Public Governance in the Age of Globalization

Karl-Heinz Ladeur

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351907750
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Globalisation
• Index: Politics & International Relations

Globalization and its relationship to public governance is one of the key issues of our time. In this book, experts from a number of disciplines attempt to define what these two terms mean and, perhaps even more importantly, what they do not. Taking as a starting point that globalization is neither the take-over of political power by multi-national 'stateless' enterprises, nor the chaotic unstructured process of dissolution of public order, the contributors suggest that what is occurring is more institutionalized than many critics would admit. It is argued that there are important transnational and supra-national elements of a new public order, which remain beyond the traditional borders of the state, but not completely beyond the state as such. Globalization, as opposed to former developments in the internationalization of the economy, is characterized by its transnational form, i.e. it is based on exchange processes which, to a greater or lesser degree, bypass both the state and the traditional international character of the world economy of the past.

Chapter 1

Globalization and Public Governance – A Contradiction?

Karl-Heinz Ladeur

I. Globalization and its Discontents

This book is devoted to the analysis of the difficult relationship between ‘globalization’ and ‘public governance’. Both concepts may appear to be so all embracing and ‘global’ that their use might, in itself, require an explanation.¹ The chapters of this book try first to explain what, with respect to ‘public governance’, ‘globalization’ is not: it is not the invocation of a chaotic unstructured process of dissolution of public order as it has been conceived of in the context of the ‘Westphalian System’ as established in 1648.² Nor is it equivalent to a take-over of political power by multi-national ‘stateless’ enterprises with a corresponding tendency towards abolishing state-based democracy. Many phenomena which are attributed to the process of globalization, in particular the crisis of the welfare-state, do not have much to do with a challenge of the sovereignty of the state by multinationals that look for new opportunities for capital investment and orient their decision-making at global markets.

With good reasons, P. Krugman³ has argued that the effective influence of globalization on the nation state is still negligible when compared to national economic factors: major sectors of the economies of the leading industrial countries develop without the underlying major impact of the world economy.

In spite of this request for a more balanced and differentiated judgement, we have to register that the important phenomenon of ‘globalization’ is taking place.⁴ However, this development is deployed in a much more institutionalized way than many critics would have it. There are important transnational (international and inter-societal) and supra-national elements of a new public order, which remain, however, beyond the traditional borders of the state but not completely beyond the state as such. New organizations and institutions are brought to bear on economic processes that impose a legal and political structure on global economic processes. The crises on the global financial markets⁵ do not call this hypothesis into question; they do, however, demonstrate that there is no harmoniously fine-tuned co-ordination between economic and legal-political evolutions.

In spite of the fact that, in a sense, we also had a global economy before World War I, new phenomena, which may justify the use of the concept of ‘globalization’, are to be taken into account by virtue of the increasing importance of ‘transnational’ forms of economic exchanges.

‘Transnational’, in this sense, means processes which develop beyond the impact of the well known international government-based treaties. This is, in fact, an important element of the transformation of economic transactions on world markets. At the end of the day, one should, of course, not forget that the economic systems at the beginning of the 20^th century were the object of a deeply rooted process of internationalization. However, former processes of globalization were much more closely related to the forms of the traditional nation state and its legal forms of mediation between internal and external relationships. The state itself has never been a closed form, but its sovereignty was demonstrated by the fact that, even in liberal states which recognized freedom of internal competition, the state used to control the external economic relations with firms in other countries very intensely/strictly. This earlier form of globalization was much more closely linked with the international state-system and the ideas on the mutual advantages of international economic relationships.

II. Globalization in the 1920s – a Lesson which has to be Learned

It is necessary to remember this past epoch of economic history if one wants to do justice to recent evolutions of the globalized economy. This is all the more so because the first World War between the major industrialized countries of the time and, moreover, the crisis of the world economy in the 1920s as well as the reactions it provoked from governments should commend us not to consider it as a simple confrontation of national (i.e., democratic) versus transnational (global, undemocratic). The re-nationalization of economic policies produced devastating consequences which may shed some new light on the sometimes chaotic reactions of emerging global institutions such as the World Bank and the IMF, which try to tackle crises as global phenomena, while nation states try to avoid protectionist state-oriented policies.⁶ The rise of fascist and national socialist movements, as well as anti-Semitism, were the phenomena that accompanied earlier anti-globalization movements which regarded cosmopolitan Jews as the core of a conspiracy against nations and their autonomy.

