regulation. “Regulation is first and foremost the responsibility of national regulators who constitute the first line of defence against market instability,” the November 15, 2008 declaration stated.
To me, this was globalisation stepping on the toes of sovereign nations. Finance allows trillions of dollars to slosh around the world at the click of a button. Until it meets regulatory walls and the rights of countries to devise their own policies that best serve their peoples’ interests. The matter gets more complex when you look beyond finance and bring the slower-moving trade frictions that are being debated in the Doha round or free labour mobility.
Reading Dani Rodrik’s The Globalisation Paradox, a gripping account of the three defining themes of our lives today, puts that conflict in perspective. “We cannot simultaneously pursue democracy, national determination, and economic globalisation,” he argues in this must-read. “If we want to push globalisation further, we have to give up either the nation state or democratic politics. If we want to maintain and deepen democracy, we have to choose between the nation state and international economic integration. And if we want to keep the nation state and self-determination, we have to choose between deepening democracy and deepening globalisation.”
This, he says, is the fundamental trilemma of the world economy. “There is an inherent tension between globalisation and decision making at the local level,” the soft-spoken Harvard professor explained to me last week. “If globalisation means that businesses and financiers and MNCs want to operate across national borders without facing any impediments ... it naturally restricts the diversity of policy requirements and institutional arrangements across countries.”
That’s why I laugh at intellectuals, who, bred on a heavy but limiting diet of Western thought, think that economic reforms in the way the West defines them — free movement of capital (their strength) but restricted passage of labour (our asset) — is the only way forward for India. Increase FDI limits in retail, banking and insurance, and all our troubles will be over, they claim. Yes, but only if the governance infrastructure intrinsic to India, in the form of stronger consumer, investor and citizen rights, functions as smoothly. Until then, can we allow the tyranny of market forces to subjugate our people? Democracy can decide that but often doesn’t as it gets hijacked by vested interests.
At a pinch, which of these three should be given primacy? Rodrik’s answer: “Democracies have the right to protect their social arrangements, and when this right clashes with the requirements of the global economy, it is the latter that should give way.” In fact, it is not globalisation that’s under a critical lens, it is hyper-globalisation. Like any good thing when taken to an extreme, it turns sour.
Rodrik’s prescription, titled ‘Designing Capitalism 3.0’ and based on “seven commonsense principles”, includes embedding governance into markets, diversity of ways to prosperity and non-democratic nations not having access to the same rights and privileges as democracies. India’s civil liberties provide a cover against lower environmental standards, but not non-democratic China’s.
I believe that the criticism of hyper-globalisation comes at a time when the competitive advantage of capital in the West is coming to an end. The problem remains the same — the East prevented the capital it needed from entering its borders, the West is thwarting the cheap labour it needs from theirs.