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8/13/2019 Uploads Files 1095 http://slidepdf.com/reader/full/uploads-files-1095 1/27 Governance in a Globalizing World by Robert O. Keohane and Joseph S. Nye., Jr. INTRODUCTION “Globalization” became a buzzword in the 1990s, as “interdependence” did in the 1970s, but the phenomena they refer to are not entirely new. As Marx and Engels wrote in 1848, “All old-established national industries have been destroyed or are being destroyed….In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal interdependence of nations.” Some skeptics believe such terms are beyond redemption for analytic use. Yet the public understands the image of the globe, and the new word conveys an increased sense of vulnerability to distant causes. For example, as helicopters fumigated New York City in 1999 to eradicate a lethal new virus, the press announced that it might have arrived in the blood of a traveler, a bird smuggled through customs, or in the gut of a mosquito that flitted into a jet. 1 Fears of “bioinvasion” led some environmental groups to call for a reduction in global trade and travel. 2 In this book we define globalism as a state of the world involving networks of interdependence at multi-continental distances. These networks can be linked through flows and influences of capital and goods, information and ideas, people and force, as well as environmentally and biologically relevant substances (such as acid rain or pathogens). Globalization and deglobalization refer to the increase or decline of globalism. As compared to interdependence, 3 globalism has two special characteristics: 1) Globalism refers to networks of connections (multiple relationships), not simply to single linkages. We would refer to economic or military interdependence between the United States and Japan, but not to globalism between the United States and Japan. US- Japanese interdependence is part of contemporary globalism, but by itself is not globalism. 2) For a network of relationships to be considered "global,” it must include multi- continental distances, not simply regional networks. Distance is of course a continuous variable, ranging from adjacency (for instance, between the United States and Canada) to opposite sides of the globe (for instance, Britain and Australia). Any sharp distinction between "long-distance" and "regional" interdependence is therefore arbitrary, and there is no point in deciding whether intermediate relationships -- say, between Japan and India or between Egypt and South Africa -- would qualify. Yet "globalism" would be an odd word for proximate regional relationships. Globalization refers to the shrinkage of 1 New York Times , Oct. 4, 1999, p. A1. 2 See for example “Warning— Bioinvas ion ” (full-page advertisement), New York Times , Sept. 20, 1999, p. A11. 3 Robert O. Keohane and Joseph S. Nye, Power and Interdependence: World Politics in Transition (Boston: Little, Brown, 1977, 2 nd ed. New York: Harper Collins, 1989.

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Governance in a Globalizing World

byRobert O. Keohane and Joseph S. Nye., Jr.


“Globalization” became a buzzword in the 1990s, as “interdependence” did in the 1970s, but the phenomena they refer to are not entirely new. As Marx and Engels wrote in 1848, “Allold-established national industries have been destroyed or are being destroyed….In place of theold local and national seclusion and self-sufficiency, we have intercourse in every direction,universal interdependence of nations.” Some skeptics believe such terms are beyond redemptionfor analytic use. Yet the public understands the image of the globe, and the new word conveys anincreased sense of vulnerability to distant causes. For example, as helicopters fumigated New

York City in 1999 to eradicate a lethal new virus, the press announced that it might have arrivedin the blood of a traveler, a bird smuggled through customs, or in the gut of a mosquito thatflitted into a jet. 1 Fears of “bioinvasion” led some environmental groups to call for a reduction inglobal trade and travel. 2

In this book we define globalism as a state of the world involving networks ofinterdependence at multi-continental distances. These networks can be linked through flows andinfluences of capital and goods, information and ideas, people and force, as well asenvironmentally and biologically relevant substances (such as acid rain or pathogens).Globalization and deglobalization refer to the increase or decline of globalism. As compared tointerdependence, 3 globalism has two special characteristics:

1) Globalism refers to networks of connections (multiple relationships), not simply tosingle linkages. We would refer to economic or military interdependence between theUnited States and Japan, but not to globalism between the United States and Japan. US-Japanese interdependence is part of contemporary globalism, but by itself is notglobalism.

2) For a network of relationships to be considered "global,” it must include multi-continental distances, not simply regional networks. Distance is of course a continuousvariable, ranging from adjacency (for instance, between the United States and Canada) toopposite sides of the globe (for instance, Britain and Australia). Any sharp distinction

between "long-distance" and "regional" interdependence is therefore arbitrary, and thereis no point in deciding whether intermediate relationships -- say, between Japan and Indiaor between Egypt and South Africa -- would qualify. Yet "globalism" would be an oddword for proximate regional relationships. Globalization refers to the shrinkage of

1 New York Times , Oct. 4, 1999, p. A1.2 See for example “Warning— Bioinvasion ” (full-page advertisement), New York Times , Sept. 20, 1999, p. A11.3 Robert O. Keohane and Joseph S. Nye, Power and Interdependence: World Politics in Transition (Boston: Little,Brown, 1977, 2 nd ed. New York: Harper Collins, 1989.

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distance, but on a large scale. It can be contrasted with localization, nationalization, orregionalization.

Some examples may help. Islam's quite rapid diffusion from Arabia across Asia to whatis now Indonesia was a clear instance of globalization; but the initial movement of Hinduism

across the Indian subcontinent was not, according to our definition. Ties among the countries ofthe Asian-Pacific Forum (APEC) qualify as multi-continental interdependence, because thesecountries include the Americas as well as Asia and Australia; but the Association of SoutheastAsian Nations (ASEAN) is regional.

"Globalism" does not imply universality. At the turn of the millenium, a quarter of theAmerican population used the World Wide Web compared to one hundredth of one percent ofthe population of South Asia. Most people in the world today do not have telephones; hundredsof millions of people live as peasants in remote villages with only slight connections to worldmarkets or the global flow of ideas. Indeed, globalization is accompanied by increasing gaps, inmany respects, between the rich and the poor. It does not imply either homogenization or equity. 4

As Frankel and Rodrik show in their chapters below, an integrated world market would meanfree flows of goods, people and capital, and convergence in interest rates. That is far from thefacts. While world trade grew twice as fast and foreign direct investment three times as fast asworld output in the second half of the 20th century, Britain and France are only slightly moreopen to trade (ratio of trade to output) today than in 1913, and Japan is less so. By somemeasures, capital markets were more integrated at the beginning of the century, and labor is lessmobile than in the second half of the 19th century when sixty million people left Europe for newworlds. 5 In social terms, contacts among people with different religious beliefs and other deeply-held values, have often led to conflict. 6 Two symbols express these conflicts: the notion of theUnited States as "the Great Satan," held by Islamic fundamentalism in Iran; and student

protestors’ erection in Tiannenmen Square in China, in 1989, of a replica of the Statue ofLiberty. Clearly, in social as well as economic terms, homogenization does not follownecessarily from globalization.


Interdependence and globalism are both multidimensional phenomena. All too often,they are defined in strictly economic terms, as if the world economy defined globalism. But otherforms of globalism are equally important. The oldest form of globalization is environmental:climate change has affected the ebb and flow of human populations for millions of years.Migration is a longstanding global phenomenon. The human species began to leave its place oforigin, Africa, about 1.25 million years ago and reached the Americas sometime between thirtyand thirteen thousand years ago. One of the most important forms of globalization is biological.The first smallpox epidemic is recorded in Egypt in 1350 BC. It reached China in 49 AD, Europe

4 United Nations Development Program [UNDP], Human Development Report , New York: Oxford University Press,1999).5 Keith Griffin, “Globalization and the Shape of Things to Come,” in Macalester International:Globalization and

Economic Space , v. 7, spring 1999, p. 3; “One World?” The Economist , 10/18/97, pp. 79-80.6 Samuel P. Huntington, The Clash of Civilizations and the Remaking of World Order (New York: Simon andSchuster, 1996).

