Power in a Complex Global System

Louis W. Pauly,Bruce W. Jentleson

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317812685
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Can twenty-first century global challenges be met through the limited adaptation of existing political institutions and prevailing systemic norms, or is a more fundamental reconstitution of governing authority unavoidable? Are the stresses evident in domestic social compacts capable of undermining the fundamental policy capacity of contemporary governments? This book, inspired by the work of the distinguished scholar Peter J. Katzenstein, examines these important and pressing questions.

In a period of complex political transition, the authors combine original research and intensive dialogue to build on Katzenstein's innovative insights. They highlight his seminal work on variations in domestic structures, on the role of ideologies of social partnership, on the regionally differentiated foundations of political legitimation, on diverse conceptions of "civilization, " and on the idea and practice of power in a tenuous American imperium. Together, the chapters map the complex terrain upon which legitimate political authority and effective policy capacity will have to be reconstituted to address twenty-first-century global, regional and state-level challenges.

The book will be of great interest to students and scholars in international organization, global governance, foreign policy analysis, and comparative politics.

Part I

State authority and capacity in turbulent times

2

Management versus Democracy

Political legitimacy and (the management of) European economic and social problems

Herman Schwartz¹

International relations (IR) as a discipline famously missed the fall of the Berlin Wall, the end of the Cold War, and the breakup of the Soviet Union. Comparative political economy (CPE) as a subfield similarly missed the housing bubble and global financial crisis of the 2000s. This blindness in IR and CPE was cognitive, a function of assumptions, rather than innate. Some things were simply not considered as part of the contrast space of the discipline, or, in everyday language, as something to be taken seriously. Will CPE as a subdiscipline repeat this error with respect to the probable disruption of existing party and governing regimes in the European Union over the next decade?

The secular rise of right-wing (mostly anti-immigrant) protest parties in Europe seems to signal a new problem of legitimacy in European politics. Anti-immigrant parties signal the erosion of the social consensus beneath democratic corporatism. Explicit populist welfare chauvinism and the exclusion of immigrants also mean the welfare state cannot promote economic flexibility. But these are not new problems, even if they take on the newly dystopian edge highlighted by Ingebritsen in the next chapter. The CPE literature has danced around the issue of legitimacy for decades. Legitimacy crises are inherent to a politics in which elites manage the masses for elites’ own desired ends, and in particular where elites manage the relationship between domestic and global markets. Each effort to legitimate a specific form of management eventually and endogenously generates a new problem of legitimacy. While Europe has a long-standing political discourse about nonhierarchical negotiation as a supplement or complement to parliamentary representation, it masks what is essentially a profoundly elite-oriented negotiation process. Indeed, from the 1950s onward, recurrent crises of legitimacy in Europe have emerged precisely because the negotiation of economic solutions is rarely nonhierarchical, even in the famously negotiated Scandinavian economies. The consistent shift of regulatory power upward to the European Union has exacerbated these problems.

CPE’s ability to deal with legitimacy issues has been in secular decline for three decades, even though such issues are at the heart of elite efforts to manage secularly rising global flows of goods, people, and capital. CPE’s cognitive problems with legitimacy stem from an increasingly microeconomic orientation. Take two classic works as endpoints of this secular trend. In Modern Capitalism Andrew Shonfield devoted two whole chapters and significant internal discussion to the issue of legitimacy. By contrast, the word legitimacy appears only six times in Varieties of Capitalism by Peter Hall and David Soskice, over three separate chapters, in uses far removed from Shonfield’s concerns. It is absent from the lengthy introduction. The word moral appears five times, of which four uses are in conjunction with the word hazard. Another indicator: out of 1,162 papers in the SSRN archive for the 2011 APSA conference, only 34 have the word legitimacy in the abstract or title.²

In this chapter I consider the legitimacy problems created by elite management of the domestic-global interface, with a particular focus on flows of immigrants since the 1950s. Three distinct phases of the CPE literature dealt with immigrants as part of a larger strategy of economic management. Those subphases are the focus on planning and legitimacy, exemplified by Andrew Shonfield, a focus on cooperation, exemplified by Peter Katzenstein and other analysts of corporatism, and a focus on coordination, exemplified by the Varieties of Capitalism literature. This is a partial attempt at an intellectual history of how CPE understands legitimacy problems rather than an empirical survey of those problems. Such a survey would require public opinion skills I do not have. It would be more useful perhaps than what I propose, insof ar as it might reveal what the public was actually thinking. But even putting aside the manifest difficulties in formulating an adequate survey instrument and then relating the findings of survey instruments to actual attitudes, I think that an important part of political legitimacy is the production of narratives about legitimacy that circulate among academic analysts and then percolate into elite discourse. That is, we should be interested in the self-conscious talk among elites about what is necessary to create legitimacy and what they think is the most pressing contemporary problem of legitimacy or economic management.

