{"id":3562,"date":"2026-08-11T22:11:59","date_gmt":"2026-08-11T16:41:59","guid":{"rendered":"https:\/\/forumias.com\/psir\/notes\/globalisation-of-the-world-economy\/"},"modified":"2026-08-12T02:57:29","modified_gmt":"2026-08-11T21:27:29","slug":"globalisation-of-the-world-economy","status":"publish","type":"psir_note","link":"https:\/\/forumias.com\/psir\/notes\/globalisation-of-the-world-economy\/","title":{"rendered":"Globalisation of the world economy"},"content":{"rendered":"<div class=\"n-wrap\">\n<div class=\"n-shell\">\n<div class=\"n-crumb\"><a href=\"\/psir\/psir-notes\/\">PSIR Notes<\/a><span class=\"sep\">\u203a<\/span><a href=\"\/psir\/psir-notes\/#ii-a\">II-A Comparative Political Analysis and International Politics<\/a><span class=\"sep\">\u203a<\/span><span>Globalisation of the world economy<\/span><\/div>\n<header class=\"n-head\">\n<div class=\"n-eyebrow\">Paper I \u00b7 Comparative Political Analysis and International Politics<\/div>\n<h1 class=\"n-title\">Globalisation of the world economy<\/h1>\n<div class=\"n-syl\"><b>Syllabus \u00b7 Paper II-A \u00b7 8<\/b> \u2014 Evolution of the International Economic System : From Brettonwoods to WTO; Socialist economies and the CMEA (Council for Mutual Economic Assistance); Third World demand for new international economic order; <span class=\"cur\">Globalisation of the world economy<\/span>.<\/div>\n<\/header>\n<div class=\"n-grid\">\n  <main class=\"n-body\"><\/p>\n<h3 id=\"meaning-dimensions-and-why-it-emerged\">Meaning, dimensions, and why it emerged<\/h3>\n<ul>\n<li><span class=\"n-lab\">Globalisation<\/span>: the integration of societies, economies and cultures through technology, communications, trade, and flows of capital and people. The term gained currency in the <span class=\"n-term\">1980s<\/span>, though its roots are older.<\/li>\n<li><span class=\"n-term\">Economic globalisation<\/span> involves rising global trade, currency exchange, capital movement, technology diffusion, travel, migration and information exchange.<\/li>\n<\/ul>\n<p><span class=\"n-term\">Reasons for emergence<\/span><\/p>\n<ul>\n<li><span class=\"n-term\">Technological advance<\/span> in transport, communication and information technology.<\/li>\n<li><span class=\"n-lab\">Liberalisation<\/span> \u2014 post-war efforts including GATT (1947) and its evolution into the WTO.<\/li>\n<li><span class=\"n-term\">Multinational corporations<\/span> expanding in search of global markets and production sites.<\/li>\n<li><span class=\"n-term\">An ideological shift<\/span> toward market economies and free trade, seen in China and Eastern Europe.<\/li>\n<li><span class=\"n-lab\">Cultural developments<\/span> \u2014 global media, popular culture, and the spread of English (viewed by some as US cultural hegemony).<\/li>\n<\/ul>\n<h3 id=\"neoliberalism-and-the-washington-consensus\">Neoliberalism and the Washington Consensus<\/h3>\n<ul>\n<li><span class=\"n-sch\">Margaret Thatcher<\/span> in Britain and <span class=\"n-sch\">Ronald Reagan<\/span> in the United States led the turn to <span class=\"n-term\">neoliberalism<\/span>: free markets, deregulation, privatisation, and a smaller state.<\/li>\n<li>After the Cold War, neoliberal globalisation accelerated under US unipolarity, with the <span class=\"n-term\">WTO, IMF and World Bank<\/span> as the coordinating institutions.<\/li>\n<\/ul>\n<blockquote class=\"n-quote\">\n<p><span class=\"n-term\">The Washington Consensus<\/span> Codified by <span class=\"n-sch\">John Williamson<\/span>: <span class=\"n-term\">liberalisation, privatisation, globalisation<\/span> \u2014 enforced through IMF\u2013World Bank conditionality.<\/p>\n<\/blockquote>\n<p><span class=\"n-term\">Features of neoliberal globalisation:<\/span> Trade liberalisation \u00b7 Financial integration \u00b7 Privatisation \u00b7 Technological advance<\/p>\n<ul>\n<li><span class=\"n-lab\">Trade liberalisation<\/span> \u2014 lower tariffs, quotas and barriers.<\/li>\n<li><span class=\"n-lab\">Financial integration<\/span> \u2014 removal of capital controls, and the rise of global financial markets.<\/li>\n<li><span class=\"n-lab\">Privatisation<\/span> \u2014 transfer of public enterprises to private ownership.