Economic Effects on Soveriegnty

A detailed Summary of Economic Effects on Soveriegnty

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.

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 clai

Another problem with conflating economic and territorial sovereignty is the danger of ignoring the links between economics and other, non-territorial aspects of sovereignty. States have recently taken on the function of satisfying the economic well being of their peoples. As such, economic security and development can be an important source of political authority. Economic policies that are either too closed or too open to the international market can result in economic problems that can undermine the political authority of the state. Many Third World peoples consider their states to be 'captured' by international economic interests, which reduces the domestic political authority of these states. This loss of political authority can have very negative consequences for the sovereignty of a state. Lack of economic control (i.e., the inability of the state to regulate economic flows across its borders) can also result in a loss of political authority, in that states that lack control often also lack the respect of their peoples.

Approaches to World Politics for the 1990s. Lexington: Lexington, 1989.

Kratochwil, Friedrich. "Of Systems, Boundaries, and Territoriality: An Inquiry into

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 a

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