Conceptions of Politics and Economics in Post-States and Markets IPE The World Turned Upside down?

Globalization and the Future of the State by R. J. BarryJones; Contesting Global Governance: Multilateral Economic Institutions and Global Social Movements by Robert O'Brien; Anne Marie Goetz; Jan Aart Scholte; Marc Williams; Privatization, Corporate Governance and the Emergence of Markets by Eckehard F. Rosenbaum; Frank Bnker; Hans-Jrgen Wagener; Governance in a Globalizing World b ... Review by: Ben O'Loughlin Review of International Political Economy, Vol. 9, No. 2 (May, 2002), pp. 401-412 Published by: Taylor & Francis, Ltd. Stable URL: http://www.jstor.org/stable/4177426 . Accessed: 10/11/2011 13:51
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Review of InternationalPolitical Economy 9:2 Summer 2002: 401-412

a]Routledge
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Review Article
CONCEPTIONS OF POLITICS AND ECONOMICS IN POST-STATES AND MARKETS IPE

R.J. Barry-Jones, The world turned upside down? Globalizationand thefuture of the state, Manchester: Manchester University Press, 2000, 292 pp, ISBN 0-7190-5101-0. Robert O'Brien, Anne Marie Goetz, Jan Aart Scholte, Marc Williams, Contesting Global Governance:Multilateral EconomicInstitutions and Global Social Movements, Cambridge: Cambridge University Press, 2000, 260pp, ISBN 0-521-77440-3 Eckehard F. Rosenbaum, Frank Bonker and Hans-Jurgen Wagener (eds) Privatization, CorporateGovernanceand the Emergenceof Markets, Basingstoke: Macmillan, 2000, 284 pp, ISBN 0-333-77892-8. Joseph S. Nye and John D. Donahue (eds) Governance in a Globalizing World, Washington, DC: Brookings Institutions Press, 2000, 386pp, ISBN 0-8157-6408-1. In the light of a discipline labelled 'international political economy' it is worth asking what an established IPE-ist refers to by the political and the economic.Notwithstanding the promising directions open to IPE scholars, such a basic question can be overlooked. But recourse to the abstraction of concepts can take us to the heart of what IPE is about and for, and allows us to situate current literature within the discipline's canon. Such an exercise, furthermore, allows us to distinguish between positive and normative propositions in IPE. Until the end of the Cold War, and for a few years after, the matter was relatively straightforward: in international affairs politics was something done by states, economics the behaviour of market actors belonging to states, or of states themselves, acting independently or jointly. It was perfectly appropriate for Susan Strange (1988) to title her introduction to IPE States and Markets.Since then three broad steps or 'generations' of conceptions of politics and economics have emerged: first, the globalization debate; second, managing governance or politics lost; and third, politics regained. After drawing out conceptions implicit in these
Review of International Political Economy

ISSN 0969-2290print/ISSN 1466-4526online ? 2002 Taylor & FrancisLtd http:/ /www.tandf.co.uk

DOI: 10.1080/09692290110126155

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generations we shall assess how four books recently published, each with a different focus and intent, 'fit in', challenge or enrich these prior underlying conceptions of politics and economics, and where this leaves our understandings of politics and economics in IPE today.' The focus of enquiry for the First Generation was globalization, and a polarization swiftly emerged. On one side globalist gurus gleefully described and prescribed the transfer of power from state to market, citing whirlwind forces of change exogenous to the state - a liberating synergy of information and communication technologies (ICTs) and financial deregulation - rendering national borders less relevant and the nationstate in retreat (Strange, 1996) or at an end (Ohmae, 1995). The globalist analyses sought to describe a powerful logic: exogenous forces and neoclassical economic 'facts' left the state with 'no alternative' but to adapt, which reinforced, concretised and legitimated this view of globalization. This view was denied by localists, for whom 'globalisation [wa]s not new' (Krasner, 1994: 13). Control remained with the state - and should remain with the state to preserve fairness through welfare and to constrain market volatility. Insofar as 'globalisation was an accurate model, financial deregulation had been a deliberate state policy' (Helleiner, 1995), production had remained home-state oriented rather than de-territorialized (Hirst and Thompson, 1996; Ruigrok and Van Tulder, 1996; Weiss, 1998), and indeed technological and business development were a function of national institutional and social arrangements (Zysman, 1996). For both globalists and localists politics meant states and economics referred to markets. Both theories posited a zero-sum battle between two separate spheres of activity. Second Generation approaches converged around one model of statemarket relations, based upon Cerny's (1993) 'competition state', and recognized that this model now existed within a more complex, multilevel, multi-actor IPE. Previous hubris and selective use of data calmed, as writers from both globalist and localist camps acknowledged the mutual benefit derived from the interplay of market and state power. As had long been the case, but for a while forgotten, states depended on market actors for wealth, employment and status, while market actors needed states to provide infrastructure, a competitive culture and a generally 'efficient economic system' (Dunning, 1997: 118; Porter, from Gibson (ed.) 1998). However, the state was no longer the sole provider of these 'governance' functions - globalist writers pointed to non-state (private, NGO-led or cyber) governance (Sassen, 2000), while localists such as Hirst and Thompson (2000: 69.) conceded the state was now a locus holding together a 'sutured' architecture of sub-, inter- and suprastate actor governance. For the Second Generation then, politics and economics remain separate spheres, but were no loner thought to be in zero-sum conflict, or to feature only unitary states and market actors. 402

