“Who needs the nation state?”,
asks Harvard University Professor Dani Rodrik in a new paper. He concludes: We
all do. His argument is that globalization’s ills stem from the “imbalance
between the global nature of markets and the domestic nature of the rules that
govern them”, and global governance is neither feasible nor desirable because:
market-supporting institutions are not unique; there is a heterogeneity of
needs and preferences with regard to institutional forms among communities;
geographical distance limits the convergence of those needs and preferences;
and experimentation and competition among diverse institutional forms is
desirable.
He makes quite a compelling case
against what he terms hyper-globalization—which considers globalization as an
end in itself rather than as a means to prosperity—just as he did in his book The
Globalization Paradox, published last year. And it is difficult to contest his conclusion that all of us need the nation state. However, some of the
prescriptions he makes for achieving “smart” globalization, in the paper and/or
in the book, should be treated with extreme caution. A careful, in-depth analysis
and assessment of their possible implications is required, to say the least. Some
issues with regard to a few of his prescriptions are briefly discussed below.
He recommends that countries be
allowed to uphold national standards in labour markets, finance, taxation and
other areas, and to do so by raising barriers at the border if necessary, “when
international trade and finance demonstrably threaten domestic practices
enjoying democratic support”. In The Globalization Paradox, he proposes
that the World Trade Organization (WTO)’s Agreement on Safeguards be expanded
in scope and converted into an Agreement on Developmental and Social
Safeguards, which would provide members, developed and developing alike, the option
of opt-outs from WTO obligations even for reasons other than competitive threat
to domestic industry. Rodrik’s proposition is that the raising of barriers at
the border to uphold national standards should be deemed legitimate only if
“democratic process” has been followed. He even goes as far so to argue that
authoritarian regimes must not count on getting the same benefits/preferences
in the multilateral trading regime, and that such regimes must meet stricter
requirements to exercise opt-outs. The emphasis on a democratic process is to
guard against the erection of trade barriers at the behest of vested interests
which do not represent the interests, values and preferences of the vast
majority of the people in a nation.
The fundamental problem with this
prescription is how to determine whether the domestic practices under threat
“enjoy democratic support”. Even if one were to accept the notion that none (all)
of the decisions of an authoritarian (democratic) regime enjoy democratic
support—which itself is highly controversial—there still remains a difficult question:
how do you judge a regime to be democratic or otherwise? While few would oppose
the proposition that governments should take decisions rooted in the interests
of the people, there are no universal principles of democracy; nor are there universally
accepted indicators or metrics of democracy. It is one thing to use indicators
such as the World Bank's World Governance Indicators, including the voice
and accountability indicator, in cross-country growth regression or a gravity
equation (to explain bilateral trade flows). But few regimes/governments will
accept the use of such indicators to judge the legitimacy of their decisions to
impose trade barriers. It is also an open question whether democracy should be
measured in terms of outcome or process. Some (with the process in mind) might
argue that India has a democratic polity because it has universal suffrage and witnesses
periodic elections, while others (with the outcome in mind) might argue that a
country plagued by rampant corruption, criminalization of politics, a raging
insurgency and separatist movements, and where poverty rates are still high, and
hunger and undernourishment rates match those in sub-Saharan Africa cannot be
considered to be a democracy—at least a functioning one. Similarly,
while some might argue that China cannot be considered as a democracy because
it is a one-party state and its citizens cannot voice their opinions as freely
as their counterparts in the West can, others might argue that if India can be
considered a democracy then surely so can China if only for the simple yet
incontrovertible fact that it represents the greatest growth and poverty-reduction
success story ever (something admitted even by its rabid critics), and that a
nation, which boasts the oldest running civilization in the world, should not
be expected to have a domestic system of governance that apes Western political
values and systems.
Moreover, even if Rodrik’s
proposal were to assess the democratic legitimacy of every decision of a regime/government
to exercise opt-outs on a case-by-case basis instead of judging a regime/government in its entirety as democratic
or authoritarian, the operational difficulties of making such assessments, even
if the criteria could be agreed upon, would make the proposal, however noble in
intent, a pie in the sky. Forget about India or China—imagine conclusively
determining whether the protection afforded by the US government to its cotton
farmers carries the support of the overwhelming majority of the American people
(unless a referendum is held on the issue!).
Just as standards concerning,
say, labour vary across nations, so do ideas of democracy. It is somewhat
paradoxical that in attempting to suggest a way to expand and preserve domestic
policy space under a multilateral economic system so that nations can uphold
their national standards in virtually any area, Rodrik tends to prescribe multilateral
harmonization, as it were, of standards in democracy. Moreover, Rodrik’s
persistent argument (which can also be found in earlier writings, including the
book One Economics Many Recipes) that authoritarian regimes must not
count on getting the same benefits/preferences as democratic ones in the multilateral trading
regime is an open invitation to trade war or a breakdown of the multilateral
trading system. Another issue is that the proposed Agreement on Developmental
and Social Safeguards, while prima facie appearing to protect the policy
space of developing countries, may in reality have adverse developmental implications
for them, particularly the least-developed countries, by making it legal for
developed countries to discriminate against imports from countries that do not
have, for example, labour standards as their own. That the proposed agreement
would also allow poor countries to take border measures to preserve their own
national standards would be of poor consolation in the real world of asymmetric
political and economic strengths of nations.
