The Retreat of Global Democracy

A nasty, unintended side-effect of globalization is its corrosive effect on democracy. Even if individual countries are becoming more democratic, it seems, the sum of global democracy is shrinking thanks in no small part to globalization.

Democracy means many things, but at its core it requires that people choose their rulers and that votes be weighted equally. But globalization means that nations and peoples can exert an asymmetric influence. America can cut off trade with Cuba not only by curtailing its own trade but by threatening punitive action against others who trade or invest in Cuba. Cuba, however, can do little to hurt America's economy. Likewise, China can injure Taiwan in ways that Taiwan cannot reciprocate.

Of course, the powerful have always encroached on the sovereignty of others. Take the story, perhaps apocryphal, of an Indian diplomat showing a map of South Asia to Stalin. "India is a very big country," Stalin observed, and then pointing to Sri Lanka said, "What is the name of this little Indian island?" "That is not an Indian island, sir," the diplomat replied, "it is a sovereign nation." "Why? "Stalin asked.

Thanks to globalization, however, dominant nations have a variety of new tools with which to influence other countries short of war. Foremost is money. Instantaneous electronic links and an improving system of global guarantees allow capital to flow across national boundaries as never before. Rapid withdrawal of such capital can have devastating effects, as we saw in 1997 when Asia's super-performing economies succumbed to financial crisis.