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A more complex picture was recognized, but no advance was made on what politics and economics are, or how they work. Indeed, politics relabelled 'governance' - shrank to a matter of managing-away conflict and instability.2 A conceptual advance comes from Third Generation approaches. Here, networks and institutions are the key units of analysis, taking us beyond markets acting on states or they on markets. For example, the social contests within a British firm will cause the firm to choose a strategy reflecting the UK societal context as well as members' perceptions of the international environment (Amoore, 1998). Instead of state or market power, a Third Generation approach would discuss political and economic power played out across public and private governance institutions by public and private actors with cross-cutting interests. Where states were the concrete realization of politics, now politics is realized in new diffuse (less democratic) ways, and where markets were the concrete realization of economics, now it is suggested that the exchange of resources depends on the interaction of groups of people, each with differing power, within institutions. This is not to reduce politics and economics to one phenomenon, rather that within this 'ensemble of governance' (Underhill, in Lawton et al. (eds) 2000: 118.) there is a tension or balance. For example globalisation's challenge to the state was not due to exogenous forces, but due to private interests - market actors with a neoclassical belief in unchecked market expansion and an interest in open borders - using their influence within governance networks to push deregulatory policy. Changeis central to Third Generation approaches:3 first, if private interests can gain asymmetrical advantage within policy networks this could also be reversed; second, 'soft' power and the importance of perception rather than coercion allows the usurping of traditional power-players - offering emancipatory and democratizing developments to emerge; and third, politics cannot be designed away through optimal governance. The reconsideration of positive propositions revitalizes normative challenges to the prior conservative emphasis on status quo-preserving management. As his title suggests, Barry-Jones' The world turned upside down? Globalizationand the future of the state is a Second Generation piece of thinking which often concerns itself with First Generation questions. According to Barry-Jones the concepts of globalization, the state, and debates concerning them are unclear, and his task is to clarify these muddy waters, without taking up a clear position himself. Chapter 1 sets out this triple whammy of complication: first we are told that the modern state is a varied and debatable institution, in practice and in principle, and that this complicates any discussion of globalization's impact on 'the' state. We are told, second, that the globalization debateis equally varied, the extremes of utopianism and rejectionism bordering a more reasoned 403

