Mercado

Democracy and Globalization
BARRY EICHENGREEN15 septembre 2006

Democratization and globalization are the two most profoundly important developments of our age. Since 1975 there has a quadrupling in the number of democratic countries worldwide. Meanwhile, global trade as a share of global GDP has more than doubled from 8 to 20 per cent, while the share of countries fully open to internationalcapital flows, as measured by the International Monetary Fund, has risen by half, from 25 to 38 per cent. There are exceptions; North Korea remains a hermit kingdom, resisting both democracy and globalization. But such exceptions are increasing few. It is hard to think of a part of the globe that is untouched by these powerful trends. And it is hard to think of an aspect of our lives that isunaffected.
It would be nice to believe that these two trends are symbiotic - that democracy and globalization support and reinforce one another. So say those impressed by the opening to the world economy of the countries of Central and Eastern Europe following the demise of Soviet-led authoritarianism. And so say those impressed by the outward orientation of Latin America since the wave ofdemocratization that began in 1978. Since international transactions benefit society as a whole, democracy that renders leaders more accountable to the citizenry should be conducive to the removal of restrictions on such transactions.
Then there is positive feedback from economic and financial globalization to political democratization. The exchange of goods and services is a conduit for the exchange ofideas, and a more diverse stock of ideas encourages political competition. In financially open economies, moreover, the government must be transparent in order to gain the confidence of the markets, and transparency spells doom for autocratic regimes. So say those impressed by how the difficulties of managing financial globalization spurred the transition to a more open and competitive democraticsystem in South Korea and Indonesia.
But there are also signs that democracy and globalization are not always so compatible. In the United States, protectionist pressures are increasingly evident, reflecting fears that the country is being flooded with cheap foreign goods. In Europe, politicians complain that the continent is being flooded with cheap foreign labor. In Latin America there arecomplaints that the benefits of globalization are not being equitably shared between foreign energy companies and the host countries, leading Bolivia and Peru to declare their contracts with those companies null and void. Only China, where democracy has made no headway and the government still feels only mild popular pressure, is able to smoothly push ahead with economic opening. But elsewhere, indemocratic countries, there are disquieting signs of a globalization backlash.
All this must come as a surprise to Bill Clinton and George Bush, who have repeatedly averred that democracy and economic opening go hand in hand and designed American foreign policy on this premise. In adopting this view, they are following in the footsteps of eminent philosophers like Immanuel Kant, who suggested thateconomic opening promotes the diffusion of democratic ideas, and influential thinkers like the Nobel Laureate Friedrich Hayek, who argued free trade and capital flows, by raising incomes and fostering economic development, create a demand for democracy. Are these great minds simply wrong?
They are not wrong, but they overlook that globalization and democracy are mutually supportive only when thefruits of globalization are widely shared and the political system is designed to make this happen. In Bolivia and Peru, globalization has disproportionately benefited the educated urban population that is well placed to take advantage of the resulting opportunities. The indigenous peoples living in the highlands have not been provided with the education and training needed to move into new sectors...