Sovereign states thus enjoy a clear advantage over the multi-nationals in the struggle for power. However, the picture grows complex when we look at the relationship between states and the major institutions of the global economy, such as the World Trade Organization, the International Monetary Fund, and the World Bank. The anti-globalists portray these bodies as a world government of sorts, driven by an uncompromising, neo-liberal ideology—the Washington “consensus,” as it is sometimes called—that is inspired by the United States and run, ultimately, according to the interests of big business.

These are harsh criticisms, but far from the truth. In contrast to the impression its detractors try to make, the WTO is in fact a relatively weak institution with insufficient authority even to enforce its will on member governments. The organization’s decision-making process, for example, usually requires a consensus of all member states, none of which are obligated to honor agreements into which they did not enter voluntarily. Even in its role as an arbitrating body, the WTO has no independent powers of enforcement. At the most it can declare a particular country to be in violation of an agreement, and permit the imposition of trade sanctions against it by the aggrieved country. In any case, the organization’s authority relies more on its prestige than on any pressure it can bring to bear of its own accord.⁵¹

Countries usually join the WTO out of clear self-interest. This is especially true for small or poor countries—and not only because of the trade opportunities that membership provides. The WTO also offers protection from the avarice of larger economic powers. In one instance, the WTO impelled the United States to remove restrictions it had imposed on the import of underwear from Costa Rica; on another occasion, it supported Ecuador in its battle against the banana-importing policies of the EU; and this September, the WTO ruled, in two separate cases, that America’s cotton subsidies and European sugar subsidies were illegal and had to be substantially revised.⁵² Lately, developing countries also began to assume a much more active role in the organization’s decision-making, forming a united front against the dictates of the large economic blocs. This was in evidence at the WTO ministerial conference held in Cancun in September 2003: The U.S., the EU, and Japan found themselves arrayed against an alliance of Asian, African, and Latin American countries that refused to accept the economic powers’ agenda, and instead presented them with their own list of demands. The conference ended with no concrete achievements, and the extensive discussions that followed have yet to produce any real progress on the topics under dispute. But the continuing crisis amply demonstrates that the arena of global trade is not a playground in which the strong have free rein.⁵³

The failure of the Cancun talks attests to substantive problems in the decision-making process of the WTO. Yet, the organization does provide a degree of order, and even impartiality, that international markets require. Either way, however, the WTO merely acts as a traffic cop for world trade, and not as its driving force. Globalization would certainly continue without it, although likely in a more aggressive form.⁵⁴

The relative weakness of the WTO explains why it poses no real threat to national autonomy. The IMF and World Bank, on the other hand, are a different story. In theory, at least, they possess the wherewithal to pressure nations into complying with their demands.⁵⁵ Both organizations’ leverage is financial: The IMF, founded in 1944 to ensure the monetary and financial stability of the international system, has to date granted loans to 87 countries totaling 107 billion dollars;⁵⁶ the World Bank, whose goal is to reduce economic disparities on a global scale, has dispensed 18 billion dollars to developing countries.⁵⁷ This aid was, of course, far from unconditional: Countries receiving support are required to take concrete measures towards economic recovery. IMF and World Bank officials believe that they are simply acting responsibly to assist countries in need; anti-globalists see it as a form of bullying.

The IMF in particular enjoys little sympathy from either the Right or the Left. The organization’s most outspoken critic is Joseph Stiglitz, who won the Nobel Prize for economics in 2002 and was chief economist of the World Bank until he was ousted in 1999. Stiglitz maintains that the Fund often achieves the opposite of its objectives: Instead of helping countries deal with economic crises, it exacerbates their plight. The reason, he claims, is that the IMF insists on applying the same prescription to every country for every ailment—a reduction in government spending, a hike in interest rates, the liberalization of commerce, and sweeping privatization—without taking into account the unique conditions of each economy. Argentina, for example, satisfied the IMF’s requirements, only to find itself knee-deep in economic quicksand as a result of huge foreign loans that made it vulnerable to sudden shifts in the world financial markets.⁵⁸ An economy should only gradually be exposed to global market forces, Stiglitz says, and then in a measured way, under careful government supervision and direction. In any case, this exposure must be done willingly, and must be in keeping with the specific needs of each country.⁵⁹

Stiglitz’s scholarly achievements and vast experience lend his opinions a certain gravity. Yet even he, like other critics of globalization, paints only a partial picture. A vivid example of this is how he portrays the case of Russia. Stiglitz blames Russia’s economic woes between 1989 and 1998 on its capitulation to IMF dictates. Russia was forced, he claims, to undergo neo-liberal “shock therapy” that resulted in utter failure.⁶⁰ Yet this is a problematic description of what happened. Russia never capitulated to the dictates of the IMF. On the contrary, although it received loans from the IMF in excess of 25 billion dollars, it systematically reneged on its reciprocal obligation to take the economic steps necessary for recovery. According to Andrei Illarionov, Director of the Institute of Economic Analysis in Moscow, the generosity shown by the IMF in granting loans to the Russian Federation in fact “reduced the willingness of national authorities to make painful but necessary changes in economic policies.”⁶¹

In truth, the weakness of the IMF lies not in the assertiveness of its policies, but rather in the inordinate generosity and weakness of will it demonstrates in the face of irresponsible governments. Global financial institutions’ eagerness to justify their existence by disbursing funds sometimes hinders the performance of market forces instead of improving it. But if anyone was doing the exploiting in Russia’s case, it was not the IMF; as other countries have done in the past, Russia’s actions amounted to milking the fund for all it was worth. There is indeed legitimate cause to question the need for supra-national institutions to supervise and control the international movement of capital, since the damage that such pretension causes is often greater than any potential good. However, the anti-globalist warnings about the creation of an all-powerful “world government” in the thrall of global capitalism are baseless. Such a universal regime does not exist, and it is very unlikely that it ever will.

In the meantime, however, rumors of the death of the sovereign state are premature. Sovereign states continue to wield wide-ranging powers both internally and externally,⁶² to play a central role in the international arena, and successfully to defend their vital interests against supra-national agencies and multi-national corporations alike.⁶³ It is true that globalization facilitates the movement of goods, technology, and people between countries. But global economic integration has not yet made borders a thing of the past. The United States and Canada, for example, are signatories to a free-trade agreement, but their common border still carries a great deal of economic significance: The volume of Toronto’s trade with Vancouver, for example, is ten times that of its trade with Seattle, even though both cities are just as far away.⁶⁴

To be sure, in the age of globalization, the state no longer functions in a political environment inhabited solely by others like itself. In the emerging global order, every country is expected to recognize other centers of power, both national and international, public and private—including the United Nations and its affiliates, NGOs operating worldwide, multinational corporations, and mass media. Nevertheless, the state maintains its place at the center of this complex system as the principal source of governing power, which it delegates both “upwards” to international bodies and “downwards” to sub-national agencies.⁶⁵ Under these conditions, the sovereign state is certainly not the only player on the political field, but the game, with its ever-changing rules, could not go on without it.