Friday, April 13, 2012
The new global macroeconomics and sovereignty : A Narrower boundary
The current interconnection between different economies, the market scrutiny and the analysts surveillance of economic data, have transformed quite a lot the scope of the sovereignty issue. Just a couple of years ago, when the discussion about the new rules for global financial transactions took place , it was clear that there would be important losses of sovereignty , if there was any chance of making significant progress on the matter.-
The Free trade agreements with all of its benefits, in some cases also imply losses of sovereignty . Let take the case of Chile, which for the sake of getting the Free trade agreement with the USA, had to quit its option of unilaterally impose control (taxes) on its capital account. Greece has been able of restructuring its private debt, within the umbrella of the euro zone and its terms. The same apply for other European countries which within the Euro zone framework, had to quit to both its own monetary and fiscal policy .-
Thus, it seems that global economics is moving toward the so to speak, Global Governance based on global rules, coordination ,information and power sharing , which beyond the specific domestic rules of each country , becomes a necessary condition to facilitates trade and financial flows . If not, market will say something about it.
Is the global economics also evolving toward a Global Supra State?. Maybe so. But what kind of state?.Certainly, not the Keynesian one. On the other side, some leaders have questioned this “market interference”, on each country right to do whatever seems appropriate. Well, that might be the cost of technology spreading everywhere. Besides as long as we live in a flat economy, it is easier to check each other out.
Actually, It is hard to think of a country alone to be able of solving its own economic problems. Let take the debt situation in Europe, which has undoubtedly an impact on the recovery of those economies ,which are complementary because of financial and technological links, and at the same time ,on all of those economics which are depending on Europe economic growth, because of the kind of good European consumers demand. Latin America economic performance, is importing more goods from the USA and Europe, which turns out to have a positive impact on the prospect of economic growth as well. So, in such a case each economy is losing its ability to apply autonomous policies without affecting the natural flows of goods and capital. Argentina tried to do so with the implementation of restriction on foreign trade, and nobody felt indifferent about it.
What are the implications which arises from this link between more chances of benefit from global growth, but at the cost of the less sovereignty?. Some preliminary ones: The State, have to be more responsible and less discretional. Policy makers, need to act with more and better coordination among themselves.The power share buttom, is not off anymore.