Making It Work: Harmonizing Globalization and National Interest in Governance

Globalization
KangZeLiu // CC 4.0

Globalization is an integral part of everyday life. However, so called “hyper-globalization” challenges national interest in favour of deeper integration.

Academics debate what values governments should prioritize and how they should interact with the international community. Countries can either sacrifice too much to find a place in the world economy or may focus wrongly on domestic public opinion alone. There is no one solution to finding the middle ground but, with some guidelines, it will be shown how it could be done in Hungary.

After World War II, western liberal countries created a new world order, which fostered interconnectedness, cooperation, and development. The system had basic principles like transparency or flexibility.

On the other hand, these rules gave just a framework in which countries can maneuver freely. Governments could operate and create their own goals and policy strategies and were rarely punished if they diverged from the status quo. However, these overarching rules should not serve as the solution for problems.

The General Agreement on Trade and Tariffs (GATT) embodied this system. It gave countries basic trading rules; however, they could personalize it for their own needs. In the GATT, only developed countries that could match certain conditions had to obey the agreements and be punished if they didn’t. This allowed developing countries to catch up their economies, on the condition that they had no word in creating the guidelines.

As globalization continued and developing countries started to catch up, more and more countries wanted to vote on how the world economy is shaped. However, these states were not yet on the developed countries’ level of advancement, and they needed new and different policies. Therefore, not only the spectrum of opinion expanded but also the number of voting members.

In an attempt to solve this new situation, the GATT got replaced by the World Trade Organisation. Yet, the new organisation not only has more defined rules, but their enforcement mechanism is stricter too.

The whole system failed to solve the problems mentioned above, obliged members to follow its rules, and international trade became dominant over domestic policies. For example, in 1998, the WTO did not allow the European Union to prohibit hormone-treated beef in the EU area, because it went against international trade laws. The WTO thought it was not sufficiently backed by scientific evidence.

As countries got more dependent on international agreements and organisations, their political stability weakened. Without knowing this web of interconnectedness and rules, citizens could easily think that their government is not really working for them, representing them. And this assumption can partially be true, as many countries were religiously focused on economic growth, even if it had a social cost.

However, these sentiments got stronger and political parties needed to solve the problem after the 2008 global financial crisis. The new question policy-makers faced was: How to navigate between globalization and national stability?

Dani Rodrick, Turkish economist, and professor at Harvard University, attempted to explain why this conflict exists, and the possible path policy-makers can take.[1] In his theory, Rodrick distinguishes between three values that governments can follow in the framework of the world economy. These are hyper-globalization, national self-determination, and democratic governance. If the government tries to follow globalization, they are willing to open their economies and follow some international laws and agreements.

However, with the new technological interconnectedness and established global organisation, globalization can be a significant force in the government’s decision making. Rodrick calls this deep globalization hyper-globalization. It is essential to distinguish between globalization and hyper-globalization. The first is the level of interconnectedness, which is necessary in the present world, while the other is when international interest becomes one of the primary focuses of governments.

When policy-makers focus on national self-determination, they prioritize domestics needs over international ones. Finally, in democratic governance, the state’s focus is fixed on where the policies land on the democratic scale and if they fit their citizens’ public opinion and the country’s laws.

Rodrick’s theory is called a trilemma because governments cannot follow all three values equally and choose what they will sacrifice. Based on this, we can examine three different government styles with their costs and benefits.

The first option is when the government wants to follow hyper-globalization and democratic governance, which was the dream idea behind the WTO and is the manifestation of the utopistic global governance. This model works best when either the member list is short, or the members are on similar opinions.

However, on a larger scale, as opinions differ, some states need to give up their preferred outcome and align with the majority of the most influential view. It is risky because, as I illustrated with the European Union (EU) and WTO 1998’s disagreement, it can make members oppose the institution and make the countries’ domestic political scene less stable.

On the other hand, it is a liveable option if it is used on a smaller scale. The most advanced version of regional cooperation is the EU, but it is still not free of problems.

