Magazine article Teaching Business & Economics

The Globalization Paradox: Why Global Markets, States and Democracy Can't Coexist

Magazine article Teaching Business & Economics

The Globalization Paradox: Why Global Markets, States and Democracy Can't Coexist

Article excerpt

The Globalization Paradox: Why Global Markets, States and Democracy Can't Coexist, Dan i Rod ri k, Oxford University Press, 345 pages, £10.99, paperback, ISBN 978 0 19965 252 5

The new Director-General of the World Trade Organisation will take office on 1 September this year. He or she (for three of the nine nominees are female) will come to the job at a crucial time: while the Doha round of talks remains stalled; global economic recovery should lead countries away from the 'beggar thy neighbour1 protectionist policies that become more attractive during recessions. Indeed, it appears that accession to the WTO is still high on many countries' agendas: membership of the trade body continues to grow, most notably with Russia's eventual accession. Is such confidence in the WTO and the benefits that membership can bring for countries justified? Whilst Monsieur Lamy's would-be successors are busy orating the case for such a view, Dani Rodrik's latest book, The Globalization Paradox, posits a much less positive view of what the WTO, or indeed any multilateral, pro-globalisation body, can achieve.

Fundamental to much of Rodrik's argument is a distinction between 'shallow' and 'deep' global integration. Under shallow integration, domestic policy and the different needs of individual states are prioritised above the rules of international bodies which exist to promote trade. Under deep integration (or 'hyperglobalisation'), domestic policy becomes secondary to a set of immutable, international trade regulations, so that 'global rules in effect become the domestic rules'. The surprising result of Rodrik's trawl through economic history is that eras of shallow integration (under the Bretton Woods consensus, for example) saw much greater increases in world trade and prosperity than eras of deep integration (the mercantilist age of joint stock companies, or the modern day multilateral regime centred on the WTO). Markets and nation states, he argues, are complements, not substitutes: larger, more solid national governments facilitate trade and wealth generation to a much greater extent than does removing all forms of government intervention.

Rodrik is not arguing that globalisation is bad, but rather he is arguing for a particular kind of globalisation: one tailored to each individual economy by that country's own government, rather than a 'one size fits all' globalisation imposed from above. As a case in point he considers the development of China, where globalisation has generated such impressive rates of economic growth because of the use of market-supporting institutions, which possess distinctly Chinese characteristics. Rodrik believes that China would have found it very difficult to diversify out of agriculture and other traditional products without the unorthodox characteristics of the government's reforms; relying on markets alone, and restricting the scope of industrial policy actually 'undercuts globalisation as a positive force for development'.

In support of his argument, Rodrik covers a large amount of economic history and draws together case studies from all over the world. Whilst the former is interesting and a good introduction to the subdiscipline (perhaps for high ability students looking for pre-UCAS summer reading) the latter is directly relevant to the economic development element of all A-Level, IB, and Pre-U economics specifications. …

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