Economist Bill Mitchell and political theorist Thomas Fazi reconceptualise the nation state as a vehicle for progressive change. They show how despite the ravages of neoliberalism, the state still contains resources for democratic control of a nation’s economy and finances.
Bill Mitchell is Professor of Economics and Director of the Centre of Full Employment and Equity at the University of Newcastle, Australia.
Thomas Fazi is a writer, journalist, translator and researcher.
This is a shortened version of the original article
We at Brave New Europe don’t take a position on Brexit. While we recognise that many dark and odious forces lay behind the Brexit vote, and that the process will inflict significant economic damage on many people, we also know that European institutions and policies typically reflect a strong neoliberal slant – and we launched this project to oppose and change this. We have sympathy with the anger against European institutions – but we also believe in the principle of European cross-border co-operation and co-ordination in many areas. Reflecting this complex reality, we will host both pro-Brexit and pro-Remain articles.
Let’s face it: national sovereignty has become irrelevant in today’s increasingly complex and interdependent international economy. The deepening of economic globalisation – and the massive leaps achieved in the fields of mass transport, communications, technology – have rendered individual states increasingly powerless vis-à-vis the forces of the market. The internationalisation of finance and the growing importance of multinational corporations have eroded the ability of individual states to autonomously pursue social and economic policies – especially of the progressive kind – and to deliver prosperity to their peoples. Financial markets and mega-corporations today wield more power than governments – and can easily bring these to their knees. This means that our only hope of tackling the cross-border challenges of modernity, of taming the power of global financial and corporate leviathans, and of achieving any meaningful change, is for countries to ‘pool’ their sovereignty together and transfer it to supranational institutions (such as the European Union) that are large and powerful enough to have their voices heard, thus regaining at the supranational level the sovereignty that has been lost at the national level. In other words, to preserve their ‘real’ sovereignty, states need to limit their formal sovereignty.
If these arguments sound familiar (and persuasive), it is because they are espoused and reinforced on a daily basis by politicians and commentators, particularly in Europe. This became acutely evident during the pre- and post-Brexit debate. A simple Google search for the words ‘Brexit’, ‘sovereignty’ and ‘delusion’ yields hundreds of articles, including from allegedly progressive commentators, mocking voters for wanting to ‘take back control’ – for being too unsophisticated to realise that there is no sovereignty to take back, that ‘[i]n today’s integrated world it is a chimera to believe that one can establish some presumed long-lost economic sovereignty’, and that ‘pooling decision-making and resources is the only way to stand up for self-interest’.
This supranational and anti-sovereign ideology is not new – and actually has embarrassing forefathers. These include the Nazis and the Italian Fascists. As the academic and author John Laughland recounts in his enlightening 1997 book, The Tainted Source: The Undemocratic Origins of the European Idea, the standard view of the Nazis as hysterical nationalists that exalted the nation-state is grossly mistaken. ‘[F]ar from exalting the nation-state, fascists generally hated it’, Laughland writes. ‘[T]he rejection of the sovereign nation-state as a viable political and economic entity on its own was explicit in Nazi and fascist thought’.Even more interesting (and unsettling) is the fact that they rejected national sovereignty for the very same reasons that contemporary thinkers and commentators reject national sovereignty – for being ‘out of date’. Much like contemporary supranationalists, fascists were obsessed with modern technology and economic interdependence, which they felt made notion of national sovereignty anachronistic.
The Nazis believed that ‘the development towards larger units’ was economically inevitable.To that end, they proposed the creation of a new European economic order to do away with ‘the economic Balkanisation of Europe’.Here the similarities between Nazi thought and the pro-Europeanism of our own day are the most striking. In 1940, Hermann Göring, president of the Reichstag, laid out a detailed plan for ‘the large-scale economic unification of Europe. This included the creation of a customs union, a single European market, a European clearing system and the establishment of fixed exchange rates between countries, ‘looking towards a European currency union’.But Nazi plans for European integration were as political as they were economic. As Heinrich Hunke, president of the Berlin Union of Businessmen and Industrialists, said: ‘The necessity of a political order for the economic co-operation of peoples is recognised’.The ultimate aim, according to Hunke, was the establishment of ‘political union in Europe’.
