Better together

The supposed conflict between borderless economic activity and national democracy is at the heart not just of the UK’s debate over whether to remain in the EU, but of the rise of anti-cosmopolitan populism everywhere.

The most useful framework for thinking about the alleged democratic deficit is Dani Rodrik’s globalisation trilemma, in which he posits that you cannot fully have more than two of the following three: international economic integration, national sovereignty and democratic politics. In other words, you must give up either on globalisation, or on democracy, or on the nation state (in which case you opt for a democratic superstate):

That it is the most useful does not mean it is right. Rather, thinking critically about Rodrik’s trilemma should lead us to more optimistic conclusions.

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? If there are things a non-democratic national government can do that democracies cannot, surely this is as true in countries cut off from the global economy. If anything, globalisation may constrain the omnipotence of non-democratic regimes more.

That means that if there is a conflict, it is one between globalisation and national self-determination (however democratic that sovereignty may or may not be). That is problematic for those who argue for Brexit on the grounds that it will allow the country to do more free trade: if the dilemma is between globalising your economy and national political freedom, the pretence of restoring sovereignty in order to liberalise trade more is incoherent.

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. But the proliferation of bureaucracy and technical rules is a response to the increasing complexity of economic activity. Any moderately modern economy, even if it kept behind rebuilt national barriers, would need a bureaucracy putting in place a thicket of technical rules to set standards to co-ordinate market participants and inform customers about what exactly they are getting. And it would need to make policy decisions — on monetary and tax policy, for instance — based in part on highly technical analysis. That may be a problem for democracy; it has nothing to do, however, with globalisation.

The question, then, is whether those rules and policies are on the whole fit for purpose, as well as whether they ultimately reflect democratic preferences. Those are not, of course, the same thing: we should be careful not to expect that more democracy always means better policies. 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. As I’ve argued at length elsewhere, no external forces prevented Irish authorities from reining in their banks or the Greek government from borrowing less in the decade before the crisis. Nor, indeed, was it impossible to restructure Greek government debt and Irish bank debt in 2010. But leaders — democratically elected national leaders, albeit subject to lots of outside pressure — decided otherwise. As for the EU more generally, how often do national governments complaining about encroachment on their affairs challenge European rules in court on the basis of the treaty protection of subsidiarity, the principle that decisions should be taken as close to citizens as possible?

The degree of economic globalisation is itself largely (but not only) a national policy choice. Indeed Rodrik himself says as much in an op-ed this week.

For example: whether to pursue free trade on the mere basis of non-discrimination, or the deeper integration that involves common regulation such as Europe’s single market, is a political choice that countries are legally and politically free to make. A recent speech by Christian Noyer, the former head of the French central bank, points out the distinction between a “common market” of mere non-discrimination — which works fine for trade in goods — and a “single market” of common rules, which is necessary for truly free trade in services (hat tip: InFacts). A country may prefer one or the other — but choosing the latter surely doesn’t make the common rules ipso facto less democratic.

Rather, the question is whether common rules help or hinder self-determination. At the individual level, we do not doubt that, within limits, subjecting ourselves to common laws enhances rather than constricts our freedom. Often, the same will be true at the international level: provided each country has its fair share of influence on the common rulemaking process, the common rules enhance a nation’s control over its destiny. Partly by freeing up resources (designing a single set of rules for the EU requires fewer bureaucrats, and surely less headache for business people, than designing 28 different sets for 28 countries).

But most importantly, because negotiating rules together is an exercise of national self-determination, not its abrogation. All the more so when technology and the scale of economic activity increasingly mean we are affected by what people do in other countries. If the goal is greater control over the world in which we live then agreeing, nation by nation, to bind ourselves by common rules enhances the opportunities we have for such control. There is nothing undemocratic about that. Another matter entirely is whether the substance of what our leaders have agreed has good or bad consequences. We should not let them off the hook by minimising their influence on the outcome.

Home economics

My colleague Emma Jacobs has written fascinating account of the progress of — and sometimes resistance to — paternity leave policies in the UK and around the world. There is a long way left to go.

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