Coping with Globalization

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

Part III

This part identifies challenges posed by globalization and the coping strategies available to governments in two arenas: currency policy and fiscal policy. Benjamin Cohen examines strategies to cope with the deterritorialization of currencies while Robert Kudrle discusses whether economic globalization saps the fiscal power of the state, under what conditions, and how governments can respond to it.

Cohen points out that when addressing issues of global finance, it is often assumed that currencies are sovereign within their respective territorial jurisdictions, whether within a single country or a monetary union. However, cross-border competition among currencies has become increasingly prevalent. Economic actors are no longer restricted to their home currency as they go about their daily business. Monetary sovereignty of states was predicated on governments being the main source of money. Where monopoly once existed in the supply of money, there is now an oligopoly. As a result, there are a finite number of autonomous suppliers-the national governments-vying to manage the demand for their respective currencies. Cohen points out that globalized money, in essence, is a political contest for market loyalty.

How can governments cope with the growing deterritorialization of money? Cohen points out that like firms in an oligopolistic industry, states have only a limited number of strategies available to defend their currency's market position. He identifies four categories of such strategies: market leadership, market preservation, market followership, and market alliance. All involve some combination of persuasion and coercion designed to influence preferences of users, either their own citizens or others. He analyzes both the conditions that determine state choice among the alternative strategies and factors determining their practical success or failure.

Kudrle examines whether globalization has indeed diminished the fiscal power of the state, and if so, how can states cope with it. There is a burgeoning literature on international taxation issues that has paralleled the more general literature on globalization. Kudrle marries them systematically with an explicit focus on how state action is constrained and what

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Coping with Globalization
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Tables and Figures viii
  • Preface xi
  • Coping with Globalization - An Introduction 1
  • Part I 27
  • 1 - A Race to the Bottom or Governance from the Top? 31
  • 2 - Convergence and Sovereignty 52
  • 3 - Environmental Regulations and the Global Strategies of Multinational Enterprises 77
  • 4 - Globalization and Federalism 94
  • Part II 115
  • 5 - Technonationalism and Cooperation in a Globalizing Industry 117
  • 6 - Dialing for Dollars 148
  • Part III 171
  • 7 - Marketing Money 173
  • 8 - Does Globalization Sap the Fiscal Power of the State? 198
  • Coping with Globalization - A Conclusion 225
  • Index 239
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