Dilemma

The Greek drama that unfolded last week brings to the fore the dilemmas confronting the modern state in the age of globalization.

Over the past two or three centuries, we cultivated the largely imagined notion that nation-states were autonomous units in the global space. Governments invoking sovereignty, deemed an absolute right of nations, basically did as they pleased. They strove to be autarkic, pursuing often costly attempts at self-reliance and self-sufficiency. They governed on the basis of some understanding of a social contract between rulers and ruled with little regard for everything else beyond their borders.

National economies were likewise imagined as self-contained units. They were not supposed to be dependent on their neighbors and did not seek their approval on decisions that were domestic in nature. International politics was conducted on the basis of non-interference in the affairs of others.

This imagination of the world order was put forth in the 19th century Treaty of Westphalia which put an end to many decades of incessant war among the European powers. It was projected as the basis for world order in the post-colonial period as many new nations emerged from the ruins of colonialism. National self-determination was the essential element of independence movements that swept the world in the 20th century.

Although intently imagined, a world of self-contained and self-sufficient nations never really happened. Nations were constrained by geography, economic reality and ideological alliances during the Cold War period.

Even as national liberation movements succeeded in extricating territory from the old colonial powers and proclaiming these patches of liberated ground as nations, there were efforts to build multilateral institutions that will, at the very least enable nations to act in concert or, at best, evolve region-states. In aftermath of the Second World War, the United Nations was established to allow a mechanism for settling disputes and guaranteeing peace for all humanity.

Regional unions, such as the European Community, began to evolve. Functional institutions such as the IMF and the World Bank gained prominence as people everywhere appreciated their role in addressing the financial needs of nations.

Soon, there was a burst of international organizations setting standards or establishing rules. The International Labor Organization encouraged nations to adopt minimum standards for the protection of workers. The World Health Organization facilitated international response to epidemics and pandemics as well as set guidelines on health care. The World Trade Organization sets down common rules governing global trade.

In addition, there are now hundreds of regional institutions performing specialized functions of every imaginable sort. We host, for instance, the International Rice Research Institute and the Asian Development Bank. There is the International Parliamentary Union and the International Postal Union.

Complementing all of these are various regional associations such as the Asean and the Arab League. Then there are regular summit meetings where heads of government commit to common undertaking such as the APEC, the G-20 and others.

Beyond all these are non-government organizations working across borders such as the Medicins sans Frontiers, the Red Cross, Amnesty International, Transparency International, the Economic Freedom Network, Greenpeace and hundreds of others. There are professional associations that establish common standards and accredit the technical competence of individual practitioners regardless of nationality or race.

The point is clear: while people might be caught up with the nationalist romance with self-contained national units, they also realize the need for establishing networks of collaboration and governance at the supranational level. The modern world cannot function without these transnational institutions, even as they might seem to encroach in the traditional domain of sovereign states.

When Greek prime minister George Papandreou agreed to the terms of the European Union agreement designed to stabilize the euro and pull Greece back from the brink of default, the matter was beyond domestic politics. The contingencies of the EU took precedence over domestic partisan concerns. This is how regional governance works. Greece, when it joined the EU, accepted the precedence of region-wide decision-making over municipal policy.

Papandreou lost all sense of proportion when he declared he would submit the terms of the EU agreement to a referendum. That caused a panic in global markets and undermined the euro, not because the Greek people might decide to flush themselves down the drain but because the concerted effort of the EU member-countries to address the debt crisis seemed futile.

Summarily summoned to Cannes by French president Sarkozy, Papandreou got some sense knocked into him. He returned to Athens and reversed himself on the matter of a referendum. The next day, he narrowly escaped a no-confidence vote in his parliament but in exchange promised to form a unity government. That emerging coalition will probably exclude him.

The Italians seem to understand the new realities of governance a bit better. As the political drama in Athens was playing out, the Italian government decided to invite the IMF to vet its own policies aimed at preventing a worsening of its own debt problem. In effect, the Italian government will be co-making domestic policies with the multilateral financial institution.

A new ethic is being set here. Nations are beginning to accept that fiscal and financial management are no longer matters exclusively in the realm of sovereignty — even as they may have tremendous repercussions on the quality of life of local populations.

The management of fiscal and financial affairs will now have to be done in partnership with the institutions of the global financial system. This is because no nation can continue to claim that whatever it does with its debt and finances is not anyone else’s concern.