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after 700; the Americas in 1520, and Australia in l789. 7 The plague or Black Death originated inAsia, but its spread killed a quarter to a third of the population of Europe between 1346 and1352. When Europeans journeyed to the New World in the 15th and 16th centuries they carried

pathogens that destroyed up to 95 per cent of the indigenous population. 8 Today, human impacton global climate change could affect the lives of people everywhere. On the other hand, not all

effects of environmental globalism are adverse. For instance, nutrition and cuisine in the OldWorld benefited from the importation of such New World crops as the potato, corn and thetomato. 9

Military globalization dates at least from the time of Alexander the Great’s expeditionsover 2300 years ago, which resulted in an empire that stretched across three continents fromAthens through Egypt to the Indus. Hardest to pin down, but in some ways the most pervasiveform of globalism, is the flow of information and ideas. Indeed, Alexander’s conquests werearguably most important for introducing Western thought and society, in the form of Hellenism,to the Eastern World. 10 Four great religions of the world -- Buddhism, Judaism, Christianity, andIslam -- have spread across great distances over the last two millennia; and in this age of the

Internet other religions such as Hinduism, formerly more circumscribed geographically, aredoing so as well 11

Analytically, we can differentiate dimensions according to the types of flows and perceptual connections that occur in spatially extensive networks:

1) Economic globalism involves long-distance flows of goods, services and capital, andthe information and perceptions that accompany market exchange. It also involves theorganization of the processes that are linked to these flows: for example, the organizationof low-wage production in Asia for the United States and European markets. Indeed,some economists define globalization in narrowly economic terms as “the transfer oftechnology and capital from high-wage to low-wage countries, and the resulting growthof labor-intensive Third World exports.” 12 Economic flows, markets, and organization asin multinational firms, all go together.

2) Military globalism refers to long-distance networks of interdependence in whichforce, and the threat or promise of force, are employed. A good example of militaryglobalism is the "balance of terror" between the United States and the Soviet Unionduring the Cold War. Their strategic interdependence was acute and well-recognized.

Not only did it produce world-straddling alliances, but either side could have usedintercontinental missiles to destroy the other within the space of thirty minutes. It was

7 New York Times , 6/15/99, p. D4.8 Jared Diamond, Guns, Germs and Steel: The Fates of Human Societies , (New York: W.W. Norton, 1998), pp.

202, 210; William H. McNeill, Plagues and Peoples , (London: Scientific Book Club, 1979), p. 168; see as wellAlfred W. Crosby, Ecological Imperialism: The Biological Expansion of Europe, 900-1900 (Cambridge: CambridgeUniversity Press, 1986).9 Alfred Crosby, The Columbian Exchange: Biological and Cultural Consequences of 1492 (Westport, CT:Greenwood Press, 1972).10 John P. McKay, et al., A History of Western Society , 4 th ed. (Boston.: Houghton Mifflin, 1991), pp. 106-107.11 Arjun Appuradai, Modernity at Large (Minneapolis: University of Minnesota Press, 1996).12 Paul Krugman, The Return of Depression Economics (New York: Norton, 1999), p. 16.

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distinctive not because it was totally new, but because the scale and speed of the potentialconflict arising from interdependence were so enormous.

3) Environmental globalism refers to the long-distance transport of materials in theatmosphere or oceans, or of biological substances such as pathogens or genetic materials

that affect human health and well-being. Examples include the depletion of thestratospheric ozone layer as a result of ozone-depleting chemicals; human-induced globalwarming, insofar as it is occurring; the spread of the AIDs virus from central Africaaround the world beginning at the end of the 1970s. As in the other forms of globalism,the transfer of information is important, both directly and through the movement ofgenetic material, and indirectly as a result of inferences made on the basis of materialflows. Some environmental globalism may be entirely natural -- the earth has gonethrough periods of warming and cooling since before the human impact was significant --

but much of the recent change has been induced by human activity.

4) Social and cultural globalism involves movements of ideas, information, and images,

and of people -- who of course carry ideas and information with them. Examples includethe movement of religions or the diffusion of scientific knowledge. An important facet ofsocial globalism involves imitation of one society’s practices and institutions by others:what some sociologists refer to as "isomorphism." 13 Often, however, social globalism hasfollowed military and economic globalism. Ideas and information and people followarmies and economic flows, and in so doing, transform societies and markets. At its most

profound level, social globalism affects the consciousness of individuals, and theirattitudes toward culture, politics, and personal identity. Indeed, social and culturalglobalism interacts with other types of globalism, since military and environmental, aswell as economic activity convey information and generate ideas, which may then flowacross geographical and political boundaries. In the current era, as the growth of theInternet reduces costs and globalizes communications, the flow of ideas is increasingindependent of other forms of globalization.

One could imagine other dimensions. For example, political globalism could refer to thatsubset of social globalism that refers to ideas and information about power and governance. Itcould be measured by imitation effect (e.g. in constitutional arrangements or the number ofdemocratic states) or by the diffusion of government policies, or of international regimes. Legalglobalism could refer to the spread of legal practices and institutions to a variety of issues,including world trade and the criminalization of war crimes by heads of state. Globalizationoccurs in other dimensions as well—for instance in science, entertainment, fashion and language.

One obvious problem with considering all these aspects of globalism to be dimensions ona par with those we have listed is that when categories proliferate, they cease to be useful. Toavoid such proliferation, therefore, we treat these dimensions of globalism as subsets of socialand cultural globalism. Political globalism seems less a separate type than an aspect of any of ourfour dimensions. Almost all forms of globalization have political implications. For example, theWTO, NPT, Montreal Convention and UNESCO are responses to economic, military,environmental and social globalization.

13 John W. Meyer, et al., "World Society and the Nation-State," American Journal of Sociology 103, pp. 144-81.

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In the aftermath of Kosovo and East Timor, ideas about human rights, humanitarianinterventions versus classical state sovereignty formulations were a central feature of the 1999United Nations General Assembly. UN Secretary General Kofi Annan argued that in a globalera, “the collective interest is the national interest,” and South African President Thabo Mbeki

stated that “the process of globalization necessarily redefines the concept and practice of nationalsovereignty.” On the other hand, Algerian President Abdelaziz Bouteflika, the head of theOrganization of African Unity, replied that he did not deny the right of Northern public opinionto denounce breaches of human rights, but “sovereignty is our final defense against the rules ofan unequal world,” and that “we [Africa] are not taking part in the decision-making process.” 14 These were debates about the political implications of social and military globalization, ratherthan about political globalization as distinct from its social and military dimensions.

The division of globalism into separate dimensions is inevitably somewhat arbitrary. Nonetheless, it is useful for analysis, because changes in the various dimensions of globalizationdo not necessarily co-vary. One can sensibly say, for instance, that "economic globalization"

took place between approximately 1850 and 1914, manifested in imperialism and in increasingtrade and capital flows between politically independent countries; and that such globalizationwas largely reversed between 1914 and 1945. That is, economic globalism rose between 1850and 1914, and fell between 1914 and 1945. However, military globalism rose to new heightsduring the two world wars, as did many aspects of social globalism. The worldwide influenzaepidemic of 1919, which took 21 million lives was propagated by the flows of soldiers aroundthe world. 15 So did globalism decline or rise between 1914 and 1945? It depends whatdimension of globalism one is referring to. Without an adjective, general statements aboutglobalism are often meaningless or misleading.


When people speak colloquially about globalization, they typically refer to recentincreases in globalism. Comments such as "globalization is fundamentally new," only makesense in this context; but are nevertheless misleading. We prefer to speak of globalism as a

phenomenon with ancient roots, and of globalization as the process of increasing globalism, nowor in the past.

The issue is not how old globalism is, but rather of how "thin" or "thick" it is at any giventime. 16 As an example of “thin globalization,” the Silk Road provided an economic and culturallink between ancient Europe and Asia, but the route was plied by a small group of hardy traders,and the goods that were traded back and forth had a direct impact primarily on a small (andrelatively elite) stratum of consumers along the Road. In contrast, "thick" relations ofglobalization involve many relationships that are intensive as well as extensive: long-distanceflows that are large and continuous, affecting the lives of many people. The operations of global

14 New York Times , Sept. 21, 1999, p. A12; Financial Times (London), Sept. 21, 1999, p. 1.15 Diamond, p. 202.16 David Held, et al., Global Transformations: Politics, Economics and Culture (Stanford : Stanford UniversityPress 1999), p. 21-22.

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financial markets today, for instance, affect people from Peoria to Penang. “Globalization” is the process by which globalism becomes increasingly thick .

