The Role of State in World Economy

In the globalized world, the role of the state has been diversified. Most states across the globe have to deal with issues of constrained resources and public demand for funds. In that regard, most governments address the most urgent issues, especially those leading to sustainability (Anderson 1). This guides their investment priorities, decisions on the segmentation of existing resources. In the global economy, several concepts are involved. They include income distribution, the competition of markets, the stability of the economy, social and legal frameworks, and distribution of public goods and services. Therefore, in this paper, the states’ role in controlling the above aspects of global economy is discussed in their influence on policy-making both at the domestic and foreign levels.

Stability of the Economy

            The stability of the world economy is dependent on policies, the rule of law, and a people-driven attitude for hard work and development. Often, world politics seems to influence most of these aspects. The World Bank (12) noted that countries that enjoyed stable political environments had a long-term development plan. Most of their government functions are run through established institutions that have, over the years, controlled their industries. An example of political stability influence on the economy is in Africa, where most nations have faced major corruption cases, election challenges, and the collapse of institutions due to dictatorial governments. For the nations to participate in a sustainable global economic environment, they must build strong government institutions. These can be witnessed in the United States.

            According to Hussain, most countries that have stable political systems have a more work-focused workforce. This is because they are not worried about new political leadership in the government. In the process, investors and other stakeholders are also not concerned about the security of their investments and contributions to the economy (1). In that regard, more economically stable states have ventured to help others build their political systems. The United Nations, International Criminal Court, and other inter-governmental bodies have sought to address some of the challenges developing countries face, such as in Sudan (Porter 16). Also, the

developed nations have to make critical decisions on offering them opportunities for trade and sharing.

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Technology Advancement

States have a significant contribution to technological growth. This is because technology has significantly contributed to globalization. One of the most recognizable technology is the internet, which has drastically changed access to information and other innovations. In the provision of technology, governments have a role in facilitating data transmission through cable services and tackling projects that require intensive capital. Among this is the network infrastructure, where most states have laid fiber optic cables to facilitate data transmission. In countries such as the US, the government has enabled the growth of Silicon Valley, which is the home origin of mega tech companies such as Google and Facebook (Chowdhury & Ocampo 12).

            State sponsors education and training, scientific research, and intellectual property management. They are responsible for creating policies that guide financial mechanisms on the internet, removal of barriers, and incubations of small tech companies. Furthermore, they facilitate collaborations between partnerships, stakeholder enrollment, and alliances through management frameworks.

Competition in the Market

In the face of globalization, states control trade and trade partners they decide to collaborate with. According to the UNCTAD report on competition policies, different governments by 1999 had introduced local regulation policies on the competition. They required significant competition in their markets to avoid abuse of market positions. This was an aim to reduce the monopoly of different companies that had dominated markets in other areas. As multinationals set establishments in foreign countries, they have to follow these competition policies (Porter 24). This is encouraged through transparent business practices such as annual financial reporting, open shareholder meetings, and other companies (Bieler & Morton 3). Also, most governments require multinationals to contribute to local initiatives that upgrade the community welfare and income status. Through civil society, social participation by corporations is evaluated based on their corporate social responsibility policies.


The progressive diffusion of democracy has forced different states to go for war due to political differences. The theory of institutional change describes two factual assumptions. They include fragmentation and military rivalry between other states. In fragmentation, the elites and the government can promise the masses of fiscal redistribution to empower them. However, this is to encourage them to develop a desire for the war. Due to this motivation, mass-army’s martial effectiveness is enhanced, leading to the defeat of the rival. After winning, the elites and government can be compensated for their losses through capital gains.

            According to the political development theory, developing a political system ensures an appropriate level of loyalty and commitment. In this process, a guaranteed redistribution of income and wealth is decided and would be actualized through the active participation of different groups that guide public decision-making. However, superpowers such as the US has become influential in controlling social and political reforms in countries (Bieler & Morton 3). With their extensive military power, they can force most states to abide by their international policies. This includes trade policies, social and political regulations, and democracy.

Distribution of Goods and Services

In the face of globalization, local governments perform most of the functions in the regulation and development of international distribution of goods and services. These functions may include protective functions, administrative, social, development, and trade functions. In customer protection, the states ensure that goods imported or exported are safe for consumption or use (Bieler & Morton 3). In that regard, through different arms of government, the state forms standards that traders in other sectors must meet. The governments can also determine the prices of goods to ensure that their people are not overcharged. Also, they may help in the elimination of misleading advertisements about products aimed at persuading customers. This is according to the setup of their consumer rights.


Therefore, states have a significant contribution to the world’s economy. Most of the influence is in controlling trade and distribution of products and services through policy-making and implementation of different legislations. Also, as discussed, the government plays a central political role during wars. It uses its political powers to enhance the capability of winning battles and ensuring gaining from acquiring resources. As discussed, the United States has been the superpower for decades and continues to influence most economic, political, and social dispensations. However, due to international regulatory organizations such as the United Nations, World Trade Organization, and International Monetary Fund. Therefore, effective regulations by these organizations allow for equitable trade welfare and distribution of wealth across countries.

Work Cited

Anderson, Robert D. “Competition policy, trade and the global economy: Existing WTO elements, commitments in regional trade agreements, current challenges and issues for reflection.” (2018).

Bieler, Andreas, and Adam David Morton. Global capitalism, global war, global crisis. Cambridge University Press, 2018.

Chowdhury, Anis, and José Antonio Ocampo. “The Global Economy since the Second World War through the Lens.” The World Economy Through the Lens of the United Nations (2018): 1.

Porter, Michael E. “Location, competition, and economic development: Local clusters in a global economy.” Economic development quarterly 14.1 (2000): 15-34.

World Bank Group. Doing Business 2015: Going Beyond Efficiency: Comparing Business Regulations for Domestic Firms in 189 Economies: A World Bank Group Flagship Report. World Bank Publications, 2014.

Hussain, Zahid. “Can political stability hurt economic growth?” World Bank, 2014. Accessed 29 September, 2020: