Essays in Honor of Lance Taylor
Edited by Amitava Krishna Dutt
Chapter 20: Institutional challenges of globalization and the developing countries
Andrés Solimano INTRODUCTION Globalization has become both a household term and an important historical phenomenon. The geopolitics of globalization has several precedents: the end of the cold war, the collapse of communism and a reconﬁguration in the balance of power towards Western countries and capitalism. The economics of globalization suggests that increased global economic interdependence can be a powerful engine for wealth creation and prosperity. On the other side however, globalization also tends to be associated with frequent ﬁnancial crisis and volatility and its beneﬁts are unevenly distributed across countries and regions. In view of these elements, globalization poses an important challenge to the existing institutional matrix, created in the mid-1940s, composed of the United Nations, the Bretton Woods Institutions (BWIs) and the World Trade Organization (successor of GATT) and other institutions. In turn, at national level globalization tends to reduce the degree of eﬀective autonomy for national governments to pursue their own development goals of growth, stability and social equity. A main challenge of public policy in the era of globalization is the seizing of the opportunities it opens while at the same time managing the tensions and problems it poses, particularly for developing countries. This requires, among other things, addressing the adequacy of the institutional framework (or governance structure), accompanying globalization, a main subject of this chapter. The chapter is organized around several sections. First, it provides an historical background on early and late twentieth century globalization episodes and other main developments of the...
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