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Globalisation and Sovereignty

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In the context of IPE, what is globalisation? To what extent has the authority of nation states been eroded by globalisation? Discuss with reference to any OECD country.

IPE and Globalisation

In order to explain globalisation in the context of International Political Economy (IPE), I will begin by discussing the frameworks that IPE uses to describe the social constructs upon which human society is based. This discussion will then extend to issues pertinent to the essay question, including the concepts of globalisation, the nation state, authority and sovereignty, and the extent to which a nation state’s participation in a globally interdependent system influences that nation state’s authority.

IPE connotes a multidisciplinary method of enquiry to explain the ever-changing relationships between states, markets and societies across history and in different geographical areas. IPE includes a political dimension that accounts for the use of power by a variety of actors including individuals, domestic groups, states, international organisations, NGO’s, and transnational corporations. IPE also involves an economic dimension that deals with how scarce resources are distributed among individuals, groups and nation-states. (Ballam and Dillman, 2011, p7)

To place globalisation within the context of IPE, one must view the concept in terms of the causes and effects of the world market economy, the relationship between

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economic and political change, and the significance of the world economy for domestic economies (Gilpin, 2003, pp 13-14).

Globalisation is a multifaceted concept, and as such, is difficult to precisely define. I have used several different sources in order to give some depth to its description. Globalisation refers to the spread of communication, commercial and transportation networks across the world and the increasing rapidity with which they can move people, capital and produce, and relay information (Worthington, 2001, p1). Globalisation, in short, can be thought of as the widening, intensifying, speeding up, and growing impact of world-wide connectedness (Held and McGrew, para 1). Globalisation is an increase in the international integration of markets for goods, services, capital and labour (Quiggin, 2001, p56).

Globalisation is characterized by four types of change. First, it involves a stretching of social, political and economic activities across frontiers, regions and continents. Second, it is marked by the intensification, or the growing magnitude, of interconnectedness and flows of trade, investment, finance, migration, culture, etc. Third, it can be linked to a speeding up of global interactions and processes, as the development of world-wide systems of transport and communication increases the velocity of the diffusion of ideas, goods, information, capital and people. And, fourth, the growing extensity, intensity and velocity of global interactions can be associated with their deepening impact such that the effects of distant events can be highly significant elsewhere and specific local developments can come to have considerable global consequences. In this sense, the boundaries between domestic matters and global affairs become increasingly fluid (Held and McGrew, para 1).
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The Nation State

The definition of a “nation state” is also subject to much debate. To serve the issues in this essay, the working definition I have adopted is “A nation state is a political entity with sovereignty over a defined territory often coinciding with the distribution of a unified ethnic identity”.

Westphalian sovereignty comprised a world system founded on the absolute sovereignty of individual nation states. The interconnectedness of the world through globalisation, and via international organisations such as the United Nations [and the OECD], has given rise to a new international political order based on a community of nations, rather than a system of sovereign states. Westphalian sovereignty is based on geographical territory which is subject to the absolute governance of the nation state (Held et al, 1999, pp 32-86). The central principle is that one sovereign state should not interfere in the domestic arrangements of another (Quiggin, 2001, p56).

Since the authority of a nation state is territorially bound, global actors (such as transnational corporations) can escape overarching political regulation. Economic power and wealth can thereby be directed and determined by the global actors, and not the nation states. This creates a new dynamic in the global order whereby the nation states structure themselves suitably in order to attract value-creating investment capital from external sources, predominantly transnational corporations. This is colloquially termed the “Golden Straitjacket”, a phrase coined by Thomas Friedman, implying that individual nations must give up some degree of sovereignty to global institutions in return for capital (Friedman, 1999, pp 101-111).
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Authority and the Consequences of Choice

What is meant by “authority”? In the context of this essay, I define the authority of a nation state to be the extent to which a nation state has the power of selfdetermination of its government, laws and social policies, materially free from external influences. I further define “erosion of authority” as any limitations imposed upon that nation state’s power of self determination. In order to faithfully answer the essay question, one must distinguish between where a nation state’s authority has actually been eroded, compared with where the nation state is merely making a choice to respond and adapt to global changes, without losing its authority. There is much debate about whether globalisation has any overall material impact on the authority of nation states.

