POST-WAR ECONOMICS 231
Nations may want democracy,
independence, and deep global
economic integration. Yet at
any one time, only two out of
three may be compatible with
each other. In the diagram each
side of the triangle represents
a possible combination.market integration because of the
prosperity that it can bring. People
want democracy, and they want
independent, sovereign nation-
states. Rodrik argues that the three
of these are incompatible. Only two
are possible at any one time. How
the trilemma is resolved implies
different forms of globalization.
The trilemma comes from
the fact that the deep, or more
complete, integration of markets
requires the removal of institutional
variations between countries. But
electorates in different countries
want different types of institutions.
Compared to US voters, those in
European countries tend to favor
large welfare states. So a single
global institutional framework in
which nation-states still existed
would mean ignoring the
preferences of electorates in some
countries. This would conflict with
democracy, and governments
would be placed in what US
journalist Thomas Friedman
(1953– ) has called a “golden
straitjacket.” On the other hand a
global institutional framework in
which democracy reigned would
require “global federalism”—a
single worldwide electorate and
the dissolution of nation-states.
Today, we are far from either the
golden straitjacket or global
federalism. Nation-states are strong,
and persistent institutional diversity
across countries suggests that the
varied preferences of different
populations are still important.
Since World War II Rodrik’s
trilemma has been resolved
by sacrificing deep integration.
Markets have been brought together
as much as possible given nations’
varied institutions. Rodrik calls this
the “Bretton Woods compromise,”
referring to the global institutions
that were established after the
war (pp.186–87)—the General
Agreement on Tariffs and Trade
(GATT), the World Bank, and the
International Monetary Fund (IMF).
These organizations aimed at
preventing a repeat of the
catastrophic backlash seen in the
1930s through a form of managed
integration, in which nation-states
were free to pursue their own
domestic policies and develop along
varied institutional paths.The liberalization era since the
1980s saw an undermining of
the Bretton Woods compromise,
with the policy agenda being
increasingly driven by the aim of
deep integration. Rodrik argues that
institutional diversity should be
preserved over deep integration.
European electorates’ desire for
welfare states and public health
systems is not just about economics,
but also their view of justice.
Institutional diversity reflects these
different values. More practically,
there is more than one institutional
route to a healthy economy. The
requirements for growth in today’s
developing countries may be
different from those for developed
nations. Imposing a global
institutional blueprint runs the
risk of placing countries in a
straitjacket that suffocates their
own economic development.
Globalization may have limits, and
it may be that the complete fusion
of economies is neither feasible
nor—ultimately—desirable. ■Deep economic integration Independent nation-stateThe 19th century
contained a very big
globalization bang.
Jeffrey G. Williamson
K. H. O’RourkeDemocracy