This important book asks two questions about the governance of the world economy: Who sets the rules, and what explains the diverse ways in which the world economy is regulated? In an age of growing interdependence, states are increasingly forced to negotiate over issues as diverse as the environment, health and safety standards, pharmaceutical patents, and banking and monetary policy. Some observers see states inevitably relinquishing authority over the world economy to governmental bodies or private multilateral firms. Drezner, however, argues that leading states are still in control of the world economy, fashioning regulatory agreements -- as they have in the past -- when functional demands exist and their interests converge. Globalization merely increases the rewards for the major powers for coordinating their policies -- and they tend to do so unless the domestic "adjustment costs" are too great. Drezner shows that it is control of their own large domestic markets that give major states the ability to wield power in the global economy. His main contribution, however, is to explode a popular notion of globalization and thereby to set an agenda for the study of global regulatory politics. For social movements seeking to shape the governance of the world economy, all roads still lead to the state. <
All Politics Is Global: Explaining International Regulatory Regimesby Daniel W. Drezner
Has globalization diluted the power of national governments to regulate their own economies? Are international governmental and nongovernmental organizations weakening the hold of nation-states on global regulatory agendas? Many observers think so. But in All Politics Is Global, Daniel Drezner argues that this view is wrong. Despite globalization,/i>… See more details below
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Has globalization diluted the power of national governments to regulate their own economies? Are international governmental and nongovernmental organizations weakening the hold of nation-states on global regulatory agendas? Many observers think so. But in All Politics Is Global, Daniel Drezner argues that this view is wrong. Despite globalization, states--especially the great powers--still dominate international regulatory regimes, and the regulatory goals of states are driven by their domestic interests.
As Drezner shows, state size still matters. The great powers--the United States and the European Union--remain the key players in writing global regulations, and their power is due to the size of their internal economic markets. If they agree, there will be effective global governance. If they don't agree, governance will be fragmented or ineffective. And, paradoxically, the most powerful sources of great-power preferences are the least globalized elements of their economies.
Testing this revisionist model of global regulatory governance on an unusually wide variety of cases, including the Internet, finance, genetically modified organisms, and intellectual property rights, Drezner shows why there is such disparity in the strength of international regulations.
Rex B. Hughes
"Rewarding. . . . Mr. Drezner . . . finds that the challenges of the future will be increasingly transnational. As globalization intensifies, the rewards for coordination will increase as well."--Economist
"Important.... Drezner shows that it is control of their own large domestic markets that give major states the ability to wield power in the global economy. His main contribution, however, is to explode a popular notion of globalization and thereby to set an agenda for the study of global regulatory politics."--G. John Ikenberry, Foreign Affairs
"All politics is global is a highly readable, authoritative, and well-investigated piece of political science literature on the globalization-global governance nexus. The explicit strength of the book is the logical and consistent development of the theory of regulatory outcomes, as well as the rigorous review of the scholarly literature. In this respect, it is strongly recommended to advanced graduate and doctoral students interested in the setting-up of game-theoretical models. . . . [T]he detailed case studies enhance the book's attractiveness for a broader readership."--Jale Tosun, Cambridge Review of International Affairs
"Among the many strengths of the book lie Drezner's skill in developing a clear and cogent analysis of state power in the global economy and the meticulous way he develops his argument for the key role state preference continues to play in international regulatory regimes. . . . Drezner never wearies in his task of refining our understanding of international regulation and in providing a more lucid insight into the politics of great power preference. The result is a book that challenges popular notions of globalization by placing the power and interests of governments back into the centre stage of debate."--Stephen G. Hughes, International Affairs
"All Politics is Global is a more than just a welcome contribution to current international relations scholarship. . . . Drezner takes a fresh look at the role of the powerful states in governing the world economy. Using simple game-theory, he provides a convincing explanation for why the great powers (the US and the EU) have not lost their influential role. In doing so, the book makes a strong case against a growing literature in international relations that attributes a significant degree of agency to international organizations or transnational private actors in shaping international regulatory outcomes."--World Trade Review
"Drezner makes an important contribution to the literature by bringing greater focus to the regulatory side of global governance in a small book that is well worth reading. . . . Drezner is to be credited for bringing a much needed discussion about the global politics of the regulatory state to the forefront of International Relations theory and practice."--Rex B. Hughes, International Affairs
"This is a detailed, scholarly book that explicates the arcane aspects of regulatory agreements. It won't crack the popular market. However, it will percolate and influence because it also explains quite well the 'big picture' elements of global trade and global regulation."--Austin Bay, Time Record News
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All Politics Is GlobalExplaining International Regulatory Regimes
By Daniel W. Drezner
Princeton University PressCopyright © 2007 Princeton University Press
All right reserved.