Using Australia (an OECD country) as an example, The Australian Department of Foreign Affairs and Trade (DFAT) strenuously maintains that globalisation is an overwhelmingly favourable process. In answering the question “Does globalisation undermine the authority of national governments?” the department’s own publication answers “No. In fact, countries cannot globalise unless their government’s choose to do so” (DFAT publication). The department’s rhetoric is clearly biased towards its own trade agenda, which is inherently dependent on globalisation. DFAT (at least in terms of what it says publicly) has an exceedingly simplistic view of the effects of globalisation on the authority of a nation state, in light of the realities of global pressures and change, and the nation state’s power to cope with such changes. The statement by DFAT does not account for the consequences to a nation state if that

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state chooses to engage in supranational union arrangements, as a result of an increasingly interconnected global order.

The nation state’s authority extends to its ability to choose whether or not it wishes to participate in such an agenda. That choice, however, must be made in light of the fact that globalisation is generally regarded as an unstoppable process, which cannot be completely reversed. The genie has left the bottle, and cannot be put back in. Any nation state which does not want to impoverish its citizens has no real choice (regardless of what authority it possesses) other than to participate in a policy agenda which recognises some level of global participation.

As stated earlier, IPE contains both a political and economic dimension. In the face of tremendous global forces, the nation state adapts to suit the conditions. The authority of the nation state is not necessarily eroded by such adaptations, indeed, strong authoritative control may be required in order to maximise opportunities and value. In facing the opportunities and threats presented by the economic dimension of globalisation, it is arguable whether there is a material impact upon the ability of the nation state to self-determine its own destiny, should it decide not to relinquish its sovereign right of economic self-determination.

This argument does not hold up as easily when reviewing the political dimension of globalisation, especially in the area of international law, as described in the following excerpt: “Twentieth century forms of international law – from the law governing war, to that concerning crimes against humanity, environmental issues and human rights – have created the basis of what can be thought of as an emerging framework of
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“cosmopolitan law”, law which circumscribes and delimits the political power of individual states. In principle, states are no longer able to treat their citizens as they see fit. Although, in practice, many states still violate these standards, nearly all now accept general duties of protection and provision, as well as of restraint, in their own practices and procedures. As governments and their citizens have become embedded in more expansive networks and layers of regional and global governance, they have become subject to new loci of authority above, below and alongside the state. Indeed, the form and intensity of contemporary political globalisation poses a profound challenge to the Westphalian 'states as containers' view of political life. In particular, political space and political community are no longer coterminous with national territory, and national governments can no longer be regarded as the sole masters of their own or their citizen’s fate.” (Held and McGrew, para 20, 21).

Globalisation erodes the boundaries between domestic and foreign politics. Policy makers and legislators cannot be isolationist when framing laws and strategic plans, and are forced to make compromises in the light of global issues. For example, a nation state’s companies are actors in the global markets. Those markets demand financial information from companies, in a disclosure format which is uniformly consistent, regardless of where in the world that company is based.

In Australia, the government has legislated to make compliance with International Accounting Standards (IAS) mandatory, within the Australian Corporations Law. These IA standards were not developed exclusively by Australia, but have evolved over time as internationally accepted financial disclosure conventions. There are many opponents to the requirements of certain aspects of International Accounting
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Standards within Australia, however, the pressure to conform to internationally accepted financial disclosures has prevailed, regardless of whether the domestic system of financial disclosure actually provided a better framework for company reporting. This, in my view, represents an eroding of authority of the Australian government to independently legislate comprehensive financial disclosure requirements which are unique (and appropriate) to its own sovereign territory whilst being contrary to International Accounting Standards.