Often, contemporary globalization is equated with Americanization, especially by non-Americans who resent American popular culture and the capitalism that accompanies it. In l999,

for example, some French farmers protecting “culinary sovereignty” attacked McDonaldsrestaurants. 17 Several dimensions of globalism are indeed dominated today by activities based inthe United States, whether on Wall Street, in the Pentagon, in Cambridge, in Silicon Valley, or inHollywood. If we think of the content of globalization being "uploaded" on the Internet, then"downloaded" elsewhere, more of this content is uploaded in the United States than anywhereelse. 18 However, globalization long predates Hollywood and Bretton Woods. The spice trade andthe intercontinental spread of Buddhism, Christianity and Islam, preceded by many centuries thediscovery of America, much less the formation of the United States. In fact, the United Statesitself is a product of l7th and l8th century globalization. Japan's importation of German law acentury ago, contemporary ties between Japan and Latin American countries with significantJapanese-origin populations, and the lending by European banks to emerging markets in East

Asia, also constitute examples of globalization not focused on the United States. Hence,globalism is not intrinsically American, even if its current phase is heavily influenced by whathappens in the United States.

Globalism today is America-centric, in that most of the impetus for the informationrevolution comes from the United States, and a large part of the content of global informationnetworks is created in the United States. However, the ideas and information that enter globalnetworks are "downloaded" in the context of national politics and local cultures, which act asselective filters and modifiers of what arrives. Political institutions are often more resistant totransnational transmission than popular culture. Although the Chinese students in TiananmenSquare in 1989 built a replica of the Statue of Liberty, China has emphatically not adoptedUnited States political institutions. Nor is this new. In the l9th century, Meiji reformers in Japanwere aware of Anglo-American ideas and institutions, but deliberately turned to German models

because they seemed more congenial. 19 For many countries today, as Schauer shows below,Canadian constitutional practices, with their greater emphasis on duties, or German laws,restrictive of racially-charged speech, are more congenial than those of the United States. 20

The central position of the United States in global networks creates "soft power": theability to get others to want what Americans want. 21 But the processes are in many respectsreciprocal, rather than one-way. Some US practices are very attractive to other countries --honest regulation of drugs, as in the Food and Drug Administration (FDA); transparent securities

17 New York Times , 8/29/99, section 4, p. l.18 Professor Anne-Marie Slaughter of Harvard Law School used the expressions of "uploading" and "downloading"

content, at John F. Kennedy School of Government Visions Project Conference on Globalization, Bretton Woods, NH, July 1999.19 Richard Storry, A History of Modern Japan (Harmondsworth, UK: Penguin, 1960), pp. 115-116; Hioaki Sato,“The Meiji Government’s Remarkable Mission to Learn from Europe and Japan,” Japan Times , Oct. 14, 1999.20 Frederick Schauer, “The Politics and Incentives of Legal Transplantation,” paper presented at John F. KennedySchool of Government Visions Project Conference on Globalization, Bretton Woods, NH, July 1999.21 Joseph S. Nye, Jr. Bound to Lead: The Changing Nature of American Power , (New York: Basic Books, 1990),

pp. 31-32.

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laws and practices, limiting self-dealing, monitored by the Securities and Exchange Commission(SEC). US-made standards are sometimes hard to avoid, as in the rules governing the Internetitself. But other US standards and practices -- from pounds and feet (rather than the metricsystem) to capital punishment , the right to bear arms, and absolute protection of free speech --have encountered resistance or even incomprehension. "Soft power" is a reality, but it does not

accrue to the United States in all areas of life, nor is the United States the only country to possessit.

Is there anything about globalism today that is fundamentally different? Every era buildson others; and historians can always find precursors in the past for phenomena of the present, butcontemporary globalization goes “faster, cheaper and deeper.” 22 The degree of thickening ofglobalism is giving rise to increased density of networks, increased “institutional velocity,” andincreased transnational participation.

Economists use the term “network effects” to refer to situations where a product becomesmore valuable once many other people also use it. This is why the Internet is causing such rapid


Joseph Stiglitz, Chief Economist of the World Bank, argues that a knowledge-basedeconomy generates “powerful spillover effects, often spreading like fire and triggering furtherinnovation and setting off chain reactions of new inventions. . .But goods—as opposed toknowledge—do not always spread like fire. . .” 24 Moreover, as interdependence and globalismhave become thicker, the systemic relationships among different networks have become moreimportant. There are more interconnections among the networks. As a result, "system effects" 25

become more important. Intensive economic interdependence affects social and environmentalinterdependence; and awareness of these connections in turn affects economic relationships. Forinstance, the expansion of trade can generate industrial activity in countries with lowenvironmental standards, mobilizing environmental activists to carry their message to the newlyindustrializing but environmentally lax countries. The resulting activities may affectenvironmental interdependence (for instance, by reducing cross-boundary pollution), but maygenerate resentment in the newly industrializing country, affecting social and economic relations.

The extensivity of globalism means that the potential connections occur worldwide, withsometimes unpredictable results. Even if we thoroughly analyzed each individual strand ofinterdependence between two societies, we might well miss the synergistic effects ofrelationships between these linkage between societies.

Environmental globalism illustrates the point well. When scientists in the United Statesdiscovered chlorofluorocarbons (CFC's) in the 1920s, they and many others were delighted tohave such efficient chemicals for available for refrigeration (and other purposes) that werechemically inert, hence not subject to explosions and fires. Only in the 1970s was it suspected,and in the 1980s proved, that CFC's depleted the stratospheric ozone layer, which protectshuman beings against harmful ultraviolet rays. The environmental motto, "everything is

22 Thomas Friedman, The Lexus and the Olive Tree: Understanding Globalization (New York: Farrar Straus Giroux,1999), pp. 7-8.23 “A Semi-Integrated World,” The Economist , Sept. 11, 1999, p. 42.24 Joseph Stiglitz, “Weightless Concerns,” Financial Times (London), Feb. 3, 1999, op-ed page.25 Robert Jervis, System Effects: Complexity in Political and Social Life (Princeton: Princeton University Press,1997).

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connected to everything else," warns us that there may be unanticipated effects of many humanactivities, from burning of carbon fuels (generating climate change) to genetically modifyingcrops grown for food.

Environmental globalism has political, economic and social consequences. Discoveries

of the ozone-depleting properties of CFCs (and other chemicals) led to this issue being put oninternational agendas, to intra-national, international, and transnational controversies about it;and eventually to a series of international agreements, beginning at Montreal in 1987, regulatingthe production and sale of such substances. These agreements entailed trade sanctions againstviolators -- thus affecting economic globalism. They also raised people's awareness ofecological dangers, contributing to much greater transnational transmission of ideas andinformation (social globalism) about ecological processes affecting human beings.

Another illustration of network interconnections is provided by the impact, worldwide, ofthe financial crisis that began in Thailand in July 1997. Unexpectedly, what appeared first as anisolated banking and currency crisis in a small "emerging market" country, had severe global

effects. It generated financial panic elsewhere in Asia, particularly in Korea and Indonesia; prompted emergency meetings at the highest level of world finance and huge "bail-out" packagesorchestrated by the IMF; and led eventually to a widespread loss of confidence in emergingmarkets and the efficacy of international financial institutions. Before that contagious loss ofconfidence was stemmed, Russia had defaulted on its debt (in August 1998), and a huge US-

based hedge fund, Long-Term Capital Management, had to be rescued suddenly through a plan put together by the US Federal Reserve. Even after recovery had begun, Brazil required a hugeIMF loan, coupled with devaluation, to avoid financial collapse in January 1999.

The relative magnitude of foreign investment in 1997 was not unprecedented. Capitalmarkets were by some measures more integrated at the beginning than at the end of the 20thcentury. The net outflow of capital from Britain in the four decades before 1914 averaged five

percent of gross domestic product, compared to two to three percent for rich countries today. 26 The fact that the financial crisis of 1997 was global in scale also had precursors: "BlackMonday" on Wall Street in 1929 and the collapse of Austria’s Credit Anstalt bank in 1930triggered a worldwide financial crisis and depression. (Once again, globalism is not new.)Financial linkages among major financial centers have always been subject to the spread ofcrisis, as withdrawals from banks in one locale precipitate withdrawals elsewhere, as failures of

banks in one jurisdiction lead to failures even of distant creditors.