If a country chooses hyper-globalization and national self-determination, it cannot answer universal democratic norms. Rodrik calls this governmental system the Golden Straitjacket, referring to the eighteen hundred Golden Strait economic model. These states’ political systems tend to be unstable, extremist, and uncontainable. In some extreme cases, like Afghanistan or Nigeria, a ruling class got established.

As they oversee the countries’ decision-making, they can alter it to make the most profit for themselves. In these states, the norms differ from the essential western democratic thinking and see things like corruption not as a problem but as a custom in which everybody needs to participate. However, in Nigeria, after a long period that the country has been extradited for the benefit of local authorities and international investors, it has resulted in an uprising and an armed conflict, making the system less stable.

The third alternative is when the government favours national self-determination and democratic governance. In this case, the government can still have open borders and participate in but not in-depth, while its priority is its own country. If the domestic economy needs protection from foreign strategies, the government will make new rules and sanction to protect the country.

First, it can be seen as cheating because countries can respect all three values by choosing this option. However, distinguishing between globalization and hyper-globalization is essential here. “Regular” globalization means that the government does not prioritize it over the other two values and only focuses on it when the others are aligned with it. Rodrick calls this option the Bretton Wood twins because he thinks that the Bretton Wood system vivified it.

I will refer to the Bretton Wood twins as the embedded liberalist approach because it also illustrates Karl Polanyi’s theory.[2] He thought that a critical ingredient of politically stable countries is putting the country’s interest first in the sense that policy decisions are based on its cultural traditions and norms. These include both democratic standards and cultural values.

Polanyi argued that if the country is not embedded into itself, then as I showed above, citizens will not be content, and extremism could rise. Therefore, using the two theories, we can understand why countries became unstable and how governments can reverse this effect.

As I argued, many countries’ citizens got tired of participating in global governance and wanted their governments to refocus on their own values and agendas. However, instead of re-embedding their economy and policies into the countries norms, some nations went to the extremes. In many cases, the beginning of the transition to the extremist government seems like a step towards the solution both Polanyi and Rodrik would recommend.

Nevertheless, because extremist populist parties usually try to appeal to “the people”, following common beliefs and solving the situation by blaming another group, they will not settle for the golden mean unless they change the parties’ structure and ideas. Instead, those governments tend to lean into more and more, not just employing the principle of national self-determination, but started altering the framework of more policies to fit into their niche.

In the EU, the rise of populist parties is a consequence of the lasting effect of the global financial crisis, the following eurozone crisis and the 2010’s migration crisis, where the parties used the unhappiness and fed upness with international organisations for their own gain.

We can see this process in the last decade in Hungary. There has already been tension in the country before the global financial crisis hit, and the country’s economy got into a downward spiralling vicious cycle. The governing Fidesz party used all this hardship to achieve their goal. The primarily promise of their campaign was that they will rebuild the country while listening to the citizens’ needs.

Before the 2010 parliamentary election, Viktor Orbán said in his speech that “The country needs a government that hark to the people, listen to them, respect their differences and understand their problems.” We can identify in their programme both the value of national self-determination and also a promised attempt to re-embed the country.

This shows how well Fidesz understood the need of the mass and what the masses wanted to hear. This is a strategy that they kept using for the last 11 years. They tried to reframe most of their policies and decisions in that it was either to protect the country or an extension of Hungarian norms and the will of the people. Also, they did not work to increase the influence of the EU but rather minimize it to the necessary level. This might give the impression that the Hungarian political system is an example of embedded liberalism.

On the other hand, if we look under the perfectly tailored words and data, it turns out that it’s just a marketing catch. The slow elimination of opposition or even objective media, the changing of the constitution, the acceptance of the civil law and alteration of the school curriculum, among other policies, were all attempts to hinder and repress democratic values in Hungary.

However, on the surface, they masked these efforts. An attempt that was more direct than not, is Fidesz’s immigration politics. It is a common populist tactic to identify themselves and the people they represent by labeling those who are not them. Fidesz made this distinction when the migration crisis of 2015 hit and continued it to this day.

The language they used when they referred to the illegal immigrants, to the EU and how they are the sole protector of the country and its citizens, further amplified nationalism and undermined general human rights. Slowly, Hungary is becoming less and less democratic, as the annual surveys of Freedom House illustrate.

