Cyberspace and Globalization
Dr Georgios I Zekos
Ass Professor, Department of International Economics, Democritos University of Thrace,
Attorney at Law and Economist,
This is a commentary published on 8 November 2002.
Citation: Zekos G, 'Cyberspace and Globalization', Law, Social Justice & Global Development Journal (LGD) 2002 (1) <http://elj.warwick.ac.uk/global/02-1/zekos.html>. New citation as at 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/lgd/2002_1/zekos/>
Globalisation is generally defined as the 'denationalisation of clusters of political, economic, and social activities' that undermine the ability of the sovereign State to control activities on its territory, due to the rising need to find solutions for universal problems, like the pollution of the environment, on an international level. Moreover, globalization is a complex, forceful legal and social process that take place within an integrated whole without regard to geographical boundaries. Thus, globalization differs from international activities, which arise between and among States, and it differs from multinational activities that occur in more than one nation-State. This does not mean that countries are not involved in the socio-legal dynamics that those transboundary process trigger. In a sense, the movements triggered by global processes promote greater economic interdependence among countries. The idea of interdependence among quite separate and distinct countries is a very important part of talks on globalisation and a significant side of today's global political economy. Is globalisation synonymous with Americanisation? The Internet is a global network of computers linked by high-speed data lines and wireless systems. Moreover, the internet is not a net in the physical or communicational sense but an open virtual network based on a common transmission protocol. The growth in the use of the Internet has been one of the most interesting technological and political developments of the late twentieth century. A domain name is a significant part of an Internet address that determines where data packets are to be sent. Each domain name corresponds to numeric Internet Protocol (IP) addresses, used by the Internet to transmit data. Every computer linked to the Internet must have a numeric address in order to be identified and located by others. Most importantly, each address must be unique so that other computers on the network are able to locate and to route messages to the correct address. If more than one organization on the Internet had the same domain name, confusion would occur when the network tried to identify and communicate with the computers within those organizations. This sets up an inherent and irreconcilable conflict with trademark law, which tolerates the use of identical marks by different persons so long as those uses do not cause confusion in the marketplace. An effective domain system involves a technological component that includes standard setting and a registration system that allocates the right to a domain name. It will also involve a resolution of the trademark problem, an issue infused with traditional and cultural notions of territoriality and sovereignty. The aim of the article is the analysis of the interrelation between globalisation and cyberspace and their influence upon the notions of economy, sovereignty, and democracy.
The technology is so exhilarating that there is a tendency to claim that the changes we detect in sovereignty, the state, jurisdiction, and law all are caused by cyberspace. The state is historically dependent and the powers of the state that we refer to, as 'sovereignty' has never been static. Technological advances, such as the development of cyberspace, give rise to new means of expression of our aspirations, including new allocations of power both to the state and to non-state entities. International law is the vehicle for revision of these allocations of power. Does technological changes occurring today require the death of the state?
Essentially an issue of global dimension, the institutional structure of domain name regulation may well determine the future of Internet governance. Two critical and overlapping questions concerning domain names are involved. The first concerns the technical functioning of the system in expediting information accurately to an infinite number of locations. As a corollary, an effective system would provide certainty, stability, and efficiency in its management and administration. Second, the system must be one that establishes clear ownership rights to a domain name and minimizes conflict in ownership disputes. In sum, an effective domain name system will function properly from both a technological and management standpoint.
What is needed is a system that better allocates domain name rights with clarity and certainty, harmonizes the technological needs of the Internet, and resolves the tension between an efficient domain name registration system and trademark owners' rights. The territorial sovereignty model, where each sovereign exerts jurisdiction over citizens falling within its territory, is not compatible with the needs of an effective domain name system. In short, domain names, which are cyberspace addresses, do not effectively reside in a physical location, and the efficacy of the domain system requires expansion beyond territorial boundaries and into worldwide-integrated laws.
In opposition to the territorial model, one might think about a domain system regulated by centralized authority under a unified legal regime. Internet libertarians submit a third model for effective net governance. They argue for a radical decentralization of lawmaking, that is, development of processes that do not impose order on the electronic world but through which order can emerge. This model of decentralized emergent decision-making is based on the sovereignty of the individual. In this vision, individual decision-makers exercising individual choices will build political order. Thus, in the long run, incompatible systems would be unlikely to coexist because network economies will lead to the efficient solution.
