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Global politics from the view of the political-economy trilemma | VOX, CEPR Policy Portal – voxeu.org

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Changing paradigm in global politics

In recent years, political landscape has been changing drastically in many countries. In the US, Donald Trump’s administration has pushed the ‘America-first’ agenda and prioritised the nation’s interest above all else since coming to power in 2017. Regardless of existing trade or other agreements, the administration has threatened to increase tariffs for trading partners or walk away from negotiations in case the conclusions are not favorable to the country. The administration’s anti-globalisation or isolationist stance has been observed in the ongoing COVID-19 pandemic as is evident from the country’s departure from the World’s Health Organization (WHO).

The UK has also prioritised its national interest and sovereignty by withdrawing from the EU. In many other countries, populist governments have arisen, both on the left and the right, touting similar slogans and advocating for de-globalisation to recover the economic and social benefits which they claim foreigners and immigrants have free ridden so far.

These new political forces are different from those of the recent past.

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For example, after WWII, Europe pursued regional political and economic integration through democratic process, although it required each country to sacrifice its own national interest. Given this history, the rise of countries prioritising self-interest and advocating anti-globalisation means a paradigm shift in the postwar order and a challenge against long-lived European unification efforts.

Even in originally rather democratic countries, such rifts between political authorities and the people have led the former to suppress the latter through undemocratic or authoritarian measures. The example includes Hong Kong, Venezuela, and Turkey.

Rodrik’s political-economy trilemma

The current changes in political order can be comprehensively viewed through the lens of Dani Rodrik (2000)’s political-economy trilemma.

The word ‘trilemma’ may remind international economists of the open economy trilemma.

The open economy trilemma, which has become a central theorem in international finance ever since its introduction by Mundell (1960) and Fleming (1961), states that a country may simultaneously choose any two, but not all, of the three goals of monetary policy independence, exchange rate stability, and financial market openness to the full extent (Fig 1–a).1

Figure 1 Open economy trilemma and the political-economy trilemma

a) Open economy trilemma

b) Political-economy trilemma

Dani Rodrik applied this theory to political economy, asserting that among national sovereignty, democracy, and globalisation, only two of these policy goals or forms of governance can be simultaneously achieved to the full extent, but not all three.

For example, the member states of the EU each have democratic institutions of governance and are open to the globalised markets. However, each state cannot pursue its own national interest or assert its sovereignty (more fully than other member states do). In other words, the EU is a good example of a region marching toward global federalism (Fig. 1–b, bottom right corner of triangle).

Reclaiming its sovereignty in order to pursue its own national interest is exactly what the UK has been trying to accomplish by withdrawing from the EU. According to Rodrik’s political-economy trilemma, the UK could have gone further toward fuller sovereignty either by restricting democratic policymaking or by limiting openness to the global economy (i.e. going from the bottom right corner of the triangle in Fig. 1–b toward the side of ‘national sovereignty’). Considering that Boris Johnson’s administration is acting in strict accord with democratic process, sacrificing globalisation would be the only way the UK could withdraw from the EU. Greater pursuit of a nation’s national interest requires curtailing its access to international markets.

Other countries try to reap the benefit of globalisation while still fully embracing their own sovereign statehood. These countries align themselves with international rules and standards when making their own, but they do not necessarily follow a fully democratic process for policymaking. Their domestic standards and rules are not based on democratically determined policies, but rather on those of multinational corporations and international organisations, or on treaties and agreements concluded by administrative bodies (i.e. bureaucrats who were not necessarily democratically elected). Thomas Friedman (1999) calls this “the Golden Straitjacket” (Fig. 1–b; top of the triangle), which he describes as a state of affairs where “[a country’s] economy grows and its [democratic] politics shrinks.”

A country wearing the Golden Straitjacket can free itself by either pursuing a higher level of democracy or becoming less globalised.