Chapter OneBringing the Great Powers Back In
Globalization is responsible for a lot of bad international relations theory.
The poor state of theorizing is not because economic globalization is irrelevant. The reduction of traditional barriers to exchange, such as tariffs and capital controls, has introduced a bevy of new conflicts over the residual impediments to global economic integration-the differences among domestic rules and regulatory standards. The affected issue areas include but are not limited to labor standards, environmental protection, financial supervision, consumer health and safety, competition policy, intellectual property rights, and Internet protocols. These differences matter: the Organization for Economic Cooperation and Development (OECD) estimates that these standards and regulations affect approximately $4 trillion in traded goods. At the start of the new millennium, these issues have been important enough to trigger an increase in the foreign affairs budgets for U.S. regulatory agencies even as the State Department's budget declined.
Regulatory issues are important in and of themselves. They matter in world politics because of the way theyaffect the distribution of resources as well. Fundamentally, however, international regulatory regimes strike a political chord because they symbolize a shift in the locus of politics. The title of this book is a play on Tip O'Neill's well-known aphorism that "all politics is local." In the current era, this statement is at least open to question. For many issues that comprise the daily substance of our lives-how to treat workers, how much to pollute, what can go into our food, what can be accessed on the Internet, how much medicine will cost-the politics have gone global.
The proliferation of new global issue areas has increased scholarly attention on how the global economy is regulated in an era of globalization. However, the theoretical debates on this topic leave much to be desired; Miles Kahler and David Lake recently concluded, "Contemporary scholarship ... has yielded only a partial, unsystematic, and ultimately inconclusive body of theorizing on the relationship between globalization and governance."
Most strands of research on this topic share a common assumption-the decline of state autonomy relative to other factors and actors. Globalization undercuts state sovereignty, weakening a government's ability to effectively regulate its domestic affairs. Global market forces are powerful enough to deprive governments of their autonomy and agency. As Thomas Friedman phrases it, globalization binds states into the "Golden Straitjacket," forcing them to choose between "free market vanilla and North Korea." Prominent pundits, policymakers, and scholars echo the assertion that globalization drastically reduces the state's ability to govern. At the same time that state autonomy is in decline, other theorists argue that globalization empowers a web of nonstate actors, including multinational corporations, nongovernmental organizations (NGOs), and transnational activist networks. Some theorists go so far as to assert that globalization requires a wholesale rejection of existing theoretical paradigms. The trouble with this belief is the lack of variation in the independent variable and the presence of variation in the dependent variable. According to these narratives, globalization increases the number and power of factors and actors that inexorably promote policy convergence, forcing states into agreement on regulatory matters. The problem with this scenario is that there are a number of regulatory issue areas-data privacy, stem cell research, global warming, genetically modified foods-where regulatory convergence has been limited at best. Structural theories lack the capacity to explain variation in coordination outcomes.
This book argues that the great powers-defined here as governments that oversee large internal markets-remain the primary actors writing the rules that regulate the global economy. The key variable affecting global regulatory outcomes is the distribution of interests among the great powers. A great power concert is a necessary and sufficient condition for effective global governance over any transnational issue. Without such a concert, government attempts at regulatory coordination will be incomplete, and nonstate attempts will prove to be a poor substitute.
A few complexities are contained within this simple argument. For example, when will the great powers agree to coordinate their regulatory standards? I argue that globalization increases the rewards for policy coordination, but has a negligible impact on the adjustment costs of coordination. Whether regulatory coordination takes place is a function of the adjustment costs actors face in altering their preexisting rules and regulations. When the adjustment costs are sufficiently high, not even globalization's powerful dynamics can push states into cooperating.
