STEPHEN H. AXILROD
With good reason, the term "globalization" became a buzzword in the 1980s. The financial world is increasingly an internationally integrated one.
Globalization has a number of implications for businesses and public policy, including a key policy question about the extent to which countries' abilities to have independent economic policies have been eroded. With respect to monetary policies, for example, before the 1990s the discussion of policy independence usually referred to the domestic political independence of central banks. In the 1990s the independence discussion will refer more and more to whether globalized markets are limiting the economic independence of nations and central banks.
The proximate cause of globalization has been the elimination of exchange and capital controls that has occurred since the 1970s. The elimination of those controls is necessary, but not sufficient, for interdependence. People in one country must also be motivated to take advantage of opportunities in other countries, and must have the physical opportunity to do so. Both the motivation and the opportunities burgeoned in the 1980s and will develop further in the 1990s, which accounts for increasing globalization.
Besides deregulation and changing laws, two events have increased the amount of interdependence. One is quantitative--the emergence of Japan in the global market; and the other is qualitative--the emergence of a new financial technology.
While changing conditions within Japan pushed it to emerge as a force in global markets in the 1980s, Japan did not emerge on its own. Its