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debate between those who believe recent changes constitute a new, 'strong globalization', and those favouring a 'weak globalization' or internationalization. Barry-Jones completes the picture of confusion by noting that evidence be used to support either position, making a conclusion can impossible. He uses the rest of the book to address the evidence anyway. To exemplify his method of assessing evidence to raise questions, Chapter 2 asks whether globalization is anything new (a questioned asked by First Generation localists), historically comparing the current so-called globalization era with late nineteenth-century internationalization. Both eras featured one hegemon, technological innovation, rapid growth of international trade, financial integration, increased migration and growing inequality between states and social groups. Novelty is the key to the globalization thesis however - the compression of time and space bring a qualitatively different world. To conclude the comparison Barry-Jones leaves the question of novelty hanging: he asks what consequences must be realized for such a qualitative shift to occur? Until it is established whether a qualitative shift has occurred, a more useful question would be whether 'history' is best utilized by mere point-bypoint comparisons. Addressing the roots of globalization (Chapter 3) Barry-Jones includes a range of factors - states, technology, economics and market actors, and social and cultural sources. In his analysis, the decisions and nondecisions of the post-war (mainly US) state was the major causal force behind globalization, e.g. failure to constrain MNCs or develop financial regulation. Multilateral pressures were state-led - states set the agenda, developed rules, and implemented and blocked policy. BarryJones recognizes the 'asymmetry in state power and subsequent process' (p.64), i.e. state power was diffused to other actors, but he underestimates the continuity of complexity. For example, 'US decisions' can be disaggregated to show that the construction of Bretton Woods and the Cold War Balance of Power were the outcome of a coalition of actors within the US - the corporate sector, conservative politicians, and military strategists - seeking to redefine the politicaland the economicin their interests. The political in this discourse became the inter-national, building up the US military/industrial complex and its European allies to oppose the USSR, while the economic became the global, integrated i.e. world markets, a revived European market and general support for big business over socialism and trade unionism. This more rigorous explanation of US strategy, a strategy labelled 'patriotic internationalism' by Jim George (2001), emerges from a Third Generation notion of people in networks or institutions. Barry-Jones almost picks up this idea, noting that MNC decision-making is down to a small group of people and therefore globalization lies 'firmly within the realms of human deliberation and choice' (p.71), but fails to apply this more widely. 404

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The author himself appears pessimistic for future governance. He argues the state has been weakened, able only to accommodate external pressures. The subordination of popular will undermines the legitimacy and support of democratic states, and a weakened state enfeebles interstate institutions at a time when 'alternative agencies' (p.115), i.e. NGOs, are even less representative and lack the resources to enforce rules and regulations. Yet Barry-Jones misses his own point concerning the varied capacity of states to deal with varied globalization: the US has a dominant influence within the Bretton Woods Institutions of the IMF, World Bank and WTO, and is pressing ahead with National Missile Defence. Precision is needed in terms of how different states are affected differently, so that we might know how states - in conjunction with other non-state actors - can set about fulfilling necessary governance functions. The value of Barry-Jones' emphasis on the varied nature of globalization almost emerges when he suggests this unevenness 'has potentially profound implications for humanity' (p.80), but this allusion to inequality is never fully pursued. By contrast, the first page of O'Brien et al's

GlobalGovernance: Contesting Multilateral Economic and Institutions Global

Social Movements stakes an interest not just in academic debates but in the people 'on the receiving end' (p.1) of the policies of multilateral economic institutions (MEIs). As well as a deeper normative concern, this book defines its purpose and method exactly. Through a series of case studies between specific MEIs (IMF, World Bank and WTO) and specific global social movements (GSMs) (environment, labour and women's movements) the authors investigate this 'collision' between two key agents of governance, in particular disputes over the emerging form of MELs,and over the content of their policies. The outcome of this collision has been the emergence of a 'complex multilateralism' with institutional change moving much faster than policy change. Complex multilateralism is evident from five findings of the book's case studies. First, in response to civil society actors, institutional change has varied. Second, the major participants are dividedby conflicting goals and interests, leading to, third, ambiguous results as all participants can enjoy only limited success. Fourth, the collision has had differenteffects on different states, strengthening the strong and weakening the weak. Despite this, fifth, the authors find the policy agenda has broadenedto include more social issues. Clearly in this book we are in the realm of a Third Generation approach, concerned with different actors working together in a positive sum manner to achieve differing but not antithetical outcomes through a changeable institutional architecture. O'Brien et al. provide an excellent introduction to those not immersed in MEI or GSM literature by unpacking two analytical categories. A focus on GSMs offers an analytical space to civil society, though there is a 405