To explore this, I survey how the understanding of legitimacy shifted from the planning and legitimacy CPE literature of the 1960s to the coordination literature of the 2000s. That later work has less to say about legitimacy because it conceives of social action in terms of coordination problems that can be resolved via fundamentally technical solutions rather than political solutions. This accords a natural legitimacy to market outcomes even when, as Varieties of Capitalism does, it posits different kinds of solutions to different problems of social order. This natural legitimacy can be seen in Hayek’s consideration of planning and coordination problems. These problems ultimately resolve into an asocial understanding of information rather than a problem of legitimacy, where legitimacy is understood as a socially shared construction of morally acceptable expectations about economic outcomes.

For Hayek, the central “economic problem of society [was] rapid adaptation to changes in the particular circumstances of time and place.”³ This made centralized economic planning impossible because no agency could hope to accrue enough knowledge, in a timely enough fashion, to make accurate (meaning efficient) decisions about the allocation of resources.⁴ Even if collecting all relevant information were possible at a low cost, by the time all the information had been collected the situation would have changed, nullifying that information’s utility. But Hayek understood information as an asocial entity. Actors enter the market with private utilities and reveal those utilities in the act of making exchanges. Prices embody this information but they are “public” rather than “social.” That is, prices cause actors to recalculate utilities, but do not change their underlying preferences and thus behaviors.

By contrast, both Keynes and (as we will see) early postwar CPE had a social understanding of information that made planning possible. This can be seen most clearly in Keynes’s ideas about the importance of “animal spirits” for growth and of beauty contests in markets. Each involved a recursive consideration of what other actors’ beliefs and preferences might be. Preferences could thus be mutually constituting, an emergent aspect of interaction, rather than prior to the receipt of price information in the market. The success of postwar planning rested precisely on this kind of mutual constitution of preferences and expectations. This legitimated economic planning in varying degrees in different countries.

If we divide legitimacy into input legitimacy (are you an accountable and proper decision maker?), “throughput” legitimacy (is the process fair?), and output legitimacy (did you deliver the goods?) following the usual European literature, then what concerns us most is the first two of these three, in part because of space considerations and in part because of theoretical ones.⁵ Let’s adopt a very narrow definition of input and process legitimacy: actors’ compliance with established routines. Successful planning, and thus output legitimacy, required participation in planning routines and compliance with planning dictates/indications. Without information and without compliance, output legitimacy was unobtainable. But planning contained endogenous sources for the breakdown of legitimacy. By definition, planning required circumscribed information sources (otherwise why not use the great decentralized information machine of the market?), and, more subtly, it required an ever-greater homogenization of inputs (again, the more variegated the information, the greater the utility of market mechanisms). Planning also created new information. Circumscribed information sources reduced representation, weakening input legitimacy, while homogenized inputs tried to transform people into widgets with uniform preferences and practices, weakening process legitimacy. New information could easily be seen as an elite imposition of a new reality on a recalcitrant population. Yet relying solely on the market led to suboptimal growth and politically unacceptable extremes of wealth and income. How does the CPE literature understand how economic managers negotiated a legitimate path through these difficulties?

Shonfield and the planned economy

Shonfield’s Modern Capitalism (1965) presented a comprehensive institutional analysis of rich-country political economy in the postwar period. Its core concern, captured beautifully on the book jacket, was the shift from the unorganized and chaotic capitalism of the pre-Depression era to the organized and partially planned capitalism of the postwar period. The jacket juxtaposes two stylized graphs. To the left, symbolically in the past, is a jagged line; to the right, the present and future, a smooth line. In effect, Shonfield presented an argument for the first great moderation: the Keynesian taming of the business cycles that had racked pre-1940s economies. But two different kinds of normative concerns about the political and legitimacy consequences of state-organized planning constituted major secondary leitmotifs. Planning could never be a purely technical exercise, nor could it be successfully imposed from the top down, despite certain caricatures of France and Japan. Successful planning needed economic actors to grant legitimacy to both the means and ends of planning in order to secure compliance with planning.⁶

Two passages capture the essence of Shonfield’s position as well as the tension between Hayekian and Keynesian notions of markets:

Economic planning is the most characteristic expression of the new capitalism. It reflects the determination to take charge rather than be driven by economic events. It also, however, has built into it something else which is alien to the traditional notions of economic planners, particularly of the Communist school: the recognition of certain limits which spontaneous choices of free people necessarily impose on the activity of planning, however benevolent and wise its intent. These limitations are two kinds: they affect the range of economic behavior that can be subjected to centralized economic decisions and they influence the manner in which these decisions are translated into fact.⁷

A bit farther down the page he drives home the point about negotiation by noting that there must be

a dialogue between planners and planned, with the latter answering back, and by their answers influencing the final shape of the plan. The state in other words finds itself, frequently and willingly, in the posture of a bargainer—a powerful bargainer, it is true, but one whose whole approach is influenced by the probability that at some stage it will have to enter into a compromise.

Legitimacy issues arise as state planners – economic managers translating decisions into fact – reshape and preshape market actors’ prior preferences. Both the means and outcomes of plans have to be morally or normatively acceptable to those actors. Shonfield’s major cases – paired as France and Britain, Germany and the United States – highlight the salience of norms and legitimacy. The first two showcase successful and unsuccessful public planning; the second two represent successful and unsuccessful private planning. In each country success ...