Recently, I went back and re-read one of my favorite books, Alesina and Spolaore’s “The Size of Nations” (MIT Press, 2003), which collects a few pretty interesting models that examine how borders get drawn in light of tradeoffs between economies of scale/scope in the production of public goods and heterogeneity of tastes. But enough with the technical jargon. I always think about this book when commentators talk about globalization being “arrested” by local separatisms, expressions of indigenous preferences or culture, or calls for decentralization, because—rather than a backlash against globalization—there’s reason to believe that these are a natural outgrowth of it. In other words, globalization may be good for the ability of localities to make local choices in the adoption of policies. Now this is clearly contrary to the conventional wisdom, which envisions homogenization as the endgame of turning the world into one big market. But not so fast.
Alesina and Spolaore’s argument is that while globalization reduces the impact of borders on trade, it need not have any impact on where they’re drawn when it comes to determining how to provide public goods. In a less-globalized world, country size means market size, which means wealth, but bigger countries also face a tradeoff in greater heterogeneity in the population over which public goods to provide. So while the country is wealthier, you’ve got to tolerate compromise with fellow citizens who want a different package of public goods than you. However, in a more globalized world, wealth depends less on size, because trade is less hampered by borders. As a result, you can get wealthy without having to control a large piece of territory, i.e. without having to compromise with other people who want a different package of public goods than you. As a result, you can provide more specialized public goods in smaller jurisdictions at a lower cost, meaning that heterogeneity of preferences is no longer such a necessary evil.
What does this mean? Well, globalization and separatism/decentralization ought to go hand-in-hand, because globalization makes smaller, more homogeneous local jurisdictions sustainable, where they otherwise wouldn’t be if you had to grow in size in order to have sufficient wealth for operating a government and providing public goods. So globalization might well be good for the recognition and expression of local tastes and cultures, because you don’t have to have such a big tent to have a decent standard of political life…certainly not as big a one as you’d need in a non-globalized world of autarky…
…and, the last time I checked, autarky is a pretty good motivator of expansion, domination, and the suppression of local preferences…
The Wolf Den 