National policy space: reframing the political economy of globalization and its implications for national sovereignty and democracy

Abstract

This paper critiques the trilemma framing of the political economy of globalization, and offers an alternative framing based on the construction of national policy space. The paper makes three main contributions. First, building on Stein (2016), it deconstructs the categories used by Rodrik (2011) and introduces distinctions between the “degree”, “type”, and “dimensions” of globalization; “effective” versus “formal” national sovereignty; “content” versus “process” of democracy; and “national” versus “global” democracy. The deconstruction shows countries face choices involving a series of margins, not a trilemma. Second, that suggests reframing the problematic in terms of national policy space, which is the “funnel” through which globalization impacts democracy and national sovereignty. Third, the paper shows a country can be impacted by globalization even if it does nothing because other countries’ actions change its possibility set. The reframing shows globalization is an intrinsically political project. To the extent it is now driving a nationalistic anti-democratic turn in politics, responsibility lies with political elites.

Theorizing Varieties of Capitalism: economics and the fallacy that 'there is no alternative (TINA)'

“…That reasoning is behind activist demands for an 'alternative globalization' to replace Neoliberal globalization. Analytically, it is reflected in Rodrik's (2011) construct of the globalization trilemma and the debate over globalization's impact on national policy space (Palley 2021c). Globalization impacts policy space, and policy space impacts the viability of policy interventions associated with Shonfield's (1965) interventionist state.…”

“…That makes the choice set a key issue, which connects to the issue of policy space. That issue has been raised in connection with Neoliberal globalization, which is argued to reduce and twist policy space (Palley 2021c). It does so by rendering unfeasible policies which were previously feasible.…”

The mercantile dilemma: formalisations and historical conclusions

“…The punchline is that monetary policy independence and financial openness are still sufficient for exchange rate floatation and Mundell's trilemma is especially applied. [12] fourthly describes Rodrik's trilemma as analytically erroneous, for globalisation is not incompatible with national democracy, he highlights, for many a democracy have partaken in globalisation to this day, XIX century golden straightjacket United kingdom included, and so have autocracies, as contemporary Singapore, he continues; that which Rodrik on the other hand assumes is consequently flawed: globalisation is excluded by national policies and democracy is not a residualincorrect, says Palley.…”