<\/li>\n<li><span class=\"n-lab\">Technological advance<\/span> \u2014 communication and transport gains enabling global supply chains and digital economies.<\/li>\n<\/ul>\n<h3 id=\"views-of-scholars-winners-and-losers\">Views of scholars; winners and losers<\/h3>\n<ul>\n<li><span class=\"n-sch\">David Harvey<\/span> (<em>A Brief History of Neoliberalism<\/em>): a project to <span class=\"n-term\">restore class power<\/span>, privileging the market over social needs and deepening income inequality and the exploitation of the Third World.<\/li>\n<li><span class=\"n-sch\">Joseph Stiglitz<\/span> (<em>Globalisation and Its Discontents<\/em>): it opened growth for some economies but isolated many developing ones, particularly through IMF-imposed structural adjustment.<\/li>\n<li><span class=\"n-sch\">Thomas Friedman<\/span> (<em>The World is Flat<\/em>): the optimistic reading \u2014 globalisation levelled the playing field across trade, technology and culture.<\/li>\n<li><span class=\"n-sch\">Jagdish Bhagwati<\/span> (<em>In Defense of Globalization<\/em>): India harnessed globalisation well, but its social and environmental costs must not be ignored.<\/li>\n<li><span class=\"n-sch\">Samir Amin<\/span> (<em>Unequal Development<\/em>): an extension of the neo-colonial accumulation strategy, keeping the periphery subordinate to the core.<\/li>\n<\/ul>\n<div class=\"n-tw\">\n<table>\n<thead>\n<tr>\n<th>Winners<\/th>\n<th>Losers<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><span class=\"n-lab\">China, India and Brazil<\/span> \u2014 high growth and industrialisation<\/td>\n<td><span class=\"n-term\">African and Latin American<\/span> economies \u2014 struggling in a trading order dominated by industrialised nations<\/td>\n<\/tr>\n<tr>\n<td><span class=\"n-lab\">Multinational corporations<\/span> \u2014 access to global markets and labour<\/td>\n<td><span class=\"n-lab\">Workers in developed countries<\/span> \u2014 jobs lost, wages stagnant, through outsourcing and automation<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span class=\"n-term\">Impact on the Global South<\/span><\/p>\n<ul>\n<li>Globalisation catalysed liberalisation and poverty reduction in countries like India and China, but also locked much of the South into a subordinate position dependent on Northern technology, finance and market access.<\/li>\n<li>Through the 1980s and 1990s, the IMF and World Bank required indebted countries to run <span class=\"n-term\">Structural Adjustment Programmes<\/span> \u2014 strict fiscal limits, cuts to public spending, privatisation and market opening \u2014 which widened social inequity in many nations.<\/li>\n<\/ul>\n<h3 id=\"2008-the-backlash-and-india\">2008, the backlash, and India<\/h3>\n<p><span class=\"n-term\">The 2008 Global Financial Crisis<\/span><\/p>\n<ul>\n<li>Triggered by the US subprime housing market and market deregulation, it showed that self-regulating markets could fail. <span class=\"n-sch\">Raghuram Rajan<\/span> (<em>Fault Lines<\/em>) traced it to global imbalances, financial integration and income disparities.<\/li>\n<li><span class=\"n-sch\">Susan Strange<\/span> had earlier warned of <span class=\"n-term\">\u201ccasino capitalism\u201d<\/span> and <span class=\"n-term\">\u201cmad money\u201d<\/span> \u2014 unregulated capital surging in speculative bursts, creating unsustainable bubbles.<\/li>\n<li>Deeper and more genuinely global than earlier crises and \u2014 unlike the Asian or dot-com crises \u2014 it originated in the heart of finance capitalism, the United States (<span class=\"n-sch\">Seabrooke<\/span> and <span class=\"n-sch\">Tsingou<\/span>).<\/li>\n<li>It produced political anger against globalisation, a renewed role for the state through stimulus and bank bailouts, and calls for a <span class=\"n-term\">\u201cnew Bretton Woods.\u201d<\/span> The chief institutional result was the <span class=\"n-term\">Financial Stability Board (April 2009)<\/span>, successor to the Financial Stability Forum, from the G20 London summit.<\/li>\n<\/ul>\n<p><span class=\"n-term\">Backlash and the return of protectionism<\/span><\/p>\n<ul>\n<li>The 2010s saw a backlash fed by persistent income disparities and cultural and environmental strain.