that appeared to be available to governments in the post-1945 era are no
longer on offer. In that immediate post-1945 era a variety of different
models of the economy coexisted; setting aside the communist command
model, even within capitalism there was great variation, with different
levels of planning and welfare provision in different
countries or groups of
countries; Keynesian ideas of demand management were accepted with
varying degrees of enthusiasm. Social democratic and quasi-corporatist
politics dominated many European polities. The majority of developing
countries adopted socialist models of one kind or another, albeit usually
with a substantial role for the private sector.
Since the late 1970s, with the rise of the integrated global economy
described above, the range of possible economic systems seems to have
narrowed quite substantially. The biggest single change has been the com-
plete collapse of the communist model post-1989, at least in part because of
its failure to keep up with the West, but,
more generally, social democratic
and welfarist economies have come under great pressure. The point about
social democracy is that it relies on the ability of the state to control key
economic variables such as interest rates and the level of employment and
this involves an ability to isolate particular countries from global trends, an
ability that is being undermined by the forces discussed above. Unified capital
markets and the control of key areas of production by giant firms make
even the limited autonomy required by social democracy difficult to achieve.
States can exclude foreign competition and limit the capacity of foreigners
to own domestic corporations, but they do so at a very high cost. In technology-
driven areas local national firms will only be able
to survive if they enter
into R & D arrangements with foreign corporations, the alternative being
that their products will be increasingly out-of-date and unattractive even to
domestic customers, the fate of car manufacturers in the UK and the US.
Openness to external investment, on the other hand, brings dividends in
terms of jobs, tax revenues and exports – witness the revived Anglo–Japanese
car industry – but in order to be attractive to foreign firms unwelcome
changes may be needed domestically.
In the English-speaking countries and in Scandinavia, welfare states have
been under extreme pressure
as a result of these factors, and demand-
management has been almost completely abandoned as a strategy. The eco-
nomics profession has come to be dominated by neoclassical economic
liberalism, and the political expressions of the latter, Thatcherism in Britain
and ‘Reagonomics’ in the US to the fore, have established a firm footing.
In effect, the New Labour (1997–) and New Democrat (1993–2000)
administrations in the UK and the US have accepted a great deal of the
economic thought of their Conservative/Republican predecessors, as have
social democrat governments in most of the rest of the world. Only in
France,
Belgium and, to a much lesser extent, Germany is neoliberalism
168
Understanding International Relations
seriously resisted at a government level – and even in those countries it is
doubtful whether the costs of an extremely expensive welfare state will be
politically bearable for much longer.
In short, it is increasingly the case that it is accepted as part of the
common sense of the age that markets should be as free as possible, that
physical controls, price controls and planning do not and will not work,
and that economies should be as open to the rest of the world as possible.
This ‘neoliberal’ position was dominant in the major economic interna-
tional organizations in the first half of the 1990s
and in that context became
known as the ‘Washington Consensus’, which provided the intellectual
backbone for the programmes recommended by the IMF and the World
Bank for developing countries requiring the assistance of those bodies,
programmes which mandated the prioritization of low inflation, the ending
of price controls, the cutting of government spending and a general
opening-up to the world economy. Also part of this package was and is the
notion of ‘good governance’ which essentially meant the adoption of
Western modes of government in order to make these developing countries
attractive to foreign investors. In some respects
this has been a progressive
move – non-corrupt democratic government and the rule of law are not sim-
ply valuable for MNCs, they are also welcomed by most local citizens,
although the occasional attempt to impose US accounting standards has
been less welcome. In any event, it is worth noting that this programme of
policies is widely regarded as having failed even within the community of
IMF/World Bank/US Treasury officials who created it in the fist place. There
have been very few success stories for the Washington Consensus and plenty
of examples of increased suffering for ordinary people; cuts in government
spending were
usually targeted on the poor, and the ending of price controls
on basic foodstuffs added to the misery. Figures such as Joseph Stiglitz, until
1999 Chief Economist at the World Bank, have acknowledged that this is so
and become very critical of neoliberal ideas (Stiglitz 2004). However, there
has been no swing back towards socialist or social democratic approaches
to the economy, and in a strong sense neoliberal ideas have come to domi-
nate the political economy of globalization.
Neo-Gramscian critics argue that this is an example of the establishment
of a new kind of hegemony. This is hegemony in a different sense from that
discussed in Chapter 7 in the context of ‘hegemonic stability’. There hegemony
meant a certain kind of domination exercised
by a particular actor, albeit
with the tacit consent of others. Here hegemony refers to the way in which
certain kinds of ideas become seen as so much part of the common sense of
a society that they cease to be seen as ‘ideas’ at all, but rather become part
of ‘how things really are’. This notion of hegemony was developed by
Gramsci in the 1920s, building on Marx’s notion of ideology, but it is not
necessarily tied to Marxist – as opposed to radical – accounts of the world.
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