It is true that traditional legal institutions are not situated to regulate the kind of disputes that arise between trademark owners and domain name owners. The libertarian model under plays the trademark problem. In particular, it is difficult to see how a decentralized system would resolve the problem of cybersquatters and others who would exploit the system in bad faith. Cyberspace is not a sovereign place mainly because governments do not view it as such and have already imposed regulatory authority over it. The reality is that government already regulates cyberspace, and any remaining pockets of decentralized autonomy that still exist survive exclusively by leave of governments. A deregulated market without governmental intervention is not possible. Nation-states already regulate the technical aspects of the domain name system, and national versions of trademark law have been superimposed on the system.
While the phenomenon of increased transgovernmentalism undoubtedly exists, and competes with transnationalism and more traditional intergovernmental international relations, transgovernmentalism is more an examination about the way states organize themselves for international relations than an observation about either the powers of the state itself or about the international legal order. Sovereignty is often objectionable when it is used as an epithet in talks of the power of the state. The right allocation of authority is dynamic, complex, and contingent. New technologies change our means of achieving our goals, both technically and structurally. Sovereignty refers to the powers we decide to assign the state as well. As mentioned above, international law is constantly shaping and reshaping the state and other institutions. Of course, the state is also shaped and reshaped by its own law, by national law. It is in this sense that international law and national law are joined in a single project of social design. Cyberspace is a technical production frontier development that has dramatically reduced the transaction costs of coordination in both the private sector and the public sector. Moreover, cyberspace today is neutral in the contention over the powers of the state. Not only does technology reinforce the tools of government, but it can also strengthen the legality of government through heightened transparency and democracy. The view that technological changes occurring today require the death of the state and its regulatory function proves too much. It is not the state that has died, but the theory of absolute territorial sovereignty.
Territoriality is the constraint that unravels the assertion of unconstrained state power. Besides, conduct still takes place in territory and people still live in territory. Most significantly effects are still felt in territory. Thus, while cyberspace may be a 'supra-territorial' phenomenon that fractures both conduct and effects, supraterritoriality is not new, and conduct and effects have been fractured in the past. More vitally, the supraterritoriality of the medium only results in part in a supraterritorial society. The real jurisdictional novelty of cyberspace is that it will give rise to more frequent circumstances in which effects are felt in multiple territories at once. Cyberspace may raise the costs of regulation to the point where it is inefficient to regulate, but it has not been confirmed that this is the case and, at least in theory, one would expect the technological developments that enable cyberspace also to enable its regulation. On the one hand, cyberspace may tend to alter information from a private good to a public good. On the other hand, cyberspace makes the exchange of information faster and cheaper. This is the reason for the rise of commerce on the Internet: both commerce in physical goods and commerce in information goods. These technological advances are growing quickly, and as enterprises realize their utility and set up network externalities by exploiting their utility in greater numbers, they will significantly decrease the cost of transacting. This decrease in the cost of transacting will have the effect of increasing the number of transactions effected. Information will flow more cheaply to both the customer and the wholesale purchaser of goods and services, enabling information also to flow more economically from the buyer to the seller. Hence, this will give rise to new forms of targeted advertising, as well as targeted product development.
Will the rise of cyberspace result in a triumph of the market over the state, the international organization over the state, or the state over either of the others? Although the world has changed, and transaction costs have been reduced, the world has never stopped changing, and transaction costs have generally been reduced constantly throughout history. From an economic standpoint, the role of jurisdictional rules is to internalise externalities to the extent desired or otherwise to provide clear allocations of jurisdiction so that it may be reallocated through transactions among states. On the one hand, law cannot exist separate from society. On the other hand, social rules arise in varying circumstances, and for varying reasons. The distinction between a social rule and a law is that law relies on the patronage of government. The backing of government is useful in many circumstances in order to overcome problems of collective action and transaction costs that might otherwise prevent the formation of a useful social rule. Will the rise of cyberspace inevitably reduce these utilities?
Cyberspace is a technical change that modifies the transaction costs and benefits profile of various social and private arrangements. The Internet has facilitated political organizational activity that has crossed national borders. For instance, the use of the Internet as a global phenomenon by the opponents of globalization highlights the potential power of the new technology. Never before have so many people in so many different places throughout the world been able to organize so swiftly and effectively to voice their views and to plan joint political activity. The state must be seen as the effect of relations of power that call it into being as having a force all its own. No longer may a country govern itself efficiently without considering its impact on the global community or the global community's impact on it. The potential downside of Internet-based democracy may also be revealed if and when Internet voting becomes widespread. The search for the best means of developing national, regional, and world economies has led to supra-national organization on a regional scale.
