Governance in a Globalizing World

Latin American Politics and Society, Summer 2002 by Sanchez, Omar

Nye, Joseph S., Jr., and John D. Donahue, eds. Governance in a Globalizing World. Washington, DC: Brookings Institution Press, 2000. Index, 368 pp.; hardcover $47.95, paperback $18.95.

Explaining and dissecting the phenomenon of globalization is a highgrowth industry. Amid the mountains of studies available in this genre, this is one of the few that deserves a place in the personal library of anyone interested in this most controversial of subjects. Few of the important dimensions of globalization are left untreated: national and international security, communications, cosmopolitanism, legal issues, transnational NGOs, international institutions, culture and identity, information policy, environmental issues are all covered in individual chapters. All the contributors are drawn from Harvard's John F. Kennedy School of Government. Their collaborative effort has produced a most insightful volume, which usefully contradicts many (unsubstantiated) assertions that one hears or reads in the media-and indeed in much scholarly work.

One of the biggest myths concerning globalization is that it is irreversible. Far from it, say most of the collaborators here. The process, after all, hinges as much on deliberate political decisions as on technological trends. And the increased volatility and uncertainty that appear to be associated with increased integration may lead to a powerful backlash with serious policy ramifications. As Joseph Nye and Robert 0. Keohane warn,

chaotic uncertainty is too high a price for most people to pay for somewhat higher average levels of prosperity. Unless aspects of globalization can be effectively governed, it may not be sustainable in its current form. (p. 1)

The introductory chapter makes the useful analytical distinction between globalism ("a state of the world involving networks of interdependence at multicontinental distances"), globalization (an increase in globalism) and deglobalization (a decrease in globalism). The distinction is more than a semantic flourish, for it allows us to speak with clarity about the phenomenon of global interdependence-avoiding the old Humpty Dumpty trap in which something means "what I say it means." It also reminds us that globalization is not new. While today's phenomenon differs in some qualitative respects, other periods of history have witnessed periods of increased globalism. In the search for verbal exactitude and analytical clarity, a step forward would be made if the academic community made more widespread use of the terms globalism and deglobalization along with the known all-inclusive word.

The book has a clear three-part division. The first part examines trends in globalization, the second looks at its impact on domestic governance, and the third examines its governance. This review will focus on the chapters centered on economic globalization.

Economists Jeffrey Frankel and Dani Rodrik do a superb job of dismantling many preconceived ideas. Judging today's world economic integration by the standard of perfect integration (a "straw man, but a useful one"), Frankel documents that developed countries are a long way from perfect openness. Next time we hear the tired motto that United States is deeply integrated into the world economy, we would do well to remember that if Americans were prone to buy goods and services from foreign producers as easily as from domestic producers, U.S. imports would equal 75 percent of the country's GDP. In other words, "globalization would have to increase sixfold, as measured by the trade ratio, before it would literally be true that Americans did business as easily across the globe as across the U.S." (p. 49). Frankel goes on to account for the factors contributing to home-bias in trade: distance and other geographical variables, linguistic and colonial factors, regional trade areas, political links, military relations, and domestic currencies.

Rodrik also points out that global economic integration remains, in his own words, "remarkably limited," certainly much more than conventional wisdom has it. But the most thought-provoking conceptual insight in his chapter is contained in his idea of "the augmented trilemma." The famous, standard trilemma of the open economy maintains that national economies cannot enjoy the benefits of monetary autonomy, capital mobility, and fixed exchange rates at the same time; in practice, they are forced to choose two out of the three. Rodrik introduces what he terms the "political trilemma of the world economy" (or augmented trilemma). The nation-state, global economic integration, and mass politics: only two out of these three are attainable. If the goal is true global economic integration and we want to maintain the nation-state, then mass politics faces severe restrictions. This is what New York Times columnist Thomas Friedman has called the "golden straitjacket." Policy choice would be drastically limited if countries adopted policies with an exclusive view to attracting trade and capital inflows: low government intervention in the economy, flexible labor policies, low taxes, privatization, restrictive fiscal and monetary policies, and so on. In this hypothetical world, Rodrik says, mass politics would not have much of a place.