The Paradox of Globalization: The Trilemma and the Role of Institutions

Fundacja Dobre Państwo • January 18, 2026 • 🇵🇱 Polski

The Screen Door: Filtering Flows to Protect National Order

This article analyzes Dani Rodrik’s concept of the screen door—a metaphor for smart globalization that balances openness and protection. Rodrik argues that markets and states are complementary: markets cannot establish or civilize themselves without institutional frameworks. Readers will learn how institutions build the foundation for exchange, why hyperglobalization threatens stability, and what defines Capitalism 3.0. The key is understanding that globalization should be a tool for social goals, not an end in itself.

Rodrik’s Trilemma: The Impossible Triad and the Golden Straitjacket

The fundamental trilemma of the world economy posits that it is impossible to simultaneously achieve maximum democracy, national sovereignty, and hyperglobalization. Choosing deep integration forces states into a golden straitjacket—a state where politics shrinks to mere ritual, and democratic debates over taxes or labor standards are stifled by the demands of mobile capital. Such hyperglobalization leads to the depoliticization of the economy, replacing citizens' choices with technocratic market necessity. Rodrik warns: when social order clashes with globalization, national choice must take precedence.

The Evolution of Capitalism: From Smith to Smart Globalization

Economic history marks a transition from Capitalism 1.0 (the minimal state) through 2.0 (the Bretton Woods order) to the sought-after 3.0 model. This new vision is based on shallow multilateralism—flexible rules governing the interfaces between systems, rather than forced harmonization. Institutional diversity is crucial here, as no single universal development model exists. States must retain autonomy to pursue climate goals and sovereignty (green policy) and to protect local social contracts from external pressure to standardize procedures.

Financial Liberalization, Geopolitics, and the Proportionality Test

Full financial liberalization without global institutions destabilizes economies, much like building a roof without walls. Modern geopolitics necessitates shortening supply chains, which Rodrik calls smart globalization. However, critics point to the risks of protectionism and clientelism. Therefore, an internal screen door is essential—an anti-rent-seeking regime and state transparency that cushions shocks. Every barrier should pass a proportionality test: a public justification of goals and means, ensuring that smart globalization does not become a facade for inefficiency.

Democratic Legitimacy Stabilizes the Trading System

In a world of global flows, are we doomed to choose between isolation and a loss of agency? Democratic legitimacy is the foundation of stability; a system that ignores the voices of its citizens invites rebellion. The solution is Capitalism 3.0, which recognizes the right of states to protect their standards, provided they do not harm their neighbors. A proper "screen door" not only protects against the stings of speculation but also allows the fresh air of exchange to circulate, strengthening democratic agency in a world of irreversible interdependence.

📄 Full analysis available in PDF

Summary

This article provides an in-depth analysis of contemporary economic challenges through the lens of Dani Rodrik's theory. The author explores the concept of the trilemma, which posits a fundamental conflict between hyperglobalization, state sovereignty, and the democratic legitimacy of power. A key element of this discussion is the metaphor of the mosquito net, symbolizing institutional intelligence—the ability of states to reap the benefits of openness to the world while simultaneously maintaining protection from negative externalities. The text traces the evolution of systems from capitalism 1.0 to the postulated vision of capitalism 3.0, based on wise globalization and pluralism. The reader will learn why the 'golden straitjacket' limits political maneuvering space and how an anti-rentier regime can protect domestic markets. This is essential reading for those seeking to understand the mechanisms governing the contemporary economic order and the role played by strong, sovereign institutions within it.

Frequently Asked Questions

What is the mosquito net metaphor in the context of globalization?

This is a comparison of institutions and regulations to a net that allows you to use an open window (international exchange) while protecting the interior of your home from threats.

Why does Rodrik think you can't have democracy and hyperglobalization at the same time?

Because democratic debates on taxes or labor law are perceived as a risk by mobile capital, which forces politics to be limited to the lack of alternatives.

What is the difference between capitalism 2.0 and 3.0?

Capitalism 2.0 is the post-war order of the welfare state and the Bretton Woods system, while 3.0 is a proposal for wise globalization that recognizes the institutional diversity of countries.

What are the main threats to the concept of smart globalization?

The main risk is that security clauses (mosquito nets) will become an excuse for protectionism, clientelism and corruption within state structures.

What does Rodrik think about global financial markets?

He sees them as a crisis-prone system because their integration preceded the emergence of global supervisory institutions, which is like constructing a roof without walls.