What is the role of the state in the global economy? Does it make sense to talk about national economic sovereignty?

Roberto Sensi, FLF student

This blog aims to briefly discuss how the neoliberal globalization has been eroding the Nation-State economic sovereignty in the last decades and open the doors toward a global governance system. In such a scenario, does it still make sense  to talk about Nation-State economic sovereignty? Whether the answer is positive or negative, it is important to ask what would be their constitutive elements of such feature of the modern state? This blog starts from broadly accepted definitions of globalization and sovereignty, and on the basis of that it identifies what have been the drivers of the sovereignty erosion and how they have been changing it. Finally, it looks at the current debates on “sovereignty “ and loss of legitimacy of the neo-liberal that have been mushrooming after the 2007-2008 financial crisis, the following economic and debt crises and the rising of populist movements.

As said, this work willingly assumes globalization as the geographical, social and economic expansion of capital, financial in primis. One of the most common referenced definition was given by Friedman, who identified globalization as “the inexorable integration of markets, nation/states and technologies to a degree never witnessed before”. Indeed, between 1980 and 2007, cross-border trade and financial flows grew tenfold in nominal terms. In the Eurozone, the value of trade in goods grew from 44% of its GDP in 1990 to 57% in 2009. Thanks to the measures aimed to relaxing the capital control rules adopted by many national State, between 1990 and 2009 the foreign direct investments (FDIs) grew from  212 billion a 1.1 trillion per year. The economic globalization, therefore, has produced a huge impact in the domestic economies.

According to Julian Ku and John Yoo, there have been three main ways through which economic globalization has been eroding nation-state sovereignty. Firstly, the increase in international trade and capital flows has been interfering with the capacity of the States to control their domestic economy. As a response, Nation-states have been delegating authority toward supra-national organizations which have been gaining independence and power. Finally, globalization has been favored and has produced significant transformations in the practice and substance of international law, creating “universal and binding obligations that regulate a nation-state’s [mainly socio-economic] treatment of its own citizens”. All three of these trends contribute to what has been defined as an intensifying system of “global governance”. According to Weiss and Thakur, this notion includes “all laws, rules, policies and institutions that constitute and mediate relations between citizens, businesses, markets and states in the international arena”.  This new form “of multilateral cooperation challenge […] sovereignty by transferring lawmaking authority from the Constitution’s organs of government to international bodies”.

In this context, it is essential to interrogate the construction, validity, and implications of sovereignty. Historically, the idea of sovereignty is often seen as synonymous of Westphalian sovereignty, i.e. the absolute control over the territory of the nation-state and over all conducts that occur within its boundaries. If that is the case, if globalization means that “no individual state can fully control the people and activity on their territory”, it implies that there has been a shift of the places of sovereignty, mainly outside of the traditional territorial framework. Despite that, it is important not to fall in the trap of considering that we have witnessed the end of the state. On the contrary, Schneiderman reminds us that in a system of “global governance”, States do not disappear but “[they] continue to perform critical functions in maintaining public infrastructures, facilitating economic flows, and policing dangers of various sorts”.

Expanding Schneiderman’s ideas and looking at how globalization unfold on the ground, it could easily be affirmed that states have played a crucial role in the consolidation of economic globalization, mainly through the establishment and enforcement of property, financial structures, and returns on the investments. They have increasingly been shielded from consequences of democratic processes. The neoliberal ideology has thus been enriched and reinforced by sovereignty, a form of power that works for the economic globalization and is not at all dissipated or lost. As William Davies states, economic globalization “has been heavily dependent on sovereign institutions in order to carry out its reinvention of liberalism and transformation of society”.

Neoliberalism seeks to squeeze and discipline sovereignty, to confine it into economically rational foundations. According to Foucault, the “governmentalization of the state” is the main characteristic of political modernity. According to Lidia Lo Schiavo,  “while the discourse on globalization pronounces the diagnosis of the crisis of the state, which consists in the disaggregation of state-sovereignty and the dis-assembling of state power and functions, what is actually at stake are the governmentality techniques of power at work; ‘governance without government’ being the macro-framework within which these processes unfold”. In this sense, “global governance is governing, without sovereign authority, relationships that transcend national frontiers. Global governance is doing internationally what governments do at home”.

Instead of facing the end of history, we are now facing a revamp of sovereignty discourses. Due to the huge social costs faced by the vast majority of the world population because of the financial and economic crisis, the debate on sovereignty is back into politics and is fully recognized for its political nature. On the one side,  we have been witnessing the irruption in the political scene of the conservative populism, represented by the election of Trump in USA and the Brexit in UK among others, which  apparently propose the revival of  an old-fashioned Westphalian Nation-State-based concept of sovereignty building on nationalistic and xenophobic sentiments (“National Sovereignty”). On the other side (opposite politically but linked in many ways), Grebaudo positions the ”progressive” reclaiming of sovereignty can be traced back to the movement of the squares of 2011, comprising the Arab Spring, the Spanish Indignados, the Greek Aganaktismenoi and Occupy Wall Street.

Although they all claim for sovereignty, it is only the latter who adopt a progressive vision of sovereignty, which builds on the bottom-up participation and direct involvement of the people in the redefinition of existing socio-economic and legal practices.  According to Julian Ku and  John Yoo, “popular sovereignty assumes that sovereign powers can be shared, divided, and limited without giving up on the entire system. In other words, popular sovereignty can coexist with elements of global governance in ways that Westphalian sovereignty cannot”. It means that “a progressive view of sovereignty needs to accept that the nation-state is not the only space for sovereignty, but that in the contemporary world sovereignty operates at different scales which all have their legitimacy, and all can be utilized as a means to pursue progressive political agendas”.

According to Samuel Gregg, “national sovereignty puts a powerful check on global governance [and] it is surely a very good thing.” Therefore, he continues, “it is thus important not leaving the discourse of sovereignty to the Right.” Demands for sovereignty spring from all too real experiences of social suffering and humiliation which the neoliberal demolition of sovereign power has unleashed.  At the same time, the debate seems still open in relation to the core element of this “progressive sovereignty” concept. It is important to further analyze what progressive politics, interpretations, constructions and distributions of sovereignty should look like and what forms of sovereignty could be realistically claimed in a globally interconnected world. Overall, at the time of borders and conflicting claims around control, we have to ask to ”what extent can territorial control and exclusions, which constitute the underlying logic of sovereignty, really be turned towards emancipatory ends[…]”.



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