Adjustment costs are a function of the ability of the affected domestic actors to use exit rather than voice in reacting to the impact of regulatory coordination. The more that domestic groups have invested in the status quo, the greater their costs of exit. Private actors with constrained exit options have a strong incentive to invest in assets specific to longstanding domestic legal and regulatory structures; these specific assets increase the economic and political costs of regulatory coordination. The less viable the exit option, the more that political voice is used, and the greater the political and economic adjustment costs. These costs will be high when the regulatory issue in question affects relatively immobile or mature sectors or markets-the regulation of land, labor, or consumer products. Ironically, the least globalized elements of great power polities exert the strongest effect on the likelihood of global regulatory coordination.
Smaller states and nonstate actors in the international system do not affect regulatory outcomes, but they do affect the processes through which coordination is attempted. The reason their effect on the process is irrelevant to the outcome is that global governance processes are substitutable. Powerful states can and will engage in forum-shopping within a complex of international regimes. They can and will use different policy tools to create those structures, depending on the constellation of state interests. Options include delegating regime management to nonstate actors; creating international regimes with strong enforcement capabilities; generating competing regimes to protect material interests; and unilateral, extraterritorial measures to establish regional spheres of influence. The preferences and actions of other states and nonstate actors will constrain certain great power strategies, however.
While relative power remains the salient fact in determining regulatory outcomes at the systemic level, it is of little importance in determining great power preferences. The result is a "revisionist" theory that resembles Jeff Legro and Andrew Moravcsik's "two-step" approach to international relations theory. The first step is identifying the domestic actors and institutions that explain the origin of state preferences. The second step is to take those preferences as given for international interactions, and to explain the bargaining outcomes as a function of the distribution of interests and capabilities. Domestic factors account for preference formation, but not the outcomes of international bargaining. That is how the theory will be developed here.
Why This Matters
The regulation of the global economy is intrinsically important. Markets rely on rules, customs, and institutions to function properly. Global markets need global rules and institutions to work efficiently. The presence or absence of these rules, and their content and enforcement, is the subject of this book. In a globalizing economy, what are the rules? Who makes them? How are they made?
The answers to these questions matter to policymakers and publics alike. Policymakers have to deal with an ever-increasing amount of regulatory questions. The number of national regulatory agencies has exploded during the current era of globalization. The street protests that started at the World Trade Organization (WTO) Ministerial meeting in Seattle in 1999 have spread to almost every significant meeting of a multilateral economic institution. They are a testament to the passions that globalization arouses. This should not be surprising. Some of the most contentious issues in world politics over the past decade-financial contagion, global warming, genetically modified foods, terrorist financing, sweatshop labor-are, at their core, regulatory disputes.
The September 11, 2001 terrorist attacks and their aftermath only increased the salience of these issues. The United States considers it vital to develop stringent global standards to block terrorist financing and monitor shipping containers. The possibility of bioterror attacks increases the demand for states to coordinate their environmental and food safety regulations. The use of the Internet by terrorist networks to communicate with one another has raised the question of how governments can effectively patrol cyberspace without choking off e-commerce. More generally, the U.S. response has highlighted the philosophical disagreements between Americans and Europeans over the proper modes of global governance. The 9/11 attacks did not reduce the questions raised by the globalization of national economies; they highlighted how the globalization of national security also generates demands for regulatory coordination.
