Globalization brings with it many challenges and opportunities, impacting every sphere of our daily lives. We spoke with Rana Foroohar, a global economic analyst at CNN and The Financial Times, about the complex impacts of globalization on modern democracy.
Journal of International Affairs: In the era of globalization, nation states share power with a large number of powerful non-sovereign actors, including corporations, nongovernmental organizations, terrorist groups, drug cartels, global institutions, banks, and private equity funds. In which aspects can we see an erosion of state capacity?
Rana Foroohar: I always like to follow the numbers, and so I'd start with the way in which debt has been transferred from the private to the public sector following the 2008 financial crisis. There's nearly $60 trillion more debt out there now than there was before the subprime crisis, but the difference is that most of it is now held in the public sector. That, of course, makes it more difficult for states to provide the services and social safety nets that citizens need, particularly at a time of great technological disruption, which is going to change the way we all work and live.
Job insecurity has risen by a third since it was first measured by the OECD in 2007. Long term unemployment is higher, and life satisfaction is lower. You can see bifurcation and a superstar phenomenon not only amongst individuals, but companies, sectors, and nations. This is in large part due to the fact that the nonstate actors you mention above, and in particular the private sector corporations, can fly 35,000 feet above national concerns (witness widespread profit and capital and IP relocation to wherever it's most convenient for such firms). Sadly, the economic condition of states makes politics more polarized and thus it is harder for the public sector to reel these private actors in.
JIA: One of the most economically empowered actors is the transnational corporation. Big international companies have found strategies for tax avoidance. Because taxation is a basic need for the state to have the capacity to provide citizens with goods and services, how can the state fight this international problem?
RF: National tax systems were set up at a time when national headquarters actually mattered, and most companies made goods that could be easily tracked. In the 21st century digital economy, all that has changed, and it calls for an entirely new method of taxation. I think...