State, Democracy and Ethnicity in Global Political Economy

There has hardly been a subject more debated in the last two decades than the transformation of the state under the dynamics of neoliberal globalisation. This debate concerns primarily the changing role of the state as a framework for collective action. Although the debate has been very diversified and impossible to reduce to simple dichotomies, one of the most conspicuous divisions is contained in the question whether, under the structural constraints of neoliberal globalisation, the state is losing its pre-eminence as a framework for the articulation and deliberation of power (Castells, 1996; Slaughter, 2005; Strange, 1996) or whether it is undergoing structural and functional transformations, but thereby still remaining a fundamental unit in the global restructuration of power and political decision making (Wade, 1996; Weiss, 1998). Most of the concerns in this debate are not new. Questions about the structure of the state and its power, its apparatus and institutions, its function and its role within a world system, and the relations between the state, the society and the economy have long been some of the central problems of the modern state theory. Some of the suggested solutions have divided the state theory into approaches and schools of thought which have existed since the 17th century. From these early debates, which were sharpened and diversified during the 19th and 20th centuries, paradigms and approaches of continuing relevance for the contemporary state theory have emerged, such as realism and neo-realism, institutionalism and neo-institutionalism, Marxism and its neo- and post- variants, the economic sociology approach,[1] the Keynesian approach and the neoliberal approach. New in the debates of the last two to three decades is the context of neoliberal globalisation in which old questions have been gaining new dimensions. It is often acknowledged, however, that the debate on the transformation of the state in the conditions of neoliberal globalisation implicitly concerns one particular model of the state (and not the idea of the state in general) – the modern nation state, which gradually evolved to be the dominant model of the territorial regulation of power from the 19th century onwards. To provide explanations for the current state transformation, it is therefore indispensable to understand the evolution of the nation state as a concrete, historically developed formation within the world system until the present time, as well as to analyse the changing pattern of accumulation within the global political economy, which occurred in the 1970s and initiated the institutional transformations of the nation state, which began in the 1980s.

This task, however, ranges too widely for the scope of this chapter, which will deal with it very generally in an overall introduction for the further analysis of the new functions of the state within the global and local neoliberal regime and its concomitant ideological narratives, which support the neoliberal re-functionalisation of the state in which the questions of democracy and ethnic and religious identities have prominent positions. A key element of my argument is that the state, even in the conditions of the global neoliberal transformation, remains a concrete historical phenomenon and that accordingly neoliberal transformation (like any other transformation) does not affect some transhistoric state per se, but concerns actual contemporary states in regard to their position and function within the world system. More specifically, the function of the hegemonial state in the global neoliberal regime is different from that of its contenders, clients or followers, in the same way that the states at the periphery and semi-periphery of the global system differ in function, position and in institutional and social structure from the states at the centre. This difference profoundly affects the relations of the state to other states and international actors, such as international organisations, international agreements and corporate capital. This difference exists in spite of, and maybe even due to, the neoliberal impetus of the global standardisation of state apparatus and institutions, which directly impacts on the direction, speed and shape in which the transformation of the states occurs as a result of the global neoliberal exigencies.

The Question of Popular Sovereignty

Three elements in the historical development of the nation state to the dominant state model of the late 20th century are decisive for understanding its current transformation. First, the reorganisation of the world into a network of territorial units with strictly defined constituencies, the democratic articulation of constituent power and the rule of law has not been a random historical development, but an evolution concomitant with the exigencies of the global political economy of the world system. Second, the process of the transformation of states from empires, kingdoms, city states and blank spaces of statelessness, which historically used to coexist, to the nation state as the ideally exclusive model of statehood around the world was a protracted one that took almost 250 years for its partial accomplishment. Third, the nation state has never existed de facto as a sole model for the territorial regulation of power on the world scale – not even after 1917–1918, which marked the end of the empire as the dominant model of territorial regulation in Europe and Euro-Asia, and not even after the 1960s when the great majority of struggles for de-colonialisation ended up with the establishment of nation states. In the long period of its evolution since the late 18th century, the nation state has coexisted with other state formations: empires, colonial empires, modern multinational states of actual socialism, state unions with different structures and levels of members’ sovereignty, and some ‘blank spaces’ of statelessness. It can be claimed that the solemn hour of the nation state finally arrived for a very short time (if it came at all) during the early 1990s. It was almost immediately rendered obsolete by the Amsterdam Treaty, which marked a new stage in the evolution of the European Union as a new type of state formation and by the tendency of the nation state to collapse at the peripheries of the world system, especially in Africa. These events introduced new state categories in both the political reality and the political theory of state.

The historical transformation of the state which paved the way for the global conquest of the nation-state model assumed its concrete guise in the late 18th century American and French revolutions. The central element of this fundamental transformation was the shift in the concept of sovereignty vested in ‘the house of the ruler’ to the concept of sovereignty vested in the people. This shift raised two fundamental problems of significant relevance for political theory. These are, first, the definition of ‘the people’ as a constitutive entity in which sovereignty is vested, and second, the question of the scope of popular sovereignty which is assigned by the institutional and legal limits of popular control in decision making and implementation. The process of the translocation of sovereignty from the institution of the ruler to the institution of the people made the central problem of this arrangement – the definition of ‘the people’ – immediately salient. Who belongs to the sovereign people and who does not, and on what criteria is the distinction based? Is there what could be called ‘a common will’ of the people and if so, how is it to be discerned? These questions became the rationale of the emerging liberal political theory and they have remained among its essential topics. In the 19th century liberal political theory came to define the sovereign people as a nation and the nation as a bounded group. The emerging nation state and the question of sovereignty related to it raised further questions about the determination of nationhood. Nationalism as the ideological glue which bound a diversity of people into one bounded group relied on imagined common fundaments such as religion, religious confession, common language and a so-called common culture. In the words of Eric Hobsbawm, ‘inventing patriotism has become a form of civic religion’ (Hobsbawm, 1990, p. 85). The myth of the nation and the concomitant boom of nation-state establishment around the world introduced new moral and legal concepts, the most important of which was ‘the right to self-determination’ of the people. In liberal political theory, this idea was settled within the scope of ‘natural right’, which gave moral and legal legitimacy to the US political doctrine on foreign policy under the administration of Woodrow Wilson, known as the Wilson Doctrine. Under the aegis of the people’s right to self-determination, this doctrine provided the rationale for early US military interventions in Latin America and the Caribbean at the turn of the 20th century.

