, the country might be better off if it had protected widgets than if it had imported them.20
Indeed, the theoretical uncertainty about trade and growth is sufficiently
great to lead Lawrence and Weinstein (1999)no friends of protectionism
to conclude in a recent study that
theory is actually quite ambiguous on the dynamic effects of trade. There are
some reasons to expect that increased international competition could accelerate productivity growth but also some reasons to expect the reverse. (p. 8)
Turning to the empirical evidence, many economists have argued that conventional villain-hero characterizations of the decline of Latin America and
the east Asian miracle are simply inappropriate. Rodrik (1999) argues that it
is wrong to blame import-substitution industrialization for Latin Americas
economic problems in the 1970s and 1980sthe effects of the oil crises were
far more important. Krugman (1994) and Sachs (1996) argue that trade had
very little to do with the east Asian miracle. High savings rates and high levels
of educational attainment mattered far more. Others contend that trade policy
was central to the east Asian model, but that the relevant policy was the protection of infant industries from import competition, rather than trade liberalization (Amsden, 1989; Wade, 1990).21
Moreover, the large n studies of the trade-growth nexus have also been
trenchantly criticized on methodological grounds (Edwards, 1993; Rodriguez & Rodrik, 1999). One fundamental objection is that the causality is the
reverse of that assumed. Fast growth and higher income levels promote trade.
Frankel and Romer (1999), for example, consider this causality question so
important that they deliberately try to exclude from their growth regressions
any parts of trade volumes that could be attributed to either wealth or trade
20. Of course, this argument requires that governments are relatively good at picking
winnerssectors and technologies that generate long future income streams. It is easier to do
this when a country can mimic technological advances already made elsewhere than if it is at the
technological frontier. For example, this may explain why Japanese efforts to pick winners seem
to have become less successful over time.
21. In contrast, Lawrence and Weinstein (1999) conclude that although the east Asian economies certainly did practice import substitution, this actually hindered their development. As a
result, their growth performance was even more of a miracle than we thought (p. 24).
963
policy by using an instrumental variables approach in which unalterable aspects

of geography are proxies for natural levels of trade. Frankel and Romer
might be right that countries that are closer to each other grow more quickly,
but this could hardly be used as support for the position that trade liberalization is good for growth and this is why governments have chosen to open their
economies.
In sum, it is undeniable that technological change has increased the gains
from tradeas they are conventionally understood. Thus, there is a good
argument to be made for the proposition that the trend toward trade liberalization around the world in recent decades is explicable in terms of the increased
opportunity costs of closure. However, things get much murkier if one considers the potential impact of trade liberalization on countries medium-term
growth trajectories.
INTERNATIONAL FINANCE
Though it is less prominent in the policy discourse on globalization, conventional international economics endorses not only free trade, but also free
finance, as being in the interests of all countries. Obstfeld (1998) effectively
summarizes the textbook argument:
International financial markets allow residents of different countries to pool
various risks . . . a country suffering a temporary recession or natural disaster
can borrow abroad. Developing countries with little capital can borrow to
finance investment, thereby promoting economic growth without sharp
increases in savings rates. . . . The other main potential positive role of international capital markets is to discipline policymakers who might be tempted to
exploit a captive domestic capital market. Unsound policies . . . would spark
speculative capital outflows and higher domestic interest rates. (pp. 2-3)
By extension, the cheaper and easier it is to move information across borders, the greater are the efficiency gains of openness. Thus, there is a simple
argument that the trend to financial market integration can be explained in
terms of the heightened costs of financial closure. This is the view of the
IMFs Interim Committee, which went so far in September 1997 as to recommend that all members commit themselves through a treaty revision to open
capital accounts, paralleling their extant commitments to current account
convertibility.22 Bradford De Long, former deputy assistant secretary for eco22. Following the Asian crisis, the International Monetary Fund (IMF) has backed away
somewhat from this unconditional position. It now argues that countries should only open their
capital accounts when the appropriate domestic institutions are in placemost important, transparent and well-regulated domestic banking systems.
964
nomic policy in the Clinton administration, believes that the benefits of capital mobility have been mammoth: the ability to borrow abroad kept the
Reagan deficits from crushing US growth like an egg, and the ability to borrow from abroad has enabled successful emerging market economies to double or triple the speed at which their productivity levels and living standards
converge to the industrial core (quoted in Bhagwati, 1998, p. 10).
Most economists these days, however, are less bullish about the benefits of
unfettered capital mobility. Any potential benefits of financial integration
must be balanced against a series of costs generated by the fact that financial
transactions are plagued by problems of incomplete and asymmetric information. Moreover, these problems are only exacerbated (rather than mitigated) as the costs of transmitting information decrease.23 The most important contemporary manifestation of these problems is that international financial markets are subject to wild swings in sentiment that are, if not wholly
irrational (Morris & Shin, 1999), certainly unpredictable. Financial crises
have been with us for centuries (Kindleberger, 1984). But they seem to have
become more frequent and more damaging in recent years, from the Latin
American debt crises of the early 1980s to the east Asian flu of the late 1990s.
The causes of the Asian crisis are hotly debated, ranging from unalloyed
panic (Sachs & Radelet, 1998) to bad fundamentals (Corsetti, Pesenti, &
Roubini, 1999). But even proponents of the latter view accept that the volume
and speed of global financial flows have rendered most emerging markets
(and as the European Monetary System crises of 1992-1993 showed, even
stable developed countries) vulnerable to essentially instantaneous switches
between good (rapid growth fueled by vast capital inflows) and bad (widespread capital flight precipitating deep recession) equilibria, with no apparent change in underlying economic conditions. As Rogoff (1999) explains,
If creditors suddenly become unwilling to roll over short-term loans as they fall
due, a country may find itself in a financial squeeze even if, absent a run, it
would have no problems servicing its debts. Devotees of the this multiple
equilibrium view believe that this is precisely what happened in the case of,
say, Mexico in 1994 or Korea in 1997. For example, creditor panic at a relatively small devaluation of the peso in December 1994 suddenly made it
impossible for Mexico to roll over its short-term debt, quickly precipitating a
23. Mishkin (1999) provides an accessible review of these issues. Adverse selection occurs
before a transaction when bad credit risks are more likely to seek out loans (even at very high
interest rates) because they are less concerned with paying back their creditors. Moral hazard
takes place after the transaction. Borrowers have incentives to invest in riskier projects than were
agreed to at the time of contract. As a result of both problems, lenders will likely make fewer
loans than they should (or would) if they were perfectly informed about the attributes of potential
borrowers.
965
crisis. Instead of humming along in a good growth equilibrium as Mexico

seemed to be doing prior to the crisis, it suddenly bounded into a bad recessionary equilibrium. (p. 25)
Thus, there are good reasons to think that although free international
finance is hypothetically allocationally efficient, informational problems
likely generate numerous costs as well. How much do we know about calibrating the trade-offs between allocational efficiency and damaging volatility, and hence about the net effects of financial market integration? Even a
defender of capital account liberalization like Fischer (1998) admits that the
answer is not much:
The difference between the analytic understanding of capital- and currentaccount liberalization is striking. The economics profession knows a great deal
about current account liberalization, its desirability, and effective ways of liberalizing. It knows far less about capital account liberalization. It is time to
bring order both to thinking and policy on the capital account. (p. 8)
Despite this acknowledgment, Fischer (1998, p. 2) is nonetheless happy to

