States and State Systems After Globalism

* Book: Taking Back Control?: States and State Systems After Globalism. Wolfgang Streeck.

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Review

Justin H. Vassallo:

Streeck’s latest book, is ... invested in imagining a path out of the policy straitjacket jointly imposed by the Washington Consensus and Brussels. He outlines a renewal of social citizenship through reclaimed sovereignty, buttressed by cooperative multipolarity. In other words, a world system that safeguards democratically determined production and distribution against an agglomeration of power by either a traditional hegemon or supranational institutions.

Importantly, this isn’t an isolationist tract nor a rejection of universal values. Streeck is indisputably a believer in the universal imperative to restore social rights, affirm national self-determination, and fulfill the right to development. His contention, however, is that globalization demands what the libertarian economist Friedrich Hayek called “isonomy” for enterprise above all other human and political considerations. It thereby stifles or circumvents the means of open deliberation within polities regarding their economic choices; and it permits the continuous upward transfer of authority to “private hierarchies” and their allies among unelected bureaucrats and international organizations—all under the pretense of free markets, individual liberty, and freedom of movement.

How did these “private hierarchies” gain such unprecedented leverage? Drawing inspiration from the economic historian Karl Polanyi, Streeck considers how “the political institutions of states, especially their democratic institutions,” are intimately connected to “their system of foreign trade.” This dynamic, in turn, both shapes and is conditioned by the evolving “architecture of the surrounding global state system.” Since the late 1970s, this architecture has compelled states that wish to belong to the “US-led international community” to prioritize the interests encompassed by their expanding systems of foreign trade over other developmental concerns.

Hyperglobalization ensued, in which the far-flung supply chains of multinationals, along with an army of creditors, supplanted more politically endogenous and state-directed forms of development. The result often was the opposite of what was promised. As is now widely recognized even by some of globalism’s former apologists, the productive basis of shared prosperity in many communities was demolished through trade agreements, while the economic diversification of the Global South was obstructed by structural adjustment programs imposed by the International Monetary Fund and World Bank. The Hayekian demand to equalize market access between nations, though subverted significantly by China, may have flooded the world with goods at a scale inconceivable a half century ago; but for most it failed to equal, let alone surpass, the leaps in human welfare achieved by mixed economies.

Western societies’ acquiescence to this process reflected an odd mix of perceived self-interest and vague moral obligation. Streeck argues that “a notion of solidarity was smuggled into the public consciousness, by which the refusal of the working class” to compete globally “could be presented as a betrayal … of international solidarity.” This gave a certain moral cover to the depoliticization, in particular, of fiscal, monetary, trade, and labor policies. But it is also true, as Streeck has previously written, that the “attrition of the public sphere” compelled those who were dazzled by the possibilities of “post-Fordist affluence” to conform to market pressures when and where they could. Liberalization, after all, connoted yet new frontiers for growth and opportunity after the crisis of Keynesianism.

The common retort to Streeck’s critique is that the politics of globalization needlessly failed certain communities but that the net reduction in inequality between countries and multistate regions is a statistical triumph. Yet as Streeck illustrates, the China miracle at the heart of any qualified defense of globalization can’t mask what it was in practice: a more conceptually palatable version of trickle-down economics that briefly roused the optimism of voters before the evidence was in. “Since 1992,” he observes, “almost 50 percent of the imports and 30 percent of the exports of the American economy took place within firms, a proportion that is even more striking in the case of services alone.” Between corporate raiding, asset inflation, and oligopolistic consolidation, an unfathomable amount of global capital has been concentrated in a very few hands. As such, wealthy and once-industrializing countries have converged, not in impressive developmental outcomes, but stagnation.