The second important issue regarding the notion of popular sovereignty has been the question of its scope. Modern liberal democracy relies on two essential elements. The first is a strict division between the political and economic spheres, which are understood as autonomous units, not only in an analytical sense but also as categories of the real. The second, evolving from the first, limits democratic deliberation and control to the political sphere. Liberal democracy encompasses public deliberation over political articulation of interest and concomitant political representation but it does not include either democratic deliberation or democratic control over economic structures and institutions. It does include the possibility of limited democratic deliberation and control of the economic sphere by political decision making at the national level through the institution of elections (mandates can be confirmed or withdrawn), but democratic control of the economy neither occurs nor is taken into consideration by liberal political theory at the level of inter- and supra-national institutions and agreements such as the IMF and the World Bank or multilateral agreements such as GATT and GATS, which de facto have had the strongest influence on shaping national economic policies in the last three decades. The division between the spheres of politics and the economy as allegedly autonomous units in liberal political theory ultimately shapes the liberal state theory, which considers the state as an autonomous unit, structurally and functionally unaffected by shifts in the global economy. State functions and structures are considered to be permanent and even static. What changes over time are the state’s policies, adapting the institutional and legal framework of the state to the exigencies of the market in order to offer the best political and legal frameworks for its inevitable fluctuations. In contrast, this chapter contends that the very structure of the nation state is fundamentally bound to the regime of production and distribution, not only providing a regulatory framework for the shifts in global economy but also acting as a fundamental element of social, political, economical and ideological re-production in terms of a permanent reallocation of the economical, social and symbolic resources in which it is embedded.

This perspective also attempts to break the dichotomy between the agency-based and the structure-based approaches to the transformation of the state by mapping the historical evolution of the neoliberal regime as a regulatory framework for the re-functionalisation of the nation state at the global level during the last three decades. It tracks the dynamics of the strategic, agent-based actions during the Reagan and Thatcher administrations, which ushered in a shift in the global political economy towards the neoliberal model and its subsequent evolution to global hegemony by which it gradually conquered not only the economic but also the political, organisational, scientific and symbolic spaces of collective action around the world, consequently changing the global distribution of power and the structural constraints imposed on agents.

From the beginning of the 1980s, during the Reagan and Thatcher administrations, the agents of the neoliberal economy established a set of global strategic political regimes directly complementary to their central economic goal: the global redistribution of capital from bottom to top. This neoliberal economic transformation of the world was accompanied by the strategic transformation of political and social institutions, legal frameworks and rules of conduct. The agents of what would become the global neoliberal regime developed political, institutional, legal, scientific and ideological tools for the transformation of the hitherto dominant Keynesian model of regulation cum distribution.

The exigencies of the new global economy based on foreign investment and financial capitalism required primarily stability and security for the flow of capital. The first requirement of the neoliberal regime, characteristically for historical capitalism, was for fragmented political units with differing legal frameworks prone to enhance the global division of labour and capital distribution. Second, it required the entrenchment of unequal wage conditions and labour bargaining power favourable to speculative investment. And finally, it required the specific political state form structured according to the model of conservative liberal democracy which had been developed under the Reagan administration in the 1980s as the mechanism for US foreign policy and which was promoted by the World Bank and other supranational credit agencies during the 1990s in the system of conditionality of credits based on the requirement of so-called ‘good governance’.

The concept of ‘good governance’ engendered a new concept of democracy coined by the neoconservative alliance which had arisen from the former anticommunist left in the US under the administration of Ronald Reagan. ‘Good governance’ became the paramount criterion for the political credibility of a state in relation to international financial institutions. Three aspects are crucial for this currently hegemonial institutional model of democracy. First, democracy is equated with capitalism or a market economy. Second, democracy is reduced to electoral democracy where elections take the form of events, not processes. Third is the expertisation of decision making and implementation. Thus good governance cum conservative liberal democracy emerged from the neoliberal project of globalisation, complementing its economic exigencies. Both concepts rely directly on the concept of the nation state and are inconceivable outside this frame.

The expertisation of decision making and technocratic policy development led to the elitisation of state rule and the concomitant voiding of popular sovereignty. The neoliberal democracy engendered new forms of interest articulation and representation in which governance replaced politics in order to protect economic policies and economic markets from democratic decision making. The process of the de-politisation of constituent power has occurred within the nation state through a gradual transformation of ideological narratives, which have shifted from an interest-based articulation of the popular will towards a notion of ‘identity’ as the fundament of social deliberation of the common will. At the level of the reproduction of knowledge, the neoliberal project has been accompanied by the ‘economic turn’ in the social sciences and the ‘cultural turn’ in the humanities. Thus, new matrices were offered as the first choice by political articulation of interest. On one side, the public choice presented the rational, self-interested and individual economic person who populates the political institutions by making conscious use of different ideologies in order to obtain votes (Downs, 1957). The other side of (multi-) culturalism offered the cultural matrix of ethnically and religiously driven bounded groups with ‘identity’ as the paramount political guiding principle (Harrison and Huntington, 2001; Kymlicka, 1997). The central rationale of the neoliberal regime, an overtly class-based redistribution of the global capital from the bottom to the top, was perfectly supplemented by the ideology of ‘cultural turn’ and the concomitant concept of identity politics, which concealed the class nature of the neoliberal project by the withdrawal from interest-based grass-roots politics in favour of an identity-based approach. This new matrix engendered the identity principle of the political articulation at the bottom and expertisation and technocratisation (in service of capital) at the top.