'Globalization' is the term used to describe the process of a growing global interconnectedness of people through the reduced effects of distances and borders, including a reduced role for the State and an increasing role for non-State actors. Proponents of the notion of globalisation dispute that the changes taking place in the world today are not just quantitatively diverse but are also qualitatively dissimilar. The extent of economic transactions and interdependence, the electronic communications uprising, homogenization of global culture, the breaking up of time and space, and an emerging universal polity meaning that social and political movements are increasingly taking place at the transnational or supranational level.
Can we equate globalisation and homogenisation? The multidirectionality of the flows of problems and opportunities that characterize globalisation requires multilevels of harmonized governance, as all levels of national government enter into new relationships. The worldwide nature of some problems necessitates coordinated state and international approaches to issues, as well as the use of private or nongovernmental actors. Worldwide forces merge the universal and the local into one complex modality through various communities and their reactions to new possibilities and challenges. Different levels of government must interact and cooperate with each other in order to take hold of new understandings of the market, the role of the private sector, and the degree to and ways in which the state might be involved. For instance, effective environmental law regulation often requires coordination and cooperation at the national and international levels. The fact that a private body is more public than private is not by itself procedurally sufficient for the new public/private paradigms that are now emerging. This is mostly the case when our focus is on democracy, transparency, and public participation as well as individual fairness. The search for the best means of developing national, regional, and world economies has led to supra-national organization on a regional scale. The European Union (EU) provides the most integrated and long-standing example of this phenomenon. Within it, Member States have submitted themselves to a different and higher jurisdiction of law that directly affects their sovereignty. The ECJ continued to expand the influence of Community law to the point of asserting its supremacy over constitutional guarantees of its Member States. In Amministazione delle Finanze dello Stato v. Simmenthal Spa, the ECJ established that:
'all national courts are obliged to enforce directly and immediately a clear and unconditional provision of Community law even where there is a directly conflicting national law …[even] one which had no jurisdiction in the domestic legal system to question or to set aside national legislative acts'.
Critics of the concept of globalization argue that we have been unified since the days of the spice trade and not much has changed. There are also critics of globalization's effects-those that accept the concept but focus on the negative effects of globalization. These critics point to environmental degradation and increasing Western imperialism as the main impacts of globalization. Does globalization strengthens or weakens the sovereignty of States? It is argued that the processes of globalization, such as liberalized trade, global capital flows, and new information technologies, erode a country's sovereignty. Besides, globalization generally, or particular processes thereof, actually foster a stronger image of sovereignty for countries, particularly developed countries.
Electronically transmitted information also sparked multinational agreements almost immediately upon its commercial deployment. Globalization should be distinguished from 'internationalization.' Sometimes, the term globalization is used synonymously with internationalization; This is because globalization means 'different things in different contexts; To equate globalization with internationalization, however, is to miss the distinct meaning of globalization; The essential distinction is that globalization denotes a process of denationalization, whereas internationalization refers to the cooperative activities of national actors; In some instances, the concerns of globalization may be motivated by the common good of humanity, whereas internationalization fulfils the national interest; The key element that underlies the concept of globalization and distinguishes it from internationalization is the erosion and irrelevance of national boundaries in markets which can actually be described as universal. For instance, globalization describes the growing irrelevance of borders in international financial transactions. Because capital flows are being denationalized, national sovereignty is becoming increasingly irrelevant in this area; what is the role of law in globalization? Sovereignty is at the heart of concepts of both national and international law. National law is the expression of sovereign power over a territory and a people. International law emanates from sovereign States, making sovereignty central to the substance and dynamics of international law. Globalization is reshaping the fixed and firm boundary between national and international spheres and changing our conceptions of the proper domain of domestic and international politics and law. The fragmentation of the State increasingly challenges the notion that within a country, there is a form of internal sovereignty or unity around a monistic legal order.
