The Effects of Globalization on State—Business Relationships: A Conceptual Framework

Do governments matter anymore? Given the rhetoric on the globalization of business practices, the apparently unstoppable growth of multinational enterprises following transnational mergers and acquisitions and claims by some that state power has been eroded so much as to make centralized decision-making, especially by smaller states, irrelevant, one might think not. When one examines the international spread of financial markets, the interpenetration of industries across borders, the spatial reorganization of production and the growth of supranational trade associations, it is perhaps easy to assume that globalization is ubiquitous and its impact has emasculated the state. Even amongst those who question the one-way causality implicit in many popularizers of global trends (Mittelman, 2000), there is a tendency to adduce a powerful logic to the dynamics of globalization. With technology given primacy in the almost instantaneous spread of information, the communications revolution has eroded many of the cultural barriers in societies and transformed many aspects of civil society (Hutton and Giddens, 2000). In doing so, states are assumed to have lost much of their potency as arbiters of change and defenders of last resort. Having domesticated the harsher aspects of the market economy (Kuttner, 2000), they have been relegated to the sidelines of a self-regulated global economy of the type that Adam Smith might easily have envisioned.