If it is accepted that the world needs something like the G20, then it is important to
inquire why this initiative so far has failed to live up to its initial promise. There is, of
course, the circumstance that much of what the G20 has offered to deliver constitutes a
global public good.46 The need for collective action stems precisely from the nature of the
G20’s deliverables. Global financial stability and a rules‐based multilateral non‐
discriminatory trading system – two of the basic endeavors of the G20 ‐‐ are for the most
part global public goods because once provided, they can be enjoyed in principle by each
country without impinging on the enjoyment of others. The objectives of financial
stability and preventing trade protectionism are conceivably widely shared, but this does
not mean that every state would be willing to put in its own share of effort to achieve
them.
46 For a discussion of global public goods please see Meeting Global Challenges: International
Cooperation in the National Interest, Report of the International Task Force on Global Public
It is in the nature of global public goods that if left freely to the actions of the
political and economic markets, their supply will tend to be short of their demand. On the
one hand, governments do not want, or are politically constrained, to limit their
sovereignty by accepting binding rules and mechanisms to enforce their compliance.
There is also the free rider problem, which means that given the non‐excludability of a
public good, there is the incentive for each country to wait for others to provide it without
sharing in the effort to supply it. The fact that many countries value public goods
differently is also an obstacle to assembling the necessary collective action for the
provision of global public goods. This circumstance is exacerbated now that countries
that are still developing and are even relatively poor have become global economic
powers due to the sheer size of their GDP and degree of engagement in the world
economy.
It is mainly for these reasons that historically it has taken a special catalytic force to
harness the international cooperation necessary to provide global public goods, a force
that this time was supposed to be generated by the G20 and, more specifically, by some of
its key members exercising enlightened leadership. Admittedly, even if a true wish to
provide that leadership were present, as seemed to be the case at inception, in its initial
steps the G20 member governments were bound to confront significant domestic political
economy limitations in their ability to pursue the necessary international cooperation. As
one of these authors warned early on in the crisis: “There will be a natural tendency for
give to their external ties. As they do so, there is a risk that they will slip toward a
breakdown in international cooperation, and even toward conflict.”47
The concern underlying this prediction was that, once the emergency phase of the
crisis was overcome, and as governments tried to pursue the adjustments and reforms
needed to address the policy failures that caused the crisis as well as the political factors
that led to those failures, forces pulling away from internationally cooperative solutions
would be unleashed to the point that governments would minimize or ignore the
importance of fulfilling their commitment to cooperate. Since adjustment is never
painless, even for surplus economies, in each country domestic politics would push
toward shifting the burden of rebalancing to those foreign counterparts involved in the
disequilibrium to be corrected, and away from the needed domestic effort. This
circumstance reinforces the inherent political difficulty faced by governments in the
construction of global public goods such as those entertained in the G20 agenda.
There is a profound disconnect between the G20’s statement of purpose as laid out
in their initial meetings and what has happened with economic policy in the United States
and in the European Union. This points toward what may be a deeper obstacle to the
construction of the global public goods that are indispensable for globalization’s
sustainability: the limitations of each domestic political system, democratic or not, to
47 Frieden, Jeffry A.“The crisis and beyond: Prospects for international economic
cooperation,” Policy Paper No. 5, Politics, Economics and Global Governance: The
internalize the consequences of others’ policies on one’s own economic performance as
well as the ramifications of one’s policies on others’ performance.
Chapter 5
The domestic political economy of international economic cooperation
It is easy for observers to point out the desirability of all manner of international
cooperative ventures, and to bemoan the paucity of successful efforts in this direction.
But policymakers – the ones who actually need to undertake the cooperation – face limits
on their action. They have to answer to domestic constituents, for a policymaker who
ignores what his constituents wants will not be a policymaker for very long. This is true
in all political systems, inasmuch as they all have some social choice mechanism that
determines who influences policy and politics – from a tiny elite to the broad electorate. Governments will only make the sacrifices necessary to carry through on their
international obligations if they have domestic support for these sacrifices. And
constituents will only put up with costly and difficult measures if they are convinced that
the benefits – in particular, the benefits of sustaining the country’s international economic
commitments – outweigh the not inconsequential costs. If we are to have a clear sense of
the prospects for international economic cooperation, then, we need a clear sense of the
domestic political constraints under which policymakers are likely to operate. It is to this
that we now turn, concentrating on some of the main centers of economic influence: the
domestic political obstacles that can stand in the way of well‐laid plans for international
cooperation. The broad conclusion to which we are driven is that in virtually all cases, the
political incentives are heavily weighted on the side of focusing on domestic problems,
even at the expense of international ones.