One of the characteristics of regulation in the global era has been the shift from state-centered, command-control approaches to market forms of regulation. Delegation to the private sector represents an important aspect of more general ways in which global processes encourage and accelerate what has been called 'third party government' whereby elements of public authority are shared with a host of nongovernmental or other governmental actors. As mentioned above, the borderless nature of telecommunications and intellectual exchange, and the easy flow of goods, capital, and pollution across jurisdictional lines, increasingly requires a global conception of both problems and opportunities. In short, the effects of globalization are not limited to the international level of policymaking and law. The same forces that make cooperation essential and fuel competition at the international level are at work at all levels of national governance. Administrative agencies contribute to issues and approaches through increased contact and involvement. States and local governing units also compete for investments of different kinds in their jurisdictions. They, too, are limited in their extraterritorial powers and must cooperate with various governmental and nongovernmental entities. The importance of the role that nongovernmental organizations now play at the international level is in line by private players at the national level. Public law values such as transparency, participation, and fairness remain relevant, even though private actors now carry out a range of tasks that can be called governmental. Administrative law deals above all with the way in which state entities exercise and explain the use of their discretion. It focuses on the means by which executive, legislative, and judicial powers, and various combinations thereof, are allocated to and then exercised by governmental entities called administrative agencies. It could be taken into account that administrative law, like international law, is state-centered. By contrast, markets involve voluntary arrangements and the private sector. Moreover, globalization processes encourage forms of governance involving new uses of the private sector to achieve public ends. Depending upon how the uses of the market are conceptualized, globalization processes can complicate both the form and the content of democracy. They rearrange the lines between public and private entities and can appear to expand the private sector by delegating functions to private forums. They can also place in the state into the private sector in new ways. Globalization yields intended and unintended effects on the scenarios in which democratic participation has been customarily relevant within and between nation-states. Thus, the move in focus from states to markets and from government to governance is noteworthy. Just as the processes of globalization and the new governance structures that result from them may in some contexts necessitate the extension of international law to nongovernmental entities.
The effects of globalization, mainly the democracy deficit call for new ways of understanding state sovereignty, and require a reconceptualization of administrative law if such basic features as public participation, fairness, and transparency are to be maintained. Furthermore, globalization refers to a multiplicity of extraterritorial activities and their national effects. These effects need not be worldwide in the sense of achieving universal impact. Rather, worldwide processes refer to complex, dynamic, legal, economic, and social processes that operate within an integrated whole, in a manner that ignores territorial boundaries. The integrated whole may be a region or just a part of various jurisdictions that may or may not be contiguous. The scale of the problem or the operation involved is determined not by territorial boundary lines, but by factors such as cost, the scope of the problem involved, or the reach of a particular technology or an economic opportunity envisioned. Another aspect of globalization processes is that they involve various multidirectional flows of ideas, goods, services, and people, and the communications networks necessary to sustain them. What drives these flows of ideas, goods, and capital, however, may have little to do with states directly. This is because it is difficult for states to exercise power beyond their borders. As a result, the social and economic forces that determine, where and how capital might flow, or labor markets development, are increasingly denationalized. The end result is a larger role for markets and private actors in dealing with borderless problems and opportunities. Markets and market processes now play a major role in governance at all levels of government. Moreover, markets can be viewed as regulatory tools in environmental contexts, but also as the primary means of winning the global competition for investment and economic growth in a particular place. In an age of economic globalisation, national standards will leverage standards upward in order to achieve international competitiveness rather than national competitiveness. Globalization processes affect broad areas of law as environmental, labor, financial and securities law. Do globalisation pressure governments to reduce social protection requirements so as to reduce the costs of national enterprises and thereby enhance their competitiveness in the global market? International trade liberalization rules appear not to constrain significantly the ability of governess to require greater social protection in many areas, including that of data privacy.
It is worth mentioning that globalization is clearest and most dramatic in environmental law. As it became more and more apparent that the externalities of environmental degradation crossed national boundaries and that some of them, like ozone depletion, were truly global, parallel developments in national environmental law accelerated, as did efforts at multi-national and/or international environmental protection law. Given the worldwide uniformity of the industrial technologies threatening the environment, a considerable substantive uniformity emerges even in national environmental rules. Internationalization serves as a supplement to the nation-state's efforts to satisfy the needs of its people. Besides, globalization is to serve the common good of humankind the preservation of a viable environment or the provision of general economic and social welfare. Is globalization a universal process? It could be argued that globalization is neither a universal process nor is the concept universally applied. Nor is globalization involving all states and regions alike, nor is it universal in the sense that all major aspects of political, economic, or social life are actually encompassed by the process.
