The globalization of world markets has been much noted with reference to attempts at the regional integration of trade, but it has been given somewhat less attention in terms of the globalization of financial markets. Yet, the two efforts are related, and more and more the different trading and financial structures of the world are becoming inter-related. Financial globalization involves all types of cross-border portfolio-type transactions, such as borrowing and lending, trading of currencies, and other financial claims, as well as the capital flows associated with foreign direct investment. Financial globalization also includes the broad integration of national markets associated with deregulation and manifested by increasing movements of capital across national borders.
A financial problem in one part of the world has the potential to affect markets elsewhere, as was seen in the financial instability in Mexico with the crisis of December 1994:
Among other things, that episode served to illustrate the vulnerabilities of the monitoring system and the difficulties associated with mobilizing large pools of capital to dampen the effects of financial meltdown in various markets (Peterson, 1995, 109).
This danger has become more acute with the development of integrated financial regions such as the Euromarket or certain Asian financial markets, as in Hong Kong, the stability of which is now in some doubt because of the impending return of the region to the control of China. The change in the international financial markets is seen today as one of the major forces in the world with which analysts must grapple. Moreover, the new global markets have a clout that has the potential for bringing about even greater change over the next few years.
Through most of this century, American companies have worked to create highly structured organizations and have worked to develop and refine the art of mass production:
These organ...