Saturday, July 1, 2023

Brexit and Rodrik’s trilemma

Michael Funke and Doudou Zhong do a great job at exploring empirically the famous Rodrik trilemma, by which there is a tension between hyperglobalization, national sovereignty and democracy, so that countries must choose two of the three corners of the trilemma (Rodrik himself explains it here). Using standard measures of globalization, national sovereignty and democracy, they confirm the relevance of the tension.

In explaining their contribution, they give useful examples of jurisdictions that take up different prototype corner solutions in the “two out of three” trade‐off. “For example, China sticks with global economic integration and national sovereignty. To this end, the triangle's third vertex, democracy, is sacrificed. At the other end of the spectrum, we see countries that have opted for deeply integrated markets and democracy vertices. Prime examples include EU countries which have transferred essential competences and jurisdiction to European institutions. The Euroland (common currency) subset of EU countries sits even deeper in this integration and global governance category.”

Funke and Zhong then relate Brexit to the trilemma: “The political priorities revealed by the Brexit referendum are national sovereignty and democracy.” The same message is given in the “official solutions” to exercises in chapter 18 of the CORE Project’s e-book “The Economy:” “voters supporting Brexit did not approve of the trade-off depicted in the bottom row of Figure 18.22. The vote reflected a popular movement that sought to increase national sovereignty that voters believed was sidetracked in pursuit of the benefits of hyperglobalization at the European level. The top row of Figure 18.22 also captures the preferred trade-off for those voting for Brexit,” meaning that British voters chose democracy and national sovereignty to the detriment of hyperglobalization.

Funke and Zhong implicitly accept that this statement is problematic, though, when they also use the trilemma to try to explain what they call the “third wave of autocratization” in recent years. Almost one‐third of the world's population lives in countries undergoing autocratization—a substantial decline of liberal democracy. Inter alia, these countries include Brazil, India, the United States (“America First”), as well as several Eastern European countries. Moreover, the world's leading autocracies, China and Russia, have influenced other countries to adopt their disdain for democracy. But it is well known that Farage (who had links with Russia during the campaign) and Johnson used some of the tools of the national-populist illiberal democratic leaders. A referendum full of lies where people did not know what they were voting for, an erosion of representative democracy and a crisis of Parliament, problems between the judicial powers and the executive… are not a sign of a healthy democracy. Besides, the leaders of Brexit where always clear that they did not want to leave globalization, but did not like the (pretty democratic by the way) European kind. Some comentators have used the metaphor of a “Syngapore on Thames.”

The authors accept that “populism supporting nationalism and restricting globalization, as well as the shift to more autocratic regimes is not an advisible policy prescription.” I agree. In a footnote, they write “Political economists have always been interested in the differences in the economic and political institutions across countries. That is reflected in the widely known “Varieties of Capitalism” debate investigating the cross‐national institutional variations of advanced economies. By analogy, a “Varieties of Globalization” debate is warranted.” And also one on “Varieties of Democracy.” Why some mainstream parties and elites have promoted nationalism in the recent past in some very important countries (the UK, the US, Israel, India…) to erode democracy (but not necessarily globalization) is something that we should keep studying.

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