Of course, if the post-war system proved anything, it was that the Nazis’ claims concerning the obsolescence of the sovereign state were grossly misplaced: not only was the Fordist-Keynesian political-economic regime that took hold throughout the capitalist world after the war predicated upon the idea that ‘[t]he state could focus on full employment, economic growth and the welfare of its citizens, and that state power should be freely deployed alongside of, or if necessary, intervening in or substituting for market processes to achieve these ends’;but the right of people to self-determination became one of the cardinal principles in modern international law, inscribed in the Charter of the United Nations (though often violated in practice), inspiring countless anti-colonial and national liberation movements throughout the underdeveloped world. As it turned out, national sovereignty was alive and well: through the institutions of the democratic nation-state, from the mid-1940s until the early 1970s, Western countries were able to achieve lower levels of unemployment, greater economic stability and higher levels of economic growth than ever before.
In general, as we explain in our new book Reclaiming the State: A Progressive Vision of Sovereignty for a Post- Neoliberal World, globalisation, even in its neoliberal form, was (is) not the result of some intrinsic capitalist or technology-driven dynamic that inevitably entails a reduction of state power, as is often claimed. On the contrary, it was (is) a process that was (is) actively shaped and promoted by states. All the elements that we associate with neoliberal globalisation – delocalisation, deindustrialisation, the free movement of goods and capital, etc. – were (are), in most cases, the result of choices made by governments. More generally, states continue to play a crucial role in promoting, enforcing and sustaining a neoliberal international framework (though that appears to be changing) as well as establishing the domestic conditions for allowing global accumulation to flourish. Furthermore, ‘[e]ven neoliberal forms of economic globalisation continue to depend on political institutions and policy initiatives to roll out neoliberalism and to maintain it in the face of market failures, crisis tendencies, and resistance’, as was made clear by the response of governments to the financial crisis of 2007-9.
Upon closer inspection, also the common view of finance as an amorphous power that exists independently of (and dominates over) states appears to be largely unfounded. To the extent that finance rules, it is because political institutions have created a regulatory system compatible with the process of capitalist reproduction under its command. As a result, financial corporations remain as (if not more) dependent on the state for their survival as any other corporations (as quantitative easing demonstrates). As Gerald Epstein notes, ‘international capital mobility can only be mobile to the extent that there is political and government intervention into financial markets’.Epstein isn’t just referring to the obvious (thought oft-forgotten) fact that financial integration can only exist if states consent to cross-border capital flows. Integrated financial markets also ‘require asymmetric power relations and institutional structures of enforcement to operate’, to guarantee creditors that their debts/credits will be paid back and to enforce debt repayment (by economic, political or military pressure).
The same can be said of neoliberalism tout court. There is a widespread belief – particularly among the left – that neoliberalism has involved (and involves) a ‘retreat’, ‘hollowing out’ or ‘withering away’ of the state, which in turn has fuelled the notion that today the state has been ‘overpowered’ by the market. However, a closer look reveals that neoliberalism has not entailed a retreat of the state but rather a reconfiguration of the state, aimed at placing the commanding heights of economic policy ‘in the hands of capital, and primarily financial interests’, as Stephen Gill writes.It is self-evident, after all, that the process of neoliberalisation would not have been possible if governments – and in particular social-democratic governments – had not resorted to a wide array of tools to promote it: the liberalisation of goods and capital markets; the privatisation of resources and social services; the deregulation of business, and financial markets in particular; the reduction of workers’ rights (first and foremost, the right to collective bargaining) and more in general the repression of labour activism; the lowering of taxes on wealth and capital, at the expense of the middle and working classes; the slashing of social programmes, and so on. These policies were systemically pursued throughout the West (and imposed on developing countries) with unprecedented determination, and with the support of all the major international institutions and political parties. In this sense, neoliberal ideology, at least in its official anti-state guise, should be considered little more than a convenient alibi for what has been and is essentially a political and state-driven project.
