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National Governments, Global Citizens

From Project Syndicate by Dani Rodrik:

Nothing endangers globalization more than the yawning governance gap – the dangerous disparity between the national scope of political accountability and the global nature of markets for goods, capital, and many services – that has opened up in recent decades. When markets transcend national regulation, as with today’s globalization of finance, market failure, instability, and crisis is the result. But pushing rule-making onto supranational bureaucracies, such as the World Trade Organization or the European Commission, can result in a democratic deficit and a loss of legitimacy.

How can this governance gap be closed? One option is to re-establish national democratic control over global markets. This is difficult and smacks of protectionism, but it is neither impossible nor necessarily inimical to healthy globalization. As I argue in my book The Globalization Paradox, expanding the scope for national governments to maintain regulatory diversity and rebuild frayed social bargains would enhance the functioning of the global economy.

Instead, policy elites (and most economists) favor strengthening what is euphemistically called “global governance.” According to this view, reforms such as those that enhance the effectiveness of the G-20, increase the representativeness of the International Monetary Fund’s Executive Board, and tighten the capital standards set by the Basel Committee on Banking Supervision would be sufficient to provide a sound institutional underpinning for the global economy.

But the trouble is not just that these global institutions remain weak. It is also that they are inter-governmental bodies – a collection of member states rather than agents of global citizens. Because their accountability to national electorates is indirect and uncertain, they do not generate the political allegiance – and hence legitimacy – that truly representative institutions require. Indeed, the travails of the European Union have revealed the limits of transnational political community-building, even among a comparatively limited and similar set of countries.

Ultimately, the buck stops with national parliaments and executives. During the financial crisis, it was national governments that bailed out banks and firms, recapitalized the financial system, guaranteed debts, eased liquidity, primed the fiscal pump, and paid the unemployment and welfare checks – and took the blame for everything that went wrong. In the memorable words of outgoing Bank of England Governor Mervyn King, global banks are “international in life, but national in death.”

But perhaps there is another path, one that accepts the authority of national governments, but aims to reorient national interests in a more global direction. Progress along such a path requires “national” citizens to begin viewing themselves increasingly as “global” citizens, with interests that extend beyond their state’s borders. National governments are accountable to their citizens, at least in principle. So, the more global these citizens’ sense of their interests becomes, the more globally responsible national policy will be.


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