Impact of Economic and Financial Globalization on the Sovereignty of States

No state is more important than the other neither is any state in the world a subject of the other. The concept of the independence of states and their legal equality internationally is referred to as state sovereignty and this concept covers all the matters that are permitted by international law. State sovereignty protects any nation from external interference and intrusion by other states that are enjoying their own sovereignty. A country gains sovereignty and independence politically, economically, culturally and socially However, globalization and the rise of the supranational organizations has watered down the concept of state sovereignty because of their immense influence on foreign policy

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International trade has expanded rapidly especially in the sunset years of the 20th century and in the 21st century. The world has become a global village and the flexibility in modern international trade is unprecedented. Foreign investments and capital market flows have peaked and most national economies heavily rely on international trade. The digital revolution brought about by the rise of the internet has revolutionized international trade because geographical barriers have been removed. This has led to the decline in transportation costs encouraging more foreign investments. The volume of international trade has gone up and new technological innovations have led to faster financial transactions. Due to economic globalization, the global economy has become more integrated than ever before. There is a lot of overseas expansion by multinational companies especially from Europe and the USA. Companies like Wal-Mart and Coca-Cola are global trading companies which means that they affect the policies that are made in every country they are located. Corporate alliances are being made more easily due to that transformation in the financial markets that has increased the financial flows. The flexibility in the use of foreign currencies is another factor that has been brought about by financial globalization. Liberalization of trade, development of high-speed communication infrastructures and global competition has revolutionized trade around the world and this has had a heavy impact on the sovereignty of the states. The states have been challenged by this wave of globalization because they are no longer in charge of the dissemination of ideas, development of technology, and control of national economic assets. The role of the state in business has diminished with the entry of multinationals. The private sector seems to be calling the shots on the economic front and the states have been left as mere observers. The governments are losing the control they had on the economy because they no longer have a lot of influence on economic policies. The economic diminution of the state in the face of economic globalization is, therefore, a challenge to the sovereignty they enjoy.

Supranational organizations have come up to challenge the sovereignty of governments. There are many N.G.Os and Transnational organizations are keeping governments on their toes and attracting international pressure should the governments’ fail to meet their national organizations. The organizations are acting as an auditor and have limited the action of governments within their territories. These supranational have become integral parts of global politics though they have interfered with the sovereignty of states. It is not easy to do away with the supranational organizations given their economic influence but their influence on foreign policy can be easily whittled down.

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