Schweizerische Zeitschrift für Politikwissenschaft
Revue suisse de science politique
Swiss Political Science Review

Peter EVANS, Chancellor's Professor of Sociology, University of California, Berkeley

The currently popular assumption that increasing levels of cross-border trade and investment turn the Westphalian nation state into an anachronism is almost certainly wrong. Unless and until they are replaced by authoritative public institutions whose geographic scope is more global, states will continue to play a key role in governance, both domestic and global. Still, it would be foolish to assume that nothing has changed. Private capital still needs states, but the character of its needs and the discourse through which they are represented in the political arena have changed. The system of "embedded liberalism" which allowed industrial welfare states to coexist with increasingly unfettered global commerce is undergoing profound changes.

The current "globalized" political economy could well produce state apparatuses much more narrowly focused on the provision of transnational business services and domestic repressive capacity. Leaving ordinary citizens, even in advanced industrial countries, without the collective goods that they came to expect as normal during the generation following World War II. This article tries to analyze the possibilities of such a transformation as well as the likely (though more desirable) alternative that traditional capacities for the delivery of public goods might be preserved.

The Role of Ideology

In any international regime, norms, formal rules, and shared assumptions are as important in shaping the role of the state as the flows of goods and capital. John Ruggie made the point impeccably fifteen years ago in his explication of how the global political economy of the "golden age" came to be characterized by "embedded liberalism" (Ruggie 1982). Liberalism, in the sense of relatively unrestricted freedom for global capital, was "embedded" in a social compact which committed the advanced industrial states to insulating (at least partially) their citizens from the costs of such a system. Embedded liberalism was also an Anglo-American construction, but it was the product of an Anglo-American ideology significantly constrained by post-World War II fears that failure to protect domestic populations might reinitiate the political traumas of the preceding decades. Like "embedded liberalism", the current regime is a means of uniting the contradictory principals of national sovereignty (the keystone of the interstate system) and economic "liberalism" (which presumes that states will restrain their desire to exercise sovereignty over economic transactions that cross their borders). What is distinctive about the current regime is first of all the degree to which economic gain can be pursued independently of sovereignty and, second, the hegemony of a version of Anglo-American ideological precepts remarkably untrammeled by anxieties over potential political instability. Finally, unlike "embedded liberalism" which was conceived of primarily as a regime for the industrialized West, the current normative regime is presumed to apply to rich and poor alike.

In the current global order, Anglo-American ideological prescriptions have been transcribed into formal rules of the game, to which individual states must commit themselves or risk becoming economic pariahs. GATT and the WTO are only the most obvious formal manifestations of the doctrine that as far as capital and goods are concerned the less individual states behave as economic actors the better off the world will be. Bilateral negotiations, at least those to which the United States is a party, convey the message even more aggressively (see e.g. Evans). The private representatives of international financial capital and, in the case of developing countries, international financial organizations like the IMF, impart the same tutelage.

The effect of global ideological consensus (sometimes aptly labeled the "Washington consensus") on individual states goes well beyond the constraints imposed by any structural logic of the international economy. The fact that becoming more actively engaged in trying to improve local economic conditions risks the opprobrium, not just of powerful private actors but also of the global hegemon makes any intervention a very risky proposition. An ideology that says such action is neither possible nor desirable, on the other hand, at least releases the local state from responsibility for whatever economic woes its citizenry may suffer at the hands of the global economy. Even richer states, with more highly developed institutional capacities for insulating their populations from economic uncertainty are under the same pressure. They are more likely to resist, and have indeed done so (Garrett 1995, Kitschelt et al. forthcoming), but it is hard for any individual state to shift the balance given the asymmetries of international power.

The Economic Logic of Globalization

The current order fits the ideological proclivities of both the only remaining superpower and the private firms that dominate the global economy. The question is whether it speaks effectively to their interests. A quick look at recent economic theorizing and the needs of transnational corporations suggests that some of the state's functions are as important to technologically advanced global firms as they ever were to more traditional domestically oriented capital.