It is also possible for a fully democratic nation to strengthen its national statehood and prioritise its national interest. However, such a country cannot reap the benefits of globalisation (Fig. 1–b; bottom left corner of the triangle). The Bretton Woods system, which existed from 1944 to 1971, allowed its member states to impose capital controls and barriers to international trade. From the perspective of the political-economy trilemma, this is a policy mix of full democracy and national sovereignty.

As these examples show, policy makers can simultaneously choose any two of the three policy goals of national sovereignty, democracy, and globalisation, but cannot achieve all three to the full extent.

Empirical validity of the political-economy trilemma

Now, a natural question arises: Can the theorem of the political-economy trilemma be empirically proven with actual data?

In our recent work (Aizenman and Ito 2020), we construct a set of the indexes, each of which measures the extent of attainment of the three political-economic factors: globalisation, national sovereignty, and democracy. The indexes are available for 139 countries between 1975 and 2016. Using these indexes, we test whether the weighted average of the three indexes is constant. If the indexes are to be found linearly correlated, it would mean that the three variables operate within a trilemma relationship, i.e. the trilemma is empirically valid.

The regression analysis shows that for industrialised countries, there is a linear negative association between globalisation and national sovereignty, while the democratisation index is statistically constant during the sample period. That means, for the industrial countries during 1975-2016, the political economy trilemma was mostly a dilemma between globalisation and national sovereignty. For developing countries, a weighted average of the three indexes adds up statistically to a constant with positive and significant weights, indicating they are in a trilemma relationship, as Rodrik claims.

Closely examining the development of the three indexes over the sample period reveals that for industrialised countries, while the level of democracy is stable and high, there is a combination of rising levels of globalisation and declining extent of national sovereignty from the 1980s through the 2000s, mainly reflecting the experience of European industrialised countries. Developing countries, in contrast, experienced convergence of declining sovereignty and rising globalisation and democratisation around the same period. Emerging market economies experienced rising globalisation and democratisation earlier than non-emerging market economies with all the three variables converging around the middle.

Figure 2 Development of political economy trilemma indexes – income groups

The possible impacts of the three policy goals on political and economic stability

Lastly, what kinds of impact could these three policy goals (national sovereignty, democracy, and globalisation) have on actual politics and economics? We perform regression analysis to examine how the three trilemma variables can affect political stability and economic stability.

Our results indicate that (a) more democratic industrialised countries tend to experience more political instability; and (b) developing countries tend to be able to stabilise their politics if they are more democratic. The lower the level of national sovereignty an industrialised country embraces, the more stable its political situation tends to be. Globalisation brings about both political and economic stability for both groups of countries.

Developed countries, particularly the US and the UK, are now asserting their national sovereignty, touting policies that prioritise their national interests and an anti-globalisation stance. If the regression analysis is correct, such policies could increase political instability and the probability of financial crisis. Furthermore, if a developing country takes an anti-democratic or an anti-globalisation stance, it could face more political or economic instability.

Let us see what will happen.

Editor’s note: The main research on which this column is based (Aizenman and Ito 2020)  first appeared as a Discussion Paper of the Research Institute of Economy, Trade and Industry (RIETI) of Japan

References

Aizenman, J and H Ito (2020), “The Political-Economy Trilemma”, Open Economies Review.

Aizenman, J, M D Chinn and H Ito (2013), “The ‘Impossible Trinity’ Hypothesis in an Era of Global Imbalances: Measurement and Testing”, Review of International Economics 21(3): 447–458.

Aizenman, J, M D Chinn and H Ito (2010), “The Emerging Global Financial Architecture: Tracing and Evaluating New Patterns of the Trilemma Configuration”, Journal of International Money and Finance 29 (2010): 615–641.

Mundell, R A (1963), “Capital Mobility and Stabilization Policy under Fixed and Flexible Exchange Rates”, Canadian Journal of Economic and Political Science 29 (4): 475–85.

Fleming, J M (1962), “Domestic financial policies under fixed and floating exchange rates.” IMF Staff Papers 9(3):369–379.