Although apparently at odds in methodological terms, the economic theories of politics and the culturalist approaches to politics both complemented the neoliberal project. Nation states remained indispensable in both cases, albeit with changes to their function and their organisational structure of decision making and implementation in accordance with the particular role (which differed from state to state) they were assigned within the global neoliberal system of production and distribution. Nevertheless, not every state became transformed in the same way. The function and the organisation of decision making and the implementation of the hegemonial state or the state’s accommodation of the managerial structures of financial capital like G7 are different from those of a state at the periphery or semi-periphery because the effect of the global division of labour and capital sorts a concomitant assignment of competencies. Although there have been some fundamental common changes such as privatisation and deregulation, which were imposed worldwide, not every state has undergone the same kind of transformation in response to the imposition of the neoliberal exigencies. The transformation of the state has been related to its function within the global system. It would therefore be more accurate to use the plural in debate about the transformation of states instead of the singular form ‘state’.

Neoclassical Economy, Neo-Liberalism and the State

For thirty years after the end of World War II, the dominant model of the social arrangement in the so-called developed world was the Keynesian model of the welfare state, supplemented in most parts of continental Europe by a social democratic arrangement between labour and capital. Contrary to the neoclassical view, which has been held responsible for the global crises of the 1930s, John Maynard Keynes, the father of the Keynesian welfare state, considered the state to be a positive and indispensable regulating force in the macro economy.

The neo-classical view, dominant before World War I and in the inter-war period, contended the opposite: that the state regulation of, and even involvement in economic activities was a reduction of individual freedom, which could be guaranteed only by the free and independent play of market forces (Friedman, 1962). Moreover, this view contended that any state involvement in the market would lead to totalitarianism and even serfdom (Hayek, 1944). The state was seen as a costly endeavour and state administration as a space available for rent-seeking individuals and practices. From this point of view, the neoclassical theory of economy favoured the so-called minimal state and economic laissez-faire policy. The state nevertheless could not be completely abolished for first it had to guarantee the property rights and rules set by the neoclassical economy against eventual uprisings and disobedience by means of its monopoly over legitimate coercive force. Second, the state had to exist to be the guarantor in the possibility of overflow effects. If free market competition should take a wrong turn regarding the interest of financial capital, the state must be preserved to intervene, not least in the form of publicly financed bail-outs. In short, neoclassical economy displayed both a conspicuous disdain for the state and a painful awareness of the bitter need for it in the service of securing capital gains and socialising losses.

Understanding the lesson from the crisis of 1929 and the following Great Depression, Keynes rejected the myth of the self-adjusting economy and explained why the state must employ economic policies to regulate the economy. He argued against the golden law of neoclassical economy to reduce government spending and cut the budget deficit at any cost, saying that this would induce and/or worsen an economic recession by reducing demand for goods and thus reducing consumption. Instead, he advocated government intervention and increased spending to stabilise the aggregate level of investment. His ideas became the dominant matrix of the post-war political economy. However, the Keynesian economic model failed to hold back the falling rate of profit of the decades from the beginning of the 1970s, which caused the owners of capital to seek new modes to reverse the downward trend of the profit rate.[2]

For capital it meant a return to the neoclassical economy which had been regarded as obsolete and even ridiculous (Quiggin, 2010). Margaret Thatcher and Ronald Regan were to became emblematic figures in the resurrection of the neoclassical doctrines and the restoration of Friedrich Hayek’s theories of political economy. The neoliberal transformation in the following years has been as profound as it has been radical. In terms of depth, scope and speed of change, the transformation could be designated a neoliberal revolution. Neoliberal economy is a form of direct redistribution of capital and formation of social class. It is a means of redistributing capital from the bottom to the top. In the three decades since the neoliberal revolution, this redistribution has been spectacular. Whereas in 1970 1% of the higher income bracket had 9% share of the total income in the United States, in 2000 its share rose to 25%. The profile of purchasing power, or real income, is even more revealing. From 1913 until 1940, the purchasing power of the top 1% was twenty times higher that the purchasing power of the other 99%. This ratio changed conspicuously after the neoliberal revolution. In 1970 the purchasing power of the 99% was 3.3 times greater than in the pre-war period. From 1980 this began to change so that by 2000 the purchasing power of the top 1% reached its pre-war ratio of twenty times the purchasing power of the other 99%. The statistics for the G7 countries are similar, and the ratios for the countries of the periphery and semi-periphery often show even far more dramatic results (Piketty and Saez, 2003).[3]

Neoliberal redistribution from the bottom to the top first targeted social security and public spending. It continued with the seizure of public goods through waves of privatisation, and it extracted an increased surplus from labour by means of new disciplines imposed on workers. This was bolstered by privatisation, deregulation and pressure for reduced government spending at the global level. The global success of neoliberalism, a mixture of a resurrected neoclassical liberal economy and a conservative political agenda, has been due to the US hegemony and the ability of the US administration to use international organisations and agreements and above all the Bretton Woods institutions to apply pressure for global compliance with neoliberal reforms. As a system for direct redistribution from the bottom to the top, neoliberalism led analysts like Holmstrom and Smith (2000) to regard it as a form of a new primitive accumulation as described by Karl Marx in the third volume of Capital.[4] This rehearsal of the practices characteristic of the Marxian concept of primitive accumulation was the neoconservative cum liberal answer to the falling rate of profit of the 1970s.