<\/li>\n<li>Protectionist politics rose with figures like <span class=\"n-term\">Donald Trump<\/span> in the United States and the <span class=\"n-term\">Brexit<\/span> movement in Britain.<\/li>\n<li>The <span class=\"n-term\">US\u2013China trade war (from 2018)<\/span> challenged free-trade principles and global production networks.<\/li>\n<li><span class=\"n-term\">COVID-19<\/span> exposed the fragility of globalised supply chains and reinforced tendencies toward protectionism and self-reliance.<\/li>\n<\/ul>\n<p><span class=\"n-term\">India and globalisation<\/span><\/p>\n<ul>\n<li>India\u2019s integration dates to the <span class=\"n-term\">1991 liberalisation<\/span>, which opened trade, investment and financial markets.<\/li>\n<li><span class=\"n-lab\">Gains<\/span>: high growth on the back of FDI and expanding exports, and a booming <span class=\"n-term\">IT and software services<\/span> sector that made India a leading technology and outsourcing hub.<\/li>\n<li><span class=\"n-lab\">Exposure<\/span>: vulnerability to global shocks, from financial downturns to the pandemic. <span class=\"n-sch\">Jagdish Bhagwati<\/span> praised India\u2019s use of globalisation for growth while warning against neglecting its social and environmental effects.<\/li>\n<\/ul>\n<h3 id=\"challenges-to-the-neoliberal-order\">Challenges to the neoliberal order<\/h3>\n<ul>\n<li><span class=\"n-lab\">Climate change<\/span>: neoliberal economics has often sidelined sustainability. <span class=\"n-sch\">Amartya Sen<\/span> (<em>Development as Freedom<\/em>) argues for growth that includes environmental concern.<\/li>\n<li><span class=\"n-lab\">Digital divide<\/span>: globalisation has deepened the technological gap, leaving many developing countries struggling to catch up.<\/li>\n<li><span class=\"n-lab\">Geopolitical rivalries<\/span>: China\u2019s <span class=\"n-term\">Belt and Road Initiative<\/span> and the rise of <span class=\"n-term\">BRICS<\/span> contest Anglo-Saxon globalisation.<\/li>\n<\/ul>\n<h3 id=\"features-of-global-governance-myth-or-reality\">Features of global governance \u2014 myth or reality?<\/h3>\n<p>The trend toward global governance is clearest in economic policy, where interdependence is deepest and the failure of cooperation causes the clearest damage. <span class=\"n-sch\">Andrew Heywood<\/span> identifies its features:<\/p>\n<p><span class=\"n-lab\">Features:<\/span> Polycentrism \u00b7 Intergovernmentalism \u00b7 Mixed-actor involvement \u00b7 Multilevel processes \u00b7 Deformalisation<\/p>\n<ul>\n<li><span class=\"n-lab\">Polycentrism<\/span> \u2014 multiple institutional frameworks rather than a single one.<\/li>\n<li><span class=\"n-lab\">Intergovernmentalism<\/span> \u2014 states retain influence; institutions favour consensual decisions and hold weak enforcement powers.<\/li>\n<li><span class=\"n-lab\">Mixed-actor involvement<\/span> \u2014 NGOs, TNCs and civil society join states and international organisations, blurring the public\u2013private divide.<\/li>\n<li><span class=\"n-lab\">Multilevel processes<\/span> \u2014 municipal to global, with no single level predominant.<\/li>\n<li><span class=\"n-lab\">Deformalisation<\/span> \u2014 reliance on norm-based, informal regimes over formal legal bodies.<\/li>\n<\/ul>\n<p><span class=\"n-term\">Myth or reality?<\/span><\/p>\n<ul>\n<li><span class=\"n-lab\">The liberal case<\/span>: an irresistible trend. The growth of international organisations both shows a greater willingness to cooperate and builds further cooperation, through trust and rule-governed habits. <span class=\"n-term\">Heywood<\/span> notes that, tied to globalisation, its salience may fluctuate but is likely to grow, since interdependence, once established, is hard to reverse.<\/li>\n<li><span class=\"n-lab\">Against overstatement<\/span>: it is more accurate to speak of an <span class=\"n-term\">emerging governance process<\/span> than an established system, and its norms are far better rooted in some regions than others. <span class=\"n-sch\">Cooper<\/span> portrays Europe as the heart of a <span class=\"n-term\">\u201cpostmodern\u201d<\/span> world for its success in pooling sovereignty \u2014 an exception, with much of the world still little affected by international rules, as \u201crogue\u201d and pariah states show.