These headlines, from the pages of the New York Times, Washington Post and Los Angeles Times, do not quite mark the death knell for national sovereignty - defined by Black's Law Dictionary as "the international independence of a state, combined with the right and power of regulating its internal affairs without foreign dictation" - but they indicate that it is critically ill.
The stories detail the drastic conditions - that will plunge Mexico into deep recession - which Clinton administration officials imposed on Mexico in the wake of the peso collapse, in exchange for a $50 billion loan package. The stories report on Mexican Finance Minister Guillermo Ortiz's "road show" on Wall Street, where he "pleaded" with investors to show faith in the peso and Mexico's austerity plans. They explain that the U.S.-sponsored bailout plan provides for the attachment of Mexican oil, the symbol of Mexican nationalism. They state that Mexican officials have made private commitments to their U.S. counterparts, ensuring that Mexican economic policy will be vetted by U.S. policymakers for the foreseeable future.
But the wrenching austerity inflicted on Mexico is only half of what the bailout signals about the demise of sovereignty. The other half of the story concerns the loss of U.S. popular sovereignty. The economic rescue plan was described in one Los Angeles Times story as "wildly unpopular with Congress and the U.S. public," and polls showed huge majorities opposing the bailout. With the exception of former Wall Street investment banker and current Treasury Secretary Robert Rubin and a few of his cohorts, it seems unlikely that the poll-watching, which-way-is-the-wind-blowing Clinton administration viewed the plan much more favorably. The Clinton politicos apparently felt no choice but to push a plan that could, at best, have no effect on the president's political standing, but, at worst, could undercut his performance in the 1996 elections.
That the Mexican bailout was implemented against the wishes of the people of the two main countries that were party to it is notable, but not unique. There is no shortage of examples of democracy failing in Mexico, or in the United States.
What is so important about the bailout from a sovereignty viewpoint is that neither Mexican nor U.S. government leaders felt they had a choice about what policies to adopt. The Mexicans knew that if they wanted bridge loans to pay off investors, they would have to submit to U.S. demands. And while U.S. officials acted in significant part to bail out friends on Wall Street, they also justified the bailout based on the belief that the fate of the United States is bound up with Mexico's, and that both countries must submit to the dictates of international financial markets.
Democracy is virtually absent from economic regulatory institutions. As a result, the global economy is being integrated in a way that denies people of individual nations the possibility of charting their own future. The start up of the new World Trade Organization will only intensify the problem, as an unaccountable international body is empowered to force changes in broad swathes of national health, safety, environmental and economic development programs and laws.
In the debates over NAFTA and GATT, many across the political spectrum dismissed concerns about the trade pacts' effect on national sovereignty. Many conservatives and liberals characterized sovereignty as an outdated notion which should properly be cast aside to embrace unfettered international trade and markets. Other liberals and many progressives argued that an emphasis on sovereignty interfered with beneficial international cooperation, and that promoting mutual interdependence would benefit all. Some, especially progressives, contended that, for better or worse, the forces of globalization are marching forward relentlessly and cannot be turned back.
It is time to rethink those notions. The Mexican peso debacle reveals sharp constraints on the scale and scope of democratic decision-making that can come with international trade, global markets and the sacrifice of sovereignty. It is possible to envision democratic structures for international economic management. Reigning in the global economy and rescuing sovereignty are important steps toward cultivating such democratic institutions.
Unless nations reassert their right to use the regulatory tools of a sovereign to control trade, investment and capital flows, the peso crisis will only be a harbinger of other disasters to come, as citizens and even government leaders find themselves unable to shape basic policy decisions.