Resisting Economic Globalization

Critical Theory and International Investment Law

D. Schneiderman

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN: 9781137004055
• eBook ISBN: 9781137004062
• Topic: Law
• Subtopic: International Law
• Index: Law

There is at present much disenchantment with the rules governing international investment. Conceived as a set of disciplines establishing thresholds of tolerable state behaviour, dissatisfaction has precipitated acts of resistance in various parts of the world. Resisting Economic Globalization explores the magnitude of the legal constraints imposed by these rules and institutions associated with the worldwide spread of neoliberalism. Much contemporary theorizing has given up on national states as a locus for countering the harmful effects of economic globalization. Though states provide critical supports to the construction and ongoing maintenance of transnational legal constraints, David Schneiderman argues that states remain crucial sites for resisting, even rolling back, investment law disciplines. Structured as a series of encounters with selected critical theorists, the book contrasts theoretical diagnoses with recent episodes of resistance impeding investment law edicts. This novel approach tests contemporary hypotheses offered by leading political and legal theorists about the nature of power and the role of states and social movements in facilitating and undoing neoliberalism's legal edifices. As a consequence, the foundations of transnational legality become more apparent and the mechanisms for change more transparent.

1

Hardt and Negri and the Immobilization of States

After the collapse of the Soviet empire, it was widely believed that humanity had coalesced around a single formula for optimal socioeconomic ordering (Žižek, 2009). The recipe for success called for less government and more markets. In the past, political authority was expected to check economic power on behalf of citizens seeking to protect themselves from the deleterious effects of markets (Polanyi, 1944/2001, pp. 79–80). Post-1989, political authority operating at the level of the national or sub-national was presumed to have dried up. States, it was said, were already doing too much; nor could they be expected to do much more.

Politics continues to have some distance to go to catch up with markets, even in the wake of the global financial crisis of 2008. According to the United Nations Commission on Trade and Development (UNCTAD), ‘[b]lind faith in the “efficiency” of deregulated financial markets’ enabled their functioning ‘with little or no supervision’ (UNCTAD, 2009b, p. 13). Once the bottom fell out of the market and shock waves rolled across national borders, governments were ‘caught off guard and were generally slow to respond’ (UNCTAD, 2009b, p. 25). The crisis provided an opportunity, insisted a commission of experts reporting to the President of the UN General Assembly, ‘to reassess global economic arrangements and prevalent economic doctrines’ and to ‘seize the opportunity to make deeper reforms’ so as to restore a balance between markets and government (United Nations, 2009, p. 14). There can be ‘no return to the status quo ante’, the experts concluded (United Nations, 2009, p. 15). Though subsequent governmental response in many developed countries was ‘unprecedented’, fiscal incapacity and cramped policy space of developing and less developed countries was ‘perceived as limited or [came] to be circumscribed in the context of IMF-supported programmes’ (UNCTAD, 2009b, p. 25). Indeed, IMF lending ‘surged’ in the wake of the financial crisis. Poor countries received support with policy conditions attached that were ‘fairly similar to those of the [conditions attached to aid in the] past, including a requirement that recipient countries reduce public spending and increase interest rates’ (UNCTAD, 2009b, pp. 35–6). Financial institutions that were too big to fail, by contrast, had few strings attached to their bailouts.

So, despite easily discernible lines of responsibility for the recent crisis, citizens and states continue to find it difficult to combat contemporary modes of mobile economic production. The modern business actor continues to appear ‘as an authentically global abstraction’ (Dirlik, 1994, p. 350). This disenfranchisement is exacerbated by transnational legal rules and institutions intended to entrench constitution-like limits on the exercise of national and local political authority far into the future. McGinnis and Movsevian, for instance, liken the disciplinary mechanisms of the World Trade Organization (WTO) to the Madisonian checking functions of the US Constitution but ‘on a global scale’ (2000, p. 515). In a similar fashion, the investment rules regime, represented by over two thousand BITs and regional trade agreements, such as the North American Free Trade Agreement, has been characterized as performing constitution-like functions (Clarkson, 2003; Schneiderman, 2008). These transnational rules and institutions, an assemblage I call ‘transnational legality’, are intended to check popular political processes and isolate the economic from the political sphere.

National state authority, according to this line of analysis, not only is incapable of countervailing the power of transnational legality, it largely has become obsolete outside of the realms of security, policing, enhancing competitiveness and restoring financial stability (Cerny, 1999). If this is correct – that transnational legality has displaced many traditional functions served by national states – is this form of the global ‘rule of law’ sustainable? We might ask, as does Fraser, how power operates ‘after the decentering of the national frame’ (Fraser, 2003, p. 170).