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qualitative difference between national and global social movements, GSMs being less cohesive or uniform, e.g. the Southern contingent of a GSM will have fewer financial resources, be more suspicious of states, and with many different interests to their Northern allies. The authors develop the concept of 'global civil society' but concede that society in many regions is neither civil nor developed, and can be an arena of conflict as much as cooperation. The diffuse nature of GSMs as institutions makes researching these global entities a problem, e.g. there are no 'representative' interviewees. This academic distraction unwittingly sheds light on a real problem - the lack of clear lines of accountability in GSMs - and while the authors seek to include the wide group of people and organisations comprising a GSM their focus on NGOs represents a tacit admission of the undemocratic nature of these movements. The positive sum nature of the MEI-GSM relationship is crucial, both sides realizing they need the other in some way. Each MEI needs GSMs for different reasons: the World Bank because its projects are most effected by the disruptive or cooperative efforts of GSMs; the IMF engages with civil society to counter criticisms and 'educate the public' to the wisdom of Structural Adjustment Programmes (SAPs); and the WTO engages with labour and environmental groups to get the support of strong states in which GSMs are influential. In contrast to MEI concern with the management of governance, GSMs engage with MEIs to change their direction and policy, and because MEIs increasingly establish development orthodoxy ahead of other state and non-state actors. So far MELs have gained more from the engagement, their goal of smooth management and the blunting of opposition being more achievable than the longterm transformation GSMs seek - an 'uphill struggle' (p.224) the authors concede. Politics and economics are closely linked within complex multilateralism, for example the IMF's use of SAPs is a political decision utilizing economic sanctions to bring political reform and cultivate economic markets. If GSMs and MEIs are part of how politics works today then clearly politics is much more than state activity, and is much less democratic than state activity could be. Yet the role of GSMs offers, if not in a clear and accountable manner, voice to near-continents of people previously excluded from political decision-making. Economics has finally become much more than a matter of markets. Rather the exchange of resources is broadened and socialized: MEIs both shape market activity and act as agents of redistribution, while GSMs can represent the economically vulnerable, challenge dominant economic ideas, and undermine or support MEI activity, thus affecting economic outcomes. Finally, for O'Brien et al. to describe the MEI-GSM relationship as a 'collision' reminds us that regardless of attempts to manage activity, trade-offs and change are inevitable. 406

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The socialization of economics, or rather the re-recognition that all (economic) relations are embedded4 in social and political relations, burns

throughout Rosenbaumet al.'s Privatization, Governance the and Corporate

Emergence of Markets. A Third Generation book which all economists should read, the authors analyse the unique and unprecedented privatization programme underway in Central and Eastern Europe and destroy a number of assumptions. First, privatization is not a genuine economic objective: if the ultimate objective of the economic transformation is the improvement of economic welfare through increased competition and an efficient division of labour, the implementation of competitive markets is what matters most, and the role of privatization must be seen in the light of its relationship to that goal. (2001: 1-2) The recession that has hit transformation countries shows that swapping planning for private ownership - one co-ordination mechanism for another - will not guarantee spontaneous market emergence or successful market development. Further, the authors add, China now features competitive markets without privatization. Second, privatization, markets and market institutions are a political project, the outcome of political decisions, and in transformation countries an explicitly stated objective (with the implicit objective of making capitalism popular). Chapters 2 to 4 show how privatization has varied across transformation countries: in Poland privatisation was slow due to a strong, centralized state; in East Germany privatization proved expensive, hijacked by politicians and used as a tool of regional and social policy; and in Hungary, Poland again and the Czech Republic privatization revenues varied not due to volume of sales but because of policy design. Thus an 'economic' process is bound in political relations. The book's second section - exploring whether privatization improved corporate governance - yields no real pattern or conclusion. However, the third returns to whether the creation of an institutional framework through privatization and general economic restructuring really led to the spontaneous emergence of markets, as in neoclassical economic theory. The answer is negative: preconditions do not beget markets, rather the building of market institutions and learning of market behaviour emerge alongside and throughmarket activity. As Chapter 14 explains, this is because the market mechanism is a communicative network whose operation depends upon the knowledge participants have about the network. For example, the actual financial transaction in a market economy is only the final stage of a long, decentralized process of offers, haggling, negotiating, being aware of other commodities available and their prices, and being aware of rival buyers or sellers and their preferences. 407