But three other features of the 1997-99 crisis are particularly worthy of note. First,although net flows of global capital were smaller than in the late 19 th century, gross financialflows were much larger. Daily foreign exchange flows had increased from $15 billion in 1973 to$l.5 trillion by l995. Second, the crisis was sparked by a currency collapse in a small emergingmarket economy. Thailand hardly occupied the same position in the system as Wall Street did in1929. Third, the crisis was almost totally unanticipated by most economists, governments, andinternational financial institutions, and complex new financial instruments made it difficult tounderstand. The World Bank had recently published a report entitled “The Asian Miracle”(1993), and investment flows to Asia rose rapidly to a new peak in 1996 and remained high until

26 “One World?” The Economist , Oct. 18 1997, p. 80.

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the crisis hit. In December 1998 Federal Reserve Board chairman Alan Greenspan said: "I havelearned more about how this new international financial system works in the last twelve monthsthan in the previous twenty years." 27 As Held, et al., argue, sheer magnitude, complexity andspeed distinguish contemporary globalization from earlier periods. 28

There are also interconnections with military globalism. In the context of superpower bipolarity, the end of the Cold War represented military deglobalization. Distant disputes becameless relevant to the balance of power. But the rise of social globalization had the opposite effect.Humanitarian concerns interacting with global communications led to dramatization of someconflicts and military interventions in places like Somalia, Bosnia and Kosovo. At the same time,other remote conflicts such as Southern Sudan which proved less accessible, were largelyignored. At the tactical level, the asymmetry of global military power and the interconnectionsamong networks raises new options for warfare. For example, in devising a strategy to stand upto the United States, some Chinese officers are proposing terrorism, drug trafficking,environmental degradation, and computer virus propagation. They argue that the morecomplicated the combination—for example, terrorism plus a media war plus a financial war—the

better the results. “From that perspective, ‘Unrestricted War’ marries the Chinese classic The Artof War by Sun Tzu, with modern military technology and economic globalization.” 29

The general point is that the increasing thickness of globalism—the density of networksof interdependence— is not just a difference in degree from the past. Thickness means thatdifferent relationships of interdependence intersect more deeply at more different points. Hence,effects of events in one geographical area, on one dimension, can have profound effects in othergeographical areas, on other dimensions. As in scientific theories of "chaos," and in weathersystems, small events in one place can have catalytic effects, so that their consequences later, andelsewhere, are vast. 30 Such systems are very difficult to understand, and their effects aretherefore often unpredictable. Furthermore, when these are human systems, human beings areoften hard at work trying to outwit others, to gain an economic, social or military advantage

precisely by acting in an unpredictable way. As a result, we should expect that globalism will beaccompanied by pervasive uncertainty. There will be a continual competition between increasedcomplexity, and uncertainty, on the one hand; and efforts by governments, market participants,and others to comprehend and manage these increasingly complex interconnected systems.


Globalization, therefore, does not merely affect governance; it will be affected by it.Frequent financial crises of the magnitude of the crisis of 1997-99 could lead to popularmovements to limit interdependence, and to a reversal of economic globalization. Chaoticuncertainty is too high a price for most people to pay for somewhat higher average levels of

prosperity. Unless some aspects of globalization can be effectively governed, it may not be

27 Greenspan quoted in Friedman, p. 368.28 Held, et al., p. 235.29 “China Ponders New Rules of ‘Unrestricted War’, Washington Post , Aug 8, 1999, p. l.30 M. Mitchell Waldrop, Complexity: The Emerging Science at the Edge of Order and Chaos (New York:Touchstone Books, 1992).

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sustainable in its current form. Complete laissez-faire may turn out to be a short-sighted responseto globalization in the long term. Our purpose in this volume (and introductory chapter) is toexplore the implications of globalization for governance in the 21 st century.

Governance refers to the emergence and recognition of principles, norms, rules, and

procedures that both provide standards of acceptable public behavior, and that are followedsufficiently to produce behavioral regularities. Governance, thus defined, need not be conducted by governments – international organizations, private firms, associations of firms, NGOs, andassociations of NGOs all engage in it. In this book we ask three fundamental questions: 1) howare patterns of globalization evolving in the first part of the 21 st century? 2) How does this affect

governance, hither to closely associated with the nation-state? 3) How might globalism itself be governed?

Contrary to some prophetic views, the nation-state is not about to be replaced as the primary instrument of both domestic and global governance. There is an extensive literature onthe effects of globalism on domestic governance, which in our view reaches more nuanced

conclusions (summarized in section II below). Instead, we believe that the nation-state is beingsupplemented by other actors – private and third sector – in a more complex geography. Thenation state is the most important actor on the stage of global politics, but it is not the onlyimportant actor. If one thinks of social and political space in terms of a nine-cell matrix, moregovernance activities will occur outside the box represented by national capitals of nation states.

Private Governmental Third Sector

SupranationalTNCs IGOs NGOs

Nationalfirms Central Non-profits

Sub-nationallocal Local local

Not only is the geography of governance more complex, but so are its modalities at allthree levels. As Lawrence Lessig argues, governance can be accomplished by law, norms,markets and architecture. (p88) Taking a local example, one can slow traffic through aneighborhood by enforcing speed limits, posting “children at play” signs, charging for access, or

building speed bumps in the roads. Lessig describes an internet world in which governance isshifting from law made by governments to architecture created by companies. “Effectiveregulation then shifts from lawmakers to code writers.” (p207) At the same time, private firms

press governments for favorable legal regimes both domestically and internationally, as do actorsfrom the Third Sector. The result is not the obsolescence of the nation state, but itstransformation and the creation of politics in new contested spaces.

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Regarding the governance of globalism, many writers use what Hedley Bull (1977)referred to as the “domestic analogy”. It is commonplace for people to think in of globalgovernance as global government, because the domestic analogy is so familiar. Michael Sandel,for instance, argues that just as the nationalization of the American economy in the last 19 th

century led to the nationalization of American government in the Progressive era, globalizationof the world economy should lead to world government (?reference). But the structure offederalism already existed in the US, and it rested on a common language and political culture.(And even that did not prevent a bloody civil war in the middle of the century.)

Another example is the UN World Development Report which portrays globalgovernance in terms of strengthening UN institutions. It calls, for example, for a bicameralGeneral Assembly; an investment trust that will redistribute the proceeds of taxes on globaltransactions; and a global central bank. State structures, and the loyalty of people to particularstates, enable states both to create connections among themselves, to handle issues ofinterdependence, and to resist amalgamation, even if it might seem justified on purely functional

grounds. Hence, world government during our lifetimes seems highly unlikely, at least in theabsence of an overwhelming global threat that could only be dealt with in a unified way. In theabsence of such a threat, it seems highly unlikely that peoples in some two hundred states will

be willing to act on the domestic analogy for well into the new century. World governmentmight or might not be desirable – we think it could have many adverse consequences – but in anyevent, it is hardly likely to be feasible.

Although we think world government is infeasible, we are not complacent about theeffects of globalization without some coherent means of governance. Karl Polanyi (1944) madea powerful argument that the inability of polities to cope with the disruptive effects of 19 th century globalization helped cause the great disturbances of the 20 th century – communism andfascism. Along similar lines, Jeffrey Williamson has more recently documented how the “latenineteenth-century globalization backlash made a powerful contribution to interwardeglobalization” (Williamson 1998: 193). Without regulation – or what was traditionally knownas “protection” – personal insecurity for many individuals can become intolerable. As Polanyi,with his dramatic flair, put it, “to allow the market mechanism to be sole director of the fate ofhuman beings and their natural environment … would result in the demolition of society”(Polanyi 1944/1957: 73).

If world government is unfeasible and laissez-faire a recipe for a backlash, we need tosearch for an intermediate solution: a set of practices for governance that improve coordinationand create safety-valves for political and social pressures, consistent with the maintenance ofnation-states as the fundamental form of political organization. Such arrangements will, weargue, involve a heterogeneous array of agents – from the private sector and the third sector aswell as from governments. And the governmental agents will not necessarily be operating onorders from the “top levels” of governments. The efficacy of these agents will depend on thenetworks in which they are embedded, and their positions in those networks. And no hierarchy islikely to be acceptable or effective in governing networks.