The 'international community' is or must be bound by uniform and universally shared rules, practices, and institutions. Globalisation, however, is generally used descriptively but with the clear inference that since no force can change it, all had better get on board. The transmission and receipt of information across space and time is distinctly faster. The networks of computers, satellites, and telephones have clearly enabled better flows of goods, capital, persons, and information across traditional geographic and political boundaries at rates that make the regulation of such flows less subject to profound bureaucratic preferences. Through the strategic coordination of economic activity across borders, corporate strategists take advantage of global disparities in income, of lower environmental standards and of differences in the degree of respect for human rights and democratic rights. The supremacy of many nation-States over activities within their borders, and perhaps over many of their citizens, is a good deal less secure. A linked but distinguishable invocation of globalisation focuses on its potential to turn over those economic relationships between the individual and the enterprise that have been fostered by the industrial revolution. Thus, globalisation permits each and every individual to become an entrepreneur capable of independently discovering and exploiting markets for goods and services. The individual can therefore challenge the multinational corporations by giving or withdrawing his labor, consumption, or investment at will, with little regard for the restrictions of space, culture, or politics. The corporation can make use of the same liberating technology to offer or withdraw employment, locate investments, exploit markets, or evade national regulations, presents a distinctly different perspective on globalisation. In a world where temporal boundaries are rendered less and less significant, given spending patterns in which demands for services are less easily satisfied than demands for goods and immobile industrial labor, and where the mandatory command of State authority shares equivalent billing in popular legitimation with privately ordered rules, the globalisation of the power of the multinational corporation is a phenomenon that should not be equated with the empowerment of the individual, civil society, or non-governmental organizations. Economic freedom is a necessary precondition for economic growth and hence global prosperity. Members of the international businesses community want free trade for capital and goods, and freer movement for high-level human resources, but they resist that employment standard, environment standards, which protect workers, ought to be transferable across jurisdictions. There is a tendency to disregard the relationship between trade and human rights issues.
Do the forces of globalisation, dragging law behind them, improve democracy, which could make law's journey so much easier? The relationship between globalisation and democracy is weak, and in some ways, even contradictory. Moreover, globalisation represents only one of two kinds of forces exercising an influence on the nation-state and on democracy. Indeed, even the world's more traditionally homogeneous integral nations have to examine the relationship among globalism, multiculturalism, and democracy. The growing economic and communications interdependence of the world means that such nations must nonetheless operate in an increasingly multicultural global environment. Besides, a world that is coming together culturally and commercially is a world whose distinct subnational ethnic, religious, and racial parts are also far more in evidence. These changes accelerate globalization; they invite law to regulate the anarchy of rival national markets and smooth the way for global markets. They mandate rules that will permit human survival. But they neither democratize nor liberalize and they can point backwards as easily as forward.
4. Globalization and Economy
It has become clear in recent times that markets do not emerge full blown when old-style regulations are removed. In fact, new rules are often necessary. Cyberspace contributes to enhancing the development of global markets for products, services, information, and capital. It is important to emphasize that deregulation of and delegations to the market do not take place in a vacuum. Markets need to be understood as part of a major reconceptualization of the country, as it comes to terms not only with universal competition but with the fact that it must deal with issues, technologies, and players whose problems, influence, and power do not map onto its own territory or political geography. Globalization of markets involves the growing interdependency among the economies of the world; multinational nature of sourcing, investment activities, trading, and manufacturing; escalating occurrence of cross-border financing and dealings; and heightened intensity of competition among a larger number of players. The creation of new products and development of new technologies also contributes to the globalization of markets. The globalization of markets has led to the formation of irreversible economic linkages among countries. This phenomenon has been fuelled by developments in transportation and communication technologies, widen of economic growth and wealth around the world, the loosening of barriers to trade, and the formation of regional economic blocs. It has also shifted the focus away from the nation-state, and more toward industry and the individual company. Processes of globalization and internationalization as well as strong countervailing forces of old and new nationalisms are but three major facets of this new complexity. It seems that globalization as distinct from internationalization denotes a process of denationalization of clusters of political, economic and social activities. Internationalization refers to cooperative activities of national actors, public or private, on a level beyond the nation-state but in the last resort under its control. In the world of the vertically integrated firm as in the world of socialism, economic relationships are determined by internal command. Besides, globalization here refers to a worldwide increase of legal protection against the ill effects of technical, economic, and