endorse financial liberalization for all countries, arguing that the best evidence in their favor is that essentially all of the OECD countries now have
open capital accounts. But of course, the causality may well run in the other
directionwealthier countries are more likely to liberalize finance, rather
than financial openness increasing national income.
Rodrik (1998) has gone further. He claims that there is no good evidence
that capital mobility is good for growth. His methodology is simple: He adds
a capital account policy variable to a typical growth regression equation of
the type pioneered by Barro (1997), that is, controlling for initial level of
income, educational levels, regional effects, and so forth. Rodriks (1998)
conclusion is stark: Capital controls are essentially uncorrelated with longterm economic performance once we control for other determinants (p. 61).
One need not go all the way with Rodrik (1998) to conclude that the case is
at best weak that there are clear economic benefits to financial market integration, and that these benefits have increased in recent years. Thus, it is hard
to argue that increasing opportunity costs of closure can have been an important driver of financial globalization.
FOREIGN DIRECT INVESTMENT
Like trade and financial integration, the textbook argument for the
increasing costs of closure to foreign direct investment centers around the
efficient allocation of resources, and the fact that these gains have increased
966
as a result of technological change in recent decades. Unlike the other two facets of market integration, however, there is little dispute in the economics
community that the effects of FDI are unambiguously positive from the standpoint of economic growth.
Technological change has had a marked impact on multinational firms.
The costs of product innovation have skyrocketed in many sectors (particularly those with the highest value added, such as aviation, computers,
pharmaceuticals, etc.). This has greatly increased the minimum efficient scale
of production for numerous industriesand hence the benefits of
multinationalization. Declining transportation costs have also made multinational production more efficient because they lower the costs of moving goods
among locations in diversified and complex production regimes.
As in the case of finance, however, it is arguable that the information technology revolution has had the biggest impact on multinational firms. The
Internet has radically reduced the costs of coordinating complex supply, production, and distribution networks that are geographically decentralized. The
automobile industry is a classic example. It may long have been efficient for
Volkswagen to buy gear boxes in the United States, build engines in Germany,
assemble cars in Brazil, and sell the finished product cars all over the world.
But the challenges of coordinating all this activity are immense, especially if
Volkswagen wants to pursue just-in-time production/low inventory best practices. Being able to coordinate all elements of the supply and distribution
chains on the World Wide Web has been a boon for firms that have incentives
to decentralize their activities.24
But is more multinational activity good for the national economies among
which it is distributed? Theory and evidence are strongly supportive.25 Interestingly, the case does not need to rely on the notion that attracting foreign
investors is beneficial to capital-poor developing countries. This would suggest, for example, that FDI within the OECD would have little impact on
growth, whereas the evidence is that FDI is good for growth even in the
wealthiest nations (Graham & Krugman, 1991). Rather, the key argument is
24. The Economist (Construction, 2000) argues that this type of Internet coordination has
even had dramatic effects in sectors, like construction, that would apparently seem a long way
from the cutting edge of e-commerce.
25. The benefits of foreign direct investment may also have implications for the costs of trade
closure. The modern view about trade and FDI is that they are complements rather than substitutes (e.g., see World Trade Organization [WTO], 1996, pp. 53-55). The reasoning is straightforward. If multinational firms are to realize the benefits of international systems of production and
distribution, they need to be able to move inputs and intermediate goods among their operations in
different countriesvia trade.
967
that foreign direct investment is a conduit for the transfer of technology and
less tangible knowledge assets such as management practices.26
SUMMARY
This section has argued that the argument that increasing opportunity
costs of closure have driven globalization is most persuasive with respect to
the multinationalization of production and least persuasive for international
financial integration. Trade occupies an intermediate place because although
the static gains from trade liberalization are well known, it is less clear
whether trade is good for growth.
IDEOLOGICAL CHANGE
The political center of gravity around the world with respect to economic
issuefiscal prudence, deregulation, and privatization (but also international
market integration)has shifted to the right in the past 20 years. The time
line would highlight successively the Reagan-Thatcher revolutions, Francois
Mitterrands neoliberal U-turn, Antipodean market making and market
opening, the rise to power of the Chicago boys in Latin America, the collapse of Communism, and the embrace of the third wayism by governing
social democrats in countries as diverse as Australia, Brazil, Britain, Germany, and Poland.
But is this ideological shift merely a description of political economic
changes driven by other factors, or does it have independent causal weight, as
analysts like Helleiner (1994) would have it?27 In this section, I endogenize
the trend toward market integration in terms of changes in the domestic balance of political power, rather than via the diffusion of economic ideas or
coercion by international institutions.
The previous two sections have argued that technological determinism
provides a compelling explanation for the trend toward international financial integration in the contemporary period, and that the efficiency incentives
26. Findlay (1978) is the seminal theoretical article. For empirical support for the proposition
that FDI has a positive impact on medium-term growth, see Blomstrom, Lipsey, and Zejan
(1994) and Easterly, King, Levine, and Rebelo (1994). Borensztein, De Gregorio, and Lee
(1998) argue that this effect is contingent on a minimal level of human capitalperhaps explaining the relative absence of FDI in Africa and its apparently limited effects on growth rates on the
continent.
27. See Gruber (2000) for a more sophisticated rendering of policy diffusion with respect to
market integration.
968
to liberalize FDI are large. The political implications of these economic arguments are clear. Lindblom (1977) famously argued that business enjoys a
privileged position under capitalism because public functions in the market system rest in the hands of businessmen. He continues:
It follows that jobs, prices, production, growth, the standard of living and the
economic security of everyone all rest in their hands. . . . A major function of
government, therefore, is to see to it that businessmen perform their tasks . . .
governments cannot command business to perform. . . . They must therefore
offer benefits to businessmen in order to stimulate the required performance.
(pp. 172-173)
It is easy to see how this privileged position has been enhanced for international financiers and multinational firms.28 If multinational firms perform
essential growth functions, governments have little choice but to pursue policies of which they approvesuch as removing impediments to their
cross-border activities. Of course, some domestic constituents may oppose
the selling of national assets to foreign entities. But if the aggregate economic
benefits of FDI are sufficiently large, governments have strong incentives to
support the multinationalization of production (and to find other ways to
compensate those who feel adversely affected by this process). If governments believe that there is simply no way effectively to regulate cross-border
capital flows, and if investment capital is a scarce good, they might as well
accept this reality and focus their energies on dealing with the consequences
of capital mobility.
These are political arguments in that they contend that the increasing
power of financiers and multinational firms has led governments to remove
barriers to international activity. But they also entail predicting policy choice
from economic effects without knowing anything more about the details of
domestic political interactions. To the extent that the previous two sections
suggest that economics does not provide a parsimonious explanation for
trade liberalizationeither in terms of technological determinism or
increased opportunity costs of closureit may be more fruitful to analyze
this trend in terms of struggles among distributive coalitions.
There has been a proliferation of sophisticated work in political science in
the past decade studying interest group and coalitions politics in the trade
area, much of it stimulated by Rogowskis (1989) seminal application of
Hecksher-Ohlin-Stolper-Samuelson models to the political arena. But in a
recent excellent review of this literature, Alt et al. (1996) acknowledge that
neither Rogowskis approach nor the contending views (Ricardo-Viner spe28. Kurzer (1993) was among the first political scientists to see this connection.
969
cific factors or increasing returns to scale) tell us very much about likely trade
policy outcomes. In particular, the authors point out that the question of why
the apparently strong political bias to protectionism has been significantly
mitigated in recent years remains a mystery.
It is relatively easy to explain the inherent political bias toward trade protectionism (Magee, Brock, & Young, 1989). Consumers are the primary beneficiaries of reductions in barriers to imports because this will lower the prices
of goods and services they buy. Both the owners and employees of protected
industries, however, will be adversely affected by import competitionprofits,
wages, and jobs will be reduced. In the conventional story, the benefits of free
trade are relatively small and spread throughout society, whereas the costs of
free trade are concentrated in import-competing industries for whom trade
policy is a life-and-death issue (plants may close, whole industries may
shrink radically, those affected will have their lives seriously altered). In turn,
collective action problems cripple consumers in the political battle against
the well-organized intense interests of import-competing industries.29
This approach cannot, however, explain the over-time trend toward trade
liberalization. As Alt et al. (1996) acknowledge, introducing more sophisticated models of trade preferences does not help much either. The limitation
of preference/coalition-based approaches is that increased demands for liberalization are likely to be offset by increased demands for protection. As
Frieden and Rogowski (1996) observe, lower costs of moving products and
information
leads to intensified demands for trade . . . on the part of those firms and individuals closest to their countrys comparative advantage. . . . On the other hand,
easier trade sharpens the desire for protection on the part of those farthest from
their countrys own comparative advantage. (p. 42)
Let me now offer an argument that might help explain why the balance of
political power has tilted in favor of freer trade. In Magees formulation,
competitive exporters sit on the sidelines in the battle between pro-trade consumers and protectionist import-competers. The assumption is that exporters
do not care about domestic trade policy; they only want access to foreign
markets. But in the contemporary world, exporters seem to be active participants in the domestic trade game. Consider the Clinton administrations
threat in the early 1990s of imposing 100% import tariffs on luxury Japanese
automobiles in response to what it considered protectionist barriers in the
29. Batess (1981) seminal argument, of course, is that there is a countervailing urban consumer bias in many developing countries because small agricultural producers, unlike manufacturers in the stable industrial democracies, are plagued by pervasive collective action problems.
970
Japanese auto parts market. The whole point of this strategy was to mobilize support among influential Japanese exporters (i.e., the auto makers)
for the liberalization of their home market. Indeed, exporters have generally
been strong supporters of trade liberalization in Japan since the 1980s
(Rosenbluth, 1996).
The multinationalization of production may also have had a significant
impact on the policy preferences of exporters. The more exporters import
intermediate inputs to produce final products, the greater their stake in lowering the prices of imported goods (and hence removing protectionist barriers).
But export interests are unlikely to be hamstrung by the kind of collective
action problems that afflict consumers. One could reasonably expect that the
increased pro-free-trade activism of exporters has tipped the political balance
in favor of freer trade.
What, then, do we know about the causal impact of political change on the
global trend toward market integration? At some level, it is surely correct that
the shift to the right on economic issues has been a proximate cause of international market integration. I have argued, however, that in the cases of financial integration and the multinationalization of production, these causal processes are political only in a quite narrow sense. The increasing power of
finance and multinational firms caused by technological changes has resulted
in public policies that are more consistent with their intereststhat is,
increasingly open markets. Things are more complicated, and more political
in the sense of the constellation of preferences and interest coalitions, with
respect to trade. Again, however, it seems that the move to trade liberalization
has its roots in technological changes that have changed the preferences of
exporters with respect to protection of the domestic economy.
CROSS-NATIONAL VARIATIONS
IN MARKET INTEGRATION
Understanding the big picturethe over-time worldwide trends toward
more internationally integrated marketsis clearly of critical importance to
any analysis of the causes of globalization. This justifies the amount of attention I have given to this subject in the preceding sections. But the magnitudes
of enduring cross-national disparities in international economic flows and
foreign economic policies are sufficiently large that they cannot be dismissed
as mere noise on the path to a single seamless global market (much as some
pundits would like to believe that this is the case).
In this section, I present a simple comparative analysis of the political
economy of the two foreign economic policy choices for which it is possible
971
to gather reasonable data for a large number of countries around the world
trade taxes and whether countries impose significant restrictions on capital
account transactions. Studying the politics of protectionism is a subject with
a very long and distinguished pedigree, but I know of no efforts to compare all
the countries of the world in the same analysis (for a recent review of the voluminous empirical literature, see Rodrik, 1994). There are a couple of global
studies of capital account openness, but these are either relatively apolitical
(Leblang, 1997) or quite preliminary (Garrett, Guisinger, & Sorens, 2000).
I explore the effects of four types of variables that have received considerable attention in the political economy literature: economic size, the level of
development, the balance of power between pro- and anti-market forces
(measured in terms both of partisan control of government and unionization
rates), and the effects of formal political institutions (in this case, the extent to
which political regimes are democratic).30 I employ the simplest possible crosssectional research design: regressing foreign economic policy outcomes in
the 1990s on the explanatory variables (using lagged 1980s values to mitigate
the possibility of reverse causality).31
This type of analysis is useful for the simple reason that it gives us a first
cut at discriminating among the numerous plausible explanations for
cross-national variations in market integration. In the 1990s, for example,
foreign economic policies were much more liberal in the OECD nations than
in the worlds poorest countries (see Table 1). There are at least two clear differences between the two groups. The OECD countries are wealthy and have
long histories of stable democracies; the poor countries have much shorter (if
any) democratic histories. The regressions reported below directly address
the following question: To what extent does democracy or income level
explain these variations? But they might also generate some insights into
important What if? questions about the future: Will we indeed witness the
creation of a seamless global economy if/when most of the worlds countries
become wealthier and stably democratic?
It is important to note at this point, however, thatif my preceding analysis is rightthere is a crucial difference between trade taxes and capital controls. Trade taxes remain an effective way of regulating international trade,
and it is not clear that the macroeconomic benefits of liberalization are overwhelming. In contrast, the impact of capital account restrictions on interna30. I would have liked to test the proposition that foreign economic policy liberalization
should be less pronounced in countries with fewer veto players (Tsebelis, 1995), but unfortunately the data are not available outside the OECD countries.
31. Of course, more rigorous analysis using panel data will be required before any more
definitive conclusions can be drawn.
972
Table 3
The Determinants of International Openness
Trade Taxesa
Ln(population)c
Ln(GDPPC)d
Left governmente
Unionizationf
Democracyg
Intercept
R2
Observations
4.31***
6.21***
1.88
5.76***
7.59***
0.06***
0.03
0.44
92.01*** 103.46***
0.51
0.65
103
53
Open Capital Accountsb

