Embedding Global Markets

An Enduring Challenge

John G. Ruggie

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9780754674542
• eBook ISBN: 9781351940757
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

John Ruggie introduced the concept of embedded liberalism in a 1982 article that has become one of the most frequently cited sources in the study of international political economy. The concept was intended to convey the manner by which capitalist countries learned to combine the efficiency of markets with the broader values of the community that socially sustainable markets themselves require in order to survive and thrive. Examining the concept and the institutionalized practice of embedded liberalism, this collection provides a survey of the macro patterns in industrialized countries. Leading scholars combine to demonstrate the benefits of embedded liberalism in practice as well as its gradual erosion at national levels, and to analyze public opinion. They provide a better understanding of what embedded liberalism means, why it matters and how to reconstitute it in the context of the global economy. The contributors contextualize the current challenge historically and theoretically so that students, scholars and policy makers alike are reminded of what is at stake and what is required.

PART I

The Idea of Embedded Liberalism

Chapter 1

Reconstructing Embedded Liberalism: John Gerard Ruggie and Constructivist Approaches to the Study of the International Trade Regime

Andrew T.F. Lang

Introduction

In 1982, John Gerard Ruggie published a study of the postwar international trade and monetary regimes entitled ‘International Regimes, Transactions and Change: embedded liberalism in the postwar economic order’ (International Regimes, Transactions and Change).¹ Against the prevailing idea that the postwar international economic order was ‘orthodox liberal’ in character, Ruggie argued on the contrary that it was characterized by a political commitment to what he called ‘embedded liberalism’.

The story of embedded liberalism was described early on as ‘highly original’² and, in Ruggie’s own words, encountered ‘some initial scepticism’.³ But it was a compelling narrative, and it quickly began to gain currency, at least within the fields of political science and international relations. Then, from the mid-1990s, Ruggie’s notion of embedded liberalism seemed to catch the imagination of scholars in other fields. It proved to be a particularly useful explanatory concept for economists and others interested in the effects of trade liberalization (and global economic integration more generally) on social protection in advanced economies.⁴ International trade lawyers, too, began to show an interest in embedded liberalism. A series of articles by Dunoff have been most influential in introducing the concept of embedded liberalism to trade lawyers.⁵ Since then, references to embedded liberalism in the writing of trade lawyers have been steadily increasing, to the extent that a familiarity with the basic contours of Ruggie’s concept is now often assumed.⁶ While it is still relatively early in the process, there seems to be every reason to think that Ruggie’s article, and the concept of embedded liberalism which it introduced, has already had a significant impact on the way trade lawyers understand the object of their study.

This growing interest in International Regimes, Transactions and Change encouraged me to spend some time exploring that article, as well as the related work of Ruggie and some of his like-minded colleagues.⁷ The experience left me with the clear conviction that as trade lawyers we have a great deal to learn from the insights which Ruggie sets out in International Regimes, Transactions and Change. For one thing, those insights challenge some of the key assumptions upon which our major debates are based: the ‘received wisdom’ which Ruggie destabilized back in 1982 still has a hold over the imagination of many of us. Moreover, Ruggie’s article draws attention to significant gaps in our research programmes. But the experience also left me with the strong sense that the most important insights which Ruggie has to offer have been misunderstood or at least neglected by the treatment of his work in the writing of many trade lawyers. In particular, while the narrative of embedded liberalism itself has been relatively well reproduced, the theoretical framework on which it is based has been neglected.

In the decades since International Regimes, Transactions and Change was written, Ruggie has emerged as one of the most important figures in the development of so-called constructivist theoretical approaches to the study of international regimes. Trade lawyers have on the whole been heavily influenced by liberal, and particularly liberal institutionalist, approaches to the study of the trade regime. We have also, at some level, internalized many of the core insights of (neo)realist thought. But we have been very slow to draw on constructivist insights.⁸ One of the great values of International Regimes, Transactions and Change, then, is that it represents an extended and highly accessible treatment of the trade regime – one which already has traction among a growing number of trade lawyers – by one of the titans of constructivist thinking. While it is not my intention to introduce trade lawyers to constructivism generally,⁹ one of my central aims was nevertheless to excavate the theoretical framework which underpins International Regimes, Transactions and Change and to explore some of the implications this framework has for the way trade scholars go about their work.

This chapter is structured as follows. In section I, I summarize International Regimes, Transactions and Change, with the intention, as far as possible, of letting Ruggie’s article speak for itself. Section II describes the resurgent interest in embedded liberalism from the middle of the 1990s and gives a flavour of the different ways in which embedded liberalism has been used in the writing of trade scholars. In section III, I offer some comments on the lessons which trade lawyers have so far attempted to draw from Ruggie’s article. First, I argue that the story of embedded liberalism usefully challenges prevailing assumptions about the underlying objectives of the trade regime and reminds us that different kinds of open, liberal trading systems are possible. Second, I show that embedded liberalism provides a framework within which to reformulate the terms of current debates about the trade regime. Instead of arguing primarily about how open the trading system should be – that is, how far down the road of trade liberalization we want to go – Ruggie shows us that we should also be debating what ‘social purpose’ we want the trade regime to embody. Third, I voice some concerns about the common tendency to see in embedded liberalism an attractive normative vision for the contemporary trade regime. I argue that this use of Ruggie’s concept risks constraining our collective imagination, and tying us to the institutional forms, ideational frameworks and political priorities of the past. I also argue that the postwar period of embedded liberalism has to some extent been mystified and eulogized and that we should remember those whose voices and concerns which were marginalized during that time.