social devices too complex, distant, or powerful to make individual self-protection possible. The most recent manifestation of this movement is the outburst of environmental protection law that is partially fuelled by a concern with nature itself but tends to achieve its maximum impetus when that concern is coupled with putative injury to individuals from pollutants. On the one hand, a Multinational Enterprise (MNE) operating in many nations and integrating its activities globally is an example of globalization. On the other hand, a MNE pursuing a strategy of maximising the interests of each corporate entity within the MNE and within the national boundaries in which it operates could be viewed as an example of internationalization. Government policy is now influenced and dictated by the free and substantial flow of capital worldwide. The main areas of change in the international financial markets have been the international financial system; advances in information technology and telecommunications; the rise of global business strategies and the MNE; new political and economic structures; new political imperatives, such as economic liberalization, privatization and deregulation; and the rise of the institutional investor; The process of harmonization will add to the erosion of national sovereignty brought about by globalization. Together, these changes have formed a trend towards international financial integration. National sovereignty is further eroded by the restrictions on policy, which the global financial markets have imposed; Countries with an open market approach to regulation and harmonized rules are more probable to flourish in the global economy as capital, both human and financial, more and more ignores national boundaries. Globalization is an important emerging business mandate applicable to virtually all businesses. It is an Information Economy, as opposed to an Industrial Economy, business concept. Modern communications tolerate businesses to operate in multiple countries with diverse shapes and forms of organization and control. They make it possible to send information to any part of an organization instantly, enabling every part to know what every other part - and the organization as a whole - is doing all the time. In the first place international trade law establishes the idea that public intervention to regulate trade is exceptional, while entirely free private trade is the norm. The rise of multinationals has impacted on the strategies and decision-making processes of the managers of such corporations. The interests of the multinational group as a whole need to be reconciled with the individual interests of each associate corporation. In other words, there is a need to integrate the decision-making process across affiliates. Treaty-based rules against tariffs and quotas, procedures for mitigating swings in commodity prices, and provisions managing exchange rate fluctuations are all presented as exceptional measures which in normal circumstances characterized by stable and self-regulating trade, commodity exchange, and currency convertibility would not be required. The EC puts forward as the normal premises of political life that administration is supplementary to politics; technical expertise is the servant of public decision-making; and executive power is subject to the popular will. Free movement of workers, goods, and capital, freedom of establishment, and freedom to provide services, all depend on an extensive regulatory framework, implemented through compulsory harmonization of national law, EC legal regimes, and common policies. In the EC the technocratic character of the political regime has reached the point where concern is voiced about the 'democratic deficit'.
First, according to neo-liberal economic theory, the globalization of economic markets will reduce inequality; second, the creation of international institutions will increase incentives for cooperation; and third, globalization brings with it ideological convergence. There is a tendency to liberalize or deregulate, thereby adopting rules and regulations designed largely to introduce competition into markets once dominated by State monopolies. Because of the liberating effects of technology and the free flow of capital around the world, private decisions involving finance, production, and investment can occur increasingly free of direct State involvement. It should be taken into account that the fall of communism led many politicians and academics to argue that there is no alternative to the neo-liberal values associated with privatization, low taxation, open markets, and a minimalist conception of government. Has not globalization transcended the complex relationship between the universal and the particular that has framed international politics since at least the Westphalian settlement in the mid-seventeenth century? As Ian Clark says:
'globalization needs also to be understood as a number of changes within the state, and not simply as a range of external forces set against it'.
Hence, markets are largely concentrated in a denationalized way. The investment necessary to build or expand a manufacturing or distribution facility freely flows across national borders. The financing for this investment is created increasingly without regard to any single place and by a worldwide financial industry located in various interconnected worldwide cities. The end result of the new networks of finance, investment, and production is that they help to create relatively integrated markets for the goods produced, and they produce new and numerous sets of relationships or economic networks that transcend the geography of countries. Multinational corporations move their production activities from location to location around the world, often loosely affiliating with various independent contractors to obtain the services or materials they need. They seek out the most cost-effective relationships as possible in what are usually the long value chains connected with the production and marketing of goods and services. Multinational corporations may locate research and development in one country, component assembly in another, final assembly in yet another country, and distribution networks in still another. They also decide how much to customize globally conceived products for local markets.