This chapter inquires into the role of state agency in an age where powerful economic actors and governmental allies seek to supplant national state authority. Though transnational economic law exhibits a palpable distrust of national law-making, it also relies on state legal forms for the critical support structures that help maintain the legitimacy of transnational legality over time. Law-making under the auspices of national states, I argue below, is pivotal to the ongoing success of the rules and institutions of economic globalization. Critical theorists of economic globalization have made similar claims about the obsolescence of national legal authority that contributes to the immobilization of states. Rather than enhancing the ability of intermediate publics to resist transnational legality, such theorizing obfuscates a range of potential pressure points operating at national and subnational levels. So, if transnational law cannot be sustained without national supports, some critical theorists help to sustain transnational legality by deeming national states inconsequential.

In the first part of the chapter, I take up the important theoretical intervention in the realm of economic globalization by Hardt and Negri (2001; 2004; 2009). They relegate national states to an inconsequential role in the global order they associate with ‘empire’. Though they otherwise show an astute understanding of globalization’s constitutional architecture, they exhibit a weak appreciation of the contradictory but sustaining role states will have in globalization’s future. In so doing, they theoretically close off important avenues for the counter-power of their valorized ‘multitude’ to resist global capitalism’s legal order. The second part of the chapter restores the place of states by inquiring into whether the rules and institutions of economic globalization can maintain their legitimating force without the mediating role of national states. Using work in social theory and international political economy, three legitimating strategies that may sustain economic globalization in the medium to long term are identified (though they are not the only ones) – comparative advantage, consumer freedom and the rule of law. Each is found unsatisfactory without the ‘normative and organizational supports’ of territorial states (Weiss, 2005a, p. 352). As an example of the ambivalent role of states in the construction of transnational legality, I turn, in the last part, to a series of recent decisions by arbitration panels established to resolve disputes between the Republic of Argentina and a variety of multinational enterprises. These cases illustrate well the disdain for national states exhibited by transnational legality though central to its continued maintenance. Constituted under the auspices of the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID), panels have been asked to consider the consistency of measures taken in the wake of the 2000–2001 meltdown of the Argentinian economy with a number of Argentine BITs. I outline here a regime that holds politics in check by punishing states for preferring the alleviation of economic oppression over the interests of already powerful foreign economic actors.

Empire’s immobilized subjects

There perhaps has been no series of books on globalization in the social sciences that has generated as much interest as those authored by Michael Hardt and Antonio Negri. Their first book, Empire (2000), was described in The New York Times as a ‘heady treatise on globalization that is sending frissons of excitement through campuses from S ã o Paulo to Tokyo’ (Eakin, 2001, B7). Empire spawned voluminous commentary (Balakrishnan, 2003; Passavant and Dean, 2004; Boron, 2005) as did a second book, expanding upon and modifying their theses, entitled Multitude (Hardt and Negri, 2004). The book-end to the trilogy, entitled Commonwealth (2009), articulates the mechanisms and institutions for a new political project of the commons. Highly innovative, idealistic, and intended to generate a new grammar for politics in the age of globalization, these books exhibit a tendency that is common to many theorists of globalization, that of failing to appreciate the critical role national legal orders play in sustaining the legitimacy of what they describe as empire or what I prefer to call, within a legal frame, transnational legality.

Let me first outline the main arguments in Empire, critique some of its elements, and then turn to its subsequent iterations in Multitude (2004) and Commonwealth (2009). Simply put, Hardt and Negri’s grand thesis is that the institutional apparatus of empire – the transnational legal order of contemporary global capitalism – will collapse under the weight of its own contradictions. What precipitates its collapse is the ‘multitude’ – the mass of ‘immaterial’ labourers that ‘sustains Empire and at the same time the force that calls for and makes necessary its destruction’ (2000, p. 61). What emerges in their account is a ‘class struggle’ without limit as ‘capitalist development is faced directly with the multitude, without mediation’, without the mediating role of national political systems, that is (2000, p. 237). Finally, as Marx predicted, ‘[c]apital and labor are opposed in directly antagonistic form’ (ibid.) giving rise to a revolutionary counter-empire of the multitude.

