Globalization and the Changing Roles of States

Global integration, economic and otherwise, has indeed been driven by technological progress and economic incentives, but it would be inconceivable in its present form without the universe of political decisions taken by states at both the national and international levels in many fundamental respects. The rapid expansion of international trade and investment in recent decades has certainly been facilitated by technological progress, but it would hardly have occurred in the absence of very deliberate policies implemented by member states of the international community. At the national level, sovereign state decisions to foster the market economy by opening to foreign trade and investment and liberalizing financial markets are, more than anything else, key to explaining present economic integration. At the international level, it has been chiefly by virtue of political decisions made by sovereign states that many agreements leading to unprecedented integration have been made.

For example, regional agreements such as the European Union, Mercosur, and NAFTA were not the result of technological progress. They have been above all the result of political visions and decisions by sovereign states. The processes which have produced, for example, the remarkable, albeit yet incomplete, rules-based WTO system are of an equally political nature. Believe me that no technological factor would help to significantly explain the way in which the Mexican economy has integrated into the world economy in just a few years. Sheer political decision and action explain why today Mexico has free trade with more countries than any other nation in the world. Of course, this circumstance includes NAFTA and the unprecedented FTA with Europe.

Acknowledging the strong political roots of globalization brings with it both good and bad news. The good news is that notwithstanding their current adverse reputation, the human inventions of politics and the nation-state are still doing a lot of good. The bad news is that, contrary to some beliefs, globalization, being to a great extent a creature of political decisions, is not an irreversible process. Its technological determinism is a fallacy. Beware of the possibility that governments and politicians can still resort to new forms of protectionism to roll back existing liberalization and can also make policy mistakes that could lead to a less propitious environment for the expansion of the international economy. They can, in short, adhere too quickly and too blindly to the emerging “political correctness” that fallaciously imputes to globalization all the present evils of the world. Let us not forget that, in modern history, globalization was already reversed once by the actions of states with disastrous consequences for humankind.

If we believe, and I certainly do, that globalization is not the cause, but part of the solution to the problems of poverty and inequality which unfortunately prevail in the world, then nation-states have an enormous responsibility not only to confront, with good politics and wise public policies, the present hostility towards globalization, but also to continue playing an active role in its orderly development. Our conference chairman, Peter Sutherland has rightly pointed out that, “While the market economy system is largely agreed in principle, the mechanisms to make it work internationally are at an early stage of development.” This is by no means an exaggeration. The agenda facing nation-states to harness globalization’s full potential contribution to human development is very challenging as well as fascinating. Of course, I do not intend to burden you with an exhaustive discussion of such an agenda. Fortunately, it is being covered to some extent in the various sessions of this meeting. Just allow me to hint at a few points that I consider to be of some relevance.

First, I would insist on the fundamental and irreplaceable role of nation-states in the construction of global governance. In this task, as in many others, it is absurd to try to bypass the nation-state with agents of nil democratic representation and of dubious transparency and accountability. Indeed, let us be attentive to all voices, but without allowing the state to be overruled by other actors, however altruistic they may claim to be.

Second, nation-states should continue to strive for a rules-based international system. This is in the best interests of the weaker members of the international community. Far from diminishing modern national sovereignties, a rules-based system enhances the power of weaker states to safeguard their legitimate interests. I liked what Secretary Robin Cook said to us yesterday, “We are now as interdependent as we are independent.” In reference to the developing countries’ cases I could change somewhat Mr. Cook’s idea to make it even more appealing: We are now independent to the extent that we are interdependent.

Third, the WTO experiment—indeed the first post-Cold War era rules-based institution—should not only be fully completed in a new comprehensive round of negotiations, but the basics of this model (binding regulations and dispute settlement provisions) should be extended to other essential areas. Rather sooner than later, the international community—represented by nation-states and assisted by existing multilateral institutions—should begin to decide on new or reinforced global institutions in fields such as the environment, investment, world taxation, banking standards, and accounting standards. Likewise, the fundamental issue of global public goods should be tackled.

Fourth, and most important, nation-states should more effectively confront the acute problem of social exclusion at both the domestic and the international levels. They should start by dispelling the mistaken idea that globalization per se is a main cause of existing disparities. Globalization offers unique opportunities that hardly any other economic arrangement could provide. The question is why some are able to take advantage of those opportunities, while others cannot—or are left behind. The bottom line (or I should better say, the dividing line) has to do with freedom. People are left behind because they are not free. And they are not free because they lack nutrition, education, training, health, basic human and political rights, security, elementary infrastructure, and employment. By means of well-designed and focused social policies which expand basic human freedoms, the most vulnerable members of societies can be empowered to share the opportunities provided by the market economy and globalization at-large. Of course this is more easily said than done. It requires sound domestic policies pursued by strong and democratic national institutions, but in many cases it also requires vigorous international cooperation that, unfortunately, is today practically absent from the agendas of the well-off countries of our world.

I hope that, beyond any altruistic sentiment, self-interest will advise a change in the present status quo about aid and international cooperation. Otherwise, confusion and animosity about globalization will prevail. And much sooner than later, everyone will have to pay for that.