A few thoughts on the Marxist theory of state could be helpful. For the early Marx, the state was an instrument of the capitalist classes, an apparatus which served their economic goals or, as he put it in The German Ideology, the state is‘the form in which the individuals of a ruling class assert their common interests’ (Marx, 1970, p. 80). The theory that the state is a direct instrument of the interest of capital over other social classes, also called the instrumentalist theory of the state, was further developed by Ralph Miliband in the 1970s (Miliband, 1977). It has been harshly criticised, notably by Nicos Poulantzas, who sees the state as neither completely autonomous from the economy – and thus from the interests of capital – as liberal theory does, nor simply reducible to an instrument of oppression, but as holding its relative autonomy from the direct interest of the capital-holding classes. According to his view, the state gives guarantees to the dominating classes that their long-term interests will be preserved, even if state actions may sometimes appear to be contrary to their short-term interests. An example that illustrates the implementation of this theory is that through giving the economic concessions of the welfare state to the dominated classes, the state greatly reduces the likelihood of them attacking the political bases of the exploitation by the dominant classes – the practice institutionalised in the form of the state power (Poulantzas, 1968).

However, it remains questionable whether Poulantzas’ view, developed in the context of the Keynesian welfare state, still bears scrutiny in the conditions of neoliberal resuscitation of primitive accumulation, which is marked precisely by a dramatic retreat from the economic concessions to labour which had previously been given in the forms of social security and high wages (key factors in Poulantzas’ analysis). It seems that in the neoliberal conditions the state has been changing its function towards being a direct instrument of accumulation cum redistribution in favour of capital, as previously held by the instrumentalist state theories. The neoliberal era has shown that ‘the institutions are ultimately about power and distribution’ (Robinson, 2006, p. 11). The fact that in the last three decades the state has evolved to a ‘competition state’, which seems to have reduced its role to the servicing of international capital in order to attract it through low wages and deregulated labour markets, is not least the result of the political decisions willingly adopted by the governments in the core regions of the world system and more or less willingly adopted by the countries of the periphery.

The willingness to adopt neoliberal reforms at the periphery was sometimes fostered and sometimes pressured by the requirements of compliance to neoliberal institutional and legal transformations as conditions for international trade, credit or membership of powerful international organisations and institutions such as the World Bank, IMF, WTO and the European Union. The concept of ‘good governance’ in which these requirements were invested was fabricated by actors tied to the foreign policy of the Reagan administration in the 1980s but it soon evolved to be an overall binding requirement of these and other organisations, thus gradually evolving into a structural constraint.

The neoliberal revolution has been accompanied by an unprecedented investment in the scientific elaboration of the ideological groundwork of the neoliberal regime, which both favours and forges social scientific theories congruent with the neoliberal value system and bolsters its central ideological bases. Theories of rational choice and public choice, democratisation studies and to some extent even cultural studies were elevated to a hegemonial position in the economic, social and human sciences, and the scientists adopting these theories had privileged access to academic positions of power and lucrative jobs in the new global governance enterprise.

Due to its reliance on financial capital and worldwide investment, the neoliberal global economy requires stability and compliant governments. It requires a system of supranational institutions and agreements, which it calls global governance, as well as favouring a political system which is legitimate and thus stable and at the same time favourable to foreign investment and untaxed capital flows, which it calls ‘democracy’. ‘Democracy’ had to be significantly redefined by the Reagan administration in the 1980s to fit the needs of the neoliberal world system. As we see shall in the next section, one of the first tasks of foreign policy under the Reagan administration was to promulgate a definition of democracy as inextricably bound to capitalism and also to strip the definitiont of any idea of democratic redistribution of capital and resources. Subsequently, the ‘democracy crusade’[5] was announced under this new banner.

Finally, the neoliberal market economy does not require only stability and compliance, it also requires a strong state to overcome the ever emerging obstacles to the institutions of the neoliberal market economy and to ensure the smooth functioning of the infrastructure. In order to fulfil these requirements, a neoliberal regime needs both a strong managerial and technocrat class and a strong military force. These can only be provided by a strong state. These conditions, however, seem to be in contradiction with the liberal impetus for the minimal state. This apparent contradiction has been resolved by a selective approach to the reduction in the bureaucracy accompanied by a significant increase in the military force in the core states of the neoliberal system and the states of the periphery. Highly mobile and independent international capital takes advantage of the particular laws and disciplinary orders of different states which favour both material exploitation and financial speculation.

The state, its structures and its functions must remain divergent in the states like the G7 nations which accommodate the managerial structures of financial capital, especially in the US, the hegemonial state of the neoliberal global system. Neoliberal doctrine with its worldwide grip is inextricably bound to the US hegemony on one side and to the division of the world into the centre and the periphery of the global system on the other side. The neoliberal world system needs strong states in service of capital with strong managerial classes and strong armies in the centre, and it requires at the same time weak states at the periphery of the world system, which in the case of insurrection completely depends on the military force of a hegemonial state.

At the periphery, different states have been able to provide a good framework for neoliberal restructuring. Contrary to the universally accepted premise of liberal democratic theory in which capitalism and democracy are equal, the best pupils of neoliberalism at the periphery have been undemocratic states such as Chile and Singapore. Nevertheless, one side effect of the neoliberal erosion of the peripheral state became especially salient on 11 September 2001 – the phenomenon of state failure and the consequent potential security threat for the states of the centre.[6] The US answered this challenge with a wave of state building interventions, which were doomed to fail from the beginning, due first to the strong ideological and political neoliberal underpinning of this project and second to the absolute disregard of the inner conflicts and dynamics inherent in every historical process of state building or decomposition.

The rise and the success of the neoliberal regime have been due to its links to US hegemony. This, it seems, could also be its doom. In the last three decades the US economy has concentrated on financial capital and international investment, similarly to European countries, exporting production to the low-wage countries of Asia and Latin America. That has favoured the short-term interests of former industrial and financial capital for it has brought spectacular revenues to a limited number of people. At the same time, domestic industry, which had been the basis for the livelihood of the rest of the US population and thus the basis of the national wealth, has been doomed to stagnation and ruin. The effects of the neoliberal regime in the US are unprecedented household deficit accompanied by a dramatic recession. The sub-prime crisis of 2008 revealed the inner contradictions of the system by setting the problem at the very core of the neoliberal economy – the US economy – which until that time had developed without a major financial crisis since 1929.