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A market transaction, then, is founded upon information, knowledge and mutual learning. Markets satisfy a formal definition of networks because they exist as 'patterns or regularities among interacting units' (Wasserman and Faust, 1994: 3, from Rosenbaum et al. (eds.) 2000: 226) and because 'communicative' market relations cannot be analysed by examining individual units in isolation. The emergence of markets is an incremental process dependent upon participants' 'structural knowledge' of a market - knowledge of prices, the reliability of those supplying information on prices, and knowledge of participants' own position within the network. Thus if participants have great structural knowledge of a planned economy, they will have difficulty adjusting and furthering a new market economy as they have to build up new communicative relations. Using the twin concepts, communicative network and structural knowledge, Rosenbaum et al. explain why once planned economies in the transformation economies of Central and Eastern Europe were ditched, markets did not spontaneously arise, but rather the process is a long, varied and often painful one. Not only does their book explain a historical process, but from this unique experience generalizations concerning 'the market' enrich the Third Generation views of economics. Economics becomes the exchange of information across networks of actors, where trust, knowledge and communication determine both price specifically and outcomes generally. The fourth book in question takes us full circle. Where Barry-Jones asked well-worn questions regarding globalization and the state, O'Brien et al. not only added extra actors but showed how they worked together in specific cases, and Rosenbaum et al. took up this notion of agents in networks interacting according to communication and knowledge. In Governancein a Globalizing World, Nye and Donahue (eds) address all these issues in a book that perhaps best represents, of those reviewed here, where IPE is in 2001, from which we can interpret what politics and economics mean at this moment. In their introductory chapter Keohane and Nye begin with Barry-Jones' old conundrums, but purport, by way of analytical certainty, to settle the questions. This analytical certainty extends to three instances. First, globalization and de-globalization are the processes of increasing or decreasing 'globalism', where globalism is a condition - 'a state of the world involving networks of interdependence at multicontinental distances' (p.2). Where the authors' old interdependence concept (1977) referred to single linkages, globalism refers to networks or multiple relationships on a greater scale than locality, nation-state or region. Second, globalism is constituted by several (analytical) dimensions - economic, environmental, military, and social and cultural - allowing a more subtle reading of international affairs, e.g. we cannot simply say 'globalism rose/fell from 1914-45', rather military globalism increased while economic globalism 408

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decreased. Third, where Barry-Jones was unsure whether globalization was new, Keohane and Nye borrow from Held (Held et al., 1999: 21-2.): 'The issue is not how old globalism is, but rather how "thin" or "thick" it is at any given time'. The Asia-Europe Silk Road represented thin globalism as it involved a small group of traders selling to an elite market, while the thick globalism of today sees multiple, intensive and extensive relations affecting many people. Globalization is thus a thickening process featuring increasing density of networks, institutional velocity and transnational participation. That we have arrived at thick globalism is evident from increasing 'network effects', e.g. expansion of trade (economic globalism) has created new employment and pollution in developing countries (social and environmental globalism), causing MEIs to introduce new social and environmental regulations (economic globalism), creating resentment in developing countries (social globalism). These new synergies make the world more unpredictable, indeed inherently uncertain, being composed of human beings5 trying to survive and prosper in a competitive environment. Rather than any global government, the current and immediate form of global governance for Keohane and Nye is 'network minimalism', networked because that is simply how activity proceeds - multiple actors working in a more or less co-ordinated way - and minimalist because global institutions should not intrude too far into the state's jurisdiction. Within the positive analysis, then, lies the normative point concerning the need for accountable and legitimate institutions, a role they feel only the state can fulfil for the foreseeable future. Rather than simply adding new actors to the mix of governance, the authors argue we are witnessing 'not the obsolescence of the nation-state but its transformation and the creation of politics in new contested spaces' (p.13). The fact that we have not reached markets so perfect that the state is sidelined is a 'useful inefficiency' (p.15) as it allows domestic institutions to evolve in a controlled manner working in conjunctionwith non-state actors in networks. Thus politics remains, contest continues, but in a transformed manner. Design is a crucial aspect of this transformed politics, and while the problems of the current design of governance institutions are discussed in many chapters of Nye and Donahue, this raises wider questions about the nature of design and conflict within the realm of politics. In Cognlianese's chapter she begins by asking 'how does the choice of institutional form influence the effectiveness of institutions in solving regulatory problems associated with globalization' (p.298)? The design of institutions not only affects how well they can deal with global problems, but also whether states support those institutions, resulting in a tradeoff: how can MEIs reassure states yet derive the necessary independence? Equally, in discussing the downfall of the 'club' model of multilateralism 409