1.42***
1.35***
0.90*
0.04
6.20*
0.38
146
2.18***
2.23***
0.04***
0.00
13.91***
0.57
59
Note: GDPPC = gross domestic product per capita. Ordinary least squares (OLS) regression
with robust standard errors.
a. Average trade taxes in 1990s (see the appendix).
b. Number of years with open capital accounts in 1990s (see the appendix).
c. Natural log of average 1980-1990 population (World Bank, 1999).
d. Natural log of average 1980-1990 gross domestic product (GDP) per capita (in constant 1997
dollars; World Bank, 1999).
e. Average left party control of executive government, 1980-1990 (Beck, Clarke, Groff, Keefer, &
Walsh, 2000).
f. Rate of unionization of nonagricultural workers in 1985 (International Labor Organization, 1997).
g. Average democracyautocracy scores, 1980-1990 (Gurr & Jaggers, 1998).
tional capital movements was probably quite limited in the 1990s. Thus,
unlike the trade case in which the level of protection has significant effects of
the material well-being of different segments of society, the politics of capital
account liberalization are likely to be more symbolic (sending signals about
the governments broader orientation to the international economy). Both
might be subject to distributional conflict, but in the case of capital account
policy, this conflict may well be more symbolic than real.
TRADE TAXES
The first panel of Table 3 presents the results for the determinants of trade
taxes in the 1990s. The first thing to note about this table is the impact of
country size on trade policy. Countries with larger populations have lower
trade taxes because they have larger domestic markets and hence less to gain
from opennessin terms of price reductions, specialization, or realizing
scale economiesthan smaller countries. Based on the estimates in the first
column of the table, trade taxes in a country with 100 million people would
have constituted almost 10 percentage points more of total trade volumes in
the 1990s than in a country with 10 million people.
The powerful effects of size are not surprising. But they are quite interesting with respect to speculation about the future of protectionism. Economists
973
have suggested that the minimum feasible size of countries has declined substantially in recent years as a result of the lower costs of trade and other
cross-border economic activity (Alesina & Spolaore, 1997). Thus, the dramatic increase in the number of countries in the world in the past decade may
also have reinforced the trend to globalization by leading to a reduction in
policy barriers to international trade.32 Nonetheless, it would be unrealistic to
assume that anytime soon the world will be composed of thousands of very
small, essentially free trading states. The growth of the EU, with the fears
about new forms of protectionism that it has engendered, is a clear counterexample to the trend toward the breakup of larger states.
The second clear finding from Table 3 is that countries at higher levels of
development were less protectionist. Based again on the first model, trade
taxes/total trade would have been 14 percentage points lower in a country
with a per capita income of $10,000 in the 1980s than in a nation with GDP
per capita of $1,000. There are numerous possible explanations of this result.
Countries with higher income per capita are likely to have relatively more
owners of capital and skilled labor and to have relatively more specialized
production profiles. Pace Alt et al. (1996), all of these actors prefer liberalization over protectionism. It may also be the case that in higher income countries, the median voter consumes more imports, again making liberalization more likely. Moreover, governments in more developed countries seem
better able to raise taxes from their citizens, allowing them to rely less on
trade taxes.
Once one controls for the effects of level of economic development, whether
countries were democracies had no impact on the level of trade protection.
This is consistent with the notion that democracy has two countervailing
effects on economic policy (Przeworski & Limongi, 1993). On one hand,
democracy makes leaders more accountable to their citizens, promoting
trade liberalization to the extent that this is good for society as a whole. On the
other hand, democracy also empowers distributional coalitions with intense
interests, making higher levels of protectionism more likely (Olson, 1993). If
these effects are largely offsetting, perhaps the preferences of different groups
in society, rather than the formal political institutions governing their aggregation, matter most for policy choice. Alternatively, one could argue that more
fine-grained institutional analysis is requiredconcerning, for example, electoral systems (Rogowski, 1987) or federalism and the separation of powers
(McGillivray, 1997).
32. World population growth without the creation of new nations, of course, would have the
opposite effect.
974
Even if broad regime type does not seem consequential in this case, there
is evidence that other types of mediating institutions do matter to trade liberalization. Although left government did not significantly affect the size of
trade taxes, the second column of Table 3 shows that countries with higher
union density were more protectionist.33 A country with 50% of its (nonagricultural) labor force unionized in 1985 is estimated to have had trade taxes
that were almost 2.5 percentage points higher than a country within a union
density of 10%. This finding makes eminent sense on the reasonable assumption that trade unions tend to overrepresent workers in less internationally
competitive firms, industries, and sectors. In terms of over-time trends, the
unionization results would also imply that if the OECD trend toward lower
rates of unionization since the 1970s is a global phenomenon, this might also
have added to worldwide trend toward trade liberalization.
CAPITAL ACCOUNT OPENNESS
The results for capital account openness are quite similar to those for trade
taxes. Countries with larger populations were less likely to have open capital
accounts in the 1990sa country with a 100 million people would have had
open capital accounts for 3 more years in the 1990s than one with 10 million.
The estimated effect of moving from $1,000 to $10,000 in GDP per capita
was essentially the same, decreasing the number of years with open capital
accounts in the 1990s by about 3. Although the precise reasons for these
effects may be somewhat different than was the case for trade liberalization,
the same general dynamics exist.
The extent to which a country was democratic had no impact on capital
account openness. However, greater trade unionization was associated with
more capital account closure. A 40-point increase in union density would have
reduced the period of openness in the 1990s by 1.6 years. Unlike the trade case,
left governments were also significantly associated with closure, decreasing
the number of years with capital account openness in the 1990s by 0.9.
But if the technological determinism thesis is correct, capital account policy these days has very little impact on the actual cross-border movements of
capital. Why, then, are the regression results so similar to those for trade protection? One simple answer would be to assume that governments and
domestic constituencies continue to think, naively, that they do. Given that
the preferences of different broad classes of actors are likely to be similar
33. Note that even though the sample of countries is roughly halved by the inclusion of union
density, the results on the other variables are essentially unaffected.
975
with respect to trade and capital account policy, we would then expect the two
policy choices to be driven by similar dynamics.
A more realistic rendering of this type of argument is that governments
understand that some policy choices are more important for the general signals about the governments broader intentions (rather than for their specific
effects in a given policy area). Capital account liberalization may be a case in
point. Restrictions send signals to domestic constituents who feel that they
would be adversely affected by openness that the government cares about
their concernsand is willing to act to defend their interests. But imposing
controls on the capital account also sends signals to mobile capital that the
country imposing the restrictions is in important senses unfriendly. In smaller,
wealthier countries with lower rates of unionization and more conservative
governments, the costs of the negative market signal may well dominate the
benefits of the positive signal to domestic constituencies, whereas the opposite is true in larger, poorer countries, particularly where the left and trade
unions are strong.
CONCLUSION
The central analytic problem one faces when trying to understand the
causes of globalization is to untangle the interrelations among three important phenomena: rapid technological change, mushrooming cross-border
economic activity, and a spate of initiatives to liberalize foreign economic
policies at the national, regional, and global levels. This article has explored
two ways to try to tease out the causal pathways among these variables. First,
I mined the vast literatures in international economics about the economic
effects of trade, multinational production, and international finance to reason
backward to the causes of integration in each of these markets. Second, I
examined todays large cross-national variations in international market integration to ascertain whether they are likely over time to erode, ultimately
resulting in a truly seamless global marketplace.
Figure 4 summarizes my assessment of the contending big picture arguments about the causes of globalization. Notwithstanding important similarities with the last great era of internationalization 100 years ago, global market
integration is qualitatively different and deeper today. Technological changes
lowering the costs of moving goodsand more important, information
have been the primary exogenous stimulus behind contemporary globalization. There are, however, three different pathways between this stimulus and
market integration.
976
Figure 4. The causes of globalization.