According to Gérard Duménil and Dominique Levy (2011), the outcome of the 2008 crisis could be more or less spectacular, but if the US is to keep its supremacy, the process of globalisation will have to be reversed. What effects it will have on the still strongly entrenched global neoliberal regime remains to be seen.

Whose Democracy and in What Function?

Some may prefer the term ‘freedom’ or ‘democracy’ to ‘human rights’ but whatever the name, the United States needs to have a response to Communism on the level of ideology (Muravchik, 1986, p. 223).

The life and work of Joshua Muravchik, the author of these lines, stands paradigmatically for an entire generation of intellectuals which marked the evolution of the new understanding of democracy in the US in the 1950s. Born in a family of eastern European immigrants and disillusioned by the direction in which the Russian revolution was heading, Muravchik, like many other young people in his milieu, joined the Young People’s Socialist Leagueunder the leadership of charismatic Trotskyist and fervent anti-communist Max Schachtmann, whose ideology, according to his biographer Peter Drucker, evolved from Trotskyism towards right wing social democracy during the 1940s and 1950s. He and his pupils Muravchick, Carl Gerschman, Tom Kahn and Rachelle Horowitz were to become emblematic figures in the development of US social democracy in the service of the cold war.[7]

By the end of the 1940s with the intensification of the cold war, the CIA establishedthe Congress for Cultural Freedom (CCF) as a theoretical foundation for the Agency’s political operations against communism in the next two decades (Saunders, 1999, p. 63). The bulk of its activities was concentrated on the organisation of conferences and the financing of academic work which promoted the theoretical linking of the notions of liberty and democracy with that of capitalism. The main themes of the conferences from 1950 to 1955 were linking freedom and capitalism in a self-evident unity and promoting the new concept of democracy as the end of ideology. These themes, as we know, were resurrected and recycled at the beginning of the 1990s.

After the revelation made by The New York Times in 1967 that the CCF was financed by the CIA, the organisation changed its name to the Association for Cultural Freedomand continued financing the work of different anticommunist NGOs.

During the 1970s, the right wing social democrats, strengthened by newcomers such as Nathan Glaser, Melvin Lasky and Jeane Kirkpatrick, evolved to build a strong opposition to the Carter administration. The battle about the direction in which US foreign policy should be headed was fought around the definition of human rights as the fundament of the liberal conception of democracy. The Carter administration conceived human rights as a legal category incorporated in civil rights at the national level and in international agreements at the international level. In this vein, the dominant understanding of human rights at the stage of international politics was a legal one. Human rights, similarly to civil rights, had a precise legal form, universally applicable to all who decided to incorporate it in their legal system. In this regard, the fundamental change in the neoconservative (late anticommunist left) opposition was to advocate shifting human rights from the framework of national and international law into the sphere of ideas and values.

From the beginning of the 1980s and in the first months of the Reagan administration in the US and the Thatcher administration in Great Britain, democratisation became the new strategy of their foreign policy and neoliberalism the new strategy of their political economy. The two concepts have an inextricably link to each other (Crawford, 1996; Robinson, 1996; Gills et al., 1993).

The Reagan administration reprised the ‘democracy crusade’ initiated by the Truman administration and abandoned after the dismembering of the CCF. The historical context of this ‘second crusade’ differed from the context of the 1950s. Democratisation was no longer just an advantage in an ideological cold war but an essential supplement to the Reagan-Thatcher doctrine of neoliberalism. Whereas in the context of the cold war the US administration had favoured and supported authoritarian regimes, on the conditions that they were right-wing based and that they build a security echelon in favour of the interest of US capital, the situation in the 1980s became more complex.

Neoliberalism changed the dominant matrices of the accumulation of capital in the core zones, away from the domination of industrial production towards the domination of the financial sector and financial services. In these conditions, predictability and stability became central to the effective functioning of the global regime. This situation favoured regimes with a strong democratic legitimacy and thus stability and predictability. The capitalist world economy has never hesitated to integrate and support right wing authoritarianism under its aegis, and the neoliberal world economy was no exception to this rule, but unlike classical liberal democracy, conservative liberal democracy offered a potential for integrating right-wing authoritarianism within its new meanings and at the same time offered more legitimacy to incumbent governments and thus more security for international capital without challenging the dominant system of uneven distribution. Finally, liberal democracy became the optimal supplement of the neoliberal economic system.

In the context of the exigencies of the new times, ‘the crusade for democracy’ became increasingly professionalised under the Reagan administration. What was once the domain of political activists and NGOs became the domain of experts. The institutionalisation of the democratic project and the concomitant inclusion of the civil actors in the democratisation enterprise introduced a new form of organisation, which was ironically at odds with one of the fundamental premises of liberal democratic doctrine – the division into state and civil society. A good example of such an organisation which was bestowed with legitimacy and whose organisational structure undermined the liberal frontier between state administration and the organisation of civil society was one of the ideological heirs of the CCF, the National Endowment for Democracy (NED),funded in 1983 under the aegis of the Reagan administration.

In contrast to overtly governmental agencies for the promotion of US interests through development policies such as the US Agency for International Development (USAID) and the US Information Agency (USIA), which were often perceived as direct agents of US American imperialism in many regions of the world, the National Endowment for Democracy (NED) appeared to be an agency of civil society, politically autonomous and ideologically neutral in regard to the State Department, US foreign policy and the interests of US capital.

An analysis of the consequences of the democratisation project of the 1980s, designed by political and economic entrepreneurs in Washington, brought Roger Burbach to the conclusion that these actors ‘have simply taken advantage of the democratic aspirations of other peoples to advance capitalism and narrow US economic interests’ (Burbach, 1992, p. 106), and that consequently the goals and strategies of ‘democratic entrepreneurs’ are not compatible with democracy.

