Vulnerability of socio-economic systems to globalization

Experimental visualization of narrower problems
Other Names:
Capitalist transnationalization of international economic relations
Globalizing competitive capitalism
Globalization of trade and investment

Globalization of the world system has progressed in three phases: expansion of trade, internationalization of financial markets, through increasing flows of investment accompanied by increased corporate and research networking. This accelerating interdependence has as its primary agent the transnational enterprise and is driven by the revolution of information and communication technology. Although globalization enhances opportunities for growth (through improved efficiency, methods of production, and new technologies), risk and vulnerability increase because globalization creates pressures for convergence policies which threaten national sovereignty. It enhances competition amongst systems and has a low tolerance for system diversity engendered by different cultural histories and institutional preferences.

Because of the erosion of national markets, the state is now a weakened instrument against the forces of globalization in the face of the networks of transnational corporations. Thus in a context of market deregulation and liberalization, financial and industrial mobility at world level bypasses the regulatory frameworks of the nation-state. In a growing number of financial and industrial sectors there is a strong tendency towards oligopolistic structures. Labour legislation and social welfare programmes are weakened or slowly dismantled while mass unemployment has become one of the major social issues. Indifference to those marginalized by these processes increases, notably under the form of increasing intolerance, social exclusion and delinking between regions. Finally, in order to increase competitiveness, there is increasing pressure for the cancellation of regulations concerning environmental protection.

A truly globalized economy would be characterized by four features. It would be determined by primarily international processes, rather than the differential performance of national economics or of corporate and government elites. Domestic economies would be subsumed by open world market processes and governments would become merely local service providers, subordinate to the decision-making of major corporations and markets. The main players would thus become the TNCs without any particular home base. Globalization would signal a final decline in the political influence and bargaining power of organized labour which would be effectively localized. Finally states that rejected the dominant logic of economic efficiency in favour of national political considerations would lose out, as would those that challenged the transnational corporations.


Turbulence in the ERM in the period 1992-1993 has reawakened fears that even trade blocs such as the EEC/EU have limited economic influence when confronted by internationally mobile capital.


If capitalism were collapsing, would we see the warning signs? (Willis Harman).

Problem Type:
F: Fuzzy exceptional problems
Date of last update
04.12.2017 – 13:55 CET