Economic Globalization, Political Democracy, and Nation-States

You can choose any two. That’s economist Dani Rodrik’s take-away from the Greek debt crisis that is roiling the Eurozone right now:

CAMBRIDGE — The $140 billion support package that the Greek government has finally received from its European Union partners and the International Monetary Fund gives it the breathing space needed to undertake the difficult job of putting its finances in order. The package may or may not prevent Spain and Portugal from becoming undone in a similar fashion, or indeed even head off an eventual Greek default. Whatever the outcome, it is clear that the Greek debacle has given the EU a black eye.

Deep down, the crisis is yet another manifestation of what I call “the political trilemma of the world economy”: economic globalization, political democracy, and the nation-state are mutually irreconcilable. We can have at most two at one time. Democracy is compatible with national sovereignty only if we restrict globalization. If we push for globalization while retaining the nation-state, we must jettison democracy. And if we want democracy along with globalization, we must shove the nation-state aside and strive for greater international governance.

Hat tip: Greg Mankiw who adds “Sad, if true.” Sad, indeed, since to my eye it would mean that we have a choice among permanent abject poverty for half the world (the world without globalization), war without boundaries (the world without nation-states), or a political order that is inevitably and intolerably unjust (the world without political democracy).

As I’ve noted before over at my place, government requires some level of consensus, some basic set of principles on which the great preponderance of the people agree. That condition exists within cultures but the principles on which the great preponderance of the people of the world can agree is actually pretty small. So, for example, the rule of law is a cultural phenomenon rather than a universal value. Majority rule? Same thing. Religious freedom, free speech, the right to own property? Principles that are highly contentious. The sixty year old attempt at codifying a set of values for the whole world, the Universal Declaration of Human Rights, is rejected outright by a significant number of members of the United Nations (they’ve put together their own alternative version). I doubt that any country in the world including this one accepts all of its articles. So, for example, I suspect Article 26 might be hotly debated here:

Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit.

Let’s engage in a couple of thought experiments. For both of them let’s assume that Dr. Rodrik’s proposition is true with the modification of degrees, i.e. that the greater the degree of economic integration among countries, the greater the necessary political integration or the less the level of political democracy. Here’s the first thought experiment. Assume the level of economic integration between China and the United States continues to increase. What will the political system of the United States be like in 50 years? Will the United States continue to exist?

Here’s the second. What policy should we pursue? Remember the assumptions.

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Dave Schuler
About Dave Schuler
Over the years Dave Schuler has worked as a martial arts instructor, a handyman, a musician, a cook, and a translator. He's owned his own company for the last thirty years and has a post-graduate degree in his field. He comes from a family of politicians, teachers, and vaudeville entertainers. All-in-all a pretty good preparation for blogging. He has contributed to OTB since November 2006 but mostly writes at his own blog, The Glittering Eye, which he started in March 2004.

Comments

  1. john personna says:

    Was the folly of princes really so much better at matching policies to reality?

    Democracies measure sentiment, and sentiment carries momentum and values of pre-globalized times. An example would be my old hobby horse – that it is illogical to have both a minimum wage and free trade. The two contradict, and lead to unintended consequences.

    To rationalize that we could go either way, we could eliminate the minimum or put a restriction on the trade. Political democracy should work it out in time, but I suspect the trade is more vulnerable than the democracy.

    (It’s quite possible that globalization overshot what most people thought was the target.)

  2. john personna says:

    Note that the US political message on globalization was not “good for them,” or “good for the world,” it was “good for us.”

    I’d say fairly broad swaths of American workers lost in the globalization game. They have good reason to call politicians on the “good for us” claim.

  3. I think that the trilemma is poorly constructed, because the problem with Greece isn’t globalization, per se, as much as it is economic integration. If Greece was not part of the EU then the effects of the crisis and the responses would have been different. Indeed, the EU element to the discussion dilutes (at a minimum) the nation-state element.

