Globalization Is Transformative

Daniel Drezner is out to correct a misguided set of scholars and commentators who have, he says, lost track of the continuing centrality of states as the actors who determine the fate of the world. He badly overstates his case — but he makes a useful point nonetheless.

In the world according to Drezner, all that matters is what the great powers (implicitly, Europe and America) want in the way of rules to run the global economy. What they want, they get. If they don’t agree about what rules are desirable for the world in a specific policy arena, the world won’t get rules. Other scholars who think other actors (corporations, civil society groups, even other states) matter are wrong, because only states have any real effect on regulatory policy. Specifically, scholars who think that the forces of globalization are driving us toward a world where regulatory policies across countries will converge are wrong. Globalization is not transformative, says Drezner, and “the global political economy of this century will look only slightly different from that of the 20th century.”

No. The global political economy is looking more and more different all the time. Yes, of course Europe and America still matter to the setting of global rules. But even within a state-centric approach, the idea that 21st-century political economy can look like that of the post-WWII era, dominated by U.S.-European views, is nonsense. From my current seat in Singapore, the economic rise of Asia is rather obviously the dominant reality. At an absolute minimum, global regulatory policy is going to have to incorporate China and India, and probably other emerging markets, as decision-makers, not just rule-takers. That means we’re heading for a multi-polar system where very different kinds of states, at very different levels of development, will matter. That’s not a minor change from the 20th century.

But the state-centric approach itself is out of date. Obviously, the autonomy of non-great-power states has already been fundamentally constrained. But even great powers are being affected. And “regulation” is no longer done only by governments.

To see this, let’s take one of Drezner’s cases: the rules on intellectual property rights (IPR) that emerged from the Uruguay Round trade negotiations that led to the creation of the World Trade Organization in the 1990s.

The U.S. and Europe didn’t wake up one morning to find themselves saying, “Hey, our national interest is to promote protection of intellectual property rights for our major corporations, and we can use the Uruguay Round trade negotiations to advance that interest.” As Susan Sell’s work has made clear, it was a handful of very large U.S.-based corporations who got the ball rolling in a desperate effort to make profits from their intellectual property in countries where those property rights were not respected. There’s no real connection between IPR and trade – but trade is where the global rules have real bite, so connecting IPR to trade would create powerful tools for enforcing IPR protections. They got U.S. trade negotiators on board, then went off to Europe to talk their peers into pushing European governments to adopt the same strategy. America, with European acquiescence, then forced the TRIPS (“trade-related intellectual property”) accord onto the Uruguay agenda, and got the rules the corporations wanted.

If the story ended there, Drezner would have a strong case about great powers setting the rules for everyone else (although he would still be missing the point about why the great powers wanted those particular rules, which is a domestic politics story – and domestic politics are increasingly influenced by transnational non-state connections). But the story decidedly did not end there. When U.S. and European pharmaceutical corporations went to exercise their new protections under TRIPS, they ran into a firestorm of opposition. The niceties of protecting intellectual property, particularly for medicines, didn’t prove convincing in the global court of public opinion as AIDS ravaged one poor country after another.

The civil society campaign that Drezner dismisses as “ephemeral” in fact had a huge impact on corporate conduct. After several contentious years, Big Pharma caved. They dropped their legal effort to stop South Africa from breaking their patents on HVI/AIDS drugs. Glaxo turned the rights to its AIDS medicines over to a South African generics manufacturer. Merck offered such deep discounts in many developing countries that the Brazilians found themselves saving millions of dollars over what it would have cost them to manufacture the drugs themselves. Corporate behavior in this area is “regulated” by pressures from civil society as much as by the formal rules set by governments.

And even when it comes to those formal rules — yes, it’s true that the U.S. has bypassed the Doha process in favor of bilateral agreements. But it’s also true that in India and other countries, generics manufacturers are now playing a key role — something that would not have happened if the U.S. had had its way.

This case illustrates two flaws in Drezner’s argument. The first is a common one in the international political economy literature — the assumption that there is some fixed and clear concept of a state’s self-interest in any given issue area. But there isn’t. State interests are hugely contested, with all sorts of players jockeying to influence what ends states will pursue in their negotiations with other states. That’s nothing new, but now globalization is opening up that once-internal process to a host of new players. How states define what their interests are is one of the most important ways globalization is affecting outcomes in global rule-making. So starting the study at the point where states have already defined their interests misses much of what matters — and doesn’t give any scope for understanding how and why state interests change over time in response to globalization.