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One could refer very generally to the governance structures we envisage as “networkedminimalism.” Networked – because globalism is best characterized as networked, rather than asa set of hierarchies. Minimal – because governance at the global level will only be acceptable ifit does not supersede national governance, and if its intrusions into the autonomy of states andcommunities are clearly justified in terms of cooperative results.

To speak of “networked minimalism” is, of course, not to solve the problems of globalgovernance but merely to point toward a generic response to them. In particular, such a phrase

begs the question of accountability, which is crucial to democratic legitimacy. In our lastsection, therefore, we will speculate on some of the implications of global governance ingeneral, and networked minimalism in particular, for democratic theory.

The balance of our chapter proceeds as follows. Section IV briefly discusses the impactof globalization on the nation-state. We believe that globalization has important effects onstates; but that the character of these effects depends as much on the nature of the state, andstate-society relations, as on globalization per se . Section V then presents our conception of

networked minimalism as a governance strategy. We pay special attention to the difference between governance within a well-defined and demarcated issue-area, and the more complex problem of governance across issue-areas. In Section VI we consider some implications ofglobalism for democratic theory. Section VII lists a set of questions that networked minimalismwould have to face if it were to become an operational approach to global governance.


As noted above, the literature on the effect of globalism on governance is extensive. Themost persuasive work, it seems to us, converges on a number of general conclusions, whichsuggest that nation-states will continue to be important; indeed, that the internal structures ofstates will be crucial in their ability to adapt to globalization, and the effects that it will have onthem.

First, it is important not to overstate the extent of the change in the near future. As Frankeland Rodrik point out, global economic integration has a long way to go. From a strictlyeconomic point of view, this can be considered as “inefficiency”. But from a political-economy

perspective, it might be termed a “useful inefficiency” that provides a buffer for domestic political differences while allowing openness to the global economy. With time and marketintegration, this useful inefficiency will be eroded, but there is still a very long way to go.

National political systems have strong effects that are not easily erased by technology. Forexample, John Helliwell’s studies show that even in North America, national boundaries have a

powerful affect on economic activity. Toronto trades ten times as much with Vancouver as itdoes with Seattle. Electronic commerce is burgeoning, but is still a small fraction of the totaleven in the United States. Geoffrey Garrett points out that despite talk of vanishing policyautonomy, “globalization has not prompted a pervasive policy race to the neoliberal bottomamong the OECD countries, nor have governments that have persisted with interventionist

policies invariably been hamstrung by damaging capital flight” (Garrett 1998: 183).

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Second, although globalization may have powerful impacts on distributional politics andinequality, these impacts are not as clear with respect to contemporary globalization as they are,in retrospect, for the 19 th century. Universal propositions about rising inequality and “the poorgetting poorer” are too simple. First, one must distinguish between domestic and internationalinequality. In general, from the Heckscher-Ohlin theorem, we should expect increasing

inequality in rich countries (capital and high-skill labor, the abundant factors, should benefit atthe expense of unskilled labor), but we should expect, at least to some degree, increasing equality – at least as far as labor employed in the market sector is concerned – in developing countries.As Grindle’s chapter shows, reality may be more complicated than theory – and the nature of the

political system and institutional weakness, may be decisive in developing countries; but the point is that our baseline economic expectations should be different in rich and poor countries.

In economic terms, low priced labor in poorer countries benefits from trade andmigration; low priced labor in richer ones suffers. This was certainly true in late l9th century,given the magnitude of migration. Jeffrey Williamson (1998: 168) concludes that “the forces oflate nineteenth-century convergence included commodity price convergence and trade

expansion, technological catch-up, and human-capital accumulation, but mass migration wasclearly the central force.” In some relationships – such as that between Britain and the UnitedStates – the Heckscher-Ohlin effect was significant; but in others, it was not very important:“Heckscher and Ohlin may have gotten the sign right, but they were not very relevant when itcame to magnitudes” (Williamson 1998: 142).

Contemporary globalization is driven so much less by labor migration than in the 19 th century, that the contemporary implications of Williamson’s argument are ambiguous.Globalization in the form of trade between rich and poor countries is likely to increase incomeinequality in rich countries, as Heckscher and Ohlin would have predicted (Wood 1994).However, in the 19 th century, capital movements had the opposite effect, since they went largelyto high-wage countries with unexploited natural resources (Williamson 1998: 168). The UnitedStates is a huge capital-importer now, despite being a high-wage country, so on an international

basis, this form of globalization could be creating divergence rather than convergence.Migration, which generates convergence, is significant now (Borjas) but not nearly as importantas in the 19 th century. And there are other potential causes of rising inequality in rich countries -- technology and the changing composition of the labor force in particular. We are not qualifiedto sort out these issues; but it is worth noting that the ambiguity of these issues in the analyticalliterature does not prevent “globalization,” writ large, from bearing political blame forincreasing income inequality. Even if skill-biased technological change is the primary cause ofthe increase in income inequality in rich countries over the past three decades, (Lawrence,Rodrik), globalization is going to be politically contentious.

Third, the impact of globalization on the state varies substantially by political-economicsystem (Keohane-Milner; Berger-Dore, etc.). One way of thinking about these issues is in termsof “production systems” (Esping-Anderson, Iversen). In market systems, globalization leads toincome inequality as market prices are bid up for skilled labor, and as the division of laborexpands. In social democratic welfare states, transfer payments limit income inequality, butunemployment results (see Sen, Development as Freedom, 1999). In Japanese-style systems,globalization puts pressure on the lifetime employment system and other provisions for

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providing welfare through the corporation rather than the state. The overall point is thatglobalization interacts with domestic politics; it is neither true that globalization produces thesame effects everywhere (much less destroys the welfare state, or destroys state power – seeWeiss, Garrett, Rodrik)), nor that globalization is irrelevant. There may be multiple feasible

paths for dealing with the effects of globalization, depending on history, structures, attitudes –

the notion of a single “golden straitjacket” is not viable.Does globalism weaken state institutions? The answers vary by the type of state and the

type of function. It is true that there are greater market constraints on states than three decadesago, but the effects vary greatly. France, Germany, Sweden feel market pressures, but the core oftheir welfare state remains strong. Some less developed countries, on the other hand, feel market

pressures, but do not have strong safety nets or governmental institutions to begin with. Withrespect to function, transnational mobility of capital and skilled labor undercuts powers oftaxation. Transnational communications and the internet make it more difficult and costly forauthoritarian police to control citizens. In some instances, differential development maystimulate ethnic tensions that can overwhelm the institutions of the state. And as Grindle points

out, some less developed countries may have such weak institutions ( for whatever historical andcultural reasons), that their leaders are unable to cope with the new challenges posed byglobalization. On the other hand, for other developing countries, economic globalism hasstrengthened state institutions by creating a more robust economic base – witness thedevelopment of Singapore, Malaysia, or Korea. Linda Weiss argues that there is more of atransformation of state functions than a weakening of the state per se. Our major conclusionabout how globalism affects domestic governance is one of caution. Certainly, there are strongeffects, but generalizations about the effect of globalism on the nation state vary with the size,

power and domestic political culture of the states involved.

From the perspective of governance, what is striking about the last half of the 20 th century is the relative effectiveness of efforts by states to respond to globalization. The welfarestate was a major step. Whether Polanyi’s narrative about the inability of polities to cope withthe disruptive effects of l9th century globalization is correct or not, such views were widelyheld. After WWII, a compromise was struck in rich countries that Ruggie (1983) has termed“embedded liberalism.” The price of an open economy was a social safety net. Rodrik has shownthat openness and the welfare state are highly correlated. Coupled with the welfare state was thedevelopment of international regimes in areas such as finance and trade, designed to promotecooperation among states. The result in the last half of the 20 th century was a remarkable periodin which economic growth was remarkably strong, despite periods of recession, and in whichmany economies became progressively more open to others’ products and capital flows.

