The Rupture of Rodrik’s Trilemma by its Vertices

Foto by WTO/Jay Louvion via CC BY-ND 2.0

Rodrik’s trilemma is today one of the most thought-provoking questions for the 21st Century. In this contribution, Andrés Ortega assesses its currency in 2019, and points out often-overlooked factors.

In The Globalization Paradox (2011), Dani Rodrik formulated his famous trilemma: it is impossible to attain economic hyperglobalisation, national sovereignty and democracy simultaneously, because only two of these things can be achieved at any one time. The sides of the triangle must be chosen and this choice that comes with consequences: according to Rodrik, between a global governance, a golden straitjacket (the narrowing of political and economic policy choices to tight parameters) or the Bretton Woods compromise, also known as the liberal order. But at a time of emergence from a lengthy crisis–that has hidden in part the technological transformation–and a change of the world order, the three vertices–and therefore the sides–are all fracturing at once. At least they are being subjected to tensions they may or may not be able to withstand, certainly in Europe but also further afield: globalisation, which was already stalling and more so now with the trade wars unleashed by the Trump Administration; national sovereignty, with the territorial tensions in a range of states and the new nationalisms; and democracy, with  the retreat of the rule of law in various places, the crisis of systems and the rise of populist movements, including in Europe. A choice can no longer be made between the three sides.

The trilemma can be looked at from other angles. Dahrendorf’s quandary puts it as the impossibility of defending at the same time economic growth, social cohesion and the rule of law. Dennis Snower see the decoupling of the economic, social and political domain.

 

The Trilemma’s Vertices: Sovereignty, Democracy, and Globalisation

Let us start with national sovereignty, although paradoxically it may prove to be an illusion in these times. Various countries experience territorial tensions, secessionist movements or serious internal division. The national sovereignty issue is fueling nationalism, at both the state and sub-state levels. Nationalism and pro-sovereignty movements have been bolstered in such major countries as Russia, Turkey, China, India and the US (‘America First’).

These tensions around national sovereignty are affecting European integration, which used to be a sui generis response to Rodrik’s trilemma, but is now in precarious health, weakened by the divisive forces resulting from the explosion of the trilemma. In turn, the EU has its own unresolved trilemma: it cannot not strive simultaneously for closer integration, the maintenance of the nation state and democracy. French president Emmanuel Macron has started an interesting debate about ‘European sovereignty’ (including ‘digital sovereignty’).

As far as democracy/rule of law is concerned, Freedom House indicates, political rights and civil liberties have been in decline throughout the world for the last 14 years. Authoritarian regimes (of various stripes) are becoming stronger. China is the clearest example. In Europe, supposedly the home of democratic values, there are also clear democratic reversals in member states, for instance in Poland and Hungary, and this affects values, radically opposed to accepting more refugees, an attitude that spread like an oil slick with a corrosive effect on the EU. In many cases populism that supports nationalism and rejects globalization has blossomed. What has happened in both European (France, Spain, Germany, Italy, etc.) and non-European democracies has led to the destruction or profound transformation of the existing systems of political parties.

Globalisation is faltering. UNCTAD shows a 23% reduction in the world’s flows of foreign direct investment in 2017 and of 19% in 2018. The World Trade Organisation forecasts trade volume growth to fall to 2.6% in 2019—down from 3.0% in 2018. Trade growth could then rebound to 3.0% in 2020; however, this is dependent on an easing of trade tensions. The economist Paul Krugman claimed that a widespread trade war could cut world trade by 70%. The restrictive trade practices of the G20 economies, not only Trump’s US, have soared. Is this the end of hyperglobalization? No. It is a change of pattern, with technology and its new connectivity and possibilities bringing about great changes that don’t hamper Rodrik’s critique.

A key problem is that not only Rodrik’s trilemma cannot be broken down into pairs, but that what has happened in the triangle’s three vertices and sides has generated a vicious–not virtuous–cycle that affects everyone. Rodrik himself sees consequences of disregarding the trilemma for each of the vertices rather than the “demolition” of the trilemma. We could say It is the trilemma that has corrupted the vertices.

The Overlooked New Factors

The trilemma, in its different versions, is not based on correlations but on causes that interrelate. But in this causality, two more recent factors are usually wrongly disregarded. One is climate change, its effects, and the policies to counter it. We are witnessing in France with the revolt of the gillets jaunes, one of the first and more prominent popular ire against some of these measures.

The other factor is the technological revolution, particularly in its present phase of Artificial Intelligence and automation. It is changing the pattern of the trilemma. For instance, the new reality of globotics, deeply studied by Richard Baldwin, is changing economics and further pushes inequality, unemployment, and populism, undermining and squeezing the middle classes, as the OCED now admits. The technological revolution is also changing the way democracy works, and also enabling more fine-tuned state control of citizens and manipulation by different groups or powers.

To escape this situation, and not demolish the trilemma but manage it, we need in our countries new European policies stemming from its core values, around technological convergence and justice, and a new social compact for a transition that has already started.

 

Andrés Ortega is Senior Research Fellow at the Elcano Royal Institute.

 

The opinions expressed in this blog contribution are entirely those of the author and do not represent the positions of the Dahrendorf Forum or its hosts Hertie School and London School of Economics or its funder Stiftung Mercator.