The Glozbalization Paradox: Why Global Markets, States, and Democracy Can’t Coexist

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Summary of Dani Rodrik’s book

The Glozbalization Paradox: Why Global Markets, States, and Democracy Can’t Coexist

Author: Egita Malinovska

2012
Introduction

In latest years world’s economy has experienced rapid growth, but directly after that came the economic and financial crisis of 2008, which moved forwards to the deep recession in a lot of countries. Reasons of so fast economy growth in many countries have been as a result of world’s globalization development, where more and more sovereign countries were pushing their economies to internationalization: free trade markets, open financial markets, less protection of own domestic markets etc. All these actions can be effective and profitable, but till some limits, where it still gives a positive influence on economic growth and sustainability. Global markets are expanding; states are trying to maximize hyper-globalization in the same time willing to keep nation sovereignty and democratic policy. That brings to several problems for efficient coexisting together. This is an issue about one of the world’s top economists- Dani Rodrik is considering in his latest book ‘’The Globalization Paradox: Why Global Markets, States and Democracy Can’t Coexist’’. In this book the author provides his own narrative about Globalization and, by brief layout of historical events and different examples of international trade and governance of countries till nowadays and describes world as it is, rather than it exists in economic theories. Rodrik is offering several proposals for changing existing globalization model. His argue is that there is a fundamental incompatibility between hyper-globalization on the one hand and democracy and national sovereignty on the other. In this point he critiques unalloyed globalization enthusiasts, who are aiming to liberalise foreign trade and capital movements. Rodrik instead of that offers the strategy forwards to smart globalization and not to maximum globalization, and suggests moderated form of global trade regulation.

Global markets, States and Democracy

In the introduction of the book Rodrik goes back to 1997, when he realized his book ´´Has Globalization Gone Too Far?´´, what happened few months before massive international financial whiplash in Southeast Asia countries, as Thiland, Indonesia and South Korea- countries which have been growing rapidly for decades, but suddenly international financial community found this region not safe anymore for further investments. That made economy of these countries to collapse, what brought to Asian financial crisis, what spread more far away from borders of these countries, by taking also Russia, Brazil and Argentina. This is the first example of globalization failure. Actually that is exactly what Rodrik sets out in his theories before, but he also admits , that even success in his previous predictions didn´t made him to foreseen the upcoming financial crisis in 2008. He is telling that crisis was predictable, but economists didn’t see obvious pitfalls, because of too strong belief in a theoretical narrative. Rodrik provides his own Globalization’s narrative, by inverting already existing theories. He is telling that global markets suffer from weak governance and are therefore prone to instability, inefficiency, and weak popular legitimacy. ‘’There are no global antitrust authority, no global lender of last resort no global regulator, no global safety net and of course no global democracy’’. He points out example of Bretton Woods regime, what was permitting policy makers to focus on domestic social and employment needs while enabling global trade to recover and flourish. The genius of the system was that it achieved balance that served multiple objectives admirably well, by leaving government free to run their own independent economic policies and to erect their preferred versions of welfare state. Here it is seen that developing countries were allowed to pursue their particular...
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