The multitude is both a productive and de-territorializing force with unprecedented mobility. This is in contrast to the geographically bound labour power of the old nation-state system. The multitude’s penchant for mobility, Hardt and Negri write, ‘indicates a real and powerful search for freedom and the formation of new, nomadic desires that cannot be contained and controlled within the disciplinary regime’ (2000, p. 253). It is a ‘desire for liberation’ (2000, pp. 253, 357), the ‘general right to control its own movement’ which is the multitude’s ‘ultimate demand’ (2000, p. 400) and the uncontainable threat to global capitalism.¹

The imperial authority of empire – the powerful countries of the Organisation for Economic Co-operation and Development (OECD), operating in the institutional guises of the United Nations Security Council, G8, G20 or International Monetary Fund (IMF) (2000, p. 309) – cannot contain the multitude which is breaking down borders and destroying distance. New forms of production, giving rise to the mobility of immaterial labour, mandate that imperial authority encounters the multitude ‘face-to-face’ so to speak. Rule is now ‘exercised directly over the movements of productive and cooperating subjectivities’ and out of this emerge demands that will render empire’s constitutional order a ‘site of struggle’ (2000, p. 319). The resulting contradiction between the subjection and the independence of agents gives rise to a ‘new social dynamic that liberates the producing and consuming subject from (or at least make ambiguous its position within) the mechanisms of political subjection’. At this point, ‘a real field of struggle ... can be reopened – a true and proper situation of crisis and maybe eventually revolution’ (2000, p. 321).

This Marxian-inspired account of the immanent contradictions latent in the current global legal order is premised on the permanent demise of the national state. For Hardt and Negri, national legal orders represent ‘positions of resentment and nostalgia’ (2000, p. 218). The processes giving rise to the decline of the nation state in their account are ‘structural and irreversible’ (2000, p. 336). Empire, conceived as a ‘universal republic’, ‘has nothing to do with ... those state organisms designed for conquest, pillage, genocide, colonization, and slavery’ (2000, pp. 166–7). With national legal orders out of the way, they can claim that borders are no impediment to labour mobility, giving rise to the insatiable demands of the multitude for greater freedom in the face of the constraints associated with empire. The alleged demise of national states, I argue below, is extravagant.

There are good reasons to doubt even the empirical basis for this hyperglobalist diagnosis of the contemporary world, where states largely are obsolete in the face of global capital. The purported post-national scene appears not to have given rise to much more worker mobility than we may have witnessed in the past. Though there are greater numbers of international migrants than ever, the percentage has remained steady at roughly 3 per cent of the global population between 2005–2010 (IOM, 2010, pp. 3, 29). By contrast, 10 per cent of the global population lived outside of their country of birth as a consequence of the waves of nineteenth and early twentieth-century migrations (Guhathakurta et al., 2007, p. 212; IOM, 2008, p. 40). It would be a gross mischaracterization, for this reason, to claim, as do Hardt and Negri, that these earlier waves of migration were ‘lilliputian events’ compared ‘to the enormous population transfers of our times’ (2000, p. 213). International migration numbers, moreover, are diminutive when compared to the dominant patterns of migration within the territorial borders of states (UNDP, 2009, p. 21). If some 214 million persons were international migrants in 2009, internal migration that same year was almost four times larger, at 740 million (UNDP, 2009, p. 21; IOM, 2011, p. 49). However large the volume of international migration, much of it (over 60 per cent) was not between developing and developed regions but primarily within regional enclaves within the same category of development (UNDP, 2009, p. 21). Poor people have far fewer resources to enable movement further abroad while legal and administrative restrictions make movement difficult if not impossible (UNDP, 2009, pp. 24, 46). Legal mobility beyond these confines is, at present, enhanced only for the few, such as investors, whose rights of exit and entry are guaranteed by the investment rules regime, and a class of professional entrepreneurs associated with the knowledge industry – such as lawyers, accountants and financial advisors – whose services are considered essential to the operation of global economic apparatuses. Labourers around the world remain mostly trapped within the confines of geographic states and regions.

Hardt and Negri refine, even reconfigure, their diagnosis in Multitude (2004). They depart somewhat from their verdict that national states irreversibly are obsolete. ‘To avoid confusion’, they write in this second volume, ‘we are not arguing here that in this interregnum nation-states are no longer powerful but rather that their powers and functions are being transformed in a new global framework’ (2004, p. 163), which is a more modest and somewhat trite claim.² Hardt and Negri emphasize that, in Empire, they were observing ‘a tendency’ in which empire would emerge as the only ‘lasting’ vehicle for global power (2004, p. xiii). In the interregnum, they write, national states continue to perform critical functions such as creating and maintaining ‘the market conditions necessary to guarantee contracts between corporations’ (2004, pp. 171, 175).

