​Why Borders Still Matter

It has been a constant refrain in recent years that, with globalisation, borders no longer matter. Supply chains are global. Capital is mobile across the world. Cashless payments systems cross borders. Pollution is no respecter of borders. Neither are infectious diseases. Data flows through the world wide web. Professionals connect through international networks.
 
One corollary is that small nations might as well pack up shop. Only the big brigades count (the US, China. India, Nigeria, Russia, the EU). Non-state actors are the future.
 
Yet, despite these assertions, borders are making a comeback. .Trite thinking ascribes the comeback to 'economic nationalism'. This blog gives seven  reasons why they still matter.

Seven reasons
 
People/identities
 
The boundaries of modern states are often artificial and arbitrary, the product of history, colonial or imperial, conquest and defeat. They contain people with many different overlapping identities. Even if history is shared, it is shared from different perspectives. Yet despite the arbitrariness and the diversity within, borders are more than an archaic relic of past nationalisms and more than a simple administrative convenience of use in combatting the spread of COVID-19.  Even 'globalists' will admit that borders still signal feelings of 'us' and 'them'. among the different associations people feel they belong to.
 
Chains and relationships
 
The image of the global supply chain for manufactures has become a commonplace. Chains are both broad, reflecting decisions to outsource related activities to other entities, and long spread-out, in cases where ownership, control and expertise is intended to be retained in-house throughout the chain.
 
Outsourcing requires trust in the outside supplier and confidence in contracts with them. Long chains are undermined if there is perceived to be a uncertainty about keeping control, including vulnerability to outside interventions, anywhere along the assembly line.
 
Thus, either uncertainty about keeping control, or lack of trust, or both, can destroy the logic of chain relationships. They argue for retaining activities in-house, and for close-to-home business relationships. With hopes of an ordered world in decline, we may have seen the peak of global chains and see instead a turn to the tried, trusted and closer at hand.
 
Capital flows
 
An enormous volume of private and public capital flows across the world each year. Nevertheless, transactions are not as seamless as they appear. In the case of private direct investment and private portfolio investment, the fly in the ointment, with apologies to flies, is ownership.
 
Ownership matters for two main reasons. First state ownership, or state connections to private owners, introduces uncertainty about business objectives and the possibility that non-business motives will influence behaviour. The managers of the private firm, or key investors, can no longer be seen to speak as principals, because a state relationship may pull the strings.
 
Secondly, ownership matters because it affects the way the managers of businesses formulate corporate objectives. Nowadays, corporate objectives include a commitment to good governance internally, and to environmental and social goals externally. The world is increasingly divided between those business that are committed to such objectives and those that are not. Investor appetites and market valuations reflect these divisions.
 
Money flows and data flows
 
Money flows readily throughout the world. There is increasing use of cashless payments systems. Digital currencies, promoted by private entities, or central banks, or both, are being developed.
 
What increasingly moves this world is not just the need for money transfers and foreign exchange, it is data gathering. Providers of services want and can obtain your personal data. They want to know, and need to know, about their clients; they can sell the information to third parties; they want and need to be able to authenticate transactions.
 
Consequently, it is a world increasingly shaped by public policies towards data gathering, storage and use. It is shaped by private and governmental attitudes towards the private sphere and its limits. These policies are not typically international, they are national or, in the case of the EU, regional. They are increasingly applied to entities outside the territory of origin. They are strongly influenced by whether or not a country is democratic. Thus, despite claims that the world of international money transfers is an anonymous seamless world, it is not. It is a world divided by data management policies that reflect political borders.
 
Knowledge
 
Knowledge knows no boundaries. Scientists working in particular areas, whether in AI or advancing knowledge of the human genome, start with broadly the same given body of scientifically accepted knowledge, and have to meet the same standards of evidence and proof in order to claim new understandings or advances.
 
What works against this general picture of a global platform for the world-wide diffusion of knowledge are three factors: first, is insecurity around claims to intellectual property; second, is the continuing importance of the locational ‘clustering’ of innovation as compared with the benefits of diffusion; third, is the extension of fields of inquiry that are said to involve national security and official secrecy. Each of these factors is a source of fragmentation.
 
The responses to pollution
 
It is also true that pollution knows no boundaries. Fully, multilaterally agreed targets to reduce pollution and to mitigate its effects are important. However, the responses to pollution remain defined by borders. This is for good reasons and for bad. The bad reason is that some jurisdictions can avoid meaningful policy responses to global targets by hiding behind their borders. The good reason is that the best policy mix will need to reflect different resource endowments.
 
The policy response will not only take endowment into account, it will also offer different blends of measures. Some will be market oriented, for example, emissions pricing and trading. Others will take the form of ‘command and control’ measures, for example the mandatory phasing-in of electric vehicles. For democratic countries ‘command and control’ is particularly politically contentious. The measures need to come from an acceptable source of authority. This is likely to involve home country authorisation and acceptance.
 
The web is global, content is not
 
It is unfortunately increasingly apparent that the ideal of a world wide web, where information is open and accessible to all, no longer pertains. The ideal has been sullied in part by the growth of false information and fake news, as well as the difficulties people encounter in trying to judge the reliability of sources, particularly social media. In addition, some governments simply are interested in content control as a means of exercising social and political control. Thus, for a variety of ‘public interest’ reasons, some good and some bad, the web is now regulated world-wide. Furthermore, regulation is likely to grow. Regulatory approaches reflect political borders.
 
The survival of the small and the legitimacy of authority
 
What the total picture adds up to is that our aspirations to live cosmopolitan lives in a fully connected, well ordered, global world remain far from reality. When liberal internationalists blame the resurgence of borders on economic 'nationalisms' they are wrong. Borders remain important for bad reasons such as social and political control and for good reasons such as to safeguard the integrity of transactions. There are more than 190 different countries in the world. Despite the growing importance of regional associations of states, the number shows no sign of decline.
 
The desire for social control and to protect and enrich ruling elites provides a ready explanation for why authoritarian and state-led market systems should want to enforce borders. What is more interesting is why borders remain important for democratic countries.
 
The underlying issue has to do with the justification of authority, or legitimacy. The key point is that there is no generally accepted approach to the legitimation of international authority. Even the EU has its so-called ‘democratic deficit’. This means that even where flows are truly global, such as in the case of pollution, international rulemaking and governance is not. At best, the efforts of the UN and its agencies mainly provide symbolic validation for global action.
 
The absence of a sense of legitimate global governance means that people in democratic countries look to rules whose content is coherent with their own political presuppositions, and to rulemaking that follows procedures congruent with the governance procedures they approve in their own polity. They find both coherence and congruence within their own systems. Borders still mark the boundaries of legitimacy.
 
The honeycomb
 
At the end of the 18thcentury when the social sciences and political economy were in their infancy, the behaviour of bees exerted a strange fascination. Perhaps the beehive still has allegorical value. Individual cells remain important for the structure of the whole.