The Privatization of Governance: Emerging Trends and Actors
Summary of Remarks made for a Panel, “The Rise of New Societal Orders and Global Supply Chains, Labor and Investment Markets,” for the International Conference: New International Trade and Investment Rules between Globalization and Anti-Globalization. Penn State University, University Park, PA April 21, 2017.
Larry Catá Backer
Globalization has proven to be a double-edged sword. On the one hand, globalization strengthens commercial and financial interdependence and cooperation among different countries through robust markets and production undertaken through global supply chains. On the other hand, globalization has sometimes increased the gap between both rich and the poor individuals within states, and between developed and developing states. This growing gap follows from the uneven penetration of globalization within states and between them. Both individuals and states participate unequally in the processes and rewards of globalization as an economic, societal, cultural and political phenomenon. It should not surprise, then, that the acceleration and deepening of globalization has also accelerated and deepened resistance among individuals within even the most globalized states, and by states that feel increasingly left behind. In recent years, the rise of anti-globalization movements has had significant effects even within highly developed countries. These contestations of international exchanges, even in certain areas, such as science and the arts, that have a relatively well established foundation, has produced efforts to protect national cultures and values even as science and the arts has produced a significant global architecture. But the contestations are even sharper in the context of globalizing economic orders and legal norms.
Nevertheless, globalization appears to continue to drive policy and to serve as the crux of contemporary societal development. Over the last decade there has been an intensification of efforts to construct conceptually coherent systems that are meant to facilitate interactions among states relating to the free movement of goods, enterprises, capital, and, to some extent, people across borders. Among these the Trans-Pacific Partnership (TPP) and the negotiation of the Transatlantic Trade and Investment Partnership (TTIP) and Trade in Service Agreement (TISA), driven by Western states, have offered the possibility of a substantially more integrated system of interactions. An emerging alternative has been developed by the People’s Republic of China. China’s One Belt One Road (OBOR) Framework promises a different approach and perhaps one that serves developing states better. Both emerging multilateral systems have been challenged by rising popular nationalist sentiments and the possibility of protectionism and the re-emergence of national barriers. Moreover, the recent election in the United States has brought to power an administration that might consider a system of bilateral arrangements a better alternative to the systems represented by TTP-TTIP-TISA, or its OBOR alternatives.
Yet all of these challenges, tensions and contradictions, indeed all of the variables that contribute toward the trajectory of globalization and its relationship to its principal actors, merely reinforce the primacy of globalization itself as a singular orthodoxy. And it is an orthodoxy that is itself embedded in the more fundamental governance orthodoxy of the mid-1945s from out of which the framework of its conception and operation was itself embedded. That orthodoxy itself posited a hierarchy in which politics served as the legitimating instrument of power, and that the state served as the apex organization of politics. That organization, itself, was expressed as the institutionalization of mass power