In order to understand this contradiction in the use of the term ‘democracy’, it is essential to have a closer look at the evolution of democratic theory in the 20th century in the direction of what is designated ‘conservative liberal democracy’, which was the theoretical basis of the neoliberal ‘democratic crusaders’. The historical concept of liberal democracy, which we encounter in Rousseau, Tocqueville and Madison, relies on a central premise which is the foundation of its legitimacy: the rule of the people for the people by the people.

The concept of conservative liberal democracy (sometimes called ‘State Department democracy’), which began to take shape in the 1950s and evolved to its more advanced forms during the neoliberal era, was based on the minimal definition of democracy by Austrian economist Joseph Schumpeter in his seminal work in 1942, Capitalism, Socialism and Democracy. Schumpeter’s debates about historical notions of democracy are complex and go beyond the scope of this chapter. Central to the theory of conservative liberal democracy, however, is his definition of minimal democracy, which he says is given when one necessary condition is satisfied: ‘free competition for a free vote’. Although he supports competitiveness, he excludes, without offering plausible reasons, forms of competitiveness such as popular insurrection or military uprising, although he does include the models of ‘unfair’ or ‘fraudulent’ competition, which he supports with economic arguments (Schumpeter, 1976).

Schumpeter introduced the logic of economy into the concept of liberal democracy by adopting a reduction of this concept in the exclusive sphere of the political and detaching any control over economy from the definition of popular sovereignty.

Based on the Schumpeterian concept of minimal democracy, conservative liberal democracy incorporated two central elements in its own concept of democracy: first, the meaning of democracy inherently reduced to political democracy and second, the ubiquity of the relationship between democracy and capitalism.

Conservative liberal democracy further narrowed the liberal reduction of the concept of popular sovereignty, which accepted popular sovereignty only in the domain of formal political decision making by restricting democratic deliberation and legitimation to the processes directly related to election techniques and structures.

The central ‘game of democracy’ was thus being played between the government and its opponents by focusing on the possibilities of the opposition for organising as political parties (which are taken for granted as the only modus of legitimate organisation of collective political will) within the legal framework of political organisation and an independent implementation of the election results (Dahl, 1971).

Two central problems emerge from an exclusively political theory of democracy. The first is that the asymmetric distribution of economic resources intensifies an uneven distribution of political power, which subverts even the fundamental premise of political democracy about the free and independent articulation of political interest. The second is that even if we accept the liberal reduction of popular sovereignty to the domain of the political only and its second level of reduction, which reduces the complexity of economic deliberation to an ‘event’ of the ‘election day’, the problem remains that it ignores all social and political processes which preceded and conditioned the electoral outcome.

The link between democracy and ‘free markets’ gained another supplement during the 1990s: the notion of the inherently peaceful nature of their association. In the last two decades, considerable intellectual energy has been invested in postulating an allegedly inherent peaceful nature of the link between so-called free markets and democracy. A thesis already widely commercialised by the CCF in the 1950s was resurrected in the late 1990s as the ‘liberal peace thesis’ or ‘Talbott thesis’.[8] The less comfortable question of how overtly authoritarian and undemocratic systems such as the Chinese system were able to accommodate neoliberalism so successfully remained largely ignored.

However, democracy building was no longer presented as a goal in itself or as reserved for a capitalist economy, as was still the case in the 1980s; it was presented as an accompanying element of the central goal of economic liberalisation, which has been presented overtly as the absolute priority since the 1990s (Collier et al., 2003).

After the Al-Qaeda attacked the US in 2001, the danger to security from uncontrolled and failed states became patent. Since that time, another form of more direct intervention by the centres in the statehood of the periphery of the world system has supplemented the activities of the ‘democracy makers’[9] – state-building or state capacity intervention. The main assumptions for this kind of intervention have been that states are fragile or failed because they lack ‘good governance’, policies and institutions, and that the solution to the problem of state weakness can be led by neoliberal, market-centred development (Rosser, 2006). That the market-led state transformations of the neoliberal era could be part of the problem, if not its main cause, has been carefully eradicated from the dominant policy-based analyses.

In neoliberal terms, ‘state capacity’ is ‘essentially the capacity of the institutions of the state to provide the conditions for market-led development to occur’ (Hameiri, 2010, p. 15). The institutional (sometimes accompanied by military) interventions led by states as well as by non-state actors form the centres of the neoliberal world system targeted to build and strengthen the institutions in the intervened states in order to improve ‘state capacity’. The intervening actors often observed: first, that their interventions affected not only the capacities and structures of the intervened states but at the same time also their own states; second, that an intervention which affects the reproduction and distribution of political power is an endeavour with a highly unpredictable outcome (often contrary to that intended); and finally that an intervention with the aim to ‘regulate the way [the foreign states’] governments govern’ (Hameiri, p. 4) could generate opposition to the intervention in both intervening and intervened countries.

Finally, a lesson can be learned which is important for both democracy making and state capacity building, which have been the central concerns of the neoliberal state interventions in the last decades – that the format of the state as the territorial nation state is (still) indispensable for the existence of the neoliberal (and even capitalist) global order.

Neo-Feudalism or Respect for Social Diversity

Finally, it is time for a closer look at what structures of collective action have privileged conditions of emergence and articulation within the frame of the global neoliberal regime in both the states of the centre and in those of the periphery. Two basic features play a decisive role: the expertisation of governing and ruling practices from the top, and identity politics as the matrix of political articulation of will from the bottom.

