Globalization is a threat to weak or capriciously governed states. But it also opens the way for effective, disciplined states to foster development and economic well-being, and it sharpens the need for effect international cooperation in pursuit of global collective action.

Embracing External Competition:

The state still defines the policies and rules for those within its jurisdiction, but global events and international agreements are increasingly affecting its choices.

People are now more mobile, more educated, and better informed about conditions elsewhere. And involvement in the global economy tightens constraints on arbitrary state action, reduces the state’s ability to tax capital, and brings much closer financial market scrutiny of monetary and fiscal policies.


“Globalization” is not yet truly global-it has yet to touch a large chunk of the world economy. Roughly half of the developing world’s people have been left out of the much-discussed rise in the volume of international trade and capital flows since the early 1980s. Governments’ hesitance to open up to the world economy is partly understandable.

Joining the global economy, like devolving power from the center, carries risks as well as opportunities. For example, it can make countries more vulnerable to external price shocks or to large, destabilizing shifts in capital flows.

This makes the state’s role all the more critical; both in handling such shocks and in helping people and firms grasp the opportunities of the global marketplace. But the difficulties should not be exaggerated, particularly when laid against the risks of being left out of the globalization process altogether.

The cost of not opening up will be a widening gap in living standards between those countries that have integrated and those that remain outside. For lagging countries the route to higher incomes will lie in pursuing sound domestic policies and building the capability of the state.


Integration gives powerful support to such policies-and increases the benefits from them-but it cannot substitute for them.

In that sense, globalization begins at home. But multilateral institutions such as the World Trade Organization have an important role to play in providing countries with the incentive to make the leap.

Promoting Global Collective Action

Global integration also gives rise to demands for states to cooperate to combat international threats such as global warming. Economic, cultural, and other differences between countries can make such cooperation difficult-even, at times, impossible. But stronger cooperation is clearly needed for at least five major concerns that transcend national borders:


Managing regional crises:

The threat of nuclear war between the superpowers has given way to a mushrooming of smaller conflicts, entailing costly problems of refugee relief and rehabilitation.

No solid international framework exists for managing these conflicts or helping avoid them. A more integrated assessment of how state policies (and international assistance) help manage nascent conflict is needed in designing economic and social policy.

Promoting global economic stability:


Concern has been growing about the potentially destabiliz­ing effects of large and rapid flows of portfolio capital, particularly when a crisis in one country can spill over into other markets.

A variety of international mechanisms have been suggested to guard against such problems, and the International Monetary Fund has recently created a new facility to help members cope with sudden financial crises. But prudent and responsive economic policies at home will be countries’ best protection. Growing international labor mobility is also raising a host of issues requiring international collective action.

» Protecting the environment:

Urgent global environmental issues include climate change, loss of biodiversity, and protection of international waters. International collective action can help through better coordination, greater public awareness, more effective technological transfer, and better na­tional and local practices.


Progress has been slow, however, raising the worry that it will take a major environmental catastrophe to goad countries into concerted action.

» Fostering basic research and the production of knowledge:

Now being revitalized to meet re­newed challenges in food production, the Consultative Group on International Agricultural Research has shown how technology can be developed and disseminated through international collective action.

Similar consultative mechanisms need to be developed to tackle other pressing research problems in the domains of environmental protection and health.


» Making international development assistance more effective:

To become more effective, foreign aid needs to be tied more closely to the policies of the recipient countries. A high priority for aid agencies is to systematically channel resources to poor countries with good policies and a strong commitment to institutional reinvigoration.