4 May: Managing globalization I. Globalization and policy There have always been opponents to international market integration. The opening up of national markets after WWII came with a side payment to those who would lose from international exposure: a social welfare state. Unemployment insurance, minimum wages, and so on effectively bought off constituencies that would otherwise have resisted openness or deregulation. This is what John Ruggie has called “embedded liberalism,” with market-oriented policies embedded within social protections. Dani Rodrik argues that globalization undermines the bargain of embedded liberalism. Inexorable market forces create a race to the bottom. Labor and capital will flee if faced with the high costs or taxes needed to finance a welfare state; labor protections, by making an economy less competitive, are no longer viable. This means that globalization will break down the social welfare state, and – since, in the short
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