    Further, from the post (I need to go read Rodrick’s piece, I will admit), the exact threat to democracy is unclear to me, as is the application of the discussion of universal values (or the lack thereof).

  4. Steve Plunk says:

    For the three to be compatible you must add a fourth element, discipline. Greece lacked discipline and found itself in trouble. Now you can say political democracy will always lack discipline but that’s false. The lack of discipline is created by politicians who tell us not to worry about it. Hardships like what Greece is going to go through will reestablish realistic expectations and discipline.

    It applies here at home as well.

  5. I’ll say this, too: while it is the case that globalization leads to a softening of state sovereignty in some areas that doesn’t mean doing away with the nation-state. Indeed, I have heard and read for years (decades) about how the state is going away, and yet in most ways states are just as significant now as they were 100 years ago.

  6. sam says:

    My guess is, given the cultural disparities, we’ll arrive at globalization and nation-states: Economics will drive the shaping. At the end of the day, a lot of the talk about freedom and liberty is really about government interference in business. We’ll end up with an unjust political order, but if business interests feel they are being attended to, then “intolerable”? I’m not sure.

    What will we look like in 50 years? Our institutions and thinking about institutions will be bent to conform to the economic imperatives vis-a-vis the Chinese. Pick any core American value, then ask whether it advances those imperatives in its current form. If the answer is no, then that value will be transmuted into something that does. And this will accomplished using the rhetoric of freedom and liberty.

    What policy should we pursue? I wish I knew.

  7. I don’t accept the assumptions, especially since there are many other unstated assumptions that have to be accpeted along with these, especially those related to what accpetance of political democracy means. At some point, the entitlement mania that has gripped Western countries will recede — it has to.

  8. PD Shaw says:

    I’m not sure I agree with the assumptions, but

    Assume the level of economic integration between China and the United States continues to increase.

    To me this would mean that China and the U.S. continue to increase the exchange of goods and services. I don’t see that increase coming solely by China increasing it’s purchase of notes and securities. Instead, this is more likely the result of increased consumption and demand from China; improved Chinese infrastructure and greater integration of the Chinese state. These are all developments which would suggest to me that Chinese citizens would be more empowered as consumers, while the Chinese nation-state would be strengthened in it’s interior and near-abroad. Anyway, I see more change in China under these assumptions than in the U.S.

    What will the political system of the United States be like in 50 years? Will the United States continue to exist?

    I predict we will still have an electoral college, much to Professor Taylor’s dismay.

    Perhaps this is very Whig of me, but China is the country that is going to be going through a lot of changes. It will probably accept any number of American political assumptions and reject many others.

  9. steve says:

    How we or China change will depend upon our relative success. In theory, a command economy should not perform as well as ours. China should end up looking more like us. However, societies are more than just economies. I suspect that Chinese culture will push it more towards a centralized economy than one might other wise expect. The same holds true for the US. If China outperforms us, we still wont copy them as much as expected since individual rights are important for us.

    Steve

  10. john personna says:

    Is China more command economy or anarchy right now?

    (On big items the central government controls, but a lot of places “mountains are high and the emperor is far away.”)

  11. c.red says:

    Interesting article and definitely worth a thought or two. While I think I get what he is saying, I think this only applies in a limited framework. Ultimately it seems globalization and the nation state that are mutually exclusive. The more you move towards one, the less you have of the other.

    Democracy is just a philosophy (that all people are of equal value within a given society) that has ultimately not been proven or even entirely understood. It makes moving along the above scale more difficult and inefficient rather than acts as a third pole.

    Regarding China and the US, I would not be surprised to see China or the US (more likely both) go through some major social and economic adjustments in the next fifty years that will cause them to become more isolationist for awhile. Certain cultural values of the US are currently antithetical to China and will prevent close integration. (In particular I’m thinking about Google recently pulling out of China’s operations, they just could not support the level of control of information China requires.) One or the other of us would have to change their national character and I don’t see that happening very much in the next fifty years.