The proliferation of crises in the global financial economy is not a new phenomenon, either: the ‘Black Monday’ on Wall Street in 1929 and the breakdown of the Austrian bank ‘Österreichische Creditanstalt’ in 1930 provoked worldwide crises.⁷ And one should not forget that reactions of nation states consisted of a re-nationalization of economic policies and a reduction of international co-operation. Instead, states focused on protectionist measures as compensation for the destabilization of the world economy. The political and economic consequences of this policy are well known. The management potential of European states in reacting to global crises should not be overestimated. One cannot simply assume that the management potential has much improved and the potential of a Keynesian policy of stimulation of consumption has more or less been exhausted. In comparison to the crisis of the late 1920s and early 1930s, the last major financial crisis, which began in 1997 in Thailand and which, fuelled by panic reactions in many countries, proliferated all over the world, turned out to be rather harmless. This shows that international institutions for the control of financial markets work – this does not exclude that they need to be improved, but it demonstrates that they can be improved. Thus it is not at the level of states but at transnational level that solutions have to be found.

The present anti-globalization movements have not produced aggressive ideologies, which might be compared to the ideologies of their counterparts in the 1920s. However, beyond their very concrete, but politically controversial, claim for a Tobin tax⁸ in order to help cool on global speculation – an idea which is not even accepted by the researcher who has given his name to this type of tax – the ideas of the anti-globalization movements remain vague. The movements themselves seem to feed on an antithetical distance from globalization rather than on a creative idea of how to impose a rational structure onto it. Fighters against globalization seem to be driven more by resentment than by reason. They differ from the rather nationalistic militancy of their predecessors in the 1920s by their passive approach: they seem to project their search for authenticity and identity within the nation state (which, on different occasions, is an object of fight itself) and on peoples of Third World countries. The contribution of Karl-Heinz Ladeur tries to question some of the arguments which are put forward by anti-globalization movements. Moreover, the search for new institutions and paradigms that might introduce more structure and homogeneity in globalization is a general focus of this volume.

This introduction is only meant to draw attention to the fact that globalization is such a heterogeneous, provocative, irritating and all-embracing phenomenon that more hidden causes of economic, political and cultural crises might not obtain sufficient attention in public discussion. This is also due to the fact that the deep structure of public rationality is centred on the state, and this goes far beyond the agenda of public decision-making; it has constituted the Western hierarchical view of society including the self-image of the citizen as a ‘public person’ being modelled on the sovereign ‘Westphalian’ state with both its distinctions and abstractions, and the movement of self-transformation of the ‘subject’ beyond the linkages of history and tradition in particular. This basic relationship permits the tendency to project the causes for the challenge of this development as being on the outside, being caused by the multinationals, etc. This relationship between both the state and the citizen as ‘subjects’ should be deconstructed. Moreover, the presupposition that the state is, almost necessarily, the instrument of democratic self-determination should be called into question as well. This is all the more so if one takes into consideration the character of so many Third World states which are looked at in a purely hypothetical way, instead of taking into consideration their functioning in a more realistic way.

III. Globalization – Whether Good or Bad – Should not be Overestimated

The contributions to this volume take a more detached view: they do not presuppose that globalization is the pre-eminent characteristic of the transformation of the economic system that we have witnessed in recent times, nor do they presuppose that globalization takes place in a chaotic unstructured way without any institutionalization or rationality. However, globalization is actually taking place, and it provokes fundamental transformations of the economic, legal and political systems. This is all the more so if one takes into consideration the changes which are derived from the technological innovations which cannot be identified with the phenomenon of globalization as such, though both evolutions are interdependent and mutually reinforcing.