Friedman TL (1999), The Lexus and the olive tree: understanding globalization, Farrar, Straus and Giroux, New York

Obstfeld, M (2015), “Trilemmas and Tradeoffs: Living with Financial Globalization”, Central Banking, Analysis, and Economic Policies Book Series. In: Claudio Raddatz & Diego Saravia & Jaume Ventura (ed.), Global Liquidity, Spillovers to Emerging Markets and Policy Responses, edition 1, volume 20, chapter 2, pages 013-078 Central Bank of Chile.

Obstfeld, M, J C Shambaugh and A M Taylor (2005), “The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility”, Review of Economics and Statistics 87 (August): 423–438.

Rodrik, D (2000), “How Far Will International Economic Integration Go?”, Journal of Economic Perspective 14(1 (Winter 2000)):177–186.

Shambaugh, J C (2004), “The Effects of Fixed Exchange Rates on Monetary Policy”, Quarterly Journal of Economics 119 (1): 301-52.

Endnotes

1 See more on the open economy trilemma in Aizenman et al. (2010, 2013), Obstfeld (2015), Obstfeld et al. (2005), and Shambaugh (2004).

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Federal government promising a 'renters' bill of rights' in upcoming budget – CBC.ca

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Prime Minister Justin Trudeau announced that his government will introduce new measures — including a new “bill of rights” — that he says will help protect those who rent their homes as part of the upcoming budget.

Trudeau said the new measures are specifically geared toward younger people, who are renting more than previous generations.

“It’s about changing the rules of the game in a way that meets young people where they are,” he said on Wednesday.

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Ottawa will work with provinces and territories to develop a “renters’ bill of rights” that would introduce a national standard lease agreement and implement requirements for landlords to disclose an apartment’s pricing history to allow tenants to negotiate their rent.

The new measures will also include a $15-million fund for provincial legal aid organizations that help tenants fight against “renovictions” and landlord abuse.

The Liberals are also proposing to change federal rules so that making rental payments on time will count toward someone’s credit scores, something Trudeau said is meant to help renters looking to one day buy a house.

“If you look at someone who pays a $2,000 [per month] mortgage, they’re getting recognition and credit for that from their bank as part of their credit score,” the prime minister said.

“But if you’re paying $2,000 a month on rent, you get no kudos.”

Typically the government doesn’t discuss what is in an annual budget until it is introduced in the House of Commons. But the announcement was made weeks prior to the release of the Liberals’ next budget, which is slated to drop on April 16.

Releasing tidbits from the budget ahead of time is part of a new communications strategy for the Liberals, sources told CBC News. Trudeau and his ministers are expected to make a number of similar announcements in the run-up to the budget, the sources said.

WATCH | Trudeau says new measures aim to help tenants: 

Liberals promise ‘renters’ bill of rights’ to fight housing crisis

5 hours ago

Duration 2:07

The Liberals are looking to create a ‘renters’ bill of rights’ to help deal with Canada’s housing crisis. Justin Trudeau says the plan is geared toward younger people suffering from a rising cost of living. The Conservatives call the measures meaningless.

Before revealing the planned rental measures on Wednesday, Trudeau took a moment to plug the April 16 fiscal plan, saying that the budget will be about “fairness.”

“For Canada to succeed, we need everyone to succeed,” he said.

Finance Minister Chrystia Freeland joined Trudeau for his announcement and hinted about further announcements ahead of budget day.

“Over the coming days and in the April budget, we are going to launch a no-holds-barred plan to wrestle down the cost of owning and renting a home,” she said.

Wednesday’s announcements came on the same day that the Canada Mortgage and Housing Corporation released a report that found a surge in new apartment construction drove housing start increases in several major Canadian cities last year.

But the report also cautions that demand continues to outweigh supply.

The opposition Conservatives, who have enjoyed a healthy lead in recent polls, have made housing — and other cost-of-living issues — a key point of attack against the governing Liberals.

