Exit and Voice in the Age of Globalization
48 Pages Posted: 17 Apr 1999 Last revised: 6 Aug 2012
Globalization provides ever-growing opportunities for small groups of producers, employers and service providers to shop the globe for more amenable jurisdictions. An international "race to the bottom," spawned by the decreasing exit costs of many businesses threatens to compromise the achievements of the welfare state. National governments, weakened by this competition that requires leaner budgets, find it ever more difficult to cooperate in the appropriation of crucial shared natural resources such as water, flora and fauna, seriously endangering these assets. Beyond the efficiency losses and social problems involved, these global competitions raise a challenge to the principle of democracy and self-determination. As national choices get more and more limited, the opportunities for individuals to take a meaningful part in shaping their lives in collective decision-making through the national political process are decreasing.
Largely pessimistic analyses of these challenges are dominated by what may be termed the Westphalian paradigm, namely the model which views global conflicts as inter-national conflicts among the 200-some sovereign states which constitute the primary building blocks of the global arena. This paradigm is premised on the still-prevailing perception of nation-states as unitary actors engaging in inter-national competition. This Article suggests that this paradigm fails to identify the various actors in the international arena. Instead of the Westphalian paradigm, this Article adopts a different paradigm -- the transnational conflict paradigm -- that explains better various collective action failures and provides guidance to feasible mechanisms to correct these failures. At its core lies the observation that states are not monolithic entities, and that many of the pervasive conflicts of interest are in fact more internal than external and stem from the heterogeneity within states. Indeed, this alternative view suggests that many domestic interest groups cooperate with foreign interest groups located across national boundaries in order to impose their externalities on their respective rival domestic groups. Thus, many global collective action failures must be attributed to conflicts among rival domestic groups rather than to inter national competition.
The transnational conflict paradigm exposes the crucial constitutional and international norms that have been designed to perpetuate that imbalanced power relationship among rival interest groups. The Article demonstrates that current norms and procedures, both constitutional and international, are inherently slanted in favor of groups with historically stronger voice in domestic political arenas, and provide them exit options from domestic regulation. These exit options permit the global race to the bottom and other collective action failures.
The Article explores the ramifications of the still dominant Westphalian paradigm from the perspectives of efficiency, democracy and equity. This analysis leads to the development of a theory on transnational institutions. It argues that such institutions could limit capture gains by small groups, and at the same time offer more effective opportunities for democratic participation in national and transnational decisionmaking.
JEL Classification: K0, K3, N50, Q2, Q3
Suggested Citation: Suggested Citation