The big question is whether the coming era of economic globalization is different, because of changes in the degree of interdependence leading to fundamental transformations; or because of the information revolution (Keohane and Nye, Power and Interdependence thirdedition, 2000, chs. 9 and 10). In the view of Kenneth Waltz (1999: 697), the more things change,the more they remain the same: “Challenges at home and abroad test the mettle of states. Somestates fail, and other states pass the tests nicely. In modern times, enough states always make itto keep the international system going as a system of states. The challenges vary; states endure.”In sharp contrast, some writers declare that as an externally sovereign actor, the state “will

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contemporary world system: networks among agents, and norms – standards of expected behavior – that are widely accepted among agents. Nevertheless, one place to begin is to ask howstates respond to the perceived need for regulation – governance – and therefore for cooperationamong them. What we find is not world government, but the existence of regimes of norms,rules and instituions that govern a surprising large number of issues in world politics. The islands

of governance are more densely concentrated among developed states, but they often have globalextension.

A. Interstate Cooperation Through International Regimes

Interests within states are affected by the actions of other states and actors, and thereforea “demand for international regimes” develops.(Krasner 1983, Keohane 1984). That is,governments become willing to exchange some of their own legal freedom of action in order tohave some influence on the actions of these other actors. Whether this involves “giving upsovereignty” is a legal issue that depends on the sorts of arrangement made. In addition to purelydomestic interests, transnational actors (corporations, NGOs) develop an interest in making

transborder transactions more predictable, and press for arrangements that do so. This functionalexplanation is a plausible account for the existence of thousands of intergovernmentalorganizations and regimes that govern issues ranging from fur seals to world trade. It may alsoaccount in part for the efforts to govern the international use of force stretching from the Hague

peace treaties at the end of the l9th century through the League of Nations to the United NationsCharter and Security Council.

Faced with the effects of growing global interdependence, and the cumbersome problemsrepresented by these dilemmas, governments – conceived more or less as unitary actors -- havesought to respond in one of four ways:

1. unilateral. Some unilateral responses are isolationist and protectionist with the effect ofdiminishing globalism. Others unilateral actions may increase global governance.Particularly interesting is the acceptance by states of the standards developed by others.This process ranges along a scale from voluntary to highly coercive.. Unilateralacceptance of common standards can be highly voluntary – for example, when states andfirms outside the United States learn how to conform to Y2K standards created (atgreater cost) in the United States, or when they copy others’ political arrangements tosolve domestic problems that they have themselves identified. Adoption of commonstandards can be partially voluntary, as when states adopt generally accepted accounting

principles, make their books more transparent, or establish regulatory agencies thatimitate those of other countries (Meyer, Finnemore). In this case, the degree ofvoluntariness is limited by the fact that foreign investment or other benefits might bewithheld, by powerful external actors, if such actions were not taken. Further toward thecoercive end of the continuum are such phenomena as IMF conditionality, linked closelyto acceptance of macroeconomic views that correspond to those of the “Washingtonconsensus.” Finally, powerful states may simply impose standards on the weak asBritain did with anti-slavery in the 19 th century (Kaufmann and Pape 1999).

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2. Where broad consensus is difficult or too costly, states may seek to construct bilateral or“minilateral” regimes (Kahler 1992) with a small number of like-minded partners.Hundreds of bilateral tax treaties exist. The Basle agreements on banking adequacy

provides another example. One consequence of such a strategy may be to change thestatus quo point, therefore making non-participants worse off, and perhaps forcing them

to join arrangements that are worse than the status quo, before any cooperation took place (Oatley and Nabors 1998).

3. Regional. States may see themselves better able to cope with global forces if they formregional groupings. Within a region, mutual recognition of each other’s laws and

policies may promote cooperation without extensive harmonization of laws. The recentstrengthening of the EU provides the principal example of such regionalism4. Multilateral cooperation on a global level. States may create international regimesand cede some power to intergovernmental organizations in order to govern specifiedissues. This involves delegation to agents as in international regimes ranging frominternational trade to environmental protection to human rights. Occasionally – the

IMF, the World Bank, and the European Union provide three prominent examples–executives of international organizations are granted extraordinary powers to make rules.

Multilateral cooperation has been remarkably extensive, indeed unprecedented, in thelatter half of the 20 th century. For this period, the multilateral cooperation model can be judged agreat success. The world seems more peaceful, more prosperous, and perhaps evenenvironmentally somewhat cleaner than it would have been without such cooperation. However,the very success of multilateral cooperation has generated increased interdependence, andglobalization, that threatens to undermine it. Technology and market growth is eroding the

politically useful inefficiency described above. Globalization has generated a diffusion of power, a proliferation of agents (from firms to NGOs) and networks, and a set of normsinfluenced by democratic politics, which make multilateral interstate cooperation more and moredifficult to manage. In addition, decolonization and political globalization greatly increase thenumber of state actors as well.

There is a trend toward diffusion of power that puts pressure on the regimes that havegoverned a number of issue areas. Early in the post-war period, key regimes for governance werelike “clubs.” Cabinet ministers or the equivalent, working in the same issue-area, from arelatively small number of relatively rich countries, got together to make rules. Trade ministersdominated GATT;. finance ministers ran the IMF; defense and foreign ministers met at

NATO; central b bankers at the BIS. These arrangements are now under a certain amount of pressure, especially in trade, as developing countries play a more important economic role andenvironmental and labor groups in rich countries become more assertive politically. Manydeveloping countries are ambivalent about the regimes, hoping for benefits while resenting thefact that latecomers face a set of club rules that they did not help to establish. Diffusing powerincreases legitimacy but makes it harder to make any clear decisions. As Harlan Cleveland once

put it, how do you get everyone into the act and still get action?

There are also increasing demands for transparency.Here the source of the pressure is notdiffusion of capabilities but the incursion of democratic norms of accountability into the

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international arena. As the international issue regime controls more important resources andvalues, demands increase for accountability, which implies transparency. But lack oftransparency, under the old “club” model, was a key to political efficacy. Ministers could make

package deals that were difficult to disaggregate or even sometimes to understand.When the legislature of the most powerful state sought to deconstruct these after the Kennedy

Round (1967), the political response was a fast-track procedure that protected the international bargaining from conflicting interests in the Congress. The basic problem is how to increasetransparency and accountability, without subjecting all deals to deconstruction and unwinding.Social globalization without coherent political governance at the global level makes this trickeven harder to bring off. NGOs, as we have noted, are increasing in number exponentially, asthe transaction costs to organization decline with the onset of the internet. Lower transactioncosts, coupled with a lack of a sense political community or authoritative political institutions,makes it much easier to pick packages apart than to put them together. Furthermore, NGOs arenot necessarily set in opposition to unitary states: on the contrary, they participate intransnational-transgovernmental networks with governmental officials (Keohane and Nye 1974),working for common purposes, often pitted against other transnational-transgovernmental

networks with different purposes.Diffusion of power and pressures for transparency make agreement more difficult. These

problems for interstate cooperation become more severe when states seek to deal withrelationships across issue-areas. As described above, the globalization is increasing the densityand interaction among networks. The islands of governance can no longer be kept isolated fromeach other. As trade becomes more important, for instance, it has more implications for laborstandards or the natural environment. It is also a subject of higher levels of social globalism:more awareness, more potential mobilization, as in the Seattle WTO meetings, November 1999.Among issue-areas, globalization is producing increased real connections. But at the level ofgovernance, there is little linkage among issue-areas. Overarching bodies such the UN areweak. Nothing plays the integrative role that occurs within well ordered nation-states. As wehave noted, even within issue-areas, the fragmentation of policy approaches and attitudes, andweak institutions, often produces policy deadlock. Thus at the broad level, the supply ofgovernance does not rise to meet the demand for it. Even more is this the case with respect tocross-issue linkages. At Seattle, some environmentalists and labor organizers demanded moreinternational governance across issues – using trade to achieve results in these issue-areas, whileothers urged unilateral curtailment of trade.

