Saturday, April 9, 2011

The Crisis of the Eurozone pt.374

Nice post on Crooked Timber about the Euro crisis, and particularly the trilemma identified by Dani Rodrik: that we cannot have globalization, democracy and the nation-state all at once. Some interpret this to mean that the EU needs to become a functioning democratic state, so that there is some kind of legitimate governance arrangement to sort out the terrible mess Europe is in.

My thoughts: nice idea, but is there any historical precedent for an number of small, already democratic states, merging into a larger, also democratic one? I honestly can't think of one (although there have been attempts at a non-democratic alternative).

The problem is that the institutions that make democracy work - political parties, a free media, interest groups - are pretty hard to organize across national boundaries. And without these institutions, what is likely to happen is that politics would remain pretty technocratic and removed from the citizens, as it is now, but with a few trappings of real democracy. The very best that we could hope for is something like the US, where parties are actually fairly fragmented compared to those in Europe. But even there huge strains are developing, and Europe is unlikely to adopt the kind of labour mobility that would allow a US-style welfare state to hold over here.

I guess the best answer to Rodrik is the oldest one - that you can have globalization, democracy and the nation-state, because democratic nation-states can function within globalization. After all, nobody forced the UK or US to liberalize their financial systems so that the trade imbalances would lead to the current chaos. I admit it is asking a lot of any political system to develop the kind of sophisticated counter-cyclical policies that would have been needed to ward off disaster. But Sweden managed it.

It's always Sweden.... And of course, we can't all be Sweden. That would be dull.