From Project Syndicate:
CAMBRIDGE – One of our era’s foundational myths is that globalization has condemned the nation-state to irrelevance. The revolution in transport and communications, we hear, has vaporized borders and shrunk the world. New modes of governance, ranging from transnational networks of regulators to international civil-society organizations to multilateral institutions, are transcending and supplanting national lawmakers. Domestic policymakers, it is said, are largely powerless in the face of global markets.
The global financial crisis has shattered this myth. Who bailed out the banks, pumped in the liquidity, engaged in fiscal stimulus, and provided the safety nets for the unemployed to thwart an escalating catastrophe? Who is re-writing the rules on financial-market supervision and regulation to prevent another occurrence? Who gets the lion’s share of the blame for everything that goes wrong? The answer is always the same: national governments. The G-20, the International Monetary Fund, and the Basel Committee on Banking Supervision have been largely sideshows.
Even in Europe, where regional institutions are comparatively strong, it is national interest and national policymakers, largely in the person of German Chancellor Angela Merkel, who have dominated policymaking. Had Merkel been less enamored of austerity for Europe’s debt-distressed countries, and had she managed to convince her domestic electorate of the need for a different approach, the eurozone crisis would have played out quite differently.