Scholarly work in this area is necessary in part because the popular discourse on the subject has been dreadful. If it is true that public intellectuals earn more attention from being spectacularly wrong than from drawing an accurate, complex picture of the world, then "pop globalization" writers have certainly garnered attention. Consider Thomas Friedman's aforementioned assertion that globalization acts as a Golden Straitjacket. This description is simple, pithy, and wrong. The persistent diversity of capitalist systems around the world contradicts Friedman's claims about the binding constraints of free market capitalism. Surveys of financial traders undercut Friedman's belief that an "Electronic Herd" runs roughshod over every facet of government intervention in the economy. Globalization does not even force firms in the same sector to compete in the same way. Friedman, like most other popular writers on this subject, offers a simple model of economic determinism-in which the interests of transnational capital dominate all other considerations-to explain how globalization works. This approach does not hold up to careful scrutiny. What is truly scary, however, is that Friedman is an oasis of clarity compared with other popular explanations proffered about globalization and global governance. This popular discourse has helped to fuel public anxieties about the future of globalization and global governance. In the United States, globalization prompts fierce domestic debates. Polling data reveals that U.S. citizens believe the integration of the United States with the rest of the world has greatly constrained U.S. policy autonomy, creating ambivalence about further international integration. In the European Union, globalization has been inexorably linked to Americanization, which has not endeared the concept to a majority of its citizens. The anxiety about globalization and global governance is even greater in the rest of the world, since other countries are far more dependent on the global economy than the United States. Global public opinion surveys demonstrate majority support in the developing world for capitalism-but want it to be accompanied by "strong government regulations." Just as the questions raised in this book matter greatly to public discourse, they also affect scholarly debates about the international political economy (IPE). Fifteen years ago, the study of IPE was essentially limited to explaining the variations in the global rules governing merchandise trade, exchange rates, and foreign direct investment (FDI). That was then. The latest era of globalization has raised a plethora of new issues to explain. Can existing IPE paradigms explain the variation of outcomes within and across these new issue areas-or are new paradigms needed?
This study also provides clues to the relationship between states and non-state actors. The debate about the relevance of nonstate actors is not new, but the current era of globalization has intensified the arguments. Some scholars exaggerate the impotence of the state, interpreting a failure to perfectly regulate a sphere of social life as an example of a general retreat of the Westphalian system. However, statists have fallen into the same trap, gleefully pointing out the vast areas of world politics where nonstate actors have minimal influence. Both sides tend to generalize from their most favorable cases. The model presented here suggests that states, particularly the great powers, remain the primary actors, but that they will rely on nonstate actors for certain functional purposes. At the same time, nonstate actors can, on occasion, jump-start regulatory agendas to advance their issues-even if the final outcome does not accord with their preferences.
Beyond the study of global political economy, the topic of regulatory coordination raises theoretical questions about global governance that affect a wide variety of debates among international relations theorists. The questions asked in this book address arguments by globalization scholars that the changes wrought on world politics in the past twenty years require completely new theories of international relations. They affect debates in international relations and international law over the extent to which global governance structures can alter or constrain state behavior. At the deepest level, resolving how globalization affects governance wrestles with the fundamental question about whether anarchy is a constant or a variable. For some issue areas, effective global governance means the transfer of authority from the national to the supranational. At what point does global regulatory governance become so routine that the global economy ceases to be anarchical?
In Leviathan, Thomas Hobbes argued that the key step in political science was the formulation of precise terms. That statement applies with a vengeance to the study of global economic regulation. A major reason for the contentious nature of debates about globalization and global governance is the disagreements over the precise meaning of terms. For example, the word "globalization" has been used so frequently to describe so many disparate phenomena that the term has been stripped of any concrete meaning. What one scholar finds important about globalization another will dismiss as irrelevant. Susan Strange argued that a chief deficiency of international political economy was the use of imprecise language; "the worst of them all is 'globalisation'-a term which can refer to anything from the Internet to a hamburger." A dictionary of international relations agrees: "the term is imprecise and its use is often heavily laden with ideological baggage." A different criticism is that the current jargon is merely old wine in new bottles. What is the difference, for example, between globalization and interdependence? How does the concept of global governance differ from international regimes? Before proceeding, clear definitions are needed.
Excerpted from All Politics Is Global by Daniel W. Drezner Copyright © 2007 by Princeton University Press. Excerpted by permission.
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What People are saying about this
Kenneth W. Dam, former U.S. Deputy Secretary of State and Deputy Secretary of the Treasury
Louis Pauly, University of Toronto
Jeffry Frieden, Harvard University
Walter Mattli, St. John's College, University of Oxford
Henry S. Bienen, President of Northwestern University
Meet the Author
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University. He is the author of "U.S. Trade Strategy" and "The Sanctions Paradox" and has been published widely in scholarly journals as well as the "New York Times" and the "Wall Street Journal". He is a regular contributor to "Newsweek International" and NPR's "Marketplace". He keeps a daily Weblog at danieldrezner.com.
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