Privatization, like nationalization before it, is a macroeconomic policy whose parameters are determined by political considerations. For the implementing government, the primary determinants of the decision to privatize include the following: sustainability of monetary policies, capital and employment needs, and pressures from external financial institutions and foreign governments. For the investor, the economic terms of the transaction are primary. The weight assigned these considerations may be influenced by the rule of law criterion. An investor's calculation of the potential returns on an investment made in a privatized entity will likely reflect a rule of law premium or discount. The rule of law does not depend for its legitimacy on the automatic application of specified doctrines, or on the existence of equal and like bargaining powers among the parties. Thus, since one of the motivations for privatization frequently is to bring forth financial inflows from foreign investors, a privatizing government is likely to adopt those measures that foreign owners of capital would deem as consistent with the rule of law. For the privatizing government, the consequences of the perceptions held by the investor and the international financial institutions are real, but they alone do not determine privatisation policies. The results were 'mixed economies' in which the State, for a variety of reasons, acquired outright ownership in certain industries, while heavily regulating others. In other words, the so-called 'natural monopolies' and 'national security enterprises' were acquired by governments to save employment in failing industries, for national security purposes, to protect the 'national patrimony' from foreign ownership, or as sources of patronage. Typical nationalization was the product of extended bargaining between the national government and the foreign concession holder. For multinational companies, economic interests were secured by pre-existing arrangements, notably previous contracts. Can the collapse of the State interventionist model evident in the privatization movement be attributed simply to the legal reasons? The existence of formal institutions may be necessary to the idea of the rule of law in the foreign investment sphere, but they are hardly sufficient. On the one hand, globalization of markets is best reflected in the 'internationalization' of business transactions. On the other hand, competition for customers and markets has intensified significantly as a result of globalization. Nowadays, business activity flows freely to places best equipped to perform it most cost-effectively and efficiently. Whereas only a handful of multinational corporations dominated international trade a couple of decades ago, today companies from all parts of the world are participating in worldwide business. The types of international business transactions have proliferated. In the past, much of international business activity was in the form of export-import and foreign direct investment. Nowadays, transactions are varied and more complex: contract manufacturing, franchise operations, turnkey construction, technology transfers, international strategic alliances, and more. Technology spreads freely and quickly between markets and players. Technological leadership does not provide a monopolistic advantage for very long. Companies must capitalize on their discoveries rapidly, before others match them. Borrowing-financing activity has become worldwide as well. Businesses finance their growth and expansion through international capital markets. As such, they are able to take advantage of varying interest rates and currency markets by tapping a variety of funding sources. As transactions get international character, they have a sweeping impact on firm performance and industry structure. On one hand, global linkages may shorten product life cycles, create intense price pressures, outdate technology or design, or simply cause sales and profitability declines. On the other hand, global exchange may lead to new growth opportunities, new sources of know-how and production inputs, new product ideas, or partnerships, which cause new sources of competitive advantage. Entire industries, if caught unprepared, can be lost to competitors due to the realities of global competition. For instance, in the United States, it is observed the decline of industries such as steel, textiles, shoes, tires, and electronics. To that extent globalization of markets causes the individual firm to understand and operate within a more complex political, legal-regulatory, and cultural framework. While the transactions are essentially the same, the context is quite different, and often, overwhelming for managers. To operate effectively in less familiar environments, managers must develop a sufficient understanding of the government sector, regulatory framework, and the cultural characteristics of the markets where they wish to carry out business.
Globalization integrates labor markets around the world and creates a growing reciprocal dependence of national economies through: superior telecommunications and international transportation systems; government policies that endorse trade liberalization; and corporate strategies of buying and selling around the world through exports and relocation of production to low-cost production places. It could be argued that the significance of globalization rests in the way the global economy alters the production of goods and assets around the world. The structural changes resulting from globalization lead in more flexible labor markets and, thus, a more flexible work force with reduced labor regulations and costs. In order to achieve greater competitiveness on a global scale, and in response to the need for greater mobility, the deregulation of labor markets has been a strategic mechanism.