Even the loss of national sovereignty which has been invoked in the past – and continues to be invoked today – to justify neoliberal policies is largely the result of a willing and conscious limitation of state sovereign rights by national elites, through a process known as depoliticisation. The various policies adopted by Western governments to this end include: (i) reducing the power of parliaments vis-à-vis that of governments and making the former increasingly less representative (for instance by moving from proportional parliamentary systems to majoritarian ones); (ii) making central banks formally independent of governments, with the explicit aim of subjugating the latter to ‘market-based discipline’; (iii) adopting ‘inflation targeting’ – an approach which stresses low inflation as the primary objective of monetary policy, to the exclusion of other policy objectives, such as full employment – as the dominant approach to central bank policymaking; (iv) adopting rules-bound policies – on public spending, debt as a proportion of GDP, competition, etc. – thereby limiting what politicians can do at the behest of their electorates; (v) subordinating spending departments to treasury control; (vi) re-adopting fixed exchange rates systems, which severely limit the ability of governments to exercise control over economic policy; and, most importantly perhaps, (vii) surrendering national prerogatives to supranational institutions and super-state bureaucracies such as the European Union.
The reason why governments chose to willingly ‘tie their hands’ is all too clear: as the European case epitomises, the creation of self-imposed ‘external constraints’ allowed national politicians to reduce the politics costs of the neoliberal transition – which clearly involved unpopular policies – by ‘scapegoating’ institutionalised rules and ‘independent’ or international institutions, which in turn were presented as an inevitable outcome of the new, harsh realities of globalisation. In this sense, the ‘hollowing out’ of substantive democracy and curtailment of democratic controlling rights that has accompanied the neoliberal transition in recent decades – leading to what Colin Crouch has famously termed post-democracy, defined as a society that continues to have and to use all the institutions of democracy, but in which they increasingly become a formal shell– should not be viewed as a separate development, possibly resulting from the pressures of economic and political internationalisation, but as an essential element of the neoliberal project. The war on sovereignty has been, in essence, a war on democracy. This process was brought to its most extreme conclusions in Western Europe, where the Maastricht Treaty (1992) embedded neoliberalism into the very fabric of the European Union, effectively outlawing the ‘Keynesian’ polices that had been commonplace in the previous decades: not just currency devaluation and direct central bank purchases of government debt (for those countries that adopted the euro) but also demand-management policies, strategic use of public procurement, generous welfare provisions and the creation of employment via public spending.
Given neoliberalism’s war against sovereignty, and the nefarious effects of depoliticisation, it should come as no surprise that ‘sovereignty has become the master-frame of contemporary politics’, as Paolo Gerbaudo notes.By the same token, it is only natural that the revolt against neoliberalism should first and foremost take the form of demands for a re-politicisation of national decision-making processes – that is, for a greater degree of democratic control over politics (and particularly over the destructive global flows unleashed by neoliberalism), which necessarily can only be exercised at the national level, in the absence of effective supranational mechanisms of representation. The European Union is obviously no exception: in fact, it is (correctly) seen by many as the embodiment of technocratic rule and elite estrangement from the masses, as demonstrated by the Brexit vote and the widespread euroscepticism engulfing the continent. In this sense, as we argue in the book, leftists should not see Brexit – and more in general the current crisis of the EU and monetary union – as a cause for despair, but rather as a unique opportunity to embrace (once again) a progressive, emancipatory vision of national sovereignty, to reject the neoliberal straitjacket of the EU and to implement a true democratic-socialist platform (which would be impossible within the EU, let alone within the eurozone). To do this, however, they have to come to terms with the fact that the sovereign state, far from being helpless, still contains the resources for democratic control of a nation’s economy and finances – that the struggle for national sovereignty is ultimately a struggle for democracy. This needn’t come at the expense of European cooperation. On the contrary, by allowing governments to maximise the well-being of their citizens, it could and should provide the basis for a renewed European project, based on multilateral cooperation between sovereign states.
Reclaiming the State – A Progressive Vision of Sovereignty for a Post-Neoliberal World
Published by Pluto Press