1 Hyper-globalization National Sovereignty Democracy The Political Trilemma of the World Economy (Dani Rodrik, 2010) Golden Straightjacket Global Governance Bretton Woods Compromise

2 What is democracy?  Democracy is a certain class of relations between states and citizens  A regime is democratic to the degree that political relations between the state and its citizens feature broad, equal, protected and mutually binding consultation  Democratization means net movement toward broader, more equal, more protected, and more binding consultation  De-democratization is movement in the reverse (Tilly, Democracy, 2007)

3 "Has Globalization Gone Too Far?," Dani Rodrik, Ch. 28, pp (Excerpted from Rodrik, “Has Globalization Gone Too Far?,” in Has Globalization Gone Too Far?, Institute for International Economics, pp. 2, 4-7, )

4 GL is exposing deep fault lines b/w social groups  Between those who have the skills and mobility to flourish in global markets and those who don't have these advantages or perceive the expansion of unregulated markets as a threat to social stability and deeply help norms  tension between the market and social groups such as workers, pensioners, and environmentalists, w/ governments in the middle

5 Sources of tension between the global market & social stability 1)Reduced barriers to trade and investment increase asymmetry b/w groups that can cross borders and those that can't 2)GL has made it exceedingly difficult for governments to provide social insurance – one of their central functions and one that has helped maintain social cohesion and domestic political support for ongoing liberalization throughout the postwar period 3)GL engenders conflicts within and b/w nations over domestic norms and the social institutions that embody them

6 1: Reduced barriers to trade and investment increase asymmetry b/w groups that can cross borders (directly or indirectly through outsourcing) and those that can't  Those who can: owners of capital, highly skilled workers, and many professionals who are free to take their resources where they are most in demand  Those who can't: many unskilled and semiskilled workers and most middle managers  their services are elastic, i.e., they are more easily substituted by the services of other people across national boundaries  Most GL research has focused on the downward shift in demand for unskilled workers rather than the increase in the elasticity of demand

7 GL enables “substitutability,” transforming the employment relationship  The postwar “social bargain” b/w workers and employers (i.e., steady increase in wages and benefits in exchange for labor peace) has been undermined  Substitutability has concrete consequences:  Workers now have to pay a larger share of the cost of improvements in work conditions and benefits (i.e., bear greater incidence of nonwage costs)  They have to incur greater instability in earnings and hours worked in response to shocks in labor demand or labor productivity (i.e., volatility and insecurity increase)  Their bargaining power erodes, so they receive lower wages and benefits whenever bargaining is an element in setting the terms of employment

8 2: GL has makes it difficult for governments to provide social insurance – one of their central functions and one that has helped maintain social cohesion and domestic political support for ongoing liberalization throughout the postwar period  Governments have used fiscal powers to insulate domestic groups from excessive market risks, especially when they're foreign in origin, but government has been downsizing for decades, reducing its social obligations

9 3: GL engenders conflicts within and b/w nations over domestic norms and the social institutions that embody them  As technology becomes standardized and diffused internationally, nations with very different sets of values, norms, institutions, and collective preferences begin to compete head on in mkts for similar goods  presents opportunities for trade among countries at very different levels of development  Trade becomes contentious when it unleashes forces that undermine the norms implicit in domestic practices  e.g., plant closed in South Carolina for child labor in Honduras or French pensions cut in favor of Maastricht  Trade policy almost always has redistributive consequences (among sectors, income groups, and individuals)

10 The Role of National Governments  Policymakers must respond to these tensions without sheltering groups from foreign competition through protectionism: 1)Strike a balance b/w openness and domestic needs 2)Do not neglect social insurance 3)Do not use "competitiveness" as an excuse for domestic reform 4)Do not abuse fairness claims in trade