Exit and Voice in the Age of Globalization

The “globalization” of commerce provides ever-growing opportunities for producers, employers, and service providers to shop the globe for more amenable jurisdictions. While they enjoy a “race to the top,” an international “race to the bottom,” spawned by decreasing relocation costs, threatens to compromise the achievements of the welfare state and lower standards of consumer protection. National governments, weakened by competition that entails leaner budgets, find it increasingly difficult to cooperate in the appropriation of crucial shared natural resources, seriously endangering these assets while damaging the environment. Not only does the growing global competition create both efficiency losses and social-welfare problems, it also challenges principles of democracy and self-determination. As competition constrains nations’ available choices, individuals have fewer opportunities to play a meaningful role in shaping their lives through the national collective decisionmaking process. Largely pessimistic analyses of these collective action challenges have been dominated by the Westphalian paradigm- a model of international relations that views global conflicts solely in terms of the 200-some sovereign states that constitute the global arena. The paradigm operates on the still-prevailing premise that nation-states are unitary actors engaging in international competition.1 Even those writers who are themselves aware of the diverse domestic forces that actually shape national policies stop short of identifying the deficiencies – both descriptive and normative – of the Westphalian paradigm. This Article argues that the Westphalian paradigm is inadequate: by focusing exclusively on interstate relations, it obfuscates the crucial role played by competing domestic interest groups in the international arena. This Article advocates a different paradigm – the transnational conflict paradigm – that better explains various collective action failures and points the way toward mechanisms that might correct these problems. At its core lies the observation that states are not monolithic entities; and that many of the pervasive conflicts of interest are in fact more internal than external, stemming from the heterogeneity within, rather than among, states. Indeed, the transnational conflict paradigm shows how domestic interest groups often cooperate with similarly situated foreign interest groups in order to impose externalities on rival domestic groups. The better-organized, and hence more politically effective, domestic interest groups – usually producers, employers, and service suppliers – cooperate with similar interests in different states to exploit less-organized groups such as consumers, employees, and environmentally vulnerable citizens. Thus, the transnational conflict paradigm attributes many global collective action failures to conflicts among warring domestic groups rather than international competition among states.