  12. steve says:

    “Is China more command economy”

    Kind of an opaque economy, but certainly more centralized than we are.

    Steve

  13. TangoMan says:

    I suspect that Chinese culture will push it more towards a centralized economy than one might other wise expect. The same holds true for the US. If China outperforms us, we still wont copy them as much as expected since individual rights are important for us.

    Your analysis contains the seeds of a contradiction. Since this post asks us to embark on a thought experiment, let’s continue in that vain and imagine what Chinese culture would be if China had an influx of 500 million Brits. Would Chinese culture still be the same? When you claim that individual rights are important “for us” I don’t get the impression that you’re making allowances for how the “us” is changing over time. The long held values of pre-1965 American culture are giving way to new values. Sure, this cultural and value change isn’t revolutionary and immediate, nevertheless as multiculturalism is encouraged, the rise of values derived from multiple cultures will be concomitant with the decline of shared values.

    That said, while I agree that we won’t be emulating China’s policies based on the cultural values we hold today, I’m not sanguine about our future ability to resist a move towards the China end of the spectrum.

  14. PD Shaw says:

    Since I answered the question, I hope it’s not impolite to question the assumption.

    Greece has about 2% of the GDP of the EU. It’s going to have problems with economic self-determinism that other countries, such as Germany, China and the U.S. are not going to have.

    Greece is one of the least economically free countries in the EU. (It appears to be tied for last in the Heritage Foundation Rankings) So I wonder what is meant here by democracy? Does it mean voting oneself benefits in a state-dominated economy? I don’t think liberalism is what is meant.

    The country also ranks high in measures of corruption, and lacks transparent accounting of how it’s spending it’s money and who it employs. It is not an example of a strong nation-state and no doubt never was.

    So, I find this triangle notion flawed on all three sides w/ respect to Greece.

  15. TangoMan says:

    Let’s engage in a couple of thought experiments. For both of them let’s assume that Dr. Rodrik’s proposition is true with the modification of degrees, i.e. that the greater the degree of economic integration among countries, the greater the necessary political integration or the less the level of political democracy. Here’s the first thought experiment. Assume the level of economic integration between China and the United States continues to increase. What will the political system of the United States be like in 50 years? Will the United States continue to exist?

    Dani Rodrik’s Premise: Economic globalization, political democracy, and the nation-state are mutually irreconcilable.

    James C. Bennett’s Premise: Immigration, Multiculturalism, Democracy; pick any two.

    It appears that from both an economic and cultural perspective that Democracy is a roadblock to the agenda’s of many factions.

    To directly address Dave’s question about whether the US will continue to exist in 50 years, my short answer is, probably not.

    By wishing to maintain a Ponzi scheme inspired Social Welfare State, the US must always insure that it is “benefiting” from population growth. The demographic data show that our non-immigrant population is not replacing itself, so we must continue to import people and we import them into a culture that has now accepted multiculturalism as an expression of anti-racism. When these newcomers are granted the power of the vote we see increasing influence flowing to racial and ethnic blocs and greater calls for redistribution of wealth from some blocs to others as well as more government intervention into private affairs in order to please the demands of various racial and ethnic blocs and this dynamic seriously redefines what we mean by democracy.

    With these factors already in play, Rodrik’s premise kicks in and as we pursue greater economic efficiency that arises from globalization we must cede rule-making authority to more internationalized institutions thereby weakening the influence of national governments. The will of the people to decide on how economic issues should be addressed within their nation state becomes atrophied in that the exercise of sovereignty will come at the cost of economic efficiency. Further, as more nation states adopt the same economic policies the degree of difference between nation states, on matters of economic policy, will decrease, thereby weakening the rationale for the existence of nation states.

    Trends in the realm of economics and culture are leading towards increased homogenization and away from distinctiveness and democracy seems to be the obstacle that must be overcome.