Note: IT = information technology, FDI = foreign direct investment, MNCs = multinational
corporations.
Technological determinism provides a parsimonious explanation for the

integration of international financial markets. The information technology
revolution has rendered capital controls much less effective than ever before.
Governments that are unwilling to risk sending negative signals to the markets therefore have strong incentives to remove capital controls. They will
still have to deal with the adverse consequences of financial integration, but
this would be the case irrespective of whether they sought to impose controls
on cross-border capital flows.
The desire of multinational firms to expand their international activities
has grown as the costs of moving goods and information have decreased. But
the multinationalization of production would not have been possible without
governments removing barriers to foreign ownership of domestic assets.
Governments have been willing to do so because FDI generates externalities
such as the transfer of technology and management best practices that stimulate economic growth. Some segments of society may still be unhappy with
977
foreign ownership of domestic assets, but if this has beneficial macroeconomic policies it may be relatively easy for governments to compensate the
opponents of the multinationalization of production.
Finally, trade liberalization has not been technologically determined
governments can and still do impose policy restrictions on cross-border trade
in goods and services. Moreover, though the one-time gains of freer trade (in
terms of lower prices, etc.) are obvious, whether this is also beneficial for or
harmful to economic growth in the longer run is debatable. It is thus likely
that more traditional political factors have played a larger role in trade liberalization than in the other two facets of market integration. I highlighted the
fact that exporters have become increasingly interested in reducing protectionism at homeeither to reduce the prospect of foreign retaliation or because they rely heavily on imports as productive inputsand suggested that
this may have tipped the domestic political balance in favor of liberalization.
Turning to my cross-national analysis, four basic points stand out. First,
one should not expect all national markets ever to appear equally globalized.
The incentives for larger countries to be open are simply considerably weaker
than those facing smaller countries. Larger countries are always likely to be
less integrated into international markets than smaller ones.
Second, levels of development have a marked impact on the propensity for
international market integration. Wealthier countries are more likely to be
open to and integrated into global markets, probably because more of their
citizens are likely to benefit from this. Economists may be correct that in the
long run income levels will tend to converge around the world. Thus, it is possible to envisage a scenario in which some of todays great disparities in market integration are lessened. But it is unlikely that the large cross-national differences in per capita income of the current era will disappear anytime in the
foreseeable future.
Third, there is little support in the cross-national evidence that democratization is conducive to market integration. As others have noted, democracy
has ambiguous and countervailing effects on economic policy choice, including international openness. On one hand, democracy makes leaders more
accountable to their citizens, which would promote openness to the extent
that market integration is welfare improving. But on the other hand, democracy empowers distributional coalitions with vested interests in resisting
market liberalization.
Finally, there is some evidence that traditional indicators of the balance of
political power within countries have affected their openness to the international economy. Countries with left-wing governments and powerful trade
unions tend to be more closed, though the substantive magnitude of these
effects is considerably smaller than those for country size and level of devel-
978
opment. One might debate whether trade unions are in secular decline or how
centrist the nominal left is becoming, but answers to these questions are
unlikely to have major effects on international market integration.
Let me finish this article by suggesting some potential implications of my
analysis of the causes of globalization for its consequences for domestic politics. International financial integration is essentially an irresistible force. The
live questions, therefore, are how large the adverse consequences of market
uncertainty and volatility are, and whether governments have the incentives
and the capacity to mitigate these consequences through domestic policies.
The multinationalization of production, in contrast, is likely to be welfare
improving for most countries. One would thus expect that dealing with its
consequences would not be a big issue in most countries. Finally, governments can still restrict trade if they want to. Trade liberalization may be welfare enhancing, but the benefits are likely to be smaller than those associated
with the multinationalization of production. In turn, freer trade has significant distributional implications for different segments of domestic society, to
which governments may seek to respond with policies of domestic redistribution. Assessing how governments balance trade liberalization with domestic
compensation remains an important question. I will explore all of these issues
in a follow-up article on the consequences of globalization.
APPENDIX
Globalization in the 1990s
Trade/GDP (%)a
979
High-income OECD
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Italy
Japan
Luxembourg
Netherlands
New Zealand
Norway
Portugal
Spain
Sweden
Switzerland
38
77
129
63
66
58
44
47
42
66
123
43
18
182
100
58
71
68
42
64
68
FDI/GDP (%)b
International Portfolio
Investment/GDP (%)c
3.1
1.8
7.9
2.6
3.3
3.0
3.4
1.4
1.0
0.9
3.8
1.0
0.6
4.5
6.3
36.0
5.5
7.1
6.0
4.5
5.8
7.6
5.7
3.4
2.3
2.5
5.7
4.7
7.6
3.8
4.8
7.4
4.9
8.3
9.4
1.1
4.0
6.3
3.4
Trade Taxes/Trade (%)d
3.2
1.1
0.0
2.7
0.1
0.7
0.0
0.0
0.1
5.1
0.0
0.0
1.2
0.0
0.0
2.2
0.6
0.5
0.6
0.7
1.1
Years With Open

Capital Accountse
10
8
10
10
10
8
6
10
3
2
7
6
10
10
10
4
6
2
6
7
(continued)
980
APPENDIX Continued
Trade/GDP (%)a
United Kingdom
United States
Average
SD
High-income other
Aruba
Bahamas
Brunei
Cayman Islands
Cyprus
Hong Kong, China
Israel
Kuwait
Macao
Malta
Netherlands Antilles
Qatar
Reunion
Singapore
Slovenia
United Arab Emirates
Average
SD
Upper-middle income
Antigua and Barbuda
Argentina
53
22
67
37
FDI/GDP (%)b
5.1
1.9
3.3
2.1
Investment/GDP (%)c
10.9
4.3
7.2
6.9
Years With Open

Capital Accountse
0.1
1.4
0.9
1.3
10
10
7.5
2.8
61.8
0
0
4
9.8
42.7
12.0
104
277
78
101
129
192
1.5
1.7
2.4
5.1
3.1
6.8
1.0
5.6
8.8
16.6
28.1
361
121
123
165
95
13.7
1.2
12.4
1.2
1.3
5.6
4.7
5.7
4.4
0.0
20.4
22.4
203
16
12.1
1.7
0.1
4.1
8.0
0
10
1
7
0
0
10
0
10
0
10
3.7
4.6
10
1
981
Bahrain
Barbados
Botswana
Brazil
Chile
Croatia
Czech Republic
Estonia
Gabon
Grenada
Hungary
Korea, Republic
Lebanon
Malaysia
Mauritius
Mexico
Oman
Panama
Poland
Saudi Arabia
Seychelles
Slovak Republic
St. Kitts and Nevis
St. Lucia
Trinidad and Tobago
Turkey
Uruguay
Venezuela
Average
SD
192
97
93
18
60
113
113
150
90
105
70
64
83
173
127
45
88
189
50
78
124
116
129
144
85
40
43
54
98
50
0.3
0.8
2.1
1.2
6.8
2.0
3.2
4.2
2.1
7.5
5.6
0.9
1.8
1.3
3.0
2.1
0.3
2.6
3.1
6.6
1.1
1.3
1.1
0.9
1.4
4.2
2.6
0.9
8.0
1.7
7.8
7.3
5.8
0.5
0.7
3.4
3.7
3.1
0.2
3.8
6.6
0.6
4.5
0.3
2.7
0.6
0.1
0.1
1.6
1.0
1.6
1.9
1.7
9.0
16.4
1.6
9.6
8.4
3.6
1.1
16.6
20.0
7.3
7.2
40.2
14.1
39.3
6.1
2.9
10.7
6.7
46.1
40.2
27.9
7.2
4.1
5.6
8.6
14.2
13.3
10
0
1
0
0
0
0
3
0
0
0
0
9
7
3
0
10
10
0
7
9
0
0
0
5
0
7
3
2.9
3.9
(continued)
982
APPENDIX Continued
Trade/GDP (%)a
Lower-middle income
Albania
Algeria
Belarus
Belize
Bolivia
Bosnia/Herzegovina
Bulgaria
Cape Verde
Colombia
Costa Rica
Djibouti
Dominica
Dominican Republic
Ecuador
Egypt, Arab Republic
El Salvador
Equatorial Guinea
Fiji
Georgia
Guatemala
Guyana
Iran, Islamic Republic
Iraq
Jamaica
FDI/GDP (%)b
60
51
114
113
49
2.9
0.1
0.8
3.0
4.3
95
77
35
84
113
116
88
57
54
54
151
117
73
43
185
46
1.3
3.0
3.7
3.5
0.4
11.6
2.8
2.6
1.3
0.2
123
5.2
Investment/GDP (%)c
0.0
0.2
1.0
0.1
0.0
13.6
16.9
8.5
6.5
0.8
6.1
0.2
11.6
16.0
0.7
0.2
0.5
4.0
0.8
40.4
12.0
10.2
25.1
12.6
0.6
9.0
Years With Open