In section IV, which is the longest and most important section, my aim is to draw attention to the theoretical framework of Ruggie’s article. International Regimes, Transactions and Change is predicated upon an approach to the study of international regimes which is in many respects fundamentally different from that which most trade lawyers tend to use. My aim is to show how this constructivist approach can augment our understanding of the trade regime and trade law in important ways. First, I show how it alerts us to dimensions of the trade regime to which we typically pay scant attention: the shared narratives that it embodies, the constitutive¹⁰ rules that it establishes, and the communicative and cognitive processes that take place within it. Second, I make the claim that constructivist approaches can enhance our understanding of the determinants of the trade regime and of institutional change in the WTO. Our current preoccupation with materialist and interestbased analyses should be accompanied by attention to the role of ideational and cognitive factors in making the trade regime what it is. Third, I argue that our understanding of the consequences of the trade regime – its effects on behaviour and outcomes – can be similarly developed. The trade regime, constructivist scholars remind us, does not just regulate actor behaviour, it also partly constitutes it, at the same time as partly constituting actors’ identities and interests. In each of these areas, I show how these insights have the potential to change the questions we ask about trade law and the role that we play as trade lawyers.

I. International Regimes, Transactions and Change: Embedded Liberalism in the Postwar Economic Order

International Regimes, Transactions and Change was originally published as part of a special issue of International Organization addressing the topic of international regimes.¹¹ This volume has become something of a foundational text for the study of regimes in the field of international relations and prefigured a number of different theoretical approaches which have developed more fully since then. At heart, the contributors to this volume sought to determine ‘whether regimes make any difference’,¹² and if so, in what way. Ruggie’s study of the postwar regimes for money and trade offers a distinctive response to this question.

Ruggie begins by briefly setting out his ‘basic approach’ to the study of international regimes. International regimes, Ruggie notes, are social institutions ‘around which actor expectations converge’. Since regimes take shape in the form of converging expectations, he argues, they have ‘an intersubjective quality’ like a language. When we study international regimes, therefore, we cannot limit ourselves to their ‘concrete elements’; we must also pay attention to their ‘phenomenological dimension’. In other words, we must understand the trade regime as, above all, an ‘intersubjective framework of meaning’.¹³ I will explain the concept of intersubjectivity in section IV below and argue that this basic insight into the nature of the trade regime is potentially the most valuable lesson for trade lawyers in Ruggie’s article.

From this vantage point, Ruggie develops his core theoretical argument about the trade regime.¹⁴ This argument, it is important to note, was framed as a response to hegemonic stability theory, which was probably the dominant theoretical model of the international economic order at the time. Hegemonic stability theory sees the international economic order as closely related to the prevailing distribution of power in the international system. For present purposes, the key prediction of this theory is that the presence of an economic hegemon – provided it is committed to liberal goals – ‘is likely to result in an open trading structure’.¹⁵ Conversely, a ‘decline in hegemonic power should … be associated with a weaker, less open’ trading structure.¹⁶ This is in part because a stable open economic order requires heavy investment in institutional infrastructure and thus an extraordinarily powerful hegemon willing to pay the costs of the provision of this ‘public good’.¹⁷

Contrary to hegemonic stability theory, Ruggie saw the international economic order as determined by ‘a fusion of power and legitimate social purpose’.¹⁸ To say anything sensible about the character of the international economic order, as opposed to merely its form, he argues, ‘it is necessary to look at how power and legitimate social purpose become fused to project political authority into the international system’.¹⁹ (This emphasis on the dimension of ‘shared social purpose’ should be understood as going hand in hand with his emphasis on the ‘phenomenological dimension’ of regimes.) He illustrates this argument by drawing a distinction between the open trading order which existed pre-WW1 and that which existed post-WW2. While a hegemonic power existed in both periods, the two trading orders differed along the axis of social purpose. The former, he argues, was characterized by a shared commitment to ‘orthodox liberalism’ or ‘laissez-faire liberalism’. The latter grew out of a commitment to something different, which he calls ‘embedded liberalism’.²⁰

The bulk of the article shows how the international economic order has historically varied according to changes in collective ideas about the ‘legitimate social purposes’ for which power can be exercised. Shared ideas at the international level, Ruggie suggests, are in part a function of changes in ideas at the domestic level. Particularly important, as far as the international trade regime is concerned, are changes in ideas about the purposes ‘in pursuit of which state power was expected to be employed in the domestic economy’.²¹ Drawing heavily on the work of Polanyí,²² Ruggie shows how the rise of free trade policies in the nineteenth century reflected a fundamental redefinition of ideas about state-society relations at the domestic level. The liberal international economic order of the time, he observes, rested on the internationalization of these ideas: the nineteenth century Pax Britannia was therefore a result not just of Britain’s hegemony, but also of the fact that this ‘new balance of state society relations … expressed a collective reality’.²³ In the period after WW1, Ruggie suggests (again following Polanyí), there was a mass social reaction against market rationality across Europe and in the United States, and this transformation in ideas about the proper social purpose of power was reflected in the form of the international economic order. Efforts to reconstruct an orthodox liberal economic order in the interwar period failed, according to Ruggie, ‘not because of the lack of a hegemon,...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication
• Contents
• List of Figures and Tables
• List of Contributors
• Acknowledgements
• Introduction: Embedding Global Markets
• Part I The Idea of Embedded Liberalism
• Part II Embedded Liberalism in Practice
• Part III A Global Civic Order?
• Index