It might appear as if intergovernmental deadlock would lead to a stalemate in the currentsystem of disaggregated global governance; and in the wake of the failure of the Seattle WTOmeetings, various alarms to this effect have been sounded. Indeed, it does seem that the post-1945 model of cooperation through intergovernmental regimes is under serious pressure.Traditionally, international regimes have been constructed, within the complex system of theworld political economies, as “decomposable hierarchies” (Simon: The Sciences of the

Artificial). The parallel here is with the nation state as a hierarchy, so that individuals within itonly interact politically through their governments. In this model – characteristic of the secondhalf of the 20 th century, at least in formal terms – international regimes, with particular states asmembers, were established to govern “issue-areas,” defined in terms of clusters of issues. Someof these regimes were open to universal membership, others were selective or required meeting a

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set of standards imposed by the original participants. These regimes, thus defined bymembership and issues, were “decomposable” from the rest of the system. Their membersconstructed rules – either in the form of traditional international law or as sets of established butless obligatory practices known as “soft law” – to govern their relationships within the issue-area. This model of separate clubs worked well, but globalization now generates so many

linkages among issues that it raises challenges to the decomposition of issue-areas. One way tosee the problem posed by globalization is that the hierarchies – both the national governmentsand established international regimes – are becoming less “decomposable,” more penetrable, lesshierarchic. It is more difficult to divide a globalized world political economy into decomposablehierarchies on the basis of states and issue-areas as the units. New strategies will be needed tosupplement the old club model.

B. Transnational and Transgovernmental Governance

Traditional interstate multilateralism is under pressure, in part, from the very forces that may

help eventually to provide new modes of global governance. The building block of globalgovernance will include not only states conceived as unitary actors, but also a more complex setof agents, networks, and organizations.

Agents in NetworksAs we have noted, the actors in world politics cannot simply be conceived of as states.

Private firms, NGOs, and subunits of governments can all play independent or quasi-independentroles. These agents help to create or exacerbate the dilemmas of diffusion of power,transparency, and deadlock, afflicting international organizations. But they may also play acrucial role in governance. When they do, they operate as parts of networks.

Because the rapidly declining cost of communication is reducing the barriers to entry, otheractors are becoming more involved in many governance arrangements that are not controlled byexecutives or legislatures of states. In other words, global governance is spreading among the toprow of cells of the matrix described above.

1. Legalization. In the absence of legislative action, judiciaries and other tribunalsextend their interpretations of rules into rule-making. The European Court of Justiceis a prime example (Alter, Slaughter). Its ability to avoid reversals of its rulings bygovernments is actually enhanced by legislative deadlock: no unanimous coalitioncan be organized to repeal ECJ rulings. On a less extensive basis, the judicial organsof the WTO have been making rules (e.g., on trade-environment issues) that could nothave been adopted by the WTO’s Council. Within domestic polities in Europe and theUnited States, Sassen shows how courts have filled legal voids related toundocumented immigration by invoking international human rights covenants. (96)

2. Transnational corporate networks. Transnational corporations respond to theabsence of governance by providing their own governance forms. Airlines andcomputer firms form alliances with one another, to gain competitive advantages.Other examples include commodity chains, producer-driven or buyer-driven

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(Gereffi). Many crucial standard-setting exercises are private. The chemical industry:“Responsible Care” standards, for example, are designed to head off national-level orinternational-level governance (Garcia-Johnson). In cyberspace, commercially craftedcodes are have a powerful impact on issues such as privacy, property rights andcopyright law. Private rules about how an offer is accepted “may or may not be

consistent with the contract rules of a particular jurisdiction….Local governmentslose control over the rules and the effective rule-maker shifts to cyber space.”(Lessig197)

3. NGOs. In the last decade of the 20 th century, the number of international NGOs grewfrom 6,000 to 26,000, ranging in size from the Worldwide Fund for Nature with 5million members to tiny network organizations. They provide services, mobilize

political action, and provide information and analysis. As a group, they providemore aid than the whole UN system. In addition to providing services, others playlobbying and mobilization roles. About 1500 NGOs signed an anti-WTO protestdeclaration that was circulated online in l999, including some from both rich and poor

countries. Technically oriented groups provided sophisticated analysis andinformation that affected the verification system of the Chemical Weapons Treaty,and the negotiations over global climate change. (EC 12/11p21) In the eyes of someanalysts, the real losers in this power shift are less governments than inter-governmental institutions which lack political leverage over policymakers and whose

public image tends to faceless and technocratic.

However, the relations of the three sectors in governance should not be analyzed solelyin isolation, much less in zero sum terms .State responses to the forces of globalism aresupplemented by private and non-governmental actors some of which compete and some ofwhich complement state actions. Transnational corporations may replace legislative functions ofstates. For example, when Nike or Mattel create codes of conduct governing their subcontractorsin less developed countries, they may be imposing codes that would not have passed thelegislatures of Honduras or India (and which those governments would have opposed at theWTO).

Similarly, companies may bypass the judicial branch of host governments because theyregard them as slow or corrupt. More and more commercial contracts are written with provisionsfor commercial arbitration to keep them out of national courts. The International Chamber ofCommerce plays a large role in this area. On the other hand, some governments are pleased when

private rating agencies like Moody’s or Standard and Poors create ratings which lead foreigncorporations to follow standards and procedures not necessarily in domestic law.

Some governments and parts of governments may also be pleased when NGOs play anincreased role in agenda setting, and well as press other governments for action. An importantexample is provided by the succession of UN-sponsored international conferences on women andissues, such as birth control, of particular interest to women. NGOs have taken the lead in

promoting this agenda; but governments and the United Nations have also played a major role(Keck and Sikkink 1998). Or consider the effects of Transparency International in exposing

problems of corruption. In other instances, NGOs form coalitions with some governments

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NormsAs we have seen, the functional explanation of intergovenrmental clubs governing issue

areas is not the whole story of global goverrnance. Social globalization -- involving NGOs,transgovernmental relations, and networks -- also plays an important role. But there issomething more. As constructivist theorists point out, changing ideas frame and channel

interests. Convergence on knowledge, norms and beliefs is a prelude to convergence oninstitutions and processes of governance. (Jasanoff) Transnational communications, coupled with political democracy, promote the development of global norms that provide a backdrop againstwhich the islands of governance stand out.

This can be seen as part of the development of an incipient civil society. It is not entirelynew. Nineteenth century anti slavery movements involved transnational ideas as well asdomestic politics. ( Keck and Sikkink, Pape) The spread of science is another early example..Examples in the 20 th century include the development of human rights ideology in the secondhalf of the century. As Sassen points out, “Self determination is no longer enough to legitimate astate; respect for interrnational human rights codes is also a factor.” (p. 96) Since the end of the

Cold War, the broad acceptance of liberal market forces is another example. In sharp contrast tothe l970s demands for a statist “new international economic order,” when a newly created Groupof 20 rich and poor countries met in 1999, the discussion was over details, not the desirability, ofa neo-liberal financial system. (FT 12/17) Pressures on traditional territorial sovereignty in thesecurity area derive largely from human rights and humanitarian norms (at odds with traditionalsovereignty norms) rather than from functional considerations. , and they remain hotly contested.After Secretary General Annan’s speech to the General Assembly on Sepember 20, 1999, theForeign Minister of Namibia (who was UNGA president at the time), expressed alarm that aright to humanitarian intervention challenged “the sacred principles and purposes of the Charteritself”, and in the United States a former official predicted “ war, at least with the RepublicanParty.” (FT 9/21/99; NYT, 12/31/99).

“Soft power” rests on the attractiveness of some actors, and their principles, to others.Soft power is therefore relative to norms: it is those actors who conform to widely admirednorms that will gain influence as a result. It is hard to pinpoint specific changes in domestic lawand practice that are directly affected by changes in norms. However, it is clear that in areassuch as human rights and the role of sovereignty, global norms are changing at a dramatic pace.Sovereignty is “up for grabs” in a way that has not been the case since the 17 th century. The factthat it was criticized by Secretary General Annan – the leader of an intergovernmentalorganization whose Charter rests solidly on the Westphalian conception of sovereignty –

provides striking evidence of normative change.

Norms do not operate automatically, but through the activities of agents in networks.Even binding international law does not meet with automatic and universal compliance. Evenless automatic are the effects of “soft law.” China may sign the International Convention on theProtection of Civil and Political Rights, hoping to avoid serious internal consequences, just as theSoviet Union signed onto “Basket Three” of the Helsinki Convention in 1975. Whether thesenorms will actually change policies, or undermine the legitimacy of regimes, depends on howagents operate: for instance, on the “boomerang effects” discussed by Keck and Sikkink (1998).