  16. TangoMan says:

    Comment stuck in moderation.

  17. john personna says:

    To directly address Dave’s question about whether the US will continue to exist in 50 years, my short answer is, probably not.

    We all live at the end of history, until next year when there’s some more 😉

    It’s an easy trap to look at the linear extrapolation of current problems, and assume no fix. You might laugh at Julian Simon’s bet, or the Peak Oilers, even as you make your own extrapolation of debt with no fix, or Medicare with no fix.

    How is now really different? Isn’t it just typical that current-worst problems will be replaced with tomorrow’s worst problems?

  18. steve says:

    “what Chinese culture would be if China had an influx of 500 million Brits.”

    It would take more than 50 years to find enough sober Brits to breed 500 million.

    “Sure, this cultural and value change isn’t revolutionary and immediate, nevertheless as multiculturalism is encouraged, the rise of values derived from multiple cultures will be concomitant with the decline of shared values.”

    You know what the NIA signs in NYC mean I assume. The evil Jews coming from Europe were going to ruin us in the past. The Chinese were the yellow menace. I think we have a good track record of integrating others. Will we change? I hope so. Our ability to innovate is important.

    Steve

  19. TangoMan says:

    It would take more than 50 years to find enough sober Brits to breed 500 million.

    Witty but not an answer. Would Chinese culture still exist if it had to accommodate 500 million people of a different culture?

    The same point applies to American culture – the values that arose from the cultural experience of pre-65 America, which was an America shaped by a pro-European immigration policy, are now being influenced by immigration from cultures which are not considered part of the West and which have not nurtured Enlightenment values.

    Will the Chinese shape all 500 million Brits into culturally Chinese citizens? If Japan had a population that was 50% Bantu, would every citizen there still exhibit what are considered Japanese cultural traits? As America works on replacing it’s population will American values hold steady across time?

    It’s an easy trap to look at the linear extrapolation of current problems, and assume no fix. You might laugh at Julian Simon’s bet, or the Peak Oilers, even as you make your own extrapolation of debt with no fix, or Medicare with no fix.

    I’m not exactly sure what point you’re trying to make, but let me take a stab at it.

    -I find Simon’s bet to be very informative and I make reference to it frequently.
    -I’m not attempting to make a straight line projection.
    -I think democracy can die by a thousand small cuts.
    -I think that democracy will be redefined to include massive wealth redistribution because this will be sanctioned by the power of the vote.
    -The democracy that existed in Steve’s reference, a culture which values individualism, will be dead and replaced by a democracy that values the interests of blocs.

  20. john personna says:

    We seem to live with a contradiction about predictions. We know one knows the future, but we’ll stop to listen to someone who says they do. Every time. Or we might throw out some futures of our own.

    Think of how many futures, worlds of tomorrow, have come and gone.

    50 years? That’s right out. No one in the history of the world has made such a thing work (by other than luck, creative reinterpretation, survivor bias, post hoc fallacy, etc.)

    Sure, you can write some speculative fiction if you think it will help you understand today, or teach something valuable, but as actual prediction, no.

    50 years is science fiction, though I of course welcome our robot overlords.

  21. john personna says:

    Heh, one too few no/knows in that second sentence.

  22. steve says:

    “Would Chinese culture still exist if it had to accommodate 500 million people of a different culture?”

    Strikes me as not knowable. If the Brits went there, it would have to be a gradual migration, and I do not think we have had a migration of that size before. I would assume they would go there because there was significant opportunity. If that were the case, I would expect that they would mostly confirm, but that they would change Chinese culture in some subtle and not so subtle ways. British takeout (eel pie) would probably spring up everywhere.

    The fact that China would keep on accepting that many over time would imply that the Chinese were doing ok with the immigration. As to the US, I expect our core values to pretty much stay the same. Recent immigrants seem to be adapting fairly well from what I can see. They do come here to work, a core American value.

    Steve