The progress of globalisation requires nation states to make choices, on a cost/benefit basis, as to how that nation state will participate in the global community of nations. These choices include international arrangements such as treaties and economic integrations, which are designed to promote greater interconnection between nations, a key component of globalisation. In the following quote from a United Nations Under-Secretary, it is clear that some choices made by nation states are made at the cost of an erosion of authority, in return for greater benefits derived from political alliances and economic integration: “An essential link between globalisation and the nation state is the concept of sovereignty, a term dating back several centuries, well before the nation-state system was established in 1648. Originally intended in reference to the establishment of order within a state, sovereignty has since been interpreted by some as a legal quality that places the state above the authority of all external laws. Yet whenever a state exercises its sovereign right to sign a treaty, it is also wilfully limiting that right by the very act of undertaking an international legal obligation. States are also bound by other rules, such as customary international law.” (Dhanapala, 2001, p2)
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What Choices Does Greece Have Now?

I will consider what may happen to a nation state’s authority once it chooses to participate in economic integration, which is an incremental path from the most loosely bound arrangement, that being the free trade area, to the most tightly bound arrangement, that being political union. The arrangements between the two extremes include a customs union, common market and economic union. I will make reference to (OECD member nation) Greece, and consider if its national authority has been eroded by its choices to participate in the EU, and in giving up its national currency, the Drachma (which it could freely print), and adopting the Euro (being the common currency of the EU).

The national debt issues of Greece have been widely reported in the media. As a nation, it was (and possibly still is) unable to sustain its foreign debt obligations without default. In return for their economic support, the Greek creditors (predominantly other EU member nations) inter alia require that severe austerity measures be imposed upon the Greek government to drastically limit its public spending, pensions and social welfare programmes. Having no sovereign option to print its own currency to service its national debt (an option available to countries such as Japan, the USA and Australia), Greece was left no choice but to implement the austerity measures required by stronger nations which are bound to Greece by economic integration.

This erosion of Greek national authority was admitted by The Vice President of the Greek Government, Theodoros Pagkalos during an interview on the French radio
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program Europe 1. After questioned on whether European influence in Greece constitutes the loss of Greece’s national sovereignty, Pagkalos answered that he has always been a “European Federalist”, and stated “I know that the loss of the national sovereignty is a problem for the Greek population but I am not against one country’s loss of its national sovereignty” (Toti, (Greek Reporter), 22 Feb 2012)

By proceeding down the path of globalisation through participation in economic integration, the option does not exist for Greece to commence a Keynesian recovery, funded by spending programmes (in Drachmas) designed to stimulate a depressed economy. Certainly there are advantages for Greece to remain in the EU as the benefits of EU membership still outweigh the costs (more than three quarters of Greeks say the country should stay in the euro zone (as reported by Reuters reporter Koutantou 26/9/2011)). The decision to retain its membership in the EU remains a cost/benefit choice for Greece, but this choice has a direct impact upon the nation’s real authority to independently legislate on economic matters in order to chart its own course out of economic recession.

This has profound implications for the ability of Greece to maintain social and political order within its territory. Denying the right to self-determination to groups that have significant grievances against the centre may lead to prolonged conflict (Cameron et al, 2006, p205). There is significant (and violent) civil turmoil within Greece, as a direct consequence of the austerity measures. The inability of Greece to contain this civil violence is another indicator of eroded authority, this time from within its own territory, as a consequence of participation in a pro-global agenda.

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The ability of Greece to mitigate the harm to its own citizens is severely limited by the forces in play exogenous to its sovereign control. The “double movement” envisioned by Karl Polanyi as society attempts to protect itself from the free market economy and preserve elements of social and economic morality (Polanyi, 1957, p130) is significantly stifled in the paralysis of the Greek experience.