Capital Accountse
0
0
0
0
10
2
0
0
0
4
10
0
1
8
2
3
0
0
3
10
3
0
0
3
983
Jordan
Kazakhstan
Kiribati
Latvia
Lithuania
Macedonia, FYR
Maldives
Marshall Islands
Micronesia, Federated States
Morocco
Namibia
Papua New Guinea
Paraguay
Peru
Philippines
Romania
Russian Federation
Samoa
South Africa
Sri Lanka
St. Vincent/Grenadines
Suriname
Swaziland
Syrian Arab Republic
Thailand
Tonga
Tunisia
Ukraine
Uzbekistan
135
91
132
106
106
91
130
1.6
4.4
1.2
3.5
2.1
29.2
58
113
98
48
26
76
55
53
108
47
76
120
33
167
67
83
79
89
69
94
1.0
4.0
3.9
1.4
5.1
2.1
1.2
0.9
0.2
1.7
16.8
1.0
1.5
10.6
11.4
7.8
0.7
2.0
0.8
2.2
0.5
3.3
2.0
0.3
0.5
0.3
0.8
3.7
0.7
3.1
2.8
3.4
37.8
3.1
0.4
1.7
2.6
0.6
0.3
0.6
16.7
31.8
24.1
16.1
10.5
25.9
4.0
11.7
2.3
21.6
40.8
47.4
11.2
17.0
49.3
27.7
2
0
7
4
6
0
10
4
4
0
0
0
3
6
0
.
0
0
0
0
0
0
0
0
2
0
0
0
(continued)
984
APPENDIX Continued
Trade/GDP (%)a
Vanuatu
Yugoslavia, FR
Average
SD
Low income
Afghanistan
Angola
Armenia
Azerbaijan
Bangladesh
Benin
Bhutan
Burkina Faso
Burundi
Cambodia
Cameroon
Central African Republic
Chad
China
Comoros
Congo, Democratic Republic
Congo, Republic
Cote dIvoire
Eritrea
Ethiopia
FDI/GDP (%)b
123
13.2
87
36
3.2
3.2
118
94
85
24
58
77
39
34
49
41
42
47
35
60
44
120
69
108
29
4.8
0.1
Investment/GDP (%)c
56.5
1.6
3.2
19.9
14.4
0.1
1.3
23.6
21.7
0.1
0.3
1.0
1.4
5.4
0.5
0.5
19.0
0.6
19.8
14.5
34.7
1.2
0.1
29.1
17.1
Years With Open

Capital Accountse
10
0
2.2
3.2
0
0
3
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
985
Gambia
Ghana
Guinea
Guinea-Bissau
Haiti
Honduras
India
Indonesia
Kenya
Kyrgyz Republic
Lao PDR
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritania
Moldova
Mongolia
Mozambique
Myanmar
Nepal
Nicaragua
Niger
Nigeria
Pakistan
Rwanda
Sao Tome/Principe
Senegal
124
54
45
49
33
78
23
52
65
78
54
149
2.5
47
61
54
100
120
109
65
4
49
78
38
80
37
33
111
62
0.4
42.8
33.1
46.3
0.6
0.2
1.7
0.7
2.1
0.2
2.8
1.5
1.6
0.7
1.0
0.4
1.9
0.0
1.3
0.1
24.3
5.0
13.6
0.0
54.6
47.2
16.3
0.0
0.0
12.5
0.1
1.4
1.8
4.3
1.0
0.2
0.1
14.1
28.5
19.0
1.1
0.8
0.0
26.1
29.5
1.0
0.1
8
0
0
1
0
2
0
7
3
3
0
0
3
0
0
0
0
1
0
0
0
0
3
0
1
0
0
0
0
(continued)
986
APPENDIX Continued
Trade/GDP (%)a
Sierra Leone
Solomon Islands
Somalia
Sudan
Tajikistan
Tanzania
Togo
Turkmenistan
Uganda
Vietnam
Yemen, Republic
Zambia
Zimbabwe
Average
SD
World
Average
SD
46
120
48
187
54
69
FDI/GDP (%)b
Investment/GDP (%)c
0.6
4.9
1.5
0.2
31
76
61
75
66
66
34
1.8
1.0
0.3
1.4
1.4
83
48
3.0
2.8

