Yes to Globalization, No to Global Governance, Part II

Five years ago, I wrote that globalization is good, but that global governance is bad.

That’s because globalization (as I define it) means free trade and other forms of cross-border economic activity. All of which is very consistent with economic liberty.

Global governance, by contrast, is very worrisome since it creates opportunities for politicians to collude in ways that undermine economic freedom.

Which is why I’ve tried to draw a distinction between good globalism and bad globalism.

Ilya Somin of George Mason University’s law school has a similar perspective. Here are some excerpts from his new article.

The debate over world government and “global governance” typically pits cosmopolitan supporters of globalization against nationalist champions of state sovereignty. …However, one need not be a nationalist to oppose world government. I am a cosmopolitan supporter of free trade… Yet I also take a dim view of world government and other similar proposals. These positions are not contradictory. Indeed, they are mutually reinforcing. Precisely because I see great value in…the opportunity to “vote with your feet,” I oppose the creation of a global state whose authority would be almost impossible to escape. …It would also undermine valuable interjurisdictional competition and exacerbate some key weaknesses of the democratic process. In the worst-case scenario, it could lead to the establishment of a global tyranny from which there may be no escape.

Given my hostility to various OECD tax harmonization schemes, I very much agree with Ilya’s desire to preserve and protect tax competition as a constraint of greedy governments.

Especially since jurisdictional competition helped produce prosperity in the western world.

Currently, national governments compete with each other to attract business, investment, trade, and productive workers. This, to some degree, incentivizes states to adopt more-effective economic policies and reduces their ability to impose excessive taxes and regulations. …A world government, by contrast, would likely stifle much of the beneficial competition that now exists. Consider, for example, the global minimum tax proposed by the Organisation for Economic Co-operation and Development (OECD), which would impose a 15 percent minimum tax on multinational firms. If this plan is implemented, it would suppress valuable tax competition, destroy more wealth than it raises in tax revenue.

I’m also a big fan of letting people “vote with their feet,” so I like what he wrote about people being able to migrate to places with better policy.

Which is only relevant if there actually are nations with better policy – something that is only possible in a world where countries have the sovereign right to set their own policies.

Throughout history, the option of emigration has been a tremendous boon to people who were forced to live under corrupt, backward, or oppressive regimes. …“Foot voting” is, in crucial respects, a better mechanism of political choice than ballot box voting. …foot voters can make a meaningfully decisive choice about the kind of government policies they wish to live under. …If a world government becomes oppressive, falls victim to corruption, or adopts economic policies that stifle opportunity, there will be nowhere else to go.

Last but not least, he worries about the risk of global governance leading to global totalitarianism.

A world government might start off as some sort of democracy, and is at the very least highly unlikely to begin as a totalitarian nightmare. But history shows that authoritarian and totalitarian political movements can seize power in a previously relatively free society, especially during a crisis. …Historically, the greatest threat to the longevity of totalitarian regimes has been the presence of rival, relatively free societies. Such rivals might forcibly overthrow the totalitarian regime (as happened with Nazi Germany). Even if they do not do so, their example might lead to restiveness among the totalitarian state’s subjects and to the adoption of reforms that bring the system down, as happened in the Soviet Bloc in the late 1980s. Once established, a global totalitarian regime would not face either of these risks.

Ilya acknowledges that the risk of global totalitarianism is probably small, but it’s instructive to note that the European Union (which is the closest example of global governance that currently exists) is infamous for its “democratic deficit.” Voters don’t get to choose the Commissioners that have almost all of the power in Brussels.

Ilya’s article is a very helpful contribution to the discussion, both because he identifies the dangers of global governance and because he clearly explains that a preference for national sovereignty does not imply support for misguided policies such as protectionism, industrial policy, or national conservatism.

My only complaint about Ilya’s analysis is that I wish he had enough space to explain that the debate about global governance is not simply yes or no.

It’s more like operating a lamp with a dimmer switch rather than an on/off switch. Here’s my back-of-the-envelope attempt to show that there’s a spectrum of options, with global government on the left and sovereignty on the right.

Note that sovereignty allows for international cooperation.

That means everything from big issues such as military alliances and trade agreements to arcane issues such as international air traffic control pacts and agreements on ocean fishing.

People can and will disagree on the merits of various international agreements. My only point is that such pacts are expressions of national sovereignty (though keep in mind that “mutual recognition” often is the best option for cross-border issues).

But the wrong kind of international cooperation can lead to governments explicitly colluding in ways that give politicians more power and thus restrict economic freedom.

The OECD’s anti-tax competition project and the global corporate tax cartel are two obvious examples.

And if that collusion becomes formalized, the next stage is supranational governance. The European Union is the most obvious case, though not a perfect example since national governments still retain certain sovereign powers.

I wonder, by the way, whether the IMF also should be included in supranational governance since its bailout powers are so widely misused (the United Nations would like to be in this category, but fortunately is too incompetent to be a major threat to economic freedom).

Last (and least, in terms of desirability), the most extreme option is total global governance.

P.S. Since I mentioned the OECD a couple of times, I encourage readers to watch this video.