Following his announcement, Trudeau was asked whether he thinks he bears any responsibility for people feeling left behind in the current economy and whether the new measures would be enough to convince younger people to support him in the next election.

In response, Trudeau suggested that a recent rise in the cost of living is not unique to Canada.

“Young people who are key to our present, and obviously key to our future, are seeing a system that is stacked against them. That’s true in Canada but also true elsewhere around the world,” he said. “What we’re focused on now is making sure that young people can see their success in the economy.”

Opposition parties criticize Liberal announcement

Scott Aitchison, the Conservative housing critic, said Wednesday’s announcement was Liberal posturing that won’t get results.

“Today’s photo op is just another set of meaningless measures that won’t result in building the homes Canadians need,” he said in a statement.

NDP housing critic Jenny Kwan criticized the announcement for not going far enough.

“The Liberals are so out of touch with what Canadian renters are experiencing that they keep offering half-measures instead of a real action,” Kwan said in a statement.

The NDP is calling on the government to invest more in affordable housing while temporarily preventing for-profit firms from buying designated affordable-housing spaces.

WATCH | Liberal government promises better protections for renters in upcoming budget: 

Liberal government promises better protections for renters in upcoming budget

9 hours ago

Duration 11:39

The Liberal government unveiled three new proposals Wednesday to better protect renters in Canada. Power & Politics speaks to Marci Ien, minister of women, gender equality and youth, about the proposed protections.

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‘Hillary was right’: Lifelong GOP voter on why he is leaving party – CNN

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‘Hillary was right’: Lifelong GOP voter on why he is leaving party

Texas Trey, a lifelong Republican voter, speaks with CNN’s Laura Coates about why he plans to leave the party before the 2024 election.


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Alberta Politics: UCP ahead of NDP by 15-points. Naheed Nenshi is the most well-known and well-liked NDP.

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From March 14 to 21, 2024, Abacus Data conducted a survey of 1,000 Alberta adults exploring several topics as part of our regular national omnibus surveys.

This is the first time we have fielded one of our public surveys in Alberta since Rachel Notley announced she was stepping down as NDP leader, triggering a leadership election. This survey was also completed prior to the announcement on Tuesday morning by NDP MLA Rakhi Pancholi that she is dropping out of the NDP leadership race and endorsing Naheed Nenshi.

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In this report, we share results of the core political opinion questions, a bit of a deep-dive on impressions of the provincial government led by Danielle Smith, and a look at how Albertans feel about the NDP leadership candidates and how they perform in hypothetical match-ups with Danielle Smith’s United Conservative Party.

The UCP holds a 15-point lead over the Alberta NDP

If a provincial election were held today, 55% of committed Alberta adults would vote UCP while 40% would vote Alberta NDP. 2% would vote for the Alberta Party while 2% would vote for another party. Since our last survey in October 2023, the UCP is down 1 while the NDP is unchanged.

Since the 2023 provincial election, the NDP is down 4 while the UCP is up 2.

Regionally, the UCP is ahead by 8 in Calgary (52% to 44%) and 38 in other communities outside Calgary and Edmonton-proper. In Edmonton, the Alberta NDP is ahead by 11 (53% to 42%).

The UCP lead by 22 among men, 7 among women and holds a commanding 39-point lead among Albertans aged 60+. Among those under 45 the two parties are basically tied.

When it comes to how Albertans feel about the performance of the Danielle Smith government, 32% approve while 38% disapprove. In Calgary, the Smith government’s net approval is -13, in Edmonton it is -20, and in the rest of the province it is +11.

Impressions of the two main party leaders are fairly similar. 38% of Albertans have a positive impression of Premier Smith while 40% have a negative impression for a net score of -1. NDP Leader Rachel Notley has a net score of -12, with 31% viewing her positively and 43% negatively.

How do Albertans feel about the provincial government?

Respondents were asked to choose phrases or words that describe the Smith government. We asked the same question to our national sample about the Trudeau government and to a large sample in Ontario about the provincial government led by Danielle Smith. We will share results of those results in the coming days.