The romantic idea of the rule of experts being the best possible way of government is not new in liberal political philosophy. It has its predecessors in ancient Greek philosophy. In modern times, discussions about the possible advantages and defects of epistocracy date from John Stuart Mill’s Considerations on Representative Government (1861). Mill advanced a plausible argument in favour of epistocracy[10] by observing that all reasonable people would admit that the political judgement of some is superior to that of others. It might therefore seem best to leave political decision-making to those who have superior knowledge and insight. However, Mill suggested that although this option may seem attractive at first glance, it would lead us to abandon democratic political equality and thus to eliminate democracy (Mill, 1861).

What is at stake in epistocracy, or the overwhelming transfer of decision-making power to so-called experts, which we have witnessed from the early 1980s until the present time, is not only an erosion of democracy, democratic articulation and representation of political interest, but also the illusion of the ‘expert’ as a neutral agent in a political vacuum, unaffected by the political and economic interests in which he or she is embedded as a member of the society. The neoliberal theory seems to ignore the fact that ‘the expert’ is not an incorporation of neutral and universally accepted knowledge but a person who is involved in the power and value relations of the society he or she inhabits.

The neoliberal impetus towards a minimal state targeted state administration as a rent-seeking apparatus which tends to be politically biased towards the incumbent regime to which it owes its existence. An alternative depolitisation of the state apparatus was suggested, and the transfer of the political process of decision making to external advisors in the guise of think-tanks, ‘independent institutes’ and other agencies and individual persons has been accomplished. How little independent such actors are and what prodigious power they enjoy is well demonstrated in the example of the European Commission (EC). The organisational structure of the European Union (EU) gives enormous powers to the EC, which is neither a directly democratically elected body nor subject to any democratic control. In accordance with neoliberal minimal state doctrines, the EC has almost no advisers on permanent contracts and accordingly depends almost entirely on external advising bodies, a system which means that conflict of interest seems to be the rule and not the exception.

A good example of the strong bias of expert groups towards the interests of capital, on the payrolls of which (via complicated ways of money flows) most of these experts are, is the paradigmatic case of the Capital Requirements Directive of 2008, which was intended to strengthen the regulation of financial markets, a strengthening which might possibly have prevented the debt crisis that followed in 2011. Twenty one of the twenty three members of the expert group which was convened to draft the directive were on the payrolls of international financial institutions. Consequently the directive, instead of strengthening the regulations, actually deregulated the existing legal framework. Accordingly, no measures were taken to restrict financial speculation or to prevent the practice of concealing ‘toxic assets’ behind the working accounts of the investment banks (Haar, Vassalos and Rowell, 2010).

A similar scenario occurred with the directive about the regulation of credit rating agencies. Wrong assessments of credit status in favour of certain big credit institutes were among the causes of the great financial crisis in Europe in 2008. As usual, the EC had gathered an expert group, ignoring the warnings of critics from small non-government organisations set up for the surveillance of corporate lobbies that the ‘experts’ were people close to international financial institutions. The result was expectedly the dismissal of the directive in March 2005.[11]

Behind the expertisation of political decision making, one fundamental idea is to be found: the theory of the gradual depolitisation of politics from above. This theory, as observed by J. S. Mill in the 19th century, leads to the erosion of democratic decision making and thus to the elimination of democracy. From the bottom, this development is accompanied by the emergence of identity politics, which evolved in the dominant matrix of group consciousness building and thus of political action. Identity politics has taken different shapes in different regions of the world in the last 30 years and has led to bloody ethnic conflicts at the periphery of the world system and to the rise of populist nationalism at the centre.

Identity-based politics came to replace the interest- and distribution-based ideas and ideologies which were globally dominant in the first forty years after World War II. The bloody conflicts of the 1990s in the Balkans and Africa introduced the concept of ethnicity to greater prominence. Until the 1960s the concept had not even been used in academic and political discourse (Hobsbawm, 1990). ‘Ethnicity’ came to mean a community or bounded group which defines itself as sharing a language, a religion or religious confession – or, as most frequently used to define ethnicity, a group with a common ‘culture’ – different from that of the groups from which it defines itself as different. This usage, broadly applied in the social sciences and humanities in the last decades to explain or define the vague concept of ethnicity with the help of the even vaguer concept of culture, is a highly problematic issue in contemporary research on ethnicity.

‘Culture’ itself an eminently questionable concept which can hardly be concretely defined by the proponents of its essentialist conception, who perceive it primarily in terms of religion or historically shared practices based on religion (which they call tradition), and which they understand in essential terms and thus as not subjected to historical change (Harrison and Huntington, 2001). Still less can ‘culture’ be concretely defined by the proponents of the constructivist approach, in which it means almost every praxis, based on almost all senses of identity – religious, sexual, moral, professional and so on – which are in fact subjected to continuous change and thus are in permanent flux; with the one word ‘culture’ is to be understood an entire way of life. The constructivist perception of culture is generally shared by the proponents of cultural and postcolonial studies. However divergent in their political intentions, both conceptions of ‘culture’ – essentialist and constructivist – have at least one common element: the idea of identity as the basis of the concept of culture. This idea began to take its present shape during the 1980s with the ‘cultural turn’ in the humanities.[12]

The revival of ethnicity as an explanatory paradigm for social conflicts and movements in the peripheries has developed along the same line of reasoning, based on the identity principle accompanied by the idea of multiculturalism. Rogers Brubaker suggests that ‘much of social analysis today is informed by what might be called an overethnicised conception of history, politics and social interaction. The ethnic categories often deployed by political and cultural entrepreneurs are often uncritically adopted by social analysts’ (Brubaker, 2004, p. 152). Accordingly, the world and its social conflicts since the 1990s seem to be based on ethnic categories, not because there is strong evidence that they really are, but because ‘ethnicity’ has become the first choice paradigm in the explanation of the social world since the 1990s. In that vein, the majority of the conflicts in Africa and the conflict in the Balkans have usually been classified as ‘ethnic conflicts’, which has completely masked the strong distributional aspects in both conflict emergence and evolution in those cases.