<\/li>\n<\/ul>\n<h3 id=\"from-embedded-liberalism-to-neoliberal-globalisation\">From embedded liberalism to neoliberal globalisation<\/h3>\n<p>The move from Bretton Woods to the WTO is often read as a shift from <span class=\"n-term\">embedded liberalism<\/span> to <span class=\"n-term\">neoliberal globalisation<\/span> \u2014 with real consequences for development strategy.<\/p>\n<ul>\n<li>The post-war order paired international cooperation with domestic <span class=\"n-term\">policy space<\/span>. Across the 1980s\u201390s, conditionality tightened and turned outward \u2014 fiscal austerity, trade liberalisation and privatisation, summed up as the <span class=\"n-term\">Washington Consensus<\/span>.<\/li>\n<li>Trade governance shifted too: GATT\u2019s <span class=\"n-term\">MFN<\/span> and national treatment gave way to the WTO\u2019s binding disciplines under <span class=\"n-term\">GATS<\/span>, <span class=\"n-term\">TRIPS<\/span> and the <span class=\"n-term\">DSU<\/span>. <span class=\"n-sch\">Robert Keohane<\/span> and <span class=\"n-sch\">Joseph Nye<\/span> frame the result as a <span class=\"n-term\">\u201ccobweb of interdependence.\u201d<\/span><\/li>\n<li><span class=\"n-lab\">The development fallout is a trade-off<\/span>: greater openness, thinner policy space. Keynesian welfare policies and protective tariffs became harder to sustain, and under SAPs the rollback of the state deepened class and regional inequalities.<\/li>\n<li><span class=\"n-lab\">The task for development<\/span>: secure the gains of integration while buffering the loss of policy space and the social costs that come with rule-bound openness.<\/li>\n<\/ul>\n<h3 id=\"latin-america-and-alternatives-to-the-us-led-order\">Latin America and alternatives to the US-led order<\/h3>\n<p>Latin America has sought a larger role in a multipolar world, but its diverse economies and unaligned agendas have limited its collective weight.<\/p>\n<ul>\n<li>The region has long been overshadowed by US dominance. The <span class=\"n-term\">Monroe Doctrine (1823)<\/span> still informs US policy, now directed at Chinese investment and Russian ties with Venezuela, Cuba and Nicaragua.<\/li>\n<li>Its assets \u2014 natural resources, cultural diversity, geographic advantage in an era of <span class=\"n-term\">\u201cnearshoring,\u201d<\/span> and the absence of inter-state war \u2014 are offset by weak governance, inequality, ideological divides and organised crime.<\/li>\n<li><span class=\"n-term\">Mello (2020)<\/span> describes the <span class=\"n-term\">OECD<\/span> as a Western-led vehicle promoting a liberal economic agenda; a larger Latin American presence there is seen as important for engagement with the global economy.<\/li>\n<li>Rather than <span class=\"n-term\">Fukuyama\u2019s (1992) \u201cend of history,\u201d<\/span> analysts describe a transition to a <span class=\"n-term\">\u201chot peace\u201d<\/span> (<span class=\"n-term\">Parsons, 1995<\/span>) in which soft power matters amid weak leadership by states and organisations.<\/li>\n<li>Without a common voice, Latin American states have worked through existing multilateral instruments: the <span class=\"n-term\">G20<\/span>, Brazil\u2019s leadership at <span class=\"n-term\">COP30<\/span>, Peru\u2019s role in <span class=\"n-term\">APEC<\/span>, Colombia\u2019s role in the biodiversity COP, and the <span class=\"n-term\">Inter-American Development Bank\u2019s<\/span> coordination of multilateral development banks. The moment of <span class=\"n-term\">relative multipolarity<\/span> (<span class=\"n-term\">Merino, 2016<\/span>; <span class=\"n-term\">Acharya et al., 2021<\/span>) offers an opening to lead new alliances.<\/li>\n<li><span class=\"n-lab\">Assessment<\/span>: the counter-hegemonic push is partial and uneven \u2014 a bid for resilience and voice rather than a rupture with the US-led order.