Global Systems and Global Governance 2

The development of new systems, technology and relationships in a range of sectors including finance, transport and management have been the driving force behind globalisation:

• Systems include ways of working, procedures and methods of organisation that allow a particular function to be carried out. Since the 1940s, many new systems have been introduced to make it easier for flows of information, capital, products, services and labour to cross national boundaries.
• The technology used for information, communications and transport has advanced rapidly.
• Before the Second World War, most relationships between countries involved one country losing and another gaining. Nowadays, relationships are based on trade and common rules - these allow everyone involved to gain.

The global financial system governs the flows of capital between countries.

Financial systems are based on companies called investment banks. The main role of investment banks is to help companies raise capital by selling shares on behalf of those companies. People or groups who buy shares are called investors, and they receive a fraction of the profits that the company makes.

In the 1980s, several things happened to make the the financial system more global:

• Information technology, such as he interne, allowed investrs greater acess to information. Investors and investment banks could easily find out whether a company was doing well or struggling, and make an informed decision about whether to invest.
• Investment banks created new financial products that made foreign investments less risky.
• Governments around the world undertook a process called financial deregulation, where they relaxed rules about what banks were allowed to do. Financial deregulation included allowing banks to charge people more for their services, as well as letting banks invest in a greater range of businesses.
• Financial deregulation also involved removing barriers to capital coming in and out of a country, making it easier for investment banks to buy and sell shares and other products across the world.
• These changes led to a greater range of companies getting involved in finance, e.g. commercial banks also began selling shares. It also enabled investment banks to take on a greater number of services, such as exchanging currencies between countries to allow them to trade across national borders.

Today, investors, banks and other companies all over the world are part of the global financial system. The decisions of banks or investors in one part of the world can affect a company on the other side of the world.

The global trade system governs the flows of products between countries.

Trade is primarily regulated by countries' governments, who control which products they let into the country and at what price. Controls include tariffs, non-tarrif barriers…