Today I’ll continue to explore the relationship between the state and the economy in the
era of globalization. I want to start with the question I closed the last lecture with: whether the
internationalization of the economy means that the role of the state will diminish in the era of
globalization. The second question, which I’ll begin today and conclude on Monday, is whether
the state is being superseded by larger forms of governance, supranational organizations such as
the UN, the EU or the WTO.
1. The Friedman position
One leading view of the changing role of the State in the era of globalization was
presented by Tom Friedman, whom we read earlier in the course. This view is two-sided. On the
one hand, the state is very important, possibly more important than ever before, because the state
alone can provide the links between the national economy and the world economy, both the
infrastructural links of ports, railroads, power plants and communications networks and the
institutional prerequisites of a stable currency, rule of law and low inflation. At the same time, all
states are subject to the discipline of the market: those that fail to provide decent infrastructural
or a stable economic and political environment are for that reason shunned by international
investment, with the consequences we discussed in Lecture 28. In a sense, all states are reading
from the same script. The different states can do better or worse jobs reading the script, but
what’s on the script is not up to them; in this sense, they have lost the power to set policy, though
of course they retain the power to carry out policy.
There is still another sense in which the role of the state is diminishing, according to
Friedman. Historically, perhaps the most important function of the state is conducting foreign
policy, the geopolitical competition among states. According to Friedman, however, the
international market favors democracies, which are spreading as the global economy develops.
Since democracies don’t fight each other, this means that international conflict may diminish, and
with the diminution of international conflict the importance of geopolitics may diminish as well.
Friedman says that no two countries with MacDonald’s franchises have ever attacked each other,
so that as MacDonald’s spreads throughout the world the threat of international conflict lessens;
though of course that’s too high a price to pay.
All this assumes, however, that states are primarily interested in economic development,