The second flaw is the implicit assumption that you can explain outcomes — the behavior of the regulated entities — solely by examining the formal rules set by governments. But in the era of codes of conduct and business “self-regulation,” that assumption no longer holds water.

So Drezner is not providing the overall rebuttal of globalization’s effects on governance that he claims. He’d be a lot more convincing without the sweeping statements that smaller states and nonstate actors don’t matter, or that great power concerts determine all. And he should tone down the language about being a “revisionist” correcting the overblown claims of the globalizationalists. In fact, as any graduate student who has studied international political economy in the past two decades can attest, there’s nothing revisionist about the state-centric approach — it has remained the dominant school of thought throughout.

What Drezner does provide is less than he claims, but it’s still a valuable contribution. He helps to define the limits of globalization’s impact on the autonomy of the U.S. and Europe in certain political economy arenas. As Drezner frames the argument, what are the conditions under which globalization has only limited, if any, impact on the autonomy of the most powerful states? He points to one factor: the costs of adjustment. If the costs of adjustment are too high, the great powers will refuse to pay them and there will be no agreed global rules.

His hypothesis faces an interesting test. On climate change, the U.S. (or at least the current administration) clearly believes the adjustment costs are too high, and is refusing to enter into serious negotiations on global rules. But a vast range of sub-state and non-state actors, even within the U.S., are committing themselves to pay all sorts of adjustment costs and are more or less negotiating across borders — witness California and the roles that leading businesses are playing in setting climate change goals, not to mention the recent global meeting of mayors. Dr. Drezner, would you care to make any predictions as to what will happen over the next decade, or two, on global climate change regulations?

Ann Florini is Visiting Professor and Director, Centre on Asia and Globalisation, National University of Singapore, and Senior Fellow at the Brookings Institution.

Also from this issue

Lead Essay

  • Drawing from his recent book, All Politics is Global: Explaining International Regulatory Regimes, Tufts University’s Daniel Drezner explains that “for many issues that comprise the daily substance of our lives … the politics have gone global.” However, he argues, the intellectual response to this development has been out of proportion to its real extent. When great powers coordinate on regulatory standards, that may be enough to shift the rest of the globe. But, as Drezner illustrates from examples ranging from the Internet to genetically modified foods, when the costs of adjustment are too high for states with economic heft, global regulatory coordination tends not to be forthcoming. In the end, we get neither a “race to the bottom,” nor liberation from the state through jurisdictional competition. “Globalization is not irrelevant to global governance,” Drezner concludes, “but it is not transformative either.”

Response Essays

  • Ann Florini, director of the Centre on Asia and Globalisation at the National University of Singapore and senior fellow at the Brookings Institutions disagrees with Daniel Drezner’s claim that global governance remains dominated by a few great state powers. “We’re heading for a multi-polar system where very different kinds of states, at very different levels of development, will matter,” Florini argues. And, she maintains, “ ‘regulation’ is no longer done only by governments.” For example, corporations, not states, put international protection of intellectual property rights on the table, but it was small states and pressure from civil society groups that eventually determined effective policy. Florini suggests Drezner’s analysis is confused by an over-simple idea of the interests of great states. “How states define what their interests are is one of the most important ways globalization is affecting outcomes in global rule-making.”

  • Jeremy A. Rabkin, professor of law at George Mason, writes, “one can accept almost everything [Drezner] says in his essay and still think the challenges we face now are different, in important ways, from the patterns we had become accustomed to in the past.” The collapse of communism and the discrediting of socialism has led to a world in which “states now are so entangled in international regimes — because so entangled in international exchange — that the accepted rules of international economic conduct are now recognized to be very important.” Though the U.S. can in principle block international rules contrary to its overall interests, domestic interests jump at the chance to push their narrow agendas, it is often easier to go along than to fight, and some marginal changes occur simply through neglect. But “marginal changes can add up to sizable effects in the aggregate.”

  • “In the main [Drezner’s] argument is persuasive,” writes Kal Raustiala, director of UCLA’s Ronald W. Burkle Center for International Relations. However, the continued preeminence of states on the world stage “is a bit more ambiguous and complex than Drezner suggests.” Raustiala argues that critics of globalization increasingly “expect more openness, more transparency, more accountability; in other words, a process more like domestic governance.” Raustiala contends that can learn something important by looking to domestic politics: powerful lobbyists and special interests did not emerge because the state was getting weaker. “The rise of interdependence and NGOs in American society didn’t signal the end of the state; it signaled the growth of the state.”