Martin Sandbu of the Financial Times has a very thoughtful discussion of my globalization trilemma, as it applies to Brexit among other things. Sandbu argues that “thinking critically about Rodrik’s trilemma should lead us to more optimistic conclusions.”
I largely agree with Sandbu’s points, but I thought it would be useful to state some of my reactions in the interest of clarifying the issues. Here are Sandbu’s main points and my take on them.
- “First, if anything it is more dilemma than trilemma (as is the more famous macroeconomic trilemma Rodrik takes his inspiration from). Consider this: if economic integration limits a national democracy’s room for manoeuvre, does it limit a national dictatorship’s opportunities any less?”
I think Sandbu’s point is true for some dictatorships, but not all. Today the prevailing worry of progressives is that an oligarchy of financiers, investors, and skilled professionals has captured the polity and is using globalization as a way of imposing its policy priorities. What globalization does for these groups is actually to expand their political opportunities, rather than constrain them. In effect, globalization becomes an instrument for narrowing the scope of what governments can do (in taxation, spending, and regulation) so as to advance the interests of this particular oligarchy.
The defining feature of a democracy is that the electorate can decide on their own path and future, even when it may conflict what a narrowly based, internationally mobile elite want – and that is what hyper-globalization restricts.
- “Second, we should beware of conflating economic integration with technocracy. Rodrik does not do this, but most of the British debate does, with the blame heaped (by all sides, it must be said) on Brussels bureaucrats.”
Indeed, but in practice, globalization is used to impose a particular technocratic set of rules serving the interests of particular groups. That it need not do so is a valid point for globalization in general, as long as don’t take it as far as hyper-globalization (see below).
- “But let us focus here on whether — as Rodrik and so many others assert — that there is necessarily a loss of democracy when the rules are set internationally while most democratic institutions remain nationally rooted. … There are reasons to doubt that assertion. One is that the scope for national action is larger than is often claimed — even in the supposedly strongest golden straitjacket of them all, Europe’s common currency. … But most importantly, because negotiating rules together is an exercise of national self-determination, not its abrogation.”
With regard to the first objection, it is useful to distinguish between globalization and hyper-globalization. The political trilemma applies full-blown to the latter. As long as we are not trying to eliminate every transaction cost to international trade and investment, there are multiple models of globalization one can imagine, leaving plenty of space for countries to devise their own social and economic arrangements. Sandbu provides the example of non-discrimination in trade versus deeper integration. The closer we get to the latter, the less room countries do have.
The second point, that negotiating global rules is an exercise of national self-determination, requires longer discussion. The point is correct as stated, but I would add that the fact that an international rule is negotiated and accepted by a democratically elected government does not inherently make that rule democratically legitimate.
The optimistic argument has been best formulated by the political scientists Bob Keohane, Steve Macedo and Andy Moravcsik. They point there are various ways in which global rules can enhance democracy -- a process that they call “democracy enhancing multilateralism.” Democracies have various mechanisms for restricting the autonomy or the policy space of decision makers. For example, democratically elected parliaments often delegate power to independent or quasi-independent autonomous bodies. Central banks are often independent and there are various other kinds of checks and balances in constitutional democracies. Similarly, global rules can make it easier for national democracies to attain the goals that they pursue even if they entail some restrictions in terms of autonomy. Keohane at al. discuss three specific mechanisms: global rules can enhance democracy by offsetting factions, protecting minority rights, or by enhancing the quality of democratic deliberation.
However, just because globalization can enhance democracy does not mean that it always does so. In fact there are many ways in which global governance works in quite the opposite way from that described by Keohane et al. Anti-dumping rules, for example, augment protectionist interests. Rules on intellectual property rights and copyrights have privileged pharmaceuticals companies and Disney against the general interest. Similarly, there are many ways in which globalization actually harms rather than enhances the quality of democratic deliberation. For example, preferential or multilateral trade agreements are often simply voted up or down in national parliaments with little discussion, simply because they are international agreements. Globalization-enhancing global rules and democracy-enhancing global rules may have some overlap; but they are not one and the same thing.
More broadly, international commitments can be used to tie the hands of governments in both democratically legitimate and illegitimate ways. External discipline can be sought in two different kinds of settings--one of which is much more defensible on the traditional democratic delegation grounds than the other.
Consider first the case where the government faces a "time-inconsistency" problem. It would like to commit to free trade or to fiscal balance, but realizes that over time it will give in to pressure and deviate from what is its optimal policy ex ante. So it chooses to tie its hands through external discipline. This way, when protectionists and big spenders show up at its door, the government says: "sorry, the WTO or the IMF will not let me do it." Everyone is better off, save for the lobbyists and special interests. This is the good kind of delegation and external discipline.
Now consider the second kind. Here, the government fears not its future self, but its future opponents: the opposition party (or parties). The latter may have different views on economic policy, and if victorious in the next election, may well choose to shift course. Now when the incumbent government enters an international agreement, it does so to tie the hands of its opponents. From an ex-ante welfare standpoint, this strategy has much less to recommend itself. The future government may have better or worse ideas about government policy, and it is not clear that restricting its policy space is a win-win outcome. This kind of external discipline has much less democratic legitimacy because, once again, it privileges one set of interests against others.
The bottom line is that I am somewhat less optimistic than Sandbu on the democratic implications of globalization. But let me stress again that the constraints really bind in the presence of a hyper-globalization/deep-integration model (a la Eurozone). For more limited models of globalization, there are considerably more degrees of freedom.