40.6
54.7
Years With Open

Capital Accountse
0.6
0.3
0.4
16.5
21.9
18.2
25.7
13.8
0
0
0
0
0
0
1
0
2
0
4
3
0
0.7
1.6
3.0
4.5
16.3
15.2
2.6
3.6
0.1
Note: GDP = gross domestic product, FDI = foreign direct investment, OECD = Organization of Economic Cooperation Development, FYR = Former Yugoslav Republic, FR = federal republic, PDR = Peoples Democratic Republic.
a. Average for 1990-1996.
b. Average for 1990-1997.
c. Average for 1990-1997.
d. Average for 1990-1995.
e. Number of years in 1990s with open capital accounts.
987
REFERENCES
Alesina, Alberto, & Spolaore, Enrico. (1997). On the number and size of nations. Quarterly
Journal of Economics, 112, 1027-1056.
Alt, James E., Frieden, Jeffry, Gilligan, Michael J., Rodrik, Dani, & Rogowski, Ronald. (1996).
The political economy of international trade. Comparative Political Studies, 29, 689-717.
Amsden, Alice H. (1989). Asias next giant. New York: Oxford University Press.
Balassa, Bela. (1985). Exports, policy choices and economic growth in developing countries
after the 1973 oil shock. Journal of Development Economics, 18(2), 23-35.
Baldwin, Richard E., & Martin, Philippe. (1999). Two waves and globalization: Superficial similarities, fundamental differences (Working Paper No. 6904). Cambridge, MA: NBER.
Barro, Robert. (1997). Determinants of economic growth: A cross-country empirical study.
Cambridge, MA: MIT Press.
Bates, Robert H. (1981). Markets and states in tropical Africa. Berkeley: University of California Press.
Beck, Thorsten, Clarke, George, Groff, Alberto, Keefer, Philip, & Walsh, Patrick. (2000). New
tools and new tests in comparative political economy: The database of political institutions.
Groff, Switzerland: World Bank.
Bhagwati, Jagdish. (1968). Distortions and imiserizing growth: A generalization. Review of
Economics Studies, 35, 481-485.
Bhagwati, Jagdish. (1998). The capital myth. Foreign Affairs, 77(3), 7-12.
Blinder, Alan S. (1999). Eight steps to a new financial order. Foreign Affairs, 78(5), 51-63.
Blomstrom, Magnus, Lipsey, Robert E., & Zejan, Mario. (1994). What explains developing
country growth? (Working Paper No. 4132). Cambridge, MA: NBER.
Bordo, Michael D., Eichengreen, Barry, & Irwin, Douglas A. (1999). Is globalization today
really different than globalization a hundred years ago? (Working Paper No. 7195). Cambridge, MA: NBER.
Borensztein, Eduardo, De Gregorio, Jose, & Lee, Jong-Wha. (1998). How does foreign direct
investment affect economic growth? Journal of International Economics, 45, 115-135.
Brooks, Stephen. (2000). The globalization of production and international security. Unpublished doctoral dissertation, Yale University.
Bryant, Ralph C. (1987). International financial intermediation. Washington, DC: Brookings
Institution.
Construction and the internetnew wiring. (2000, January 15). Economist. Retrieved from the
World Wide Web at http://www.economist.com/tfs/aarchive_tframeset.html
Corsetti, Giancarlo, Pesenti, Paolo, & Roubini, Nouriel. (1999). Paper tigers: A model of the
Asian crisis. European Economic Review, 43, 1211-1236.
Dooley, Michael P. (1995). A survey of academic literature on controls over international capital
transactions (Working Paper No. 5352). Cambridge, MA: NBER.
Drezner, Daniel. (1998). Globalizers of the world, unite! Washington Quarterly, 21(1), 207-225.
Dunning, John H. (1993). Multinational enterprises and the global economy. Reading, MA:
Addison-Wesley.
Dunning, John H. (Ed.). (1997). Governments, globalization and international business. Oxford,
UK: Oxford University Press.
Easterly, William, King, Robert, Levine, Ross, & Rebelo, Sergio. (1994). Policy, technology
adoption, and growth (Working Paper No. 4681). Cambridge, MA: NBER.
Edwards, Sebastian. (1993). Openness, trade liberalization and economic growth in developing
countries. Journal of Economic Literature, 31, 1358-1393.
988
Edwards, Sebastian. (1999). How effective are capital controls? Journal of Economic Perspectives, 13(4), 65-84.
Feldstein, Martin, & Horioka, Charles. (1980). Domestic savings and international capital flows.
Economic Journal, 90, 314-329.
Finance: Trick or treat. (1999, October 23). Economist, pp. 91-92.
Findlay, Ronald. (1978). Relative backwardness, foreign direct investment and the transfer of
technology. Quarterly Journal of Economics, 92, 1-16.
Finger, J. Michael, Ingco, Merlinda D., & Reincke, Ulrich. (1996). The Uruguay round, statistics on tariff concessions given and received. Washington, DC: World Bank.
Fischer, Stanley. (1998). Capital account liberalization and the role of the IMF. In Should the
IMF pursue capital account convertibility? Essays in international finance 207 (pp. 1-10).
Princeton, NJ: Department of Economics, Princeton University.
Frankel, Jeffrey A. (1993). On exchange rates. Cambridge, MA: MIT Press.
Frankel, Jeffrey A., & MacArthur, Alan. (1988). Political vs. currency premia in international
real interest differentials: A study of forward rates for 24 countries. European Economic
Review, 32, 1083-1121.
Frankel, Jeffrey A., & Romer, David. (1999). Does trade cause growth? American Economic
Review, 89, 379-399.
Frieden, Jeffry A., & Rogowski, Ronald. (1996). The impact of the international economy on
national policies. In Robert O. Keohane & Helen V. Milner (Eds.), Internationalization and
domestic politics (pp. 25-47). New York: Cambridge University Press.
Garber, Peter M. (1998). Buttressing capital account liberalization with prudential regulation
and foreign entry. In Should the IMF pursue capital account convertibility? Essays in international finance 207 (pp. 28-33). Princeton, NJ: Department of Economics, Princeton
University.
Garrett, Geoffrey. (1998a). Global markets and national politics: Collision course or virtuous
circle? International Organization, 52, 787-824.
Garrett, Geoffrey, Guisinger, Alexandra, & Sorens, Jason P. (2000). The political economy of
capital account liberalization. Unpublished manuscript, Yale University.
Garrett, Geoffrey, & Lange, Peter. (1995). Internationalization, institutions and political change.
International Organization, 49, 627-656.
Goldstein, Judith. (1997). International law and domestic institutions. International Organization, 50, 541-564.
Graham, Edward M., & Krugman, Paul R. (1991). Foreign direct investment in the United States
(2nd ed.). Washington, DC: Institute for International Economics.
Gruber, Lloyd. (2000). Ruling the world. Princeton, NJ: Princeton University Press.
Guillen, Mauro. (in press). Is globalization civilizing, destructive or feeble? Annual Review of
Sociology.
Guisinger, Alexandra. (2000). The supporting conditions for trade liberalization. Unpublished
manuscript, Yale University.
Gurr, Ted R., & Jaggers, Alison. (1998). Polity III updateregime characteristics, 1800-1998
(dataset). Polity. Retrieved from the World Wide Web at http://www.bsos.umd.edu/ cidcm/
polity/
