Thursday, January 17, 2013

Decline of the nation in a globalized world?

An interesting piece on the boundaries globalization is breaking down for the global players and technological players is "The decline of nations" by Francisco Dao. He states that global players, especially multinational corporations, are not affected by national boundaries and state of the economies as much as local actors are since they can move from one jurisdiction to the other. The same is with the technology world that gets its services from across the globe.
"As global players disassociate themselves from individual countries, it results in a bifurcated global economy made up of a global class that is able to leverage international labor and markets, and national classes who are more reliant on the well being of their respective nation. Countries are left to compete for relevance in an economic world that has no respect for national borders. In this scenario, nations have two choices both of which lead to their eventual ruin. 
The first option is to hold the line on taxes and regulations and watch their global players depart (or obfuscate profits) for countries offering a more favorable environment. The second option is to offer incentives to keep global players within their tax base. However, this ultimately produces a race to the bottom, as nations bend over backwards to the demands of global players who have no reason to be loyal to any individual country. Either way, nations are faced with eventual decline."
Dani Rodrik, on the other hand, reiterates the dominance of the nation state even in an increasingly globalized world about which I had blogged about here. He states the myth of the fall of the nation state needs to be resisted.

 Are there extremities in this debate?While globalization is gradually impacting various sectors, the action and focal point is still very much local and national. Countries respond to globalization in myriad ways in varying situations from outright protectionism to open arms free trade. Even today large populations are outside the circle of benefitting from globalization. Nevertheless, the world has been impacted by globalization and reduction of barriers. While no one can predict the way the global economy will take, this constant tension between national imperatives with global pressures is a constant definitive.

An interesting debate in the context of domestic policy space and growing international trade.

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