The global financial crisis has prompted calls for a new international regime to regulate global capital. Much of the thinking has centered on a narrow revision of existing structures such as the International Monetary Fund. Wolfgang Reinicke offers a different approach.
Although his book appeared before the current panic gripped policymakers, his proposal-a global public policy network made up of public, private, nongovernmental, and international organizations-touches on many of the concerns about globalization that have arisen in the last few months. It is, however, a proposal that is freighted with risks, the most important of which centers on the ceding of public regulatory oversight to private regulatory bodies.
Reinicke begins by noting that globalization, which "has been characterized as an essentially economic phenomenon[,] takes place in a social, political, legal, and cultural setting-national and international-that has the capacity to slow and even reverse global economic trends." This capacity shows itself in the form of what Reinicke calls "defensive intervention" and "offensive intervention" by national governments. Defensive intervention-the creation of barriers such as capital controls and tariffs-and offensive intervention-lowering taxes or liberalizing capital accounts as part of a national competitiveness strategy-are both found to be deficient solutions to the problems of globalization (since globalization has been defined by Reinicke as primarily a microeconomic, not a macroeconomic, phenomenon); indeed, Reinicke argues that they exacerbate the problems.
The deficiencies of these two strategies, and the growing erosion of internal state authority over global corporate activities, mean that states cannot fully control the actions of corporations. The solution is to take (some) governance out of the hands of the nation-state and place (some) of its authority in the hands of international institutions and other nonstate actors: "businesses and their associations, labor groups, nongovernmental and nonprofit organizations, consumer groups, foundations, and other interested parties." This global public policy network would be charged with formulating and implementing policy in the area of "soft" international law, which Reinicke defines as "legally nonbinding international instruments."
The risk in such an approach is apparent, and to be fair, Reinicke is quite aware of it. He does not, however, fully investigate the implications of such a move, which seems to create an even larger "democracy trap," or democratic deficit, than that which it hopes to prevent. Moreover, it is an unnecessary move; as other critics have pointed out, eroding state authority is best dealt with by bolstering that authority internally, not by ceding it to the presumably ineluctable forces of globalization.
W. W. F.
Two staff members from the German weekly Der Spiegel detail how globalization privileges the market over the state. The authors argue that government's constant deferral to the market can lead only to the delegitimization and disintegration of state power: "Globalization turns out to be a trap for democracy itself." This is a charge that is not without merit, and in the hands of a capable theorist such as Susan Strange it is a provocative thesis. Here it is a foundation on which is heaped a large bundle of anecdote, reporting, and unexamined charges, all conveyed in a tone that is sometimes more breathless exposé than hard-hitting analysis. The paperback price is extortionate.
W. W. F.
The popular image of the footloose, anational corporation, which The Global Trap incessantly promotes and which forms the centerpiece of Global Public Policy, is here put to the test and found to be more apparent than real. Corporations may be multinational, operating across borders and building products from myriad international sources, but they are, in structure, finance, and innovation techniques, still very much creatures of their parent countries. The authors focus on American, German, and Japanese corporations and show that they maintain distinctive national styles. They conclude that a truly anational corporation is a myth, one that American businesspeople, rather than their German and Japanese counterparts, are more likely to believe in and promote. The thrust of the book's argument may be found in an article by two of the authors, William Keller and Louis Pauly, in the November 1997 issue of Current History on the global economy.
W. W. F.
Jagdish Bhagwati is a rarity: an academic economist who can communicate the abstract, sometimes counterintuitive thought of his profession to a larger audience. Moreover, his writing is executed with wit and flair, and is marked by a fundamental decency in a field filled with verbal thuggishness and intellectual preening. This collection of his writings over the last ten years includes sustained essays, occasional pieces, book reviews, and, in what would have been a mistake for a lesser writer, letters to the editor on selected topics. The case for free trade is made (and remade), as is the case against Clinton administration trade policy toward Japan and that for liberalized immigration.
W. W. F.