The changes occurred in the recent century as a result of globalization has in fact influenced the policy making ways and considerations. This has complicated the aspects of decision making particularly regarding policy matters and is true even in the case of domestic policies. Though nation states still hold control over domestic policy making process they need to verify whether the policy structures and priorities are complementing international policies and associated factors. Such compliance with international policies and legal structures are in fact essential to shape domestic policies that are implementable and enforceable. There are international agencies like World Trade Organization (WTO), World Bank (WB) and International Monetary Fund (IMF) that influences even the domestic polices either directly or indirectly. The extent of influence these international bodies have in shaping domestic policies appear to be relevant in today’s world and the major challenges in shaping domestic economic and social policy in relation to the capability of the nation state is discussed.
2. Role of nation state in shaping social and economic policies
Nations do have the right or authority to frame domestic policies that influences their economy and internal matters, but the extent of power and influence rested upon nation states have changed over the years. Efforts aimed at developing a highly prosperous world order have in fact affected the sovereignty or control of the nation state even in framing internal policies. That is, as a result of internationalization and liberalization, the social and economic issues also have gained global dimensions and hence the considerations of the nation states with regard to policy making need to be diversified and globalized. Hence domestic policies should be designed in compliance with international policies or legal frameworks and efforts to minimize or nullify policy interferences with other nations also should be rightly considered and addressed. Or else there would be interventions from international bodies like WTO, IMF and other institutions depending on the subject matter. Though the liberalization and globalization initiatives have reduced the sovereign powers of nation states, the policies framed from the new perspective have wider scope and application beyond borders. Schmidt have noted that the current trends which resulted from the “political and economic reforms internal to nation-states, such as privatization, deregulation, and decentralization have diminished central governments' powers at the same time that they have freed business even more” (1).
Though the nation states continue to have a crucial role in making decisions with regard to domestic policies, their independence in choosing the policy framework appear to be limited.
That is, nation states would not be able to frame policies specifically based only on their national priorities and preferences. The influence of the international treaties they have ratified might overrule their preferences and priorities and the policies need to be framed in accordance with the objectives of such international conventions. International organizations like WTO, World Bank, etc could intervene if the domestic policy is conflicting. For e.g. the environmental policies of US and other countries need to be in compliance with the international considerations on climate change. Reducing the carbon footprint was an important consideration of the climate change conference and hence environmental policies need to be compliant in fulfilling various international commitments associated with these policies. So the specific considerations of the nation state need to be sacrificed during similar case situations for the purpose of facilitating international commitments. On the other hand, Gilpin has opined that in “highly integrated global economies”, the nation states do exert considerable authority in developing policies to attain national goals (5). This could be true in the case of powerful or developed countries like US, who have considerable influence on these international bodies.
Globalization and associated activities have enhanced the influence of markets on the economic and social conditions of the state and hence domestic policies need to be framed based on the specific market requirements and conditions. So the basic consideration is to make domestic policies to complement the market requirements and not specifically cater to national interests alone. Considerations of national interests in policy making appear rather very limited in the changed scenario where expansion of the markets emerged as essential pathways for growth and development. On the other hand social issues like poverty alleviation, healthcare, reducing the gap between the rich and the poor, etc are some area that requires specific national focus but the option of external dependence or “international coherence and cooperation” need to be considered in matters associated with social and economic development as well (Grindle 14). Gilpil claims that under these circumstances the authoritative role of the nation state in policy making is diminishing (10). These factors also implies that international organizations have a certain role in shaping policy matters particularly in matters associated with regard to monitoring and regulation.
As social policies and economic policies influences the world economy, the interferences from international bodies would be high if the domestic policies are not designed in accordance with due considerations of their state. Increasing influence of international organizations in the internal matters of the state threatens the sovereignty of the nation state. For e.g. as a result of General Agreement on Trade and Tariff “(GATT) ratification in Congress, the role of WTO is seen to usurp US trade prerogatives, such as its ability to impose sanctions unilaterally with Super 301” (Schmidt 6).
