Essay on A Key Factor Of Sovereignty

979 Words Nov 8th, 2015 4 Pages
A key factor of sovereignty lies in the status of its external recognition; according to Li and Zhou: financial sovereignty is a component of sovereignty itself and therefore is “…composed of financial sovereign status, financial sovereign authority, and financial sovereign capability.”(Li and Zhou, p. 178). Sovereign status, being based on the recognition and consent of other states, should not be affected by globalization of financial capitalism, leaving the other two components from Li and Zhou: financial authority and capability to be impacted. Status aside, a state’s ability to manage its own monetary policies are crucial for maintenance of its economic policy. MNCs play a large role with regards to affecting a developing nation’s standing. According to Li and Zhou the three major credit rating agencies account for “95 %” (Li and Zhou, p. 178) of the stakes in that field. This massive share enables these MNCs to exert influence, for example in 2008 as a result of these credit rating agencies “…downgrading the sovereign credit ratings of Spain, Greece, and Portugal…” and issuing “…warnings on the economic outlook of these countries…”, the countries in question “…launched austere fiscal policies which resulted in severe economic, social, and even political problems…” (Li and Zhou, p. 180). This was an example of sovereign states’ political processes being influenced by globalization and in turn affecting their capability as sovereign states. Li and Zhou found that…

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