The global experience of the devastating effects of modern warfare, including the first uses of atomic weapons, induced the international community to rethink the century-old concept of state sovereignty. The international community began to realize that international peace and security had become not only an international responsibility, but also a universal or global responsibility and they limited the principle of state sovereignty accordingly. The international community is gradually recognizing the existential threats to the survival of Earth posed by the escalating destruction of the human environment. Ozone layer depletion, water pollution, global warming, soil and groundwater pollution, and vast land areas radiated by nuclear waste have reached dimensions that go beyond the capabilities of not only individual states but also regional organizations to cope with these threats. The above problems create global threats. The close interrelation of environmental destruction and underdevelopment adds to the worldwide scope of these problems. The rapid advancement of air traffic has brought the economic community closer together than ever before. But much more importantly, the telecommunications revolution has truly globalized international markets, particularly financial markets. The movement of capital, once a matter of weeks or days occurs in a matter of seconds these days. A national decision on interest rates in many cases immediately affects trade policies worldwide. This decisive acceleration of market transactions does not only amount to quantitative time-savings; it is in fact changing the market and the agents' behavior qualitatively. A third factor contributing to the globalization of markets, closely linked to the high international mobility of capital, goods, and services, is constituted by the emergence of multinational corporations. For instance, the process of globalization within the framework of the EC shows that both the mechanisms of a free market and the instruments of central regulation, backed by central enforcement authorities (Commission and Court), have been applied. Under the EC or supranational model, the effect of globalizing lawmaking is an immediate one, in line with a monistic approach to the relationship between international/supranational and national law. The principle of the supremacy of EC law means that national law is set aside or, in the case of Directives national lawmaking is prearranged by the compulsory goals set by the Directives. There is, with regard to the goals, no room for discretion on the part of the national lawmakers. The immediate effect of the supranational law as the globalizing agent is independent of the sovereign will of the Member States and is backed up by the enforcement powers of the ECJ.
Development of cyberspace has boosted the development of globalisation in new rhythms and dimensions. Globalization is a process that does not mean that brings forward all the negatives of the international economy and politics as arisen during the centuries. Furthermore, globalization is more harmonisation and unification rather than homogenisation in absolute terms. The above analysis has shown that globalisation has brought more players in the central arena of the effort of the humans for progress and survival and enhanced the prospects for development rather than eliminated democracy, the role of a state, sovereignty and territoriality of a country. Globalization should not merely promote the interests of some industrialists but it should be an effort to correct the misgivings of the modern world by unified the whole effort for success in a universal level. Of course it is not easily achieved an idealistic world working perfectly without problems and misgivings. Thus, globalisation should be a universal effort for the whole world to solve problems of existence and survival of humans through the 21st century and furthermore. Besides, a war against globalization means fragmentation of the world and a better chance for a division of people with the excuse of some reason that can be raised as the supra principle as it has been happened for centuries. There is a need for the establishment of the rules that will govern globalization and its goal should be efficiency and not imposition and suffocation of the world. A more universal effort is needed in order to achieve a real globalization and not merely a pseudo- globalisation. Electronic territoriality and sovereignty is a different conception rather than the real world territoriality and national sovereignty of a state. The electronic world and the electronic economy are new adventures of the real world but they are viewed by humans and not by electronic human beings. Therefore, it is confusing some time to understand the difference between the two worlds and the need to find out the interrelation between the rules needed to govern them. The effect of the cyber world is felt in and by the real world and so the applicability of the traditional principles of law is still relevant. The velocity of cyberspace and the potential of globalization give another dimension to the conception of national sovereignty. Thus, there is a possibility for an electronic invention within the sovereignty of a state through the use of cyberspace since entrance and exit in this world is undetected by real world means rather than a real one, which does not mean that its existence is in danger at least at the present time and the current form of cyberspace transactions and the emerged form of globalisation. Electronic technology in general and not merely cyberspace can be used to impose undemocratic rules and to erode sovereignty of the weaker states. An electronic/virtual world needs not only its electronic/virtual rules but also the implementation of those rules in real terms in order humans to be able to understand electronic transactions and deal effectively with them. Finally, Globalisation and cyberspace have the potential to strengthen democracy and protect human life and safe primarily the environment in a global scale.
* BSc(Econ) (Aristotle University of Thessaloniki), JD (Democritos University of Thrace), LLM (University of Hull), PhD (University of Hull, England), <http://www.diavlos.com/zekos>, Ass Professor, Department of International Economics, Democritos University of Thrace, Attorney at Law and Economist, Amvrosia-Komotini, Greece.
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