The Impact of Globalization on Governance

Wisconsin - April 1999

The conference will explore the consequences of changes in the international political economy for the policy making process, the viability of policies and the distribution of political power in nation states. It will be held under the auspices of SOG.

The Conference Theme

There is a widespread perception that the international political economy has evolved in ways that have severe consequences for the governance of the nation state. There has been a considerable increase in the volume of international trade, and a far greater increase in the volume of money being traded internationally. In a world in which tariff barriers have become very low and nontariff barriers are being eliminated by the World Trade Authority and, at the regional level, by the Single market of the European Union and by the North American Free Trade Agreement, nation states are increasingly constrained in their economic, social and labor policies. The imperatives to be competitive in trade and to operate monetary policies that command confidence on foreign exchange markets have become more pressing. Domestic policies ranging from education to environmental protection to employment law have been re-evaluated in terms of their contribution to competitiveness or uncompetitiveness. The need to be seen to be operating policies that the financial markets deem prudent has driven politicians from Thailand to Italy to Canada to take political risks in balancing budgets by cutting popular programs that would have seemed foolhardy in the recent past.

These constraints on policy choices have also been accompanied by significant shifts in the distribution of power. Central bankers, for example, have been among the obvious beneficiaries. There has been a global trend towards increasing the autonomy of central banks and to devolve to them the main responsibility for making crucial choices, for example in the trade offs between the levels of inflation and unemployment that will be accepted.

This trend has been promoted by international organizations such as the EU, the OECD and the International Monetary Fund. Both labor unions and environmental groups have complained that their ability to secure policies they favor at the national level is undermined by both the movement of industry to less regulated environments (from France to Britain, from the USA to Mexico) and the invalidation by supranational authorities of domestic policies which impede trade, such as the former American policy on protecting dolphins by banning imports of tuna from countries that did not meet its 'dolphin safe' requirements.

Even the very shift to making a wider range of policies through international agreements covering an extraordinary range of issues can, because of the closed nature of most such negotiations, be seen as reducing democratic accountability; criticism of the 'democratic deficit' in the EU, for example, suggests that the making of major policy decisions by heads of government or relevant ministers in diplomatic negotiations is a poor substitute for parliamentary accountability.

Others believe that these views are too pessimistic. International agreements such as the Maastricht Treat agreement to create a single European currency will free member states from the pressures of exchange rate crises that have been so debilitating in the past. David Vogel has argued that environmental and consumer groups have been able to use international agreements to raise substantially, not lower, standards of protection. Other scholars suggest that the volume on international trade is not sufficiently high to impinge on the freedom of policy choices for nation states; the volume of international trade in particular, it has been argued, is not unprecedentedly high, and for the United States constitutes a return to levels of trade dependence found at the beginning of the century. Others note that while many wide ranging policy agreements are made in international meetings, they are still made by leaders who know that they will have to defend those agreements domestically, as Major found to his cost with Maastricht and as Clinton has found in his struggles to win NAFTA and GATT ratification or to regain 'fast track' powers. In brief, the consequences of globalization are not as powerful, obvious and certain as is contended.

The conference seeks to address this debate about how great the consequences of globalization have been for domestic governance. Papers are invited that address topics such as the consequences of globalization for all aspects of regulation, economic and labor market policy and the distribution of power among domestic actors.