Whether the consistent openness to Russia, the recently increased interest with China, and the strong sympathy towards Trump’s United States can be considered as an act of hyper-globalization, is debatable. Some might say that it is not; as Fidesz tried to the EU’s authority over the country. Therefore, we could not speak about deep globalization.

Nevertheless, we need to remember that Fidesz is willing to accept the EU’s financial help and agrees to cooperate. Moreover, being defensive against one global power does not mean that they are avoiding all of them.

Fidesz’s Russian stake is present in its policy decision with Paks2, the plan for the second Hungarian nuclear power plant and their voting in the European Parliament. Not to mention the revitalized connection with China and the debt that Hungary will need to carry for a long time in the future. Based on this, I would classify Hungary as a Golden Straitjacket, as we would any similar authoritarian exploitation.

We know now what the problem is and how it got to this stage. The next question is if it can be at all reversed? As we saw at least in words, Orbán’s government, in the beginning, had embedded liberalist attributes. Is there a way not to swing between global governance and the golden straitjacket and just partly to land on embedded liberalism?

Academics researching Rodrik’s trilemma in practice gave some guidelines and helpful tips.[3][4][5] One of their first concerns were globalization and technological progress. As I highlighted, discussing Rodrik’s definitions, globalization is an undeniable part of everyday life. Completely backing down from the global market and closing the economy can make countries much worse off, as most countries tend to be specialized in certain goods and services while importing the rest.

Therefore, it is recommended for governments to embrace their already established connection and create new sanctions or agreements to those areas where the economy and the country is most vulnerable.

To manage the potential damage that the base level of globalization poses, policy-makers should launch new social policies targeting those who have experienced losses because of globalization. These groups can be manual labour workers or lower-income households. Implementing more socio-economics focused policies that aim to decrease social inequalities.

However, the government needs to explain to their citizens that some of their decisions and policies are carried out because they have a long-term gain, even if they do not have significant benefits in the short run. Also, these policies will rekindle democratic norms and help to rebuild the democratic structure of the country.

Another way that exaggerated nationalism can be remedied is if the government were to adopt a new understanding of how the citizens of the country are identified. In cases like Hungary’s above, I showed that an important tool Fidesz used is framing.

A new government could, with effort, use the same tool to construct a new, more inclusive Hungarian image, where people are not excluded. It would take a long time to re-educate the population about racial stereotypes and discrimination. However, in the long run, a new multicultural society, which encourages inclusion and “common social purpose”, is the most prospective possibility.

If next year’s election results in a change of government, the new government could use these insights and tips in practice. Policy-makers should prioritize the country and the citizens before jumping ahead into international agreements. Citizens can still be uncertain about globalization, and they need to be reassured that they are the government’s priority.

Moreover, the country will need to have a stable base to build its foreign policies on. They should try to first rebuild democratic norms by fostering a more inclusive environment in the country, trying to stop the growing discrimination, and letting a more diverse media grow. Another step could be the re-evaluation of the redistribution system and modifying it to better decrease social inequality.

The most important thing is to not forget to monitor in the future, whether their policies are genuinely aligned with the country’s norms and democratic structure or not, before falling into the same cycle that Fidesz had fallen into.


References

[1] Rodrik, D., 2011. The globalization paradox: democracy and the future of the world economy. WW Norton & Company.

[2] Ruggie, J.G., 1982 International regimes, transactions, and change: embedded liberalism in the postwar economic order. International organization, 36(2): 379-415.

[3] Milner, H.V., 2019. Globalisation, populism and the decline of the welfare state. Survival, 61(2), pp.91-96.

[4] Xu, Q., Cheong, B. and Guan, C., 2020. Populism and Hyper-globalisation: Can Embedded Liberalism Rebalance Globalisation Again?. Available at SSRN 3722949.

[5] Goodman, S. W. and Pepinsky, T. B. (2021) “The Exclusionary Foundations of Embedded Liberalism,” International Organization. Cambridge University Press, 75(2), pp. 411–439. doi: 10.1017/S0020818320000478.


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