3. Influence of International organizations
WTO was established for the purpose of promoting free trade and free markets and hence any domestic social or economic policy that intervenes with the efforts of the WTO would be disputed. But countries like US consider the objectives of WTO as opportunity to expand the various sectors across borders. For e.g. by utilizing these opportunities for growth and development, US healthcare industry and various other sectors have expanded in to international markets. Privatization of some of the sectors like healthcare, telecom, etc which were the monopoly of the public sector are indications of the influence of WTO and their interventions (Osterhammel and Petersson 9). It was the initiative of premier organizations like WTO and World Bank to open up and expand the sectors which were mainly controlled by the public sector. WTO would take appropriate action against member states that do not facilitate the smooth implementation of their policies.
WTO and World Bank adopt policies that would facilitate in fulfilling their objectives of market expansion and diversification. “The restrictions on national sovereignty imposed by
WTO through GATS will make it increasingly difficult to reverse these trends” (Price, Pollock and Shaul 1892). WTO, World Bank and other organizations develop frameworks for the member states to comply and any lapse in initiating efforts for attaining the objectives would be treated as a serious offence and these organizations impose strict penalties on those nations. So the domestic policy of all nations who are party to these international organizations need to be framed in compliance with the policies and associated guidelines. As a result of the influence of these international bodies the market structure of the different member states has been changed in order to achieve the objectives. Policies aimed at rapid market expansion and privatization of different services appears to be the major highlights of the influence of these international organizations. These changes in fact lead to reduction in the capability of the governments of nation states to control or regulate the industries including financial sectors.
As a result of these changes in different areas even the social setup has also altered, which in turn would result in major adjustments in the social welfare schemes and policies of the government. Such types of adjustments were done to match the requirements of the times as well as to comply with international commitments. For e.g. rise of unemployment as a result of these structural changes would prompt the nation states to adopt appropriate policies to normalize the figures. So reforms in different policy matters become inevitable and it has to be accordance with the specifications of the international organizations.
Assessment on the extent of challenge posed by international organizations like WTO, World Bank, IMF, etc in shaping domestic economic and social policy revealed that the role of nation states in policy matters have diminished to a certain extent. But nation states remain as the authority for deciding on the domestic policies despite having lost absolute control over the decision making process. Nation state lacks the independence in choosing the policy matters based on the specific national interests, priorities and preferences and they need to design policies that would be complementary to other international matters and concerns. So nation states need to adopt policy matters that are complementing to international goals and objectives of international organizations. Organizations like WTO, World Bank, etc would exert greater pressure and impose punishments for lack of compliance with the policy considerations of these international bodies. Though nation state have lost absolute power in decision making, each nation could attain greater levels of growth and prosperity if they remain in compliance within the policy frameworks as imposed by international organizations like IMF, World Bank, etc
David, Price., Allyson, M. Pollock, and Jean, Shaoul. How the World Trade Organisation is shaping domestic policies in health care? The Lancet, 354 (1999). Web. 11 June 2013.
Gilpin, Robert. Global political economy: Understanding the international economic order. New Jersey: Princeton University Press, 2001. Print.
Grindle, Merilee, S. “Social policy in development: Coherence and cooperation in the real world”. DESA Working Paper, No. 98 (2010). Web. 10 June 2013.
Osterhammel, Jurgen. and Petersson, Neils, P. “Globalization: Circle navigating a term. New Jersey: Princeton University Press, 2001. Print.
Scharpf, Fritz, W. and Vivien, A. Schmidt (eds.). 2000. Welfare and Work in the Open Economy. Volume II. Diverse Responses to Common Challenges. Oxford: Oxford University Press, 2000. Print.
Schmidt, Viven. A. “The new world order, incorporated: The rise of business and the decline of the nation state". Daedalus, 124. 2 (1995). Web. 9 June 2013.