Conclusion

This essay does not answer the question of whether, on balance, erosion of authority is necessarily a bad thing, especially in terms of overall human freedom. It may be that a nation state’s eroded authority due to globalisation is an acceptable price to pay, when faced with the alternative, such as North Korea, a most tragic example of isolationist authority. John Quiggin, in his paper “Globalisation and Economic Sovereignty” considered the effects of globalisation on Krasner’s four concepts of sovereignty (being International legal sovereignty, Westphalian sovereignty, Interdependence sovereignty and Domestic sovereignty). Quiggin’s conclusion was that there was little support to the view of globalisation as an exogenous force that has undermined domestic economic sovereignty. On the contrary, he found that financial globalisation is best interpreted as the international counterpart of domestic neoliberalism. The swing to neoliberalism [at the nation state level] was a response to the failures of the post-1945 Keynesian, welfare state and Bretton Woods policy frameworks. (Quiggin, 2001, p78)

Quiggin interprets globalisation as a consequence of the neoliberal domestic policy choices made by nation states, not the other way around. There can be no doubt that
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the nation state has suffered some erosion of authority due to globalisation, as has been illustrated in the examples of this essay. However, the role and authority of the nation state has never been more important (as per Polanyi’s “double movement”), in strongly protecting and advantageously promoting its citizens, national resources and national interests within a globalised world order.

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REFERENCES Balaam, David N. & Dillam, Bradford 2011 'What is International Political Economy?' 5th ed. Boston USA, Longman Cameron D, Ranis G, Zinn A 2006 “Globalisation and Self-Determination - Is the nationstate under siege?” 1st edition Abingdon UK Routledge DFAT Publication, “Globalisation: Keeping the Gains” Australian Department of Foreign Affairs and Trade, retrieved from Internet http://www.dfat.gov.au/publications/globalisation_gains/faqs.pdf Dhanapala, J (United Nations Under-Secretary General for Disarmament Affairs) 2001 “Globalisation and the Nation State”, Conference on “A Cartography of Governance: Exploring the Role of Environmental NGOs”, University of Colorado Law School, University of Colorado at Boulder, Colorado 7 April 2001. Originally published in the Colorado Journal of International Environmental Law & Policy, Volume 13, Number 1 (2002) (article/speech) retrieved from Internet http://www.un.org/disarmament/HomePage/HR/docs/2001/2001Apr07_Colorado.pdf Friedman, Thomas 1999 “The Lexus and the Olive Tree: Understanding Globalisation” 1st edition, NY USA, Farrar Straus & Giroux Gilpin, Robert 2003 “The Nature of Political Economy” in “International Political Economy: state market relations in a changing global order” edited by C. Roe Goddard, Patrick Cronin, Kishore C Dash. 2nd edition Colorado USA, Lynne Reiner Held, D and McGrew, A, circa 1999 “Globalisation” Entry for Oxford Companion to Politics retrieved from Internet http://www.polity.co.uk/global/globalizationoxford.asp Held, David, Anthony McGrew, David Goldblatt, and Jonathon Perraton, 1999 “Global Transformations: Politics, Economics and Culture”. Stanford: Stanford University Press Koutantou, A (2011, September 26) “Most Greeks Want To Stay In Euro, See Default Risk” Reuters. Retrieved from http://www.reuters.com/article/2011/09/26/us-greeceeuro-poll-idUSTRE78P5JJ20110926 Polanyi, Karl (1957). “The Great Transformation. The Political and Economic Origins of Our Time.” Paperback edition, Boston: Beacon Press. Quiggin, John 2001 “Globalisation and economic sovereignty” Source: the Journal of political philosophy. Vol9, no1, 2001
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Toti, F (2012, February 22) “Vice President of Greek Government Supports Loss of National Sovereignty of Greece.” Greek Reporter, retrieved from http://greece.greekreporter.com/2012/02/22/vice-president-of-greek-governmentsupports-loss-of-national-sovereignty-of-greece/ Worthington, Glenn 26 June 2001 “Globalisation and Threats to National Government in Australia” Parliament of Australia Library Research Paper 27 2000-01 retrieved from Internet http://www.multiculturalaustralia.edu.au/doc/parllib_globalisation.pdf

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