Ideas Across Time by Igor Webb copyright 2008

Introduction

Economic Effects on Sovereignty Some commentators claim that in the modern world, medium-sized economies do not have economic sovereignty any more. Thus it is necessary to form large economic and trading blocks such as the EU in order to recover some economic sovereignty. There is some truth in the idea that modern medium-sized governments have less control than they did in the past. "From about 1930 to about 1970 governments had a historically unusual degree of control over their economies"(Walker 3). They could fix market exchange rates, limit imports through tariffs and quotas, control capital flows, and boost domestic production. In the 1990s capitalist governments have much less control. A government that attempted to control capital flows would receive much less international investment than more open competitor nations. Central banks cannot maintain market exchange rates against the will of private investors.(Thomson,25)

Discussion

Another way in which analysts confuse the aspects of sovereignty is through the conflation of territoriality and economics. The problem lies with characterizations of trans-border economic flows.

Questions related to trans-border control, as opposed to purely domestic issues, have also exercised states. The claims states have made with regard to authoritative control of movements of people, commodities, investments, and information, ideas, or culture across their international boundaries have changed across time and over countries. (Krasner 86) The question of trans-border flows of information, ideas, and culture will be dealt with below. At issue here is how economic sovereignty and territorial sovereignty interact. Put differently, how do trans-border economic flows affect territoriality? As is the case with political sovereignty, economic sovereignty has no direct effect on territorial sovereignty. To be sure, goods and capital move across borders, but these economic trans-border flows do not necessarily challenge how states recognize each other's borders or how states defend their borders. Indeed, it would seem that the ways in which international economic interactions have been organized and regulated, both on the state and international levels, has largely divorced economic sovereignty from the realm of territoriality.(Krasner,75)

One must not take this point too far however, as there are many important indirect interactions between economic and territorial sovereignty. For example, international economic flows can be an important source of revenue for the state. For example, tariff collection from imports, foreign exchange from exports, and an increasing domestic tax base from production for foreign markets, to name a few. Some of these revenues ...