In the past four decades it has been frequently argued that globalization is invading the nation state. The thought is that globalization will result in following: the loss of state sovereignty; the meaninglessness of the national border; and the inability to determine national economies. In addition, it is thought that globalization results in governance powers being transferred to international organizations, and that globalization exacerbates environment problems and generate new military concern like terrorism. However, within the discipline of IPE, the emphasize of the following evaluation will be placed on the impact of economic globalization on state's policy choices. .
Hyper-globalists perceive the state as causality of globalization, and even advance predictions of the demise of the nation state. In this view, the capacity, autonomy, and authority of the state are undermined by the power of global markets and capital so states are no longer able to discharge the function of governance under the environment of globalization (Phillips, 2005: 92). First, it had been argued that the period after the end of the Second World War witnessed a rapid growth of trade, which indicated a greater interconnectedness in the nature of the economy (O'Brien & Williams, 2010: 163). Therefore, national economies would be sensitive and vulnerable to external economic problems, which the nation state is incapable of dealing with. Second, the integration of financial markets where the capital enjoys a high level of fluidity to flow across borders so that national governments are unable to control the movement of national capital. Third, the expansion of transnational production led to the growth of transnational corporations and the increase of foreign direct investments. As a result, as Strange (1997: 365-369) argues, the power of the state flows to firms, and the role of the state is reduced to provide economic infrastructure to attract investment.