Helleiner, Eric. (1994). States and the reemergence of global finance. Ithaca, NY: Cornell University Press.
International Labor Organization. (1997). World labor report, 1997-1998. Geneva, Switzerland:
Author.
989
International Monetary Fund. (2000). International financial statistics [CD-ROM]. Washington, DC: Author.
Jones, Geoffrey. (1996). The evolution of international business: An introduction. New York:
Routledge.
Katzenstein, Peter J., Keohane, Robert O., & Krasner, Stephen D. (1998). International organization and the study of world politics. International Organization, 52, 647-686.
Kindleberger, Charles P. (1984). A financial history of western Europe. London: Allen and
Unwin.
Krasner, Stephen D. (1999). Sovereignty. Princeton, NJ: Princeton University Press.
Krueger, Anne O. (1997). Trade policy and economic development. American Economic
Review, 87, 1-22.
Krugman, Paul R. (1987). Is free trade passe? Journal of Economic Perspectives, 11(2), 131-144.
Krugman, Paul R. (1994, November/December). The myth of Asias miracle. Foreign Affairs,
62-78.
Krugman, Paul R. (1999). Capital control freaks. Slate. Retrieved September 27 from the World
Wide Web at http://slate.msn.com/
Krugman, Paul R., & Obstfeld, Maurice. (1991). International economics: Theory and policy
(2nd ed.). New York: HarperCollins.
Kurzer, Paulette. (1993). Business and banking. Ithaca, NY: Cornell University Press.
Lawrence, Robert Z., & Weinstein, David E. (1999). Trade and growth: Import-led or
export-led? (Working Paper No. 7264). Cambridge, MA: NBER.
Leblang, David A. (1997). Domestic and systems determinants of capital controls in the developed and developing world. International Studies Quarterly, 41, 435-454.
Lindblom, Charles E. (1977). Politics and markets. New York: Basic Books.
Maddison, Angus. (1995). Monitoring the world economy. Paris: OECD.
Magee, Stephen P., Brock, William A., & Young, Leslie. (1989). Black hole tariffs and endogenous policy theory. New York: Cambridge University Press.
Mallampally, Padma, & Sauvant, Karl P. (1999, March). Foreign direct investment in developing
countries. Finance and Development, 34-37.
Marston, Richard C. (1995). International financial integration. New York: Cambridge University Press.
McGillivray, Fiona. (1997). Party discipline as a determinant of the endogenous formation of
tariffs. American Journal of Political Science, 41, 584-607.
Meddling in the currency market. (1999, November 20). Economist, p. 96.
Mishkin, Frederic S. (1999). Global financial instability. Journal of Economic Perspectives,
13(4), 3-20.
Montiel, Peter J. (1995). Capital mobility in developing countries. World Bank Economic
Review, 8, 311-350.
Moravcsik, Andrew. (1998). The choice for Europe. Ithaca, NY: Cornell University Press.
Morris, Stephen, & Shin, Hyun. (1999). Coordination risk and the price of debt. Unpublished
manuscript, Yale University.
Obstfeld, Maurice. (1998). The global capital market: Benefactor or menace? (Working Paper
No. 6559). Cambridge, MA: NBER.
Obstfeld, Maurice, & Taylor, Alan M. (1997). The great depression as a watershed: International capital mobility in the long run (Working Paper No. 5960). Cambridge, MA: NBER.
Ohmae, Kenichi. (1995). The end of the nation state. New York: Free Press.
990
Olson, Mancur. (1993). Dictatorship, democracy and development. American Political Science
Review, 87, 567-576.
Przeworski, Adam, & Limongi, Fernando. (1993). Political regimes and economic growth. Journal of Economic Perspectives, 7(3), 51-69.
Rodriguez, Francisco, & Rodrik, Dani. (1999). Trade policy and economic growth: A skeptics
guide to the cross-national evidence (Working Paper No. 7081). Cambridge, MA: NBER.
Rodrik, Dani. (1994). What does the political economy literature on trade (not) tell us that we
ought to know? (Working Paper No. 4870). Cambridge, MA: NBER.
Rodrik, Dani. (1997). Has globalization gone too far? Washington, DC: Institute for International Economics.
Rodrik, Dani. (1998). Who needs capital-account convertibility? In Should the IMF pursue capital account convertibility? Essays in international finance 207 (pp. 55-65). Princeton, NJ:
Department of Economics, Princeton University.
Rodrik, Dani. (1999). The new global economy and developing countries. Washington, DC:
Overseas Development Council.
Rodrik, Dani. (2000). How far will international economic integration go? Journal of Economic
Perspectives, 14(1), 177-186.
Rogoff, Kenneth. (1999). International institutions for reducing global financial instability.
Journal of Economic Perspectives, 13(4), 21-42.
Rogowski, Ronald. (1987). Trade and the variety of democratic institutions. International Organization, 41, 203-223.
Rogowski, Ronald. (1989). Commerce and coalitions. Princeton, NJ: Princeton University Press.
Rosecrance, Richard N. (1999). The rise of the virtual state: Wealth and power in the coming
century. New York: Basic Books.
Rosenbluth, Frances McCall. (1996). Internationalization and electoral politics in Japan. In
Robert O. Keohane & Helen V. Milner (Eds.), Internationalization and domestic politics
(pp. 137-158). New York: Cambridge University Press.
Sachs, Jeffrey D. (1996). Reforms in eastern Europe and the former Soviet Union in light of the
east Asian experiences (Working Paper No. 5404). Cambridge, MA: NBER.
Sachs, Jeffrey D., & Radelet, Steven. (1998). The east Asian financial crisis. Brookings Papers
on Economic Activity, 1, 1-74.
Sachs, Jeffrey D., & Warner, Andrew. (1995). Economic reform and the process of global economic integration. Brookings Papers on Economic Activity, 1995(1), 1-118.
Strange, Susan. (1998). Mad money: When markets outgrow governments. Ann Arbor: University of Michigan Press.
Thurow, Lester C. (1997). A global economy. Foreign Policy Forum, 1, 61-83.
Tsebelis, George. (1995). Decision making in political systems. British Journal of Political Science, 25, 289-326.
United Nations Conference on Trade and Development. (1995). World investment report 1995.
Geneva, Switzerland: United Nations.
Wade, Robert. (1990). Governing the market. Princeton, NJ: Princeton University Press.
Wade, Robert. (1996). Globalization and its limits. In Suzanne Berger & Robert Dore (Eds.),
National diversity and global capitalism (pp. 60-88). Ithaca, NY: Cornell University Press.
Williamson, Oliver E. (1975). Markets and hierarchies. New York: Free Press.
World Bank. (1997). Global economic prospects and the developing countries: 1997. Washington, DC: Author.
World Bank. (1999). World development indicators [CD-ROM]. Washington, DC: Author.
World Trade Organization. (1996). Annual report: 1996. Geneva, Switzerland: Author.
991
Yergin, Daniel, & Stanislaw, Joseph. (1999). The commanding heights: The battle between government and the marketplace that is remaking the modern world. New York: Simon and
Schuster.
Geoffrey Garrett, professor of political science at Yale University, is author of Partisan

