Individualism & world order.

• Author: McGinnis, John O.

DISAGREEMENT about world order is a continuation of disagreement about domestic order. At its heart are the same questions. How much power should be given to centralized decision-making as opposed to decentralized decision-making and markets? Should regulatory authority be exercised through democratically accountable mechanisms or elite and bureaucratic ones? What is really at stake thus becomes much clearer when more traditional political concepts are used to elucidate such relatively opaque terms as sovereignty, multilateralism, global governance and customary international law.

Classical liberalism--the philosophy of limited and accountable government--provides an appropriate framework for analyzing the foundation of global order because liberalism actually began in discussion of international matters. After all, Adam Smith and David Ricardo initiated the case for classical liberalism two centuries ago when they attacked nationstates' restrictions on international trade.

This same framework of ideas provides coherent and consistent answers to the two most salient questions of international legal order. First, what kinds of international organizations and agreements are justified? Classical liberalism provides a principled framework that approves of trade agreements that keep capital markets open, because these agreements create a market for governance for competing sovereigns. It is more skeptical of other global multilateral agreements, be they environmental accords, human rights conventions or an agreement on an international criminal court, because the bureaucracies needed to run them may create new centers of unaccountable powers.

Second, by what process should agreements be reached and interpreted? What role should non-governmental organizations (NGOs) play in generating international law? Before the rise of classical liberalism, specific factions, like the aristocracy, or self-appointed interpreters of natural and divine law, such as augurs or kings, generated law. The classical liberal project has advanced through replacing this structure with representative government and careful checks and balances. Treaties have the potential to make full use of these processes, and a world of increasingly democratic nations is beginning to realize that potential. In contrast, reliance on a customary international law shaped by NGOs and law professors is anachronistic--a return to generating norms by narrow factions and a secular priestly caste.

Agreements & Institutions

CLASSICAL liberalism proceeds from two principles. First, individuals should be free to interact with one another as they choose, subject to the proviso that they cannot harm others through force or fraud. Second, government's object is to protect these freedoms and the property they generate. The dilemma for the latter objective is that a government powerful enough to achieve this goal can also threaten freedom and property. Thus, another objective of classical liberalism is to restrain the exercise of official power and assure that it is confined to its proper function of providing public goods--those that the market and family cannot supply.

Thus, the classical liberal international order should advance freedom by breaking down barriers to exchange and other voluntary interactions among people of various nations. And it should welcome ways of restraining governments from acting beyond their legitimate purposes, so long as these restraints do not unduly empower international bureaucracies.

It might be thought that classical liberalism thus simply translates in international matters to a Wilsonian concern with advancing democracy at every turn. But even in a democracy large and diverse enough to inhibit majority tyranny, minority factions in the form of special interests can use their greater leverage to gain government resources at the expense of the public. Mechanisms beyond simple democracy are therefore needed to assure, in the political scientist Mancur Olson's phrase, that a nation is governed by an "encompassing interest" rather than by special interests. Such an encompassing interest--the diffuse majority or supermajority of citizens-has less incentive than special interests to engage in the expropriation of resources through government action. It would then be extracting resources largely from itself. The best international mechanisms thus do not promote simple democracy but instead promote governance by the encompassing interest within various nation-states.

Peaceful competition among sovereign nations furnishes a primary mechanism for empowering the "encompassing interest" of a nation and for reducing the ability of interest groups to take resources from the government. Under what political scientists term "jurisdictional competition", sovereigns compete by providing efficient levels of public goods. If they do not, investment will dissipate and companies will flee the jurisdiction. Such competition thereby restrains leaders from unduly rewarding themselves or their supporters and encourages policies that will make their people prosperous. Competition also permits each nation the opportunity to learn from good policies that others adopt.

Decentralized lawmaking by sovereign nations also has the virtue of allowing different nation-states to satisfy the preferences of diverse peoples in the world. It is not too much to say that jurisdictional competition and the satisfaction of diverse human needs are the defining virtues of modern sovereignty. In sharp contrast, centralized power exercised in the international sphere has the potential over time to become even more vexatious than domestic centralized power, for three reasons.

First, the international arena is opaque to most citizens, and this lack of transparency empowers leaders and the factions that support them. Concrete examples of the difficulty that citizens have in controlling international organizations abound. Brussels-based bureaucrats are more distant than those in the EU's home nations. It is thus not surprising that they engage in all sorts of financial shenanigans, including the recent expense-account abuses, that would never be tolerated at home. Second, more is at stake in formulating international rules. If a faction or interest group succeeds in obtaining a regulation that disadvantages competitors on a global scale, it can gain a world's worth of monopoly profits.

Finally, international regulations can extinguish jurisdictional competition that restrains overreaching behavior by domestic agencies.

From these considerations flow three general criteria to determine whether international agreements and organizations concerning trade, human rights, regulation and an international criminal court are justified.

Mutuality of Gains. Internationalizing structures of regulatory authority are generally appropriate only when the gains could not be realized by the nations acting on their own. This flows from a basic principle of subsidiarity. Localized institutions are generally easier to control and are more likely to reflect diverse preferences.

Facilitating the Encompassing Interest: International agreements and institutions should facilitate the governance of participating nations by an encompassing interest. Thus, agreements that intensify international jurisdictional competition are always welcome. In contrast, in areas where jurisdictional competition is not possible, establishing international rules can sometimes be more desirable.

Light Elaboration Mechanisms: The final criterion concerns the substantiality of the mechanism needed to make international agreements work. If complex international mechanisms creating substantial regulatory authority are needed to sustain the agreement, they run a higher risk of capture by special interest groups, because such institutions are distant from the citizens affected by them. Accordingly, even when nations have the possibility of realizing mutual gains from an international framework, these gains may be outweighed by the costs generated by the international framework itself. For instance...