In Alberta, views of the Smith government are mixed but generally more positive than how people feel about the Ford government in Ontario or the Trudeau government federally.

More than half of Albertans feel the Smith government is “clear on what it wants Alberta to be” rather than “unclear on what it wants Alberta to be”. Half thinks the government is “focused” while 33% think it is “distracted”. More feel it is “effective” than “ineffective” and about equal numbers feels the government is “focused on the right priorities” rather than “focused on the wrong priorities”.

34% describe the government as “unifying” while 42% think it is “divisive” and 43% describes it as “proactive”, more than feel it is “reactive”.

Overall, for a government that has taken on some controversial issues, these results suggest it is seen positively and in the right frame with a sizeable portion of the population.

But we also asked respondents whether they feel the provincial government is sufficiently focused on or addressing several key issues. Areas where most Albertans want to see the government more focused include “managing the cost of living” (60%) and “improving the healthcare system” (58). Another 52% think it could be more focused on “keeping your taxes as low as possible”.

In contrast, the provincial government is more likely to be seen as sufficiently focused on “standing up for Alberta” (49%) and “growing the Alberta economy” (37%).

One area where there’s more neutral views is on climate change. 38% of Albertans feel the provincial government could be more focused on it, 28% think it is moderately or highly focused on it, while 34% are either neutral or unsure about it.

These results suggest that so far, the Smith government has done a pretty good job managing expectations and signalling to its coalition that it’s sufficiently handling the top issues people report are important to them.

The Alberta NDP Leadership Race

In this survey, we also asked several questions regarding the Alberta NDP leadership election.

We started by assessing the impressions people have of the six candidates running to be Alberta NDP leader. A few things stand out:

1 Naheed Nenshi is by far the most well known of the candidates. 74% of Albertans had an impression of Mr. Nenshi, significantly higher than Sarah Hoffman (49%), Kathleen Ganley (60%), Rakhi Pancholi (39%), Hil McGowan (39%), or Jodi Calahoo Stonehouse (37%).

2. Naheed Nenshi is also the only candidate who has a clear net positive impression. 31% of Albertans have a positive view of him compared with 23% who have a negative view for a net score of +8. Kathleen Ganley is the only other candidate with a net positive, but just barely at +1.

3. Nenshi’s net scores are +14 in Calgary, +9 in Edmonton, and -1 in the rest of the province. Sarah Hoffman’s net scores are +2 in Edmonton, -6 in Calgary, and -3 in the rest of the province. Note, only 42% of Albertans outside the two largest cities have an impression of Ms. Hoffman.

And so apart from Mr. Nenshi, none of the other leadership candidates are household names (they rarely are in leadership races) and Mr. Nenshi has a substantial advantage when it comes to name recognition and favourability.

Now, we also tested five of the candidate in hypothetical matchups with Danielle Smith and the UCP.

From that exercise we learned a few things:

None of the leadership candidates perform as well as Rachel Notley as part of our main ballot question although Naheed Nenshi performs better than anyone else. This is likely more about his name recognition than any ability to attract Albertans who wouldn’t otherwise vote NDP – except in Calgary.

When we look at the regional dynamics, a few things stand out. In Edmonton, no one performs as well as Rachel Notley currently does. The main ballot question has the NDP ahead by 11. In all of the hypotheticals, that gap drops considerable.

In Calgary, Nenshi performs best, turning an 8 point UCP lead into a statistical tie. None of the other candidates perform better than Rachel Notley currently in Calgary.

Outside of Edmonton and Calgary, Nenshi performance as well as Notley but with all other possible NDP leaders the UCP lead grows.

Finally, another way to look at the potential impact of each NDP leadership candidate to shake up vote intentions to see how much of NDP support they retain and how much support they attract from other parties.

Naheed Nenshi does the best at attracting new supporters and retaining more of the current NDP support base. Sarah Hoffman retains more of the NDP base than other candidates, except for Nenshi, but attracts slightly less UCP and other party supporters than Nenshi. All the other candidates hold 2 in 3 current NDP supporters or less and attract few UCP candidates.

