"Globalisation refers to an evolving pattern of cross-border activities of firms, involving international investment, trade and collaboration for the purposes of product development, production and sourcing, and marketing. It is driven by firm strategies to exploit competitive advantages internationally, use favourable local inputs and infrastructure, and locate in final markets. These strategies are shaped by declining communication and transport costs, and rising R&D costs; macroeconomic trends and exchange rate fluctuations; and liberalisation of trade, investment and capital movements".OECD Jobs Study. Facts, Analysis, Strategies. 1994. 1. INTRODUCTIONGlobalisation is not a new phenomenon. There have been many periods of global economic integration, followed by periods of backlash. Despite these occasional disruptions, the degree of economic integration in the world has been rising over time. Especially since the Second World War, the pace of economic integration has become more rapid. Technological progress has improved transportation and communications, enhanced information awareness and information processing, and has set the stage for new products and innovations. These developments make it much easier for national markets to be globally integrated. Although these markets still do not form a global village, they have become so interdependent that they are changing the environment in which economic activity takes place. This new economic environment has, however, also brought about certain disadvantages, such as the large reversals in international capital flows and resulting economic crises in many countries. Towards the end of last year, these crises led to protests against free trade and "global capitalism". Demonstrations were particularly strong in the City of London and at the World Trade Organisation round of negotiations in Seattle. More recently the meetings of the IMF and World Bank in Washington and Prague during April and September 2000 were also the focus of protests against globalisation and the debt burden of some developing countries. Despite these demonstrations, global economic integration today is greater than it has ever been and is likely to become even stronger in the coming years. 2. CONSEQUENCES AND LESSONS OF GLOBALISATIONNew technologies will continue to make the world a smaller place. The linkages between stock exchanges in many countries increased significantly in the 1990s. Recent empirical evidence1 shows that due to the elimination of obstacles to free trade, greater financial market integration has led to greater market efficiency and better risk-and-return combinations for investors. There has been a sharp increase in the weight of foreign assets in the portfolios of some agents, as well as the correlation between the relevant stock indices and the ability of each market return to explain the behaviour of returns in other markets. The disadvantage of the greater integration of financial markets is that it reduces the ability of domestically focused policies to deal with the problems arising in the respective domestic financial markets. South African share prices are increasingly influenced by the views of international investors. Developments in London, New York, Frankfurt and Tokyo often have a greater influence on domestic share prices than actual developments in South Africa. South Africa has seen major swings in foreign exchange flows, interest and exchange rates in recent years. Under these circumstances, errors of judgement maybe easily made with domestic macroeconomic policy that could have a detrimental effect on aggregate domestic economic activity in South Africa. It can be said that the greater the level of integration of the global market, the greater the need for worldwide supervision. One of the important questions in this regard is whether such worldwide supervision should be provided by a single international supervisor or by a closely linked group of supervisors. South Africa’s sophisticated financial system compares favourably with those of most industrialised cou