The Greek Referendum and the Globalization Paradox

3 11 2011

I teach a class on the history of globalisation. It is designed for both students doing degrees in history and IR and politics students who want some historical background. Right now, the students in this class are reading Dani Rodrik’s book The Globalization Paradox.

One of the core arguments of this book is that there is a fundamental incompatibility between globalization on the one hand and democracy and national sovereignty on the other. Participation in the global economy sometimes requires governments to impose economic policies that often go against the will of the majority of the people living in the country. We can live in a globalized world or a world of sovereign and democratic nation states, but we can’t have both, at least according to Rodrik.

I’m not entirely convinced by Rodrik’s thesis. However, in the last few days, we have seen a striking illustration of this point. Greece was recently offered an assistance package by the other European countries that was conditional on the Greek government, which is nominally socialist, making massive structural reforms. These reforms, which involve tax increases, mass privatisation, and cuts to benefits, are unpopular with Greeks. Many Greeks resent the fact that economic policy in their country is now being set by foreign politicians, which seems like an affront to the idea of national sovereignty and downright undemocratic. However, Greece’s leaders agreed to the deal in the belief that it is absolutely necessary for the country’s continued participation in the Euro, which has facilitated economic exchange between Greece and the outside world.

After his return to Greece, the Greek PM decided to hold on referendum on the austerity package he had negotiated with the other European leaders. ┬áIn effect, he was reneging on the deal he had agreed behind closed doors with the other EU bigwigs. You can justify the decision to call a referendum on the grounds that it is democratic, but in practice giving the people a say threatens the policies necessary for Greece to remain part of the Eurozone, and possibly the EU as well. Whether leaving the Eurozone and the EU would be good for Greece is, I suppose, a value-laden question. Most anti-globalization people would cheer this outcome as a victory for people power. Most neo-liberals would decry this move as a step backwards to autarky and nationalism. What is clear is that democracy, or at the very least direct democracy, isn’t always compatible with pro-globalization policies.

To my mind, this is a fantastic “teachable moment.” I’m looking forward to hearing what the students have to say about this complex issue with obvious parallels with the breakdown of the gold standard.