Hyper Globalization and the European Union

When it comes to hyper globalization, in his book [1], Dr. Dani Rodrik gives the example of European Union ("EU") as the best example of hyper globalization. The establishment of a single currency, competition law, immigration policies, and multiple cross-border trade agreements was done to ensure the free movement of man, material, and money across the entire continent which was the entire premise of the formation of the EU.

Even though hyper-globalization promotes political stability, especially in the case of a region as socially diverse as the EU along with other benefits like encouraging international migration, technology sharing, and faster and more equitable movement of cash from the government to enterprises and people in a cyclical form, reduction in currency manipulation, creation of employment opportunities, etc. It does have its fair share of negative effects which can gallop in the long run, they are including but not limited to an increase in tax exploitation of domestically registered international enterprises, a decrease in environmental conditions, non-availability of skilled workers, overconsumption, etc.

Hyper globalization is an idealist pipe dream that is great in theory but when it comes to practical application and as referenced by the author himself by writing that the process of globalization itself has winners and losers as no two countries can be the same which can be seen from Greece being the loser of the EU due to its inability to develop when compared to its other member nations that proved that no nation could enjoy the “trifecta” of hyper globalization-Democracy, sovereignty, and hyper globalization. The process of hyper-globalization would put more names on this list. Another pitfall of hyper-globalization is the creation of global cartels and/or shifts in the authoritarianism of member nations with leverage due to their resources, location, or international standing.

According to me, what the author is trying to say is that the effectiveness of the theory of hyper globalization greatly relies on the principle of “ceteris paribus” and the degree of stability of PESTLED-Political, Economic, Social, Technology, Legal, Environmental, and Demographic factors. Once these factors go beyond a certain delta, they cannot be projected and that is when unfavorable effects occur on member nations.

Concerning balancing national interests like economic prosperity, financial stability, and equity, the following inter-related principles can be derived from his writing:

1. Countries should self-regulate.

2. Markets will develop only to the extent they are allowed to operate within the applicable laws, associations, and regulatory confines of a country.

3. cross-border Uniform and cross-border regulations like that of the EU’s competition law, IPR, etc. may hurt the national sovereignty of certain member nations.

4. A modular model of capitalism is required to be developed and adopted to balance the achievement of national with international objectives.

5. Anti-trade deterrents like sanctions should not be imposed on member nations to accept sub-par products, services, or resources. Neither should they be used as pressure points on other member nations to leverage them to unethically change their national policies.

6. A balance must be struck between free and fair trade as seen from the recent situation of China’s dumping of metals crashing the global index, particularly affecting India’s market.

7. Economists are re-looking at VERs, VATs, and differential import quotas for certain countries to control a sudden and steep fall in domestic markets.

[1] Straight Talk on Trade: Ideas for a Sane World Economy, Princeton University Press, 2017.

Art: "The Eight-Man Circle of Ghulam Ali Khan" by William & James Fraser.