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weak) parliamentary body. Some, such as Moravscik, think this problem has been overstated inthe European context, but it may still be relevant for most IGOs.

IGOs consist of secretariats, forums, and dispute settlement procedures. Theirlegitimacy depends on congruence between their formal rules and informal practices, on the one

hand, and broadly shared norms about their proper behavior, on the other. When rules andnorms become inconsistent with one another, their established practices become contested. Forinstance, UN Secretary-General Kofi Annan’s September 20 speech in effect questioned thecontinuing validity of Article 2, Section 4 of the UN Charter: “Nothing contained in the presentCharter shall authorize the United Nations to intervene in matters which are essentially withinthe jurisdiction of any state.” In the name of human rights norms, Secretary-General Annandeclared that “state sovereignty, in its most basic sense, is being redefined by the forces ofglobalization and international cooperation.” He went on to suggest that the use of force to haltthe Rwanda massacres of 1994 would have been justified even without a mandate from the UNSecurity Council. (Annan speech: UN website; see the essence in the Economist , September 18,1999).

As noted above, most well-organized IGOs with relatively strong formal organizationsoperate within well-defined issue-areas and with established transnational and transgovernmentalnetworks For instance, BIS is central bankers. IMF is finance ministers. The World Bank isdevelopment ministers. WTO is trade ministers. NATO is defense and foreign ministers.

This perspective raises interesting questions about how the minimalist design for globalgovernance fits with democratic theory. Take the WTO. On a first approximation, it is verymodel of a democratic organization. The secretariat is small and weak. It is highly responsive tothe (mostly) elected governments of its member states. Its dispute settlement procedures providespace for national democratic processes while still protecting the system of world trade. If

pressures within a democracy cause a country to derogate from its agreements, the WTO panelcan authorize compensation for others rather than see a tit for tat downward spiral of retaliation.It is like a fuse in the electrical system of a house. Better the lights go out than the house burnsdown. Better to make some concessions to the domestic politics of trade than to see a downwardsspiral of tit for tat retaliation that makes everyone worse off as in the l930s. But that is not thewhole story.

Transgovernmental Governance We have noted above that some rule-making takes place informally, through

transnational and transgovernmental networks, such as those in the Year 2000 Council, the ISO14000 standards-setting group, or the International Organization of Securities Regulators. Otherrule-making is formally intergovernmental, but the actual practices may bear a closerresemblance to the transgovernmental model.

Seen from a transgovernmental perspective, for instance, the WTO is a club of tradeministers working with rules that have served well in that issue area. But it becomes more

problematic when one considers issue linkages, the “trade and. ….” issues. Environment andlabor ministers, for example, do not have a seat at the table. In other words, some relevant

publics have no direct voice. Thus the demonstrations at Seattle, incoherent and self interested

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though they were, had a point In principle, this could be solved by linkages among UNorganizations – UNEP and ILO – but they do not have similar strength. And if they did, issuesof accountability would be raised, since effective decisionmaking would be further removedfrom democratic legislatures.

Some cooperation with NGOs might help to alleviate the concern, though choice of NGOand roles would be important in terms of preserving the effectiveness of the IGO. For example,some NGOs might be invited not to participate directly in trrade negotiations, but could be givenobserver status at WTO Council meetings where rules are discussed, or given the right to fileamicus briefs in dispute settlement cases. (see Esty). The World Bank has been relativelysuccessful in co-opting NGOs. More than 70 NGO specialists (mostly from technically

proficient organizations) work in Bank field offices. “From environmental policy to debt relief, NGOs are at the center of World Bank policy…The new World Bank is more transparent, but isalso beholden to a new set of special interests.” (EC,p21) Environmental NGOs have playedeffective roles at UN conferences. Whether this would work for other organizations is an openquestion. Can one design some linkage of the issue islands of global governance that does not

slip into the problems of designing a cumbersome polity modeled on national government? Ifsuch design is not undertaken, will the islands of governance be able to maintain theirlegitimacy? Isn’t some kind of issue linkage/representation necessary at the global levelanalogous to embedded liberalism at the domestic level?

Popular Politics at the Global LevelAs we have noted, some quasi-legislative international activity is much looser than that of

the WTO or World Bank. Agenda 21, adopted at the Rio Conference on SustainableDevelopment, is very “soft” law: it does not have treaty status, and it obliges no one. Likewise,despite the UN Convention on Eliminating Discrimination Against Women, most of the normsrevolving around women’s rights have not been codified into treaties that have universal or near-universal validity. Yet some of these activities seem to have stronger roots in NGOsinternationally and in domestic politics, than more specific, technical organizations. Thisapproach is “popular” – accessible to the people and to civil society. On the other hand, it doesnot usually lead to formal rules that have obligatory status (“hard law”); and its results aretypically susceptible to contrasting interpretations. It provides a context for activity, but does notalways provide clear “hooks” to change policy.

The Disarticulation of Global GovernanceGlobal governance is anything but neat. IGOs are formally accountable, through chains

of delegation, to democratic publics; but those publics often perceive them as distant andtechnocratic. Transparency and participation are often low. The politics of accountability fororganizations such as the IMF and the WTO take a variety of forms, not limited to oversight bynational executives, and by national legislatures. Media-oriented demonstrations such as that atSeattle, internet agitation, and critical publicity all play a role. Since IGOs have a relativelyweak base of legitimacy, they are vulnerable to criticism. The problem, therefore, is less a lackof IGO accountability than a chaotic politics in which deadlock or paralysis can result from theintense criticism of a minority.

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Rule-making and rule-interpretation in global governance have become pluralized.Rules are no longer a matter simply for states or intergovernmental organizations. Private firms,

NGOs, sub-units of governments, and the transnational and transgovernmental networks thatresult, all play a role, typically in conjunction with central state authorities andintergovernmental organizations. As a result, the only design for global governance at this stage

in history that seems remotely feasible is what we have called “networked minimalism,” whichseeks to preserve national democratic processes and embedded liberal compromises whileallowing the benefits of economic integration.

Three key issues can be identified: a) What form is such networked minimalism likely totake – how much intergovernmental, how much transgovernmental or transational? b) Howeffective can such governance arrangements be? Can they really govern? c) How democratic cansuch governance arrangements be – how much accountability can they assure? Are there otherforms of accountability – market, legal, reputational, etc. – that can supplement the model ofdemocratic accountability through elections?

Insofar as networked minimalism can work as a governing principle within issue-areas, itmust come to grips with problems of issue linkage in the context of rapid normative change. Themodel of decomposable hierarchies or “intergovernmental issue clubs” creates a basis for action,

but needs to be supplemented with a strategy to enhance legitimacy. Cross sectoral partnershipsof government (and IGO), private, and third sector organization may provide part of a solution,

but they still pose problem with respect to accountability. On the other hand, there are manyforms of accountability that can be invoked besides that of hierarchical reporting.

As Applbaum shows in his chapter, it is important not to think of legitimacy solely interms of majoritarian voting procedures. Many parts of the American constitution (such as theSupreme Court) and political practice would fail that test. Democratic legitimacy has a numberof sources, both normative and positive. Legitimacy in international regimes will derive in partfrom delegation from elected national governments, but also from market effectiveness (seeLipset l960); and transnational civil society. But most of all, insofar as major societies aredemocratic, legitimacy will depend on the consistency of international governance practices withdemocratic norms. It will be crucial to preserve some space for separate domestic political


It is possible that the political base of intergovernmental organizations and internationalregimes will be too weak to sustain high levels of governance: that the “demand for internationalregimes” will exceed the supply. Deadlock and frustration could result. But the results of suchdeadlock are not clear. They could lead to a move away from such institutions for governance,

back to the state, limiting globalism, as occurred after 1914. But that is not likely. They couldlead in quite other directions – toward the development of quasi-judicial processesinternationally, “soft legislation,” and effective governance of specific issue-areas bytransnational and transgovernmental networks. What is not likely is a mere repetition of the pastor a return to a world of isolated nation states. Gobalism is here to stay. How it will be governedis the question.