Globalization and economic sovereignty

In this paper, attention will focus primarily on economic and financial aspects of the globalization debate, and on their implications for public policy. Nevertheless, these issues cannot be separated from their historical and political context. The current discussion of globalization can only be understood in relation to the development of economic and political institutions over the past century. Globalization is frequently discussed as a counterpoint to national sovereignty. It is commonly asserted that globalization has eroded national sovereignty or that it has rendered borders obsolete. In particular, it is asserted that, in a globalised world economy, governments have no alternative but to adopt neoliberal economic policies of privatisation, deregulation and reductions in public expenditure. The analysis presented in this paper gives little support to the view of globalization as an exogenous force that has undermined domestic economic sovereignty. On the contrary, financial globalization is best interpreted as the international counterpart of domestic neoliberalism. Both in domestic and international policy, the swing to neoliberalism was a response to the actual and perceived failures of the post-1945 policy framework in which domestic Keynesianism and the welfare state were complemented internationally by the Bretton Woods system. The advocates of neoliberal reform have had only limited success in implementing their policy agenda, even in the English-speaking countries. The choice between continued neoliberal reform and a remodelled social democracy remains open. The direction chosen by democratic governments will ultimately depend on the relative success of competing economic and social models, rather than on an exogenous process of globalization