Compare this to what was achieved in the social-democratic era and its American equivalent, the New Deal order. The mixed economies of Western Europe and North America were afforded some degree of autonomy from external market pressures, which therefore disciplined domestic capital (and foreign subsidiaries) to follow a pattern of fixed reinvestment, while limiting the concoction of speculative and arcane financial instruments; trade liberalization, though championed by the dominant wings of both political parties in Washington, was largely incremental and generally supported by working-class electorates on the basis that it would foster their mutual development and rising prosperity.

Streeck envisions emulating that earlier postwar model, but moving in a decidedly more autarkic and non-capitalist direction. Only the ideal “Keynes-Polanyi State,” he writes, “can be the instrument of the protectionism that every society wishing to remain one needs” (my emphasis). In his estimation, the threat posed by the current global economic regime to social cohesion and any sense of common purpose within countries can’t be exaggerated. As evidenced by the unrest and alienation that pervades the West, the maximally competitive world order that was reified after the fall of the Soviet Union through corporate-friendly international law and international organizations has made it nigh impossible for individual countries to preserve a social contract independent of the dictates of transnational finance and mainstream economists’ preoccupation with efficiency.

Accordingly, any renewal of social democracy must recognize sovereignty as a precondition of its goals. Arrangements that might punish economic predation, decommodify labor, and generally allow societies to reimagine the common good as something greater than, and even untethered from, conventional economic metrics—these can only succeed, in Streeck’s view, if the “foreign economy” is subordinate to the pursuit of internal collective needs. “Unlike the neoliberal state model,” he writes, “the Keynes-Polanyi state has a general preference for the greatest possible internalization of economic and operational interconnections, even at the expense of economic efficiency, provided that this can be offset by non-material gains of greater value.” He adds: “States on the Keynes-Polanyi model are protectionist in a strict sense, insofar as they are prepared to sacrifice economic values to protect non-economic ones, such as the minimization of collective external dependency or the preservation of a minimum of social stability and continuity.”

That focus on “external” dependence is crucial. Once democracies surrender control of their sectoral distribution, labor markets, and welfare policies to “universal” yet ever-changing metrics of efficiency and profitability, they have little choice over who they must exchange with. Nor, for that matter, do they have any meaningful discretion over which entities create employment and under what terms. Such openness allows multinationals to mercilessly conduct labor arbitrage throughout supply chains, encouraging a race to the bottom at home and abroad, while allowing transnational oligarchs and private equity to snap up vital resources, including housing and land.

The frequent conflation of openness with worldliness, however, is a powerful tool with which to smear all opposition to globalism as reactionary. This only further eases policy capture: In Streeck’s schema, greater openness, encouraged in public discourse as a matter of enlightened middle-class values, correlates with the insulation of economic governance from genuine public oversight. Our final traces of self-government, in short, become a mirage, tenuously perpetuated by routine elections of vanishing consequence.

Democracy, therefore, can’t survive unless citizens are able to substantially renegotiate their social contracts—and thus reassert the legitimacy of popular sovereignty. The best hope for this, according to Streeck, lies with smaller states and even possibly subnational, semiautonomous units. Yet the devolution of power away from the market’s centralizing institutions can only happen in an international system that encourages “regional planning” within and between states, free from the pressure to replicate market structures and legal systems. “Small-statism, or restored distributed sovereignty, as a way out of neoliberal stagnation,” Streeck writes, “requires a supportive international order.” Just as the democratic nation-state must affirm pluralism while maintaining the idea of the whole, so, too, must the state system respect heterogeneity in the world economy while still enabling, as the Old Left broadly intended, internal development within countries, as well as economic collaboration between them insofar that it befits stability and peace.

Such an alternative system, Streeck emphasizes, would be fundamentally different from the pseudo-internationalism of market integration as propounded by left- and right-neoliberals. Because of the premium placed on sovereignty, cooperation would be ad hoc and delimited; any greater continuous form of “interdependence,” however noble-sounding, would have to avoid reproducing the enmeshment of public bureaucracies and private hierarchies witnessed in the neoliberal era."

(https://www.compactmag.com/article/the-prophet-of-left-conservatism/)