The "new growth theory" which provided more elegant ways of formally "endogenizing" technological change and brought the idea of increasing returns back into the center of economic debates (Romer 1994), could easily read as legitimating an expanded role for the state, but was extremely difficult to translate into policy prescriptions. Admitting the possibility of increasing returns also required accepting the fact that the evolution of markets and competition was often highly "path dependent" (see e.g. Arthur 1990) and consequently characterized by multiple equilibria. This in turn made it harder to argue that unfettered markets could be counted on to automatically maximize efficiency (or welfare) but didn't necessarily point to strategies that could improve on market outcomes.

The consequences of this vision of economic growth are magnified by the fact that an increasing number of products -- from software to media images -- are more "ideas" than "things". Since the cost of reproducing an idea is essentially zero, returns increase indefinitely with the scope of the market. In an economy of "ideas" subject to increasing returns rather than "things" subject to decreasing ones, the distribution of income and profits is especially dependent on "appropriability". The magnitude of returns to an idea doesn't flow from a logic of "marginal production costs" in a meaningful sense of the term, but it does depend on authoritative decisions, like the determination of the duration of copyright and patent protection and the intellectual property regime more generally. As an economy produces more ideas, authoritative enforcement of property rights becomes both more difficult and more crucial to profitability. In a global economy, this requires an active, competent state that is able to secure the compliance of other states to its rules. In short, the most privileged economic actors in a global information economy (i.e., global companies like Disney or Microsoft whose assets take the form of "ideas") don't need weaker states, they need stronger ones, or at least states that are more sophisticated and active enforcers than the traditional "nightwatchman state".

The growing centrality of struggles over appropriability is evident if one looks at the global economic policies of the United States over the course of the last two decades. From "super 301's" to GATT negotiations to threatened cancellation of China's most favored nation status because of software piracy, the question of intellectual property rights has become a key facet of U.S. international economic policy. While other forms of regulation are in disrepute, this particular kind of policing is now treated as one of the cornerstones of economic civilization.

Intellectual property rights are a specific instance of a general point. In the complex exchange of novel intangibles, authoritative normative structures, which are provided in large measure by the state, become the keystones of efficient exchange. The "new institutional economics" with its emphasis on the necessity of "governance structures" and the pervasive importance of "institutional frameworks" to any kind of economic transactions further generalizes the argument that efficient markets can only exist in the context of effective and robust non-market institutions (see e.g. North 1985, Williamson 1985). Transnational investors trying to integrate operations across a shifting variety of national contexts need competent, predictable public sector counterparts even more than do old-fashioned domestic investors who can concentrate their time and energy on building relations with a particular individual government apparatus. The same argument applies even more strongly to global financial capital. The "dictatorship of international finance" is really closer to a "mutual hostage" situation. The operation of the international financial system would descend quickly into chaos without "responsible" fiscal and monetary policies on the part of international actors. Financial markets can easily punish deviant states but in the long run their returns depend on the existence of an interstate system in which the principal national economies are under the control of competent and "responsible" state actors. Those who sit astride the international financial system also need capable regulators. The lightning speed at which transactions of great magnitude can be completed makes for great allocational efficiency in theory, but also makes for great volatility in practice. "Rogue traders", are (as the name implies) supposed to be aberrant exceptions to the rule. Yet, the possibility of enormous returns from speculative success makes the "rogue" role a continually tempting possibility (Block 1996). After a certain point, reducing the power of states to interfere increases collective exposure to risk more than it expands the possibilities for individual profits.

Both current economic theory and the practical logic of the global economic suggest that while powerful transnational economic actors may have an interest in limiting the state's ability to constrain their own activities they also depend on capable states to protect their returns, especially those from intangible assets. The question is not whether these actors need states. The question is whether the state that they end up with will reflect their needs or their ideology. The answer to this question will depend in part on the outcome of other debates which focus less on economics and more on the socio-political impact of state institutions.

