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THE PACE OF TECHNOLOGICAL CHANGE, especially the speeding up of communications, and the extent of international economic integration have, together, brought into question the effectiveness of many traditional, national economic policy instruments. The erosion of economic sovereignty has led many to question the future of the nation-state as the main building block of governance. This questioning has, in turn, affected the terms of debate of national politics. There has been, in many countries, a rise of populist movements rejecting closer international integration and some of its most visible symbols, such as trade and migrants. What is variously described as a "new nationalism," the "politics of cultural identity," the "politics of the soil," "positive nationalism," or the "new mercantilism" reflects, each in a different way, a reaction to the loss of authority of nation-states and an attempt to reassert it or to assert other forms of identity.
This essay deconstructs what is loosely called "globalization," or economic integration, and the ways it affects the economics and politics of nation-states. It argues that simple determinism is not in order. There are complex iterative processes at work. Domestic policy-making and politics have been internationalized and foreign policies have been subjected to growing domestic pressures. The nation-state has "lost" sovereignty to regional and global institutions and to markets but has also acquired new areas of control in order to promote "national competitiveness." While technological change may have pushed in one direction, social and political forces may have pulled in another. As a consequence, the extent and pace of globalization is much more in evidence in some areas, notably finance, than in others.
Overall, the process of globalization has generally been longer and slower than much contemporary conceit will admit. It has also been cyclical and subject to major reversals. Between 1914 and 1945 a combination of war and economic nationalism (the latter sustained until very recently in China, India, Russia, Argentina, Brazil, and Mexico, among others) reversed a century's progress in integrating economies. Although international trade has grown faster than output throughout the postwar period, the share of trade in the gross domestic product (GDP) of Organization for Economic Cooperation and Development (OECD) countries only returned to 1913 levels by around 1970, and for the United States by the...