Globalization, as opposed to former developments of internationalization of the economy, is definitely characterized by its transnational form, i.e., it is based on exchange processes which, more or less, bypass both the state and the traditional international character of the world economy in the past. It is an important characteristic of the globalization process that it produces more spontaneously self-generating flexible ways of co-ordination and co-operation among firms, instead of following the established tracks of international co-operation among states, even if they were established in the interest of firms. But in the past, the public forms and instruments including international treaties between states were much more important as institutions for the mediation and the establishment of a legal basis for private contracts and transactions. The new forms of co-ordination are generated in a bottom-up, instead of a top-down, approach; they create self-stabilizing networks of inter-relationships from which expectations which help orient participants to develop trust can emerge⁹ – a version of trust in the continuity of the network itself, not just in the personal reliability of the partners about which one could collect personal experience¹⁰ (note that this was the basis of the famous lex mercatoria in mediaeval ages). The generation of flexible institutions takes places beyond the state; it follows from the shared interest in establishing stable co-ordination patterns which is made possible by the increasing interest in the quality of complex products, the reliability of relationships, the broadening of the perspectives of the participants through the commonality of interchanging roles (participants change from the role of sellers to that of buyers and vice versa on regular terms),¹¹ the importance of trust, the complexity of contracts, and the diminishing impact of state law on practices of contract-making.

IV. The Emergence of Networks and of a New ‘Paradigm’?

All this is the reason why the contributors to this volume often refer to the concept of ‘network’ which – in spite of the fact that it is fashionable now – is crucial in the sense of referring to the rise of a new ‘relational rationality’ (McClennen), as opposed to a traditional rule-based universal rationality linked to the rise of the modern state and modern law.¹² Traditional forms of ‘situational’ patterns of co-ordination had been linked to local parochial practices of co-operation; they had excluded foreigners whereas the new forms of ‘relational’ heterarchical co-ordination are global: they allow for stability under conditions of complexity and may establish trust among strangers. This spontaneous generation of norms has occurred at all times, especially in the economic system, but it has been brought about much more slowly:¹³ economic practice has produced ‘boni mores’, commercial habits, private standards, general experience, etc., which were always the necessary basis for the interpretation and transformation of state-based domestic and international law. They were needed for the specification of private law in particular.

However, private networks of inter-relationships nowadays are much more dynamic, and they allow for much more self-stabilization than in the past, because participants can no longer just presuppose the general standards of expectations enshrined in boni mores habits, etc., they have to include more general interests in contract-making, they have to broaden the horizon of decision-making and, at the same time, they have to change relationships continuously. This is why participants can neither wait for the state to come up with new rules, nor for new private standards (new experience) to be brought about spontaneously. Private exchange relationships have to integrate an element of institution building which opens the way for new options, without doing away with all legal constraints.¹⁴ It is a kind of hybrid linkage between individual exchange and the generation of flexible situational constraints and expectations, which allows for new relations to be brought about. The evolution of spontaneously generated patterns of behaviour and co-ordination has to be monitored, evaluated, varied and renewed, because state law is not flexible enough to adapt to the new requirements of a globalized and, above all, dynamic economy. Reflexive, strategic and procedural constraints of rule-making are increasingly important. This is also why the international, but still state-based, law-making treaties lose their importance.

However, it has to be recalled that this is just a repercussion of a development, which takes place within the domain of domestic law, as well. In both domestic and transnational legal relationships, it can no longer be presupposed that the judge will be able to provide sufficient specialized knowledge and competence so as to come up with adequate legal solutions for such highly complex cases. And this is another reason why the common interest of transnational firms in establishing a reliable legal basis for innovative complex contracts, etc., increases. And, at the same time, this is the basis for the productivity of the network concept that, above all, indicates the rise of a new logic which accepts the potential of heterarchical inter-relationships to generate ‘emergent’ patterns of co-ordination which may replace universal rules imposed from above. If one takes into consideration this intertwinement of domestic and transnational forms of new elements of spontaneous law, the rise of global forms of co-ordination beyond public international law can no longer be regarded as anomalous deviations from the right way of state-based law, but as the expression of an evolutionary step towards new forms of the self-organization of societal norms which go beyond the official legal system.

V. Against Simplifications which are Far Spread among Anti-Globalists

The contributions to this volume draw on the traditional forms of linkages between law and the spontaneous generation of rules and standards, such as experience, which was closely related to state law. On the other hand, they go further in the analysis of post-modern forms of institutions and law beyond the state in order to discover new patterns of self-organization which introduce more reflexivity and potential for self-observation and self-transformation of relationships into legal practices. In a first step, it should be retained that transnational legal forms do not just oppose state sovereignty and the requirements of justice hammered out in state law from outside, but that they react to a fundamental transformation in the economic system, which is due to increasing levels of complexity and the rise of a new paradigm of ‘relational rationality’ which is based on the assumptio...