The Political Trilemma of the World Economy
(Dani Rodrik, 2010)
Hyper-globalization
Golden
Straightjacket
National
Sovereignty
Global Governance
Bretton Woods Compromise
Democracy
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What is democracy?
 Democracy is a certain class of relations
between states and citizens
 A regime is democratic to the degree that
political relations between the state and its
citizens feature broad, equal, protected and
mutually binding consultation
 Democratization means net movement toward
broader, more equal, more protected, and
more binding consultation
 De-democratization is movement in the reverse
(Tilly, Democracy, 2007)
2
"Has Globalization Gone
Too Far?,"
Dani Rodrik, Ch. 28, pp. 241-246 (Excerpted
from Rodrik, “Has Globalization Gone Too
Far?,” in Has Globalization Gone Too Far?,
Institute for International Economics, pp. 2,
4-7, 77-81.)
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GL is exposing deep fault lines b/w
social groups
 Between those who have the skills and mobility
to flourish in global markets and those who
don't have these advantages or perceive the
expansion of unregulated markets as a threat
to social stability and deeply help norms
  tension between the market and social
groups such as workers, pensioners, and
environmentalists, w/ governments in the
middle
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Sources of tension between the
global market & social stability
1) Reduced barriers to trade and investment
increase asymmetry b/w groups that can
cross borders and those that can't
2) GL has made it exceedingly difficult for
governments to provide social insurance –
one of their central functions and one that
has helped maintain social cohesion and
domestic political support for ongoing
liberalization throughout the postwar period
3) GL engenders conflicts within and b/w
nations over domestic norms and the social
institutions that embody them
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1: Reduced barriers to trade and investment
increase asymmetry b/w groups that can
cross borders (directly or indirectly through
outsourcing) and those that can't
 Those who can: owners of capital, highly
skilled workers, and many professionals who
are free to take their resources where they are
most in demand
 Those who can't: many unskilled and
semiskilled workers and most middle
managers
 their services are elastic, i.e., they are more easily substituted
by the services of other people across national boundaries
 Most GL research has focused on the downward shift in
demand for unskilled workers rather than the increase in the
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elasticity of demand
GL enables “substitutability,”
transforming the employment
relationship
 The postwar “social bargain” b/w workers and
employers (i.e., steady increase in wages and benefits
in exchange for labor peace) has been undermined
 Substitutability has concrete consequences:
 Workers now have to pay a larger share of the cost of
improvements in work conditions and benefits (i.e., bear
greater incidence of nonwage costs)
 They have to incur greater instability in earnings and hours
worked in response to shocks in labor demand or labor
productivity (i.e., volatility and insecurity increase)
 Their bargaining power erodes, so they receive lower wages
and benefits whenever bargaining is an element in setting the
terms of employment
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2: GL has makes it difficult for governments
to provide social insurance – one of their
central functions and one that has helped
maintain social cohesion and domestic
political support for ongoing liberalization
throughout the postwar period
 Governments have used fiscal powers to
insulate domestic groups from excessive
market risks, especially when they're
foreign in origin, but government has
been downsizing for decades, reducing
its social obligations
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3: GL engenders conflicts within and b/w
nations over domestic norms and the
social institutions that embody them
 As technology becomes standardized and diffused
internationally, nations with very different sets of
values, norms, institutions, and collective preferences
begin to compete head on in mkts for similar goods
 presents opportunities for trade among countries at very
different levels of development
 Trade becomes contentious when it unleashes forces
that undermine the norms implicit in domestic practices
 e.g., plant closed in South Carolina for child labor in Honduras
or French pensions cut in favor of Maastricht
 Trade policy almost always has redistributive
consequences (among sectors, income groups, and
individuals)
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The Role of National Governments

Policymakers must respond to these tensions
without sheltering groups from foreign
competition through protectionism:
1) Strike a balance b/w openness and
domestic needs
2) Do not neglect social insurance
3) Do not use "competitiveness" as an excuse
for domestic reform
4) Do not abuse fairness claims in trade
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