GLOBALIZATION AND THE SUBSTITUTABILITY OF GLOBAL GOVERNANCE STRUCTURES

1. GLOBALIZATION AND THE SUBSTITUTABILITY OF GLOBAL GOVERNANCE STRUCTURES Daniel W. Drezner University of Chicago November 2003

2. THE PUNCHLINE • Even in an era of globalization, the great powers remain the key actors in global governance • Great power preferences determines whether regulations will be coordinated and enforced • Other actors affect the process of regulatory coordination -- not the outcome

3. THE LITERATURE Globalization is responsible for some bad IR theory: • RACE TO THE BOTTOM HYPOTHESIS • WORLD POLITY APPROACH • GLOBAL CIVIL SOCIETY

4. THE ONION, MAY 1, 2002 Correct Theory Discarded In Favor Of More Exciting Theory GRETNA, NE— The correct theory regarding the closing of Marvin's Diner was discarded Monday in favor of a far more exciting theory. "I bet the Omaha mafia muscled them out," said Gretna resident Lucinda Dunfee, pondering the fate of Marvin's Diner, which was shut down due to health-code violations. "They were taking business away from Steak Barrel, and those guys don't care who they get mixed up with." Dunfee noted that the restaurant's trash cans were often overturned during the night, which was likely an act of intimidation on the part of the Omaha crime syndicate.

5. FLAWS IN THE LITERATURE • RTB • No empirical support • Flawed theoretical assumptions • World Polity • Ill-defined causal mechanisms • Ambiguous empirical evidence • GCS • Ill-defined actors • Focus on existence rather than prevalence

6. THREE POINTS TO RECOGNIZE • State power still exists in an era of globalization • Non-coordination can be the Pareto-optimal equilibrium outcome • Global governance processes are substitutable (Most and Starr 1984)

7. MY REVISIONIST MODEL 1) States are primary actors 2) Power is a function of market size • Explicit coercive power • Implicit rewards of harmonization 3) Coordination generates public benefits 4) States incur costs from switching to new regulatory standards

8. A SIMPLE GAME

9. A MODIFIED GAME

10. FOUR RESULTS • No coordination can be the dominant equilibrium • Likelihood of coordination increases as benefits rise, costs fall • Market power can generate a unique equilibrium -- at great power’s ideal point • Coercive economic power can assist in generating a unique equilibrium

11. PREDICTED OUTCOMES

12. HARMONIZED STANDARDS

13. CLUB STANDARDS

14. RIVAL STANDARDS

15. SHAM STANDARDS

16. IMPLICATIONS • Gee, there’s a lot of neorealist behavior going on • States important, but not the only actors • Debates about non-state actors, global governance are improperly framed • Globalization does alter great power politics, but not as commonly thought

17. EXPLAINING STATE PREFERENCES TWO PRIMARY INPUTS: • Degree of economic development • rising incomes  stronger regulation • rising incomes  regulation of service sector • Embedded economic institutions • Anglo-Saxon  laissez-faire, adversarial • Continental  centralized, corporatist

18. GREAT POWER CONFLICTS: Distribution of adjustment costs to new regulatory standards NORTH-SOUTH CONFLICTS: Distribution of benefits from successful regulatory coordination DISTRIBUTION OF INTERESTS