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- i.e. rich country ministers meeting in private to decide global rules Keohane and Nye look at the current multi-actor landscape and ask 'how do you get everyone into the act and still get action' (p.27)? It is thus impossible to completely design-away conflict. Similarly, designing away the problems that are the focus of current conflict will only create new problems. For example, the consciousness of global problems partly created the need for global governance institutions, but the 'democratic deficit' problem then arose. Were this to be solved, new power relations would exist which would be problematic for some, e.g. an alteration to global core-periphery relations, more pressure on global institutions from an emergent global demos, less technocracy may affect the quality of decision-making, less national allegiance may bring instability, and so on. Were it not a zero-sum metaphor, we could perhaps label the pushing of conflict from one issue to another 'political hydraulics'. It is regrettable that this offers no salvation to social scientists wishing for predictive power. A contradiction between inherent uncertainty and trade-offs versus the desire to somehow manage and improve world affairs is present in Third Generation approaches such as O'Brien et al. and Nye and Donahue, and while it may provide a 'get out of jail card' in terms of absolving responsibility for predicting the next financial crisis or regime collapse, the question must be posed whether all scholars and agents of governance can do is learn from history and keep redesigning. Yet the epistemologyof the Third Generation softens this blow, underlines the conceptions of politics and economics we have drawn from these books, and in doing so offers hope to those wishing for more than just refinement of global management. In particular Rosenbaum et al.'s notion of markets as communicative networks existing through the structural knowledge of participants contributes to our understanding of politics and economics as processes constituted by agents perceiving and responding to structures and those structures being constituted by the actions and perceptions of agents (Amoore et al., 2000). Further, one could optimistically argue that this epistemologicalmove mirrorsactual change in the perceptions of those involved in running the global economy. Third Generation notions that history is a non-determined process and institutions a product of the human mind are not actually new - Vico wrote as much in the eighteenth century (Cox, 1981) - but it is a major step to recognize that this epistemology reflects a real challenge to orthodox policy over the past decade. Where markets were thought to be spontaneous and inevitable, now it is recognized institutions must first be nurtured. Where states were believed to be the natural unit of power, now governance is understood to be diffuse (with democratic implications). Where firms were thought of simply as profit-maximizing units, now corporations are thought to have an obligation to accommodate social and 410

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environmental responsibilities. Where NGOs existed only to represent neglected groups and issues, now their support can often be necessary for policy approval and implementation. Reconsideration of positive propositions, through this epistemological lens, revives normative possibilities in IPE. A further cause for optimism regarding future change in institutional form and policy is the changing nature of power entailed by these altered conceptions of politics and economics. In communicative networks and cross-institutional interactions the outcome of processes is not determined as much by traditional power resources - economic wealth, military might, natural resources - as by knowledge, expertise, and manipulation of Western public opinion. Of course Western states and firms have greatest access to these resources of indirect power, but not a monopoly. Yet if politics has been transformed and economics reconsidered in the last decade alone, if functions have been abdicated and not fully fulfilled, if the nature of power alters the capacities of actors old and new, then there is all to play for in the world of IPE. Ben O'Loughlin New College, Oxford NOTES 1 It should be noted that the three generationsare analyticalcategories used to illustrateevolving conceptionsof politics and economicsin IPE.The actual evolution of the literatureis more messy in both content and timing, e.g. some literaturecould be interpretedto fit into several generations,or some First Generationliteraturewritten after Third (if the author is particularly myopic or stubborn).
Higgott (2000) argues a post-Washington Consensus agenda has emerged in which the term 'global governance' is merely part of a new discursive construction in which the global economy is a neutral space to be managed rather than inherently conflictual. A number of buzzwords are being assimilated into this discourse, e.g. civil society, transparency, social capital, and financial architecture. This is not to argue that any type of change - for example 'progress', 'development' or any teleology - are inevitable, rather change per se is inevitable. For the embeddedness of economic relations in social relations see also Gallarotti (2000), and Granovetter (1985) for the original use of the concept. This could raise questions for political theorists and philosophers regarding the nature of human nature and its implications for governance. Designing governance privileges notions of the improvable, rational human being, while if we perceive humans as selfish animals competing in a Hobbesian state of nature, conflict is inevitable.

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REFERENCES Amoore, L. et al. (2000)'Paths to a historicizedinternationalpolitical economy', 7:1. Reviewof International PoliticalEconomy, Amoore, L. (1998) 'The Contested Firm:Production,Work and the Challenges
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