Globalization: An Analytical Framework

Abstract

The paradigm example of globalization is the global integration of financial markets. Globalization has significant implications for New Zealand--a small island nation far from the centers of world capital--that flow from the particular characteristics of New Zealand\u27s economy. In order to sustain current levels of economic growth, the New Zealand government has adopted a liberal policy to attractf oreign capital. In the future, a major taskf or New Zealand is to align further the internal logic of the deregulatory process as expressed in domestic legislation with an international environment in which domestic economies are more globally integrated. This article argues that the concept of globalization provides a new analytical framework for accomplishing that task. The article commences by identifying different meanings of globalization and key drivers in the globalization of the financial markets. Because globalization is an ambiguous concept, the second half of the paper attempts to sharpen understanding of the concept by considering concrete instances in which globalization has affected New Zealand. Examples provided are: the crash of 1987; the improvement of New Zealand\u27s international investment position through a noticeable increase in foreign investment; capital shortage; capital flight; political debate in New Zealand; New Zealand\u27s tax treatment of foreign investors; and exemptions for foreign issuers. Here, it is argued that as far as domestic policymakers are concerned, globalization demands, first, a clear set ofpriorities in the particular area (a microscopic view), and, second, a global view of the subject matter (a macroscopic view).The article concludes by suggesting n analyticalf rameworkf or domestic policymakers and legislators addressing globalizationissues. Complex systems can be viewed as the subject of macroscopic knowledge; hence, globalization can be characterized as macroscopic knowledge since it is complex, conceptual, and fuzzy. By contrast, domestic legislation can be characterized as microscopic knowledge; i.e.,focused on one domain in which there is little or no contradiction.On this view, globalization can be used as a tool to examine the context of any given domestic legislation, thereby enriching our understanding of specific legislation by introducing dynamic and predictive criteria. The concept of globalization radiates the possibility of a new analytical framework for policymakers. Coupled with the macroscopic/microscopic viewpoint, it enables us to avoid the pitfall of domestic introspection by introducing criteria of internal and external coherence. Internal coherence asks whether a proposed domestic policy is congruent with policy in related areas. For example, is there regulatory symmetry between domestic legislation in taxation, securities, and foreign investment areas? External coherence asks the globalization question: How should domestic legislation reflect change in the international context