Politics in the Global Economy. His current research focuses on the political economy of
globalization and the institutional structure of the European Union.

The Causes of Globalization

Uploaded by

Copyright:

Available Formats

The Causes of Globalization

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Causes of Globalization

Uploaded by

Copyright:

Available Formats

COMPARATIVE

THE CAUSES OF GLOBALIZATION

here is little disagreement these days that globalization is changing

COMPARATIVE POLITICAL STUDIES / August-September 2000

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

It is easy, however, to endogenize these ideological changes in terms of

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

THE PARAMETERS OF CONTEMPORARY GLOBALIZATION

Garrett / CAUSES OF GLOBALIZATION

Figure 1. Global market integration, 1970-1997.

COMPARATIVE POLITICAL STUDIES / August-September 2000

Figure 2. Trade policy, 1973-1995.

Figure 3. Capital flows and capital account policy, 1970-1997.

Garrett / CAUSES OF GLOBALIZATION

Figure 3 reveals a similar pattern with respect to international capital

Source: Income categories from World Bank (1999).

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

Years With Open

But soothsayers would probably want to highlight instances of high and

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

ful purpose, however, of highlighting two things. First, there is something

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

trend to declining barriers could be the product either of a voluntary choice by

The technological determinism thesis regarding international finance is

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

Garrett / CAUSES OF GLOBALIZATION

TRADE AND MULTINATIONAL PRODUCTION

No one would deny that technological change has significantly affected

COMPARATIVE POLITICAL STUDIES / August-September 2000

THE COSTS OF CLOSURE

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

ization) that freer trade leads to the undersupply of beneficial production

Garrett / CAUSES OF GLOBALIZATION

policy by using an instrumental variables approach in which unalterable aspects

COMPARATIVE POLITICAL STUDIES / August-September 2000

Garrett / CAUSES OF GLOBALIZATION

crisis. Instead of humming along in a good growth equilibrium as Mexico

Despite this acknowledgment, Fischer (1998, p. 2) is nonetheless happy to

COMPARATIVE POLITICAL STUDIES / August-September 2000

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

Open Capital Accountsb

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

Garrett / CAUSES OF GLOBALIZATION

COMPARATIVE POLITICAL STUDIES / August-September 2000

Figure 4. The causes of globalization.

Technological determinism provides a parsimonious explanation for the