Labour mobility, relatedly, is also dislodged from the central place it held in their analysis in Empire. If ‘mobility increasingly defines the labor market as a whole’ (2004, p. 133) – a point which does not to stand up well to empirical testing – their emphasis here is on the disruptive role of ‘migrant’ workers, who cross over and thus partially undermine ‘every geographical barrier’ (2004, p. 134). They cannot give up entirely though on the critical role of movement and fluidity. Mobility, they maintain, ‘increasingly defines the labor market as a whole’ (2004, p. 133). In the final volume of their trilogy, Commonwealth (2009), they continue to evince ambivalence about the capacity of immaterial labour to move about. They acknowledge that one strategy of contemporary capitalist control is to establish barriers that ‘channel and halt the flows of labor’ (2009, p. 147), yet they quickly return to a position where labour remains predominantly nomadic and mobile (2009, p. 244).³ Much emphasis is placed, instead, on the denationalization of sovereignty via forms of pluralized ‘governance’.

In this last volume, Hardt and Negri rely on the system-theoretic analysis of the global scene initiated by Luhmann and developed further by Teubner.⁴ In their description of contemporary forms of governance without the state, they invoke Teubner’s analysis of lex mercatoria (the customary law merchant) (Negri, 2008, p. 19) and ‘societal constitutionalism’ (the establishment of autonomous transnational legal orders) (Hardt and Negri, 2009, p. 347). They go so far as to say that elements of the systems-theoretic account ‘fit so closely with our analyses of biopolitical society that they could be seen as a summary of a string of passages in this book’ (2009, p. 374). I take up Teubner’s account in the next chapter but, so as to better contrast their theoretical orientations, I want to say a little about systems theory in this context. Teubner has described the emergence of ‘non-statal private legal regimes’ (Fischer-Lescano and Teubner, 2004, p. 1009) that are independent of state-centred sources of law-making. The functional differentiation of new forms of law-making operating at global levels – giving rise to the associated phenomenon labelled the ‘fragmentation’ of international law (Koskenniemi and Leino, 2002) – has severed the ‘structural coupling’ between law and politics previously under the supervision of national constitutional orders (Luhmann, 2004, pp. 487–8). Legal norm production can now be observed proliferating outside of common national institutions, giving rise to autonomous ‘civil constitutions’, operating in all variety of global sectors, whether they be transnational corporations, federated trade unions or human rights networks (Teubner, 2004, p. 8). Hence, Teubner says, we should think of a ‘global law’ without the state, like lex mercatoria, developing in ‘relative insulation from politics’ (Teubner, 1997a, p. 6). The constitutive rules developed autonomously by these various societal actors increasingly, however, are coming into conflict with each other, giving rise to ‘irritations’. In terms redolent of Polanyi’s double movement, Teubner describes systems as giving rise to ‘counter-movements’ that propose corralling the negative effects on other sub-systems (Teubner, 2011a, pp. 213–14; Teubner, 2012, p. 78). The strategy principally is one of devising ‘internal limitations’ to sub-systems thereby inhibiting their compulsion to growth and subsequent collision with competing sub-systems (Teubner 2012, pp. 81–3). Hardt and Negri, however, are not so much interested in devising inter-systemic rules for resolving conflict between functionally differentiated regimes. As states irretrievably are obsolete, they have no expectation that national state forms will harness global processes. They can perceive of no circumstances in which it would be appropriate to have states intervene. Though Teubner has acknowledged this possibility (1997a, pp. 4, 22), self-limitation strategies, he insists, can only be developed endogenously (2012, p. 85). Hardt and Negri, instead, envisage the construction of a global public space – another sort of self-constitutionalization – via the exodus of the multitude from the national institutions that corrupt and block the development of what they call the ‘common’ (2009, p. 247). National political power bases, in these ways, are anachronistic in the face of new mechanisms of governance that are emerging.

Hardt and Negri, moreover, do not explicate the persistent appeals of domestic movements addressed to political authority operating at national and subnational levels. For instance, their treatment of the cross-societal alliance represented by the Coordinadora in the Cochabamba water wars, a much heralded tale of local resistance led by a coalition of union activists and peasant leadership resulting in the renationalization of the municipal water supply (discussed in Chapter 3 below), merely becomes an instance of the multitude’s political form promoting an ‘altermodernity’ (representing a ‘decisive break’ with modernity).⁵ The multitude, they claim, ‘has no interest in taking control of the state apparatuses’ (2009. pp. 108–12, 355) and this is despite their acknowledgment that the Coordinadora helped to pave the way for Evo Morales to assume the Bolivian presidency in 2005 (2009, p. 108). They ...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Acknowledgments
• Introduction
• 1 Hardt and Negri and the Immobilization of States
• 2 Teubner and System Liberation
• 3 Habermas and Global Power Policy
• 4 Santos and the Difficulty of Sustainable Resistance
• 5 Wolin and Democracy’s Debasement
• 6 Foucault, Ecuador and on Being ‘Freer Than They Feel’
• Conclusion: Resistance’s Prospects
• Cases Cited
• Bibliography
• Index