THE WASHINGTON CONSENSUS AND THE CHANGING ROLE OF THE STATE
While globalization studies have rapidly extended to virtually every corner of social science research, this salience can be part of the difficulty of engaging with the subject.[70] The wide range of fields covered by globalization—whether economics, politics, culture, or others—and the diversity of arguments this raises, poses the question of whether globalization is an empty ‘buzzword’.
However, this need not lead us to abandon the study of globalization, but instead to be clear as to what we understand by globalization, and our purposes in employing the term. Here, I focus on contemporary changes in global political economy associated with the rise of the ideas and practices known in shorthand as the Washington consensus. This is not to say that economic developments are the only facet of globalization,[71] or that globalization only dates from the past ten to fifteen years.[72] Rather, my argument is that the broader acceptance and implementation of neoliberal ideas from the 1990s onwards should be seen as the major factor contributing to the reconfiguration of political power, and as such is the aspect of globalization that requires the most urgent attention of constitutional discourse.Perhaps the only point of agreement in the globalization literature is that the term itself is ‘an essentially contested concept.’[73] David Held et al identify three
The Washington Consensus and the Changing Role of the State 19 broad schools of thought on economic globalization[74]: the hyperglobalists, for whom the world is now a ‘borderless’ single market where nation-states are becoming obsolete[75]; sceptics, who emphasise the continuing importance and power of nation-states,[76] and who cast current economic phenomena more as ‘regionalisation’ or ‘internationalisation’; and transformationalists, who regard globalization as the source of radical societal changes, which are circumscribing, but not eliminating, state sovereignty in an increasingly interconnected world.[77] In particular, they argue that ‘the notion of the nation-state as a selfgoverning, autonomous unit appears to be more a normative claim than a descriptive statement.’[78] The position I adopt is closest to that of the transformationalists, that as a result of wide-ranging social and economic processes, we are witnessing a qualitative change in societal organisation and functioning.
The nature of these changes is articulated by Anthony Giddens as ‘the intensification of world-wide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa.’[79] Boaventura de Sousa Santos distinguishes two forms of global interconnection: ‘globalized localism’ which is ‘the process by which a given local phenomenon is successfully globalized’—for example, the global spread of US popular culture—and ‘localized globalism’ which connotes ‘the specific impact of transnational practices and imperatives on local conditions that are thereby destructured and restructured in order to respond to transnational imperatives’[80]—such as the emergence of free trade areas. If globalization is the transnational extension and habituation of local ideas and practices, which ideas and practices are taking on this global character?
One of the dominant features of globalization was the ascendancy in the 1990s of the Washington consensus, which represented ‘a tacit but powerful agreement’[81] among political, business and academic elites on neoliberal economic and political reform. This consensus sought to supplant Keynesian ideas based on the imperative of state intervention with neo-classical economic ideas of the minimal state and the deregulated market. Having developed first in the UK and US in the 1980s, neoliberal policies such as fiscal constraint, free trade, reduced welfare spending and lower taxation, were soon endorsed by governments across the industrialised world,[82] in the transitional economies of Latin
America and Central and Eastern Europe,[83] and also in the developing world.[84] Accordingly, by the end of the 1990s, one could identify a worldwide shift ‘away from an emphasis on state economic management and service provision, to an ethos of “privatism” in the provisioning and regulation of social and economic life.’[85]
For some, the global reach of a ‘neoliberal economic consensus’[86] is exaggerated,[87] while others suggest that its scope is more thinly conceived than is often thought.[88] Indeed, contemporary critical scholarship argues against regarding neoliberalism as the inevitable form of economic globalization,[89] and is beginning to imagine what a post-Washington consensus world may resemble.[90] However, it is compatible to resist the idea of the Washington consensus as irreversible, but hold that it continues to provide the baselines for political debate. For example, any constituency that seeks to readjust the balance between the state and the market has to contend with ‘the desire of powerful economic actors for low taxes, open markets and acquiescent labour.’[91] Perhaps the most important artefact of the Washington consensus—and which in many ways remains the default position against which counter proposals have to vie—is a qualitative shift in perception over the role of the state.
This is manifested in a three-fold diffusion of state power: first, by ‘shrinking the state,’[92] whether by limiting the policy levers it can deploy to influence macroeconomic policy—eg, by handing over to central banks the power to fix interest rates—or by ‘hollowing out’ the state of its former functions. The acceleration in the latter process in recent years has been marked: whereas privatisation was initially visited on utilities[93] and ancillary services in the public sector, it has more recently been extended to what might once have been seen as core public services such as social security,[94] law and order[95] and air traffic
The Washington Consensus and the Changing Role of the State 21 control.[96] As a result, private corporations are now frequently the immediate means of delivering services to the public.
Secondly, the shift of functions from public to private hands, also seeks to reorient our view of the political nature of these functions. Public policy now often engages with issues such as the provision of pensions, or the building of prisons, or investment in air traffic control, not in the political vocabulary of the equitable allocation of resources, but rather in the ‘technical’ vocabulary of efficiency and effectiveness.[97] This underlines that privatisation is not simply a transfer of control from a minister to a CEO: it also involves downgrading the public interest in guiding the delivery of these services.[98] As David Kennedy puts it, this ‘[technocratic governance, a displacement of public by private, of political alignments by economic rivalries [has] shrivelled the range of the politically contestable.’[99] The corollary is that those functions remaining in state hands are also to be carried out according to market principles.[100] Thus, political power is not only diffused, but narrowed, further restricting the scope for the interventionist state.
The third, and most significant, development affecting the state is the emergence of the global economy. The successful pursuit of economic liberalisation, allied to technological innovations, has led to an intensification of global economic integration. There is now considerable evidence that domestic economies are more intertwined with and open to each other than at any previous stage of history, as indicated for example by the unprecedented scale of currency transfers[101] or foreign investment.[102] Saskia Sassen captures the resultant relocation of political decision-making as a ‘new geography of power’ whose key actors and sites include global capital markets, transnational legal firms, new forms for regulating global business such as international commercial arbitration, and electronic economic activity.[103] The global economy also affects decisions made by states, whose interests are now ever more closely linked to the operation of global market forces. For example, global financial markets not only render
national economies vulnerable to large-scale currency speculation,[104] but in assigning credit ratings to states with a view to influencing inward investment, also potentially inhibit their choice of action across ‘all areas of policy, not just macro-economic policy.’[105]
In these ways, the global economy undermines the idea that political power resides exclusively, or even primarily, with the state; however, this does not mean that the state has ceased to be important. For one thing, the state remains necessary in providing the infrastructure for global capitalism.[106] Rather, globalization requires us to rethink our view of the state, and its relation to the exercise of political power. It is not the case that globalization makes states the simple tool of neoliberalism, but that as the former ‘transforms the conditions under which wealth is created and distributed, it simultaneously transforms the context in which, and the instruments through which, state power and authority is exercised.’[107] Sassen suggests that this should not lead to the conclusion that sovereignty has not been eroded, but rather that it has been transformed and relocated in ‘a multiplicity of institutional arenas.’[108] My argument is that the principal corollary of a reconfigured state is the elevation of multinational corporations as major political actors on the global stage.