<\/li>\n<\/ul>\n<div class=\"n-pyq\"><span class=\"n-pyq-chip\">UPSC 2025 \u00b7 20m<\/span><span class=\"n-pyq-q\">Latin America has made moderate success in countering the US-led global economic order by forming various organizations emphasizing regional sovereignty, economic integration and alternative development. Discuss.<\/span><a class=\"n-pyq-a\" href=\"\/psir\/psir-pyq\/latin-america-has-made-moderate-success-in-countering-us-led-upsc-psir-2025-3408\/\">Answer<\/a><\/div>\n<h3 id=\"the-thread-four-strands-one-story\">The thread \u2014 four strands, one story<\/h3>\n<ul>\n<li><span class=\"n-term\">Bretton Woods<\/span> built the institutions. <span class=\"n-term\">The CMEA<\/span> offered an alternative that could not survive its own rigidity. <span class=\"n-term\">The NIEO<\/span> named the injustice of the order and pressed for structural change. <span class=\"n-term\">Globalisation<\/span> deepened both the gains and the grievances.<\/li>\n<li>Globalisation and neoliberalism drove the fastest integrated growth in history \u2014 and exposed recurring financial crises, environmental damage and widening income disparities that keep the demand for reform alive.<\/li>\n<li>The Global South is no longer only asking to be included in a system others designed. Through quota reform, alternative banks, and platforms like the G20, it is trying to <span class=\"n-term\">rewrite the rules<\/span>.<\/li>\n<li>The open question for India and the developing world: whether the gains of integration can be secured without bearing the full social and economic cost \u2014 a balance <span class=\"n-sch\">Joseph Stiglitz<\/span> frames as the need to redesign globalisation so that it works for the many rather than the few.<\/li>\n<\/ul>\n<div class=\"n-next\"><a href=\"\/psir\/notes\/third-world-demand-for-a-new-international-economic-order\/\"><em>Previous<\/em><b>Third World demand for a new international economic order<\/b><\/a><span><\/span><\/div>\n<p><\/main><\/p>\n<aside class=\"n-rail\">\n<h4>On this page<\/h4>\n<p><a href=\"#meaning-dimensions-and-why-it-emerged\">Meaning, dimensions, and why it emerged<\/a><a href=\"#neoliberalism-and-the-washington-consensus\">Neoliberalism and the Washington Consensus<\/a><a href=\"#views-of-scholars-winners-and-losers\">Views of scholars; winners and losers<\/a><a href=\"#2008-the-backlash-and-india\">2008, the backlash, and India<\/a><a href=\"#challenges-to-the-neoliberal-order\">Challenges to the neoliberal order<\/a><a href=\"#features-of-global-governance-myth-or-reality\">Features of global governance \u2014 myth or reality?<\/a><a href=\"#from-embedded-liberalism-to-neoliberal-globalisation\">From embedded liberalism to neoliberal globalisation<\/a><a href=\"#latin-america-and-alternatives-to-the-us-led-order\">Latin America and alternatives to the US-led order<\/a><a href=\"#the-thread-four-strands-one-story\">The thread \u2014 four strands, one story<\/a><\/aside>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Globalisation of the world economy for the UPSC PSIR optional \u2014 PSIR Notes \u203a II-A Comparative Political Analysis and International Politics \u203a Globalisation of the world economy Pap<\/p>\n","protected":false},"template":"","meta":{"jetpack_post_was_ever_published":false,"fx_note_key":"II-A.8.4","fx_note_sec":"II-A","fx_note_point":"8","fx_note_desc":"Globalisation of the world economy for the UPSC PSIR optional \u2014 PSIR Notes \u203a II-A Comparative Political Analysis and International Politics \u203a Globalisation of the world economy Pap","footnotes":""},"class_list":["post-3562","psir_note","type-psir_note","status-publish","hentry"],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/psir\/wp-json\/wp\/v2\/psir_note\/3562","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/psir\/wp-json\/wp\/v2\/psir_note"}],"about":[{"href":"https:\/\/forumias.com\/psir\/wp-json\/wp\/v2\/types\/psir_note"}],"version-history":[{"count":2,"href":"https:\/\/forumias.com\/psir\/wp-json\/wp\/v2\/psir_note\/3562\/revisions"}],"predecessor-version":[{"id":3809,"href":"https:\/\/forumias.com\/psir\/wp-json\/wp\/v2\/psir_note\/3562\/revisions\/3809"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/psir\/wp-json\/wp\/v2\/media?parent=3562"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}