Civil Society and the State

New perspectives on governance that highlight the potential role of "civil society" provide a nice complement to the economic side of Anglo-American ideology. Even though they are not "global" perspectives in themselves, they fit with the new global order. The political triumph of the "stateless" Anglo-American world order, as reflected in the implosion of state-socialist societies, is an important impetus to the charisma of civil society. The intrusive efforts of the state, ostensibly aimed at enhancing welfare, are seen as "crowding out" community (Coleman 1990). Just as neo-classical political-economy negates the state's role in the development of a more productive and efficient society, the growing charisma of civil society negates the state's ability to speak to non-market needs. The revitalization of "civil society" is portrayed, at least by conservatives, as a solution to the social and political side of public well-being that could make the state politically obsolete, just as global markets made the state economically obsolete. In fact, a more careful reading of the evidence suggests that relations between the state and civil society are more productively thought of in terms of "mutual empowerment" or "synergy". Robert Putnam's brief polemic with Joel Migdal provides a good starting point. Based on his reading of the relationship between "social capital" and the efficacy of regional governments in Italy, Putnam takes issue with Midgal's work which seems to suggest that "strong societies" result in "weak states" and that one of the necessary conditions for the emergence of "strong states" is a "massive societal dislocation, which severely weakens social control" (Migdal 1988: 269). Not so, argues Putnam, "civic associations are powerfully associated with effective public institutions ... strong society, strong state" (Putnam 1993: 176). What Putnam's perspective suggests is that just as modern markets depend on economic decisions being nested in a predictable institutional framework, likewise "civic engagement" flourishes more easily among private citizens and organized groups when they have a competent public sector as an interlocutor.

Others have drawn the same lesson from very different contexts. Looking at Africa, the region in which the disintegration of both state organizations and civil society has been most dramatic, Naomi Chazan argues for a "symbiotic relationship between state and civil society" (Chazan 1994: 258). Vivienne Shue (1994), looking at what might be considered the polar opposite case - the People's Republic of China, finds a similar kind of "mutual empowerment" of state and society. The vicissitudes of state-society relations under communist and "post-communist" rule demonstrate, she says, "an intriguing relationship ... between the emergence of a robust sphere of civil associational life, on the one hand, and the consolidation of social power in a relatively strong or resilient state organization, on the other" (Shue 1994: 66).

Examining what he calls "the browning of Latin America" over the course of the eighties, Guillermo O'Donnell (1993) sets out the converse argument in a way that is very consonant with the "mutual empowerment" hypothesis put forward by Chazan and Shue. First of all he points out that "current attempts at reducing the size and deficits of the state as bureaucracy ... are also destroying the state-as-law and the ideological legitimation of the state" (Guillermo 1993: 1358). He then goes on to argue that the "crisis of the state" leads to a degeneration of civil society in which community organization and civic engagement are replaced by an "angry atomization" (Guillermo 1993: 1365). These broad arguments that the fate of civil society is linked to the ability of the public sector to sustain itself have interesting counterparts at the micro-level. Studies scattered throughout the developing world find evidence for "state-society synergy". Effective development projects at the micro-level often seem to involve state agencies working in combination with local social groups. The possibility of "co-production", in which state agencies and local communities work together to jointly produce a needed service or collective good, is associated in turn with state apparatuses that have sufficient esprit de corps and bureaucratic sophistication so that they can move beyond mechanistically imposing the simplest possible set of centralized rules. The archetypal case in point is Taiwan's irrigation associations, which are built around a subtle melding of centralized bureaucratic decision-making and real involvement of local villagers, including substantial community control over the process of local water allocation (see e.g. Moore 1989). The evidence for positive sum relations between the effectiveness of civic associations and state capacity is not limited to the Third World. Even in the "stateless" United States, there are interesting historical examples of "state-society synergy". In examining the founding of the Children's Bureau, one of the most successful early developments in the US welfare state, Skocpol shows how a broad spectrum of geographically dispersed women's voluntary associations were crucial to this "statebuilding for women and children" (Skocpol 1992). She also notes the parallels between this "maternalist" effort and the relationship between voluntary associations of farmers and the U.S. Department of Agriculture, another example of state-society synergy generating widespread social and economic change (Skocpol 1992: 486). If this work is right, a sustained efflorescence of civil society may well depend on the simultaneous construction of robust, competent organizational counterparts within the state. Conversely, a "state-society synergy" view implies that a move toward less capable and involved states will make it more difficult for civic associations to achieve their goals, thereby diminishing incentives for civic engagement. In the most extreme case, a globalized version of O'Donnell's "browning" would be the result. Once again, a closer examination of recent theoretical perspectives, political this time rather than economic, suggests an interest in the maintenance or expansion of state capacity. In this case, however, it is the interests of ordinary members of "civil society" that are at play rather than those of transnational elites.

