Economic Effects On Soveriegnty Essay Research Paper

Economic Effects on Sovereignty

Some commentators claim that in the modern world, medium-sized economies do not have economic sovereignty any more. Thus it is necessary to form large economic and trading blocks such as the EU in order to recover some economic sovereignty. There is some truth in the idea that modern medium-sized governments have less control than they did in the past. “From about 1930 to about 1970 governments had a historically unusual degree of control over their economies”(Walker 3). They could fix market exchange rates, limit imports through tariffs and quotas, control capital flows, and boost domestic production. In the 1990s capitalist governments have much less control. A government that attempted to control capital flows would receive much less international investment than more open competitor nations. Central banks cannot maintain market exchange rates against the will of private investors.

Another way in which analysts confuse the aspects of sovereignty is through the conflation of territoriality and economics. The problem lies with characterizations of trans-border economic flows.

Questions related to trans-border control, as opposed to purely domestic issues, have also exercised states. The claims states have made with regard to authoritative control of movements of people, commodities, investments, and information, ideas, or culture across their international boundaries have changed across time and over countries. (Krasner 86)

The question of trans-border flows of information, ideas, and culture will be dealt with below. At issue here is how economic sovereignty and territorial sovereignty interact. Put differently, how do trans-border economic flows affect territoriality? As is the case with political sovereignty, economic sovereignty has no direct effect on territorial sovereignty. To be sure, goods and capital move across borders, but these economic trans-border flows do not necessarily challenge how states recognize each other’s borders or how states defend their borders. Indeed, it would seem that the ways in which international economic interactions have been organized and regulated, both on the state and international levels, has largely divorced economic sovereignty from the realm of territoriality.

One must not take this point too far however, as there are many important indirect interactions between economic and territorial sovereignty. For example, international economic flows can be an important source of revenue for the state. For example, tariff collection from imports, foreign exchange from exports, and an increasing domestic tax base from production for foreign markets, to name a few. Some of these revenues can then be geared toward military expenditures to bolster defense. Conversely, uncontrolled military and high technology exports can be a threat to national security. A state that does not regulate its military exports could easily find itself confronted with an enemy fighting with its own equipment. In the end however, the threat of trans-border economic flows to territorial sovereignty seems overstated. Thomson and Krasner note that “interdependence arguments ignore the relationship between the growing level of some transactions, both domestic and international, and the…control of a defined territory by a stable government that exercises final authority” (197). To repeat, there are linkages between economic and territorial sovereignty, but they are indirect, and the fact that money and goods cross borders does not constitute a direct threat to territoriality.

Another problem with conflating economic and territorial sovereignty is the danger of ignoring the links between economics and other, non-territorial aspects of sovereignty. States have recently taken on the function of satisfying the economic well being of their peoples. As such, economic security and development can be an important source of political authority. Economic policies that are either too closed or too open to the international market can result in economic problems that can undermine the political authority of the state. Many Third World peoples consider their states to be ‘captured’ by international economic interests, which reduces the domestic political authority of these states. This loss of political authority can have very negative consequences for the sovereignty of a state. Lack of economic control (i.e., the inability of the state to regulate economic flows across its borders) can also result in a loss of political authority, in that states that lack control often also lack the respect of their peoples.

The point that states can be either too open or too closed to the international market, in the view of their ‘domestic constituencies’, suggests an important difference between economic sovereignty on the one hand, and territorial and political sovereignty on the other. One reason that economic sovereignty is poorly understood is that in contrast to territorial and political sovereignty, it is not a maximal goal. A state can never get enough territorial and political sovereignty, in the sense that in these aspects of sovereignty, there is no such thing as ‘too much of a good thing.’ This is not the case for economic sovereignty. Economic sovereignty is a state of affairs not even the largest countries can afford for long. All states require some international trade and investment in order to remain strong. In a very real sense, some degree of economic sovereignty may be sacrificed to build and maintain territorial and political sovereignty. “Improving standards of living helps maintain domestic political sovereignty by maintaining the popular legitimacy of the state” (85). An improving economy also increases the resources that the state can extract in order to defend the country.

From these discussions, it is clear that economic sovereignty is linked to both political and territorial sovereignty, though in indirect ways. However, conflating territorial and economic sovereignty serves only to confuse the linkages between the two, and obscures the linkages between economic and political sovereignty. One must pull apart territorial, political, and economic sovereignty in order to see how they fit together.

Works Cited

Krasner, Stephen D. “Sovereignty: An Institutional Perspective.” Comparative

Political Studies April 1988: 75-86.

Kratochwil, Friedrich. “Of Systems, Boundaries, and Territoriality: An Inquiry into

The Creation of the State System.” World Politics October 1986: 35-40.

“Political Theory and Political Philosophy.” The Internet Encyclopedia of

Philosophy. Online. America Online. 28 March 1999.

Thomson, Janice E., et al. Global Changes and the Theoretical Challenges:

Approaches to World Politics for the 1990s. Lexington: Lexington, 1989.

Walker, R.B.J. “Security, Sovereignty, and the Challenge of World Politics.”

Alternatives 1990: 3-10.