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Thursday, June 07, 2007

Globalization and the Power of the State

Dan Drezner says people who expect globalization to reduce the power and autonomy of individual governments are going to be disappointed, "the global political economy of this century will look only slightly different from that of the 20th century." Here's a condensed version of his argument from Cato Unbound:

The Persistent Power of the State in the Global Economy, by Daniel W. Drezner, Cato Unbound: The 20th century witnessed the inexorable rise of the state as the pre-eminent player in economic life. By standard metrics — state spending as a percentage of GDP, regulation of economic activity — governments exercised increasing influence over their national markets as the century progressed. ...

For many scholars and commentators, the 21st century was supposed to be different, because of ... globalization... For good or ill, the globalization of markets was expected to constrain state power in a variety of ways. Indeed, the dominant strands of globalization research share a common assumption – the decline of state autonomy...

A particular fear — or hope, depending on one’s ideological proclivities — was that globalization would encourage a “race to the bottom.” According to this model, capital has become increasingly footloose... In such a world, capital will seek the location where it can earn the highest rate of return. High rates of corporate taxation, strict labor laws, or rigorous environmental protection lower profit rates by raising the costs of production. Capital will therefore engage in regulatory arbitrage, moving to (or importing from) countries with the fewest and lowest regulatory standards. Nation-states eager to attract capital – and fearful of losing their tax base – lower their regulatory standards... The end result is a world where regulatory standards are at the lowest common denominator. ...

For others, the rising power of voluntary associations is even more important in constraining the state’s role in the global economy. Enthusiasts and scholars who study global civil society posit that globalization empowers a new set of nonstate actors — particularly nongovernmental organizations (NGOs). The growth of NGOs, epistemic communities, public policy networks, transnational social movements, and even private orders amounts to the creation of a global civic society that is too ideationally powerful for states to ignore. In an Internet age, these groups have agenda-setting powers that compel states to take (or cease) action...

These are not the only arguments put forward about how globalization affects the state. Lawyers and sociologists look at the ever-increasing web of laws, rules, treaties, and international institutions, and see the state cosseted by global norms. Some theorists go so far as to assert that globalization requires a wholesale rejection of existing theoretical paradigms in international relations. Indeed, if there is a recurring theme that runs through the literature..., it is that economic globalization attenuates state power.

It was this kind of ideational environment that prompted me to write All Politics Is Global: Explaining International Regulatory Regimes. In the book, I conclude that globalization has been responsible for a lot of bad predictions about international relations. ...

For the past century, the standard approaches to international relations — realism and liberalism — have focused on the role that state power and national interest play in determining outcomes in world politics. All Politics Is Global argues that globalization does little to reduce the salience of these factors. One of the basic measures of aggregate power has been relative market size. The current era of globalization, if anything, reinforces that metric of power. Governments that regulate large markets — at present, the United States and European Union — will establish the rules that other actors will follow. ...

The biggest implication of All Politics Is Global is that the global political economy of this century will look only slightly different from that of the 20th century. The state will not intervene in the same crude fashion it did in the past (tariffs, quotas, capital controls) but it will intervene. Governments that regulate large domestic markets will continue to be the primary actors writing the global rules of the game. NGOs and other activists will capture media headlines and occasional moral victories, but have little long-term influence on outcomes. The proliferation of international rules, laws, and organizational forms will not limit state sovereignty — if anything, it will enhance the ability of the great powers to go forum-shopping at will. ...

What is taking place today in the theoretical debates about globalization and global governance echoes similar debates from three decades ago. During the early seventies the global economy seemed to be buffeted by one shock after another — the first oil crisis, the end of the Bretton Woods era, etc. This triggered a surge of research into the ways in which complex transnational interdependence could alter the behavior of states. This research emphasized the ways in which non-state actors and the global economy constrained states. A few years later, another wave of scholarship arose asking how the political externalities of interdependence would be regulated in an anarchic world. The result was the literature on international regimes, which pointed out the ways in which states remained the primary actors in establishing the rules of the game, while other actors and factors were “intervening variables.”

A similar yin and yang is taking place in the current theoretical debates about how economic globalization affects world politics. The first wave of this literature arrived in the nineties, highlighting the ways in which the globalization phenomenon placed added constraints on the state. All Politics Is Global belongs to a small but growing literature that looks at globalization and global governance from a state-centric perspective. ... Globalization is not irrelevant to global governance, but it is not transformative either.

    Posted by on Thursday, June 7, 2007 at 12:33 AM in Economics, International Trade, Politics | Permalink  TrackBack (0)  Comments (53)

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