When the rules won’t bend

Hans Kundnani assesses the roots of the globalization backlash

The World Today Published 3 August 2018 Updated 15 September 2020 2 minute READ

Wolfgang Schäuble, the former German finance minister: ‘Elections cannot be allowed to change economic policy’

Wolfgang Schäuble, the former German finance minister: ‘Elections cannot be allowed to change economic policy’

There is currently much anguish about the future of the post-war international order, which is widely understood as being a ‘rules-based order’.

The assumption is that rules mitigate the worst features of, or ‘civilize’, international politics. In particular, they are supposed to prevent great powers from acting in an unrestrained way.

As the ‘rules-based order’ has been threatened – first by ‘revisionist’ powers such as China and Russia and now by President Donald Trump – the western foreign policy establishment has been almost unanimous in its defence of it. For foreign policy experts, it seems to be axiomatic that rules in international politics are inherently a good thing.

However, for anyone who has taken part in discussions about Europe since the euro crisis began, rules do not seem quite so unproblematic.

In the European context, rules are particularly associated with Germany’s inflexible approach to the euro crisis – which is often contrasted with a French approach based on ‘discretion’.

Since the crisis began in 2010, creditor countries led by Germany have sought to expand the eurozone’s system of fiscal rules and rejected pleas for flexibility by debtor countries.

This emphasis on sticking to the rules leads to the idea, as Wolfgang Schäuble, the former German finance minister, put it, that ‘elections cannot be allowed to change economic policy’. Rules are rules.

Thus Europe illustrates the limits of rules. This is no coincidence. After all, the process of developing rules to govern relations between states has gone further in Europe than at a global level or in any other region in the world.

Thus the European Union is the ultimate ‘rules-based order’. In a sense, the essence of European integration is the gradual removal of policy – in particular economic policy – from the space of democratic politics and the creation of rules to govern it. In other words, the EU depoliticizes – it transfers issues from the political realm to the judicial realm, where they are subject to rulings by the European Court of Justice. This illustrates that the antithesis of rules is not so much power as politics. Depoliticization can be a good thing – but it can also undermine democracy.

‘Since the end of the Cold War there has been a tendency to assume that the system of rules should continue to expand, and displace politics, indefinitely’

Although the process of depoliticization has gone furthest within the EU, it has also taken place at a global level.

As the economist Dani Rodrik has shown, the period between the end of the Second World War and the 1980s was one of moderate globalization in which the limited rules of the General Agreement on Tariffs and Trade allowed states to experiment with different models of development. However, since the end of the Cold War – the era of what Rodrik calls ‘hyper-globalization’ – integration has deepened and constrained states to a much greater extent.

In particular, the rules of the World Trade Organization established in 1995 now limit the ability of all but the poorest states to pursue the kind of industrial policy that used to be possible. There is now a backlash against ‘hyper-globalization’ from citizens who feel that they can no longer influence policy through the democratic process, which remains largely national.

None of this means that rules are inherently a bad thing – just as they are not inherently a good thing. Economic integration – whether at the European or global level – requires some rules.

The problem is that, in the absence of a global democracy, there is no way to legitimize rules at the global level. Whereas in democratic nation states, rules are the product of a democratic process, and democracy and rules therefore go hand in hand, this is not the case for rules in international politics.

This explains why, outside the West, the ‘rules-based order’ is often seen as illegitimate. Even within the EU, rules are to a large extent a function of the relative power of member states – as the development of the eurozone’s fiscal rules since the crisis began illustrates. Thus, as Rodrik argues, there is a fundamental tension between deep integration – and the rules that come with it – and democratic politics.

What this means is that we need to think about the rules in international politics in a deeper and more nuanced way.

Since the end of the Cold War, there has been a tendency, particularly in Europe, to assume that the system of rules could and should continue to expand – and displace politics – indefinitely. But the euro crisis and the backlash against ‘hyper-globalization’ illustrate the dangers of that approach.

That does not mean we should abandon the idea of a ‘rules-based order’ altogether. But we should think about the limits of rules in an international context. The question, in other words, is: at what point do rules go from ‘civilizing’ international politics to undermining democracy