But the big takeaway is how little UCP support is attracted to any of the candidates at the moment demonstrating the level of polarization in Alberta at the moment.

It is also worth noting that given Nenshi name recognition advantage, this comparison isn’t a perfect measure of potential opportunity or risk for the other candidates but it does clearly show how challenging it will be for any of these candidates, if elected leader, to grow the NDP support base. Nenshi likely has the best chance and right now is the lower risk at losing existing NDP support.

Find out more about the The Three Threads and how the Abacus Data team looks
at polling for public affairs and advocacy.

The Upshot

According to Abacus Data CEO David Coletto: “In reflecting on the findings of our recent survey, it’s clear that Premier Danielle Smith’s position in Alberta politics remains robust ten months into her mandate.

Retaining the support garnered in the last election, her government appears not only to have maintained its winning coalition but also enjoys a reasonably favourable approval rating amidst challenging economic conditions. This standing is especially notable when compared to incumbents in other provinces.

The Smith government is perceived as having a distinct mission and vision, demonstrating effectiveness in its undertakings, and maintaining focus on what many Albertans deem the right priorities, despite criticisms around certain initiatives like the Alberta Pension Plan and on-going disputes with Ottawa – which Albertans recognize as an area the government has focused a lot on.

The Alberta NDP leadership race introduces an intriguing dynamic, particularly with Naheed Nenshi’s advantage on name recognition and favourability among the candidates. His recent endorsement by former leadership candidate and NDP MLA Rakhi Pancholi, coupled with claims of a significant increase in party membership, underscores his potential to translate personal brand into political capital. This development is crucial in leadership contests, where the ability to mobilize new members can decisively tilt the scales. Nenshi’s profile offers the Alberta NDP a formidable asset in its leadership transition, highlighting the strategic importance of both visibility and organizational support in such contests.

However, the broader challenge for the Alberta NDP, and indeed for any leader emerging from its ongoing leadership race, lies in positioning the party as a credible and appealing alternative to the United Conservative Party under Danielle Smith. Despite a leadership race that has garnered national attention, the ultimate electoral test will be in persuading UCP supporters to change their preferences. More akin to convincing cola drinkers to stop drinking cola than switching from Pepsi to Coke.

Premier Smith’s brand, characterized by having a clear vision and a focus on priority issues for Albertans, sets a high bar. The evolving political landscape in Alberta, shaped by both individual leadership qualities and collective party dynamics, continues to be a compelling study in contrasts and possibilities.”

Methodology

The survey was conducted with 1,000 Alberta adults from March 16 to 21, 2024. A random sample of panelists were invited to complete the survey from a set of partner panels based on the Lucid exchange platform. These partners are typically double opt-in survey panels, blended to manage out potential skews in the data from a single source.

The margin of error for a comparable probability-based random sample of the same size is +/- 3.1%, 19 times out of 20.

The data were weighted according to census data to ensure that the sample matched Canada’s population according to age, gender, educational attainment, and region. Totals may not add up to 100 due to rounding.

This survey was paid for by Abacus Data Inc.

Abacus Data follows the CRIC Public Opinion Research Standards and Disclosure Requirements that can be found here:  https://canadianresearchinsightscouncil.ca/standards/

ABOUT ABACUS DATA

We are Canada’s most sought-after, influential, and impactful polling and market research firm. We are hired by many of North America’s most respected and influential brands and organizations.

We use the latest technology, sound science, and deep experience to generate top-flight research-based advice to our clients. We offer global research capacity with a strong focus on customer service, attention to detail, and exceptional value.

And we are growing throughout all parts of Canada and the United States and have capacity for new clients who want high quality research insights with enlightened hospitality.

Our record speaks for itself: we were one of the most accurate pollsters conducting research during the 2021 Canadian election following up on our outstanding record in the 2019, 2015, and 2011 federal elections.

 

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