The identity-based conception of politics has seen a revolution in social theory which accompanied the neoliberal revolution in political economy. This radical change ended hitherto dominant interest or class-based political theories and shifted the focus of the understanding of social conflict to the realm of traditional (religious) values.

In the centres a similar shift has been accomplished by multiculturalism. Similarly to ethnicity, the notion of culture in the neoliberal context is an identity-based concept. It has been developed in the context of the shift from interest- and class-based concepts of collective action towards the religion- and value-oriented concepts characteristic of the neoliberal era. Multiculturalism came to prominence in the early 1990s in the context of the debate about massive migration to the Western core economies and the integration of immigrants with ‘different cultural backgrounds’ into social life and political representation.

One of the most important theoreticians of multiculturalism, Will Kymlicka, suggests that the liberal nation states, while claiming a civic conception of citizenship, have actually ‘engaged in a process of nation-building, in which the majority national group has attempted to diffuse its language and culture throughout the entire territory of the state’ (Kymlicka, 1997, p. 47). According to Kymlicka, that has been typically resisted by old national minorites, whereas immigrants have typically accepted integration in the new culture. Kymlicka criticises the secular civic citizenship for its alleged ethnic, racial and cultural blindness, which does not accord with reality. In reality, according to Kymlicka, secular ‘colour blindness’ is in fact the strategy of universalising the majority nation culture over all minority cultures. He suggests instead a multicultural governance with wide communitarian autonomies of minority groups (whether defined as ethnic, national, racial or religious) towards ‘self-representation’ in the state.

Multicultural governance was praised as a genuine model of pluralism during the 1990s but it subsequently came under substantial criticism for generating a model of representation based on communities or groups, not on individuals. Further, it came under attack for generating a model which favours representation based on ethnic or religious identity because, in the frame of multiculturalism, minorities are by definition cultural – ethnic, sexual, religious etc. – and never political or class minorites. This favours the positions of the ethnic notables within different ethic minority groups as mediators and interlocutors between the community and the state. Second, this model operates on an identity-difference dichotomy, which strives to preserve the ‘cultural’ and religious differences within the society and not to overcome them, concomitantly perpetuating the communalist model of governance for the future and thus reducing individuals to members of identity bounded groups. Being at odds with both classical liberal theory and classical critical theory, multiculturalism has been accused of favouring patrimonial oligarchies (Robinson, 2006) as well as limiting active citizenship. In the words of Amrtya Sen (2006, p. 78), ‘Why should the British citizen who happens to be a Muslim have to rely on clerics and other leaders of the religious community to communicate with the prime minister?’

At the abstract level, multicultural governance has evolved as a grass-roots complement to epistocracy, the expert-led governance. Whereas the latter erodes popular sovereignty and democratic equality by conscious strategies to depolitise politics, leading to oligarchic forms of corporate governance, the former replaces individual democratic deliberation by patrimonial oligarchies, which rule over their particular identity groups in the framework of the global economy. In this context, multiculturalism means relative autonomy in regard to ‘cultural’ matters and little influence, if any at all, on matters of political economy.

Finally, a lesson can be learned from reflecting on the neoliberal state transformations of the previous three decades: that the state is not losing its power in regard to international capital in any more substantial way that has been the case in the past. What is changing is the structure of social compromises and alliances and accordingly the function of the state in regard to international capital. The state in a neoliberal regime has become a direct instrument in the project of neoliberal redistribution. This, at different levels and through different strategies, has been the dominant feature of the neoliberal state transformations at both the centres and the peripheries of the world. It does not seem to be changing appreciably as an unmediated effect of the current crisis of neoliberalism. This underlying matrix of the neoliberal global regime might have long-term effects on the structure of social alliances which are the fundaments of social compromises in every nation state, and it could eventually even outlive the current accumulation regime.

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Panels

Market Participants Consultative Panel. (2004). Public statement from the seventh meeting of the Market Participants Consultative Panel. Paris

N.G.

*Corresponding author: Dunja Larise. Post-Doctoral Research Fellow in Political Theory Centre d´Etudes et de Recherches Internationals (CERI) of the Science Po, Paris.

[1]The name that Ronald and Jaqueline Stanfied gave the state-theoretic views of Karl Polanyi according to which every economic activity requires a social system in which it can and must be embedded.

[2]For the theory about the tendentially falling rate of profit as a cyclic event intrinsic to the capitalist system, see Marx, K. and Engels, F., 1969.

[3]Piketty and Saez use the data from income statements reported by the Internal Revenue Service (IRS). The data of the IRS are often criticised as incorrect or biased but they would hardly be biased in the direction of reporting higher income. Bias arises from underestimating the income of the top 1% by not taking into account tax evasion through tax havens for example.

[4]‘The bourgeoisie, at its rise, wants and uses the power of the state…to force...[wages]…within the limits suitable for surplus making, to lengthen the working day and to keep the labourer himself in the normal degree of dependence [on capital]. This is an essential element of the so-called primitive accumulation’ (Marx, 1969, pp. 121–2).

[5]Ronald Reagan’s Address to the British Parliament, New York Times, 9 June 1982.

[6]In September 2002, US National Security issued a strategy paper in which it is stated that: ‘America is now threatened less by conquering states than we are by failing ones’ (White House, 2002, p. 1).

[7]There is an important and significant difference between European and US conceptions of ‘social democracy’, so that these two concepts should not be treated as equivalents.

[8]‘Democracy contributes to safety and prosperity – both in national life and in international life – it’s that simple.’ Strobe Talbott, US Deputy Secretary of State, 1997.

[9]The term ‘democracy makers’ has been borrowed from Nicolas Guillhot (2005).

[10]The rule of wise.

[11]Source: Market Participants Consultative Panel, Public statement from the seventh meeting of the Market Participants Consultative Panel (Paris, December 2004).

[12]For a more detailed analysis of the ideological function of the concept of ‘culture’ within the frame of neoliberal globalisation, see Larise (2009).