Future Prospects

Just because an information-oriented, globalized system of production would seem to depend even more than prior economies on the competent exercise of public authority does not mean that the institutional bases of such authority will remain intact. Nor will a positive association between a more vibrant civil society and more capable state institutions necessarily prevent both from disappearing.

Private transnational actors may need competent, capable states more than their own ideology admits but the calculations of even sophisticated managers are biased by their own worldviews. Bent on maximizing its room to maneuver, transnational capital, could easily become an accomplice in the destruction of the infrastructure of public institutions on which its profits depend. By the time state capacity is so reduced that the unpredictability of the business environment becomes intolerable, even to major actors who have wide latitude in choosing where they do business, reconstructing public authority could be a long and painful process, even an impossible one. The specter of an unintended collapse of state institutions should not be completely discounted. Much more likely, however, is the transformation of such institutions. Beleaguered state managers and political leaders, bent on trying to preserve the state as an institution (and their own positions), may come up with some innovative organizational improvements and some salutary ways of reducing the scope of what states attempt, but their primary strategy is likely to be reneging on the old commitment to "embedded liberalism".

One plausible defensive adaptation is a "leaner meaner" state in which the capacity to deliver services that the affluent can supply privately for themselves (e.g., health and education) is sacrificed while the more restricted institutional capacity necessary to deliver essential business services and security (domestic and global) is maintained. Delivering security means in turn devoting more resources to the repression of the more desperate and reckless among the excluded (domestic and international). Rescuing "embedded liberalism" would require a very different configuration of state-society relations, one founded on relations of "mutual empowerment" between state institutions and a broadly organized civil society of the kind suggested by Chazan and her colleagues (Kohli and Shue 1994). Engaging the energy and imagination of citizens and communities in the "co-production" of services is a way of enhancing the state's ability to deliver services without having to claim more scarce material resources from society. The increased social approbation that comes with more effective, responsive service becomes in turn an important intangible reward for those who work within the state. Since such a strategy simultaneously rewards the reinvigoration of civil society, thereby augmenting the reservoir of potential participants in "co-production", it is almost certainly subject to increasing returns. Like the returns to the development of bureaucratic forms of organization in an earlier era, the returns to more innovative forms of stateness based on "state-society synergy" could be prodigious.

Unfortunately, the kind of capacity necessary to make the state a dependable partner in a strategy of "state-society synergy" is already in scarce supply. Civic groups are correspondingly less likely to be attracted to strategies of "mutual empowerment" that involve state agencies. Legitimate disillusionment with the state's capacity to deliver, exacerbated by the pervasive anti-state discourse of the Anglo-American global order, produces a domestic political climate that makes engaging the state as an ally seem farfetched. Finally, and perhaps most important, private elites are likely to see any form of "state-society synergy" that involves subordinate groups as a political threat.

The political prospects of state-society synergy are slim, but they should not be discounted all together. For beleaguered state managers or politicians disenchanted with leaner, meaner stateness, the political attractions of a "state-society synergy" strategy are obvious. It promises a way out of the currently asphyxiating capacity gap. It also promises to generate a set of allies potentially much less ambivalent about the value of public institutions that the business elites that are the principal political pillar of the leaner, meaner state. The logic is equally powerful from the point of view of civic organizations. They need capable state organizations to put their policy preferences into practice even more than TNC's need states to guarantee the global business climate. Leaner, meaner remains more likely, but the possibility that state apparatuses might forge new alliances with civic actors in the early decades of the new millennium is no less implausible than the alliances that were actually forged between labor organizations and the state during the early decades of the 20th century.

