Coping with Globalization

By Aseem Prakash; Jeffrey A. Hart | Go to book overview
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4

Globalization and federalism

Governance at the domestic level

Alfred C. Aman, Jr.


Introduction

Globalization, the increasing integration of factor, input, and product markets coupled with the increasing salience of multinational enterprises, has affected the ways in which states at the national and local levels interact with the private sector. It also has influenced the kinds of problems deemed politically appropriate for collective, regulatory action. Various states have attempted to cope with globalization by downsizing and shifting, sometimes dramatically, from state regulatory regimes to increasing reliance on markets and market forces. As Spar and Yoffie point out in Chapter 1, governments in some developing countries may have also indulged in "races to the bottom" by competitively diluting their laws to attract foreign investment (for a critique of the race-to-the-bottom thesis in fiscal affairs, see Kudrle's chapter). As a result of globalization pressures, deregulation, privatization and various forms of cost-benefit analyses have dominated the regulatory reform agenda in the US as well as in many other countries. These kinds of reforms usually are legislative in nature. They represent current political choices on the part of government to repeal some statutes, reform others, or abolish some administrative agencies and streamline others.

These kinds of statutory changes have their parallels in the private sector and they have not been the only kind of legal responses to the global economy. There have been shifts in constitutional philosophy and approach as well. At the private level, corporate change and reform during this period of increasing globalization often has been typified by greater decentralization. Many of the same economic pressures that drive companies to seek more efficient structures as well as production processes are affecting domestic governance as well.

The relationship of state power to centralized power has been undergoing a resurgence of interest in the US and elsewhere. There has been an increasing trend not only towards markets and market approaches, but the devolution of governmental power to state and local levels. Welfare reform is an example of this in the US. But devolution of federal power is not

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