The most important implication of this discussion is that debate on the state should focus on finding ways to provide ordinary citizens with the collective goods that they need and deserve. Allowing traditional Anglo-American ideology to frame the debate distracts us from this essential focus. Becoming mesmerized by the power of globalized production and exchange is equally counterproductive. Whether the future unfolds in the probable direction of a leaner, meaner state or embodies more unlikely elements of state-society synergy does not just depend on the economic logic of globalization. It depends on how people conceptualize and talk about states.

References

Arthur, Brian W. (1990). "Positive Feedbacks in the Economy", Scientific American (February): 92-99.

Block, Fred (1996). The Vampire State and Other Stories. New York: The New Press. Chang, Ha-Joon (1995). "The Evolution of Perspectives on Regulation in the Postwar Era". Washington, DC: Economic Development Institute of the World Bank, Working Paper.

Chazan, Naomi (1994). "Engaging the State: Associational Life in Sub-saharan Africa", in Joel Migdal, Atul Kohli and Vivienne Shue (eds.). State Power and Social Forces: Domination and Transformation. Cambridge: Cambridge University Press.

Coleman, James (1990). Foundations of Social Theory. Cambridge, MA: Harvard University Press.

Diamond, Larry (1994). "Rethinking Civil Society: Toward Democratic Consolidation", Journal of Democracy 5(3).

Evans, Peter (1989). "Declining Hegemony and Assertive Industrialization: U.S. Brazilian Conflict in the Computer Industry", International Organization 43(2) (Spring): 207-238. Fligstein, Neil (1996a). "Markets, Politics and Globalization". Unpublished Ms, Berkeley: Department of Sociology.

Fligstein, Neil (1996b). "Markets as Politics: A Political-Cultural Approach to Market Institutions", American Sociological Review 61[August,]:656-673.

Garrett, Geoffrey (1995). "Capital Mobility, Trade and the Domestic Politics of Economic Policy. International Organization 49(4): 657-687.

Gellner, Ernest (1994). Conditions of Liberty: Civil Society and its Rivals. New York: Penguin Press.

Hall, John A. ed. (1995). Civil Society: Theory, History and Comparisons. London: Polity Press.

KitschelT, Herbert et al. (forthcoming). Continuity and Change in Contemporary Capitalism. New York: Cambridge Univ. Press.

Kohli, Atul and Shue, Vivienne (1994). "State Power and Social Forces: On Political Contention and Accommodation in the Third World", in Joel Migdal, Atul Kohli and Vivienne Shue (eds.). State Power and Social Forces: Domination and Transformation, Cambridge: Cambridge University Press.

Krugman, Paul (1995). Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations. New York: W.W Norton.

Migdal, Joel (1988). Strong Societies and Weak States: State-Society Relations and State Capabilities in the Third World. Princeton, NJ: Princeton University Press.

Moore, Michael P. (1989). "The Fruits and Fallacies of Neoliberalism: The Case of Irrigation", World Development 17(11): 1733-50.

North, Douglas C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press.

O'Donnell, Guillermo (1993). "On the state, democratization and some conceptual problems: A Latin American view with glances at some postcommunist countries", World Development 21(8). Panchamuki, V.R. (1996) "WTO and Industrial Policies" [Study No. 7 UNCTAD Project on "East Asian Development: Lessons for a New Global Environment]. Geneva: United Nations.

Putnam, Robert (1993). Making Democracy Work: Civic Traditions in Modern Italy. Princeton: NJ: Princeton University Press. Romer, Paul (1994). "The Origins of Endogenous Growth", Journal of Economic Perspectives 8(1): 3-22.

Ruggie, John (1982). "International regimes, transactions and change: embedded liberalism in the postwar economic order", International Organization 36(2): 379-415.

Shue, Vivienne (1994). "State Power and Social Organization in China", in Joel Migdal, Atul Kohli and Vivienne Shue (eds.). State Power and Social Forces: Domination and Transformation. Cambridge: Cambridge University Press.

Skocpol, Theda (1992). Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States. Cambridge, MA: Harvard University Press.

Wapner, Paul (1995). "Politics Beyond the State: Environmental Activism and World Civic Politics", World Politics 47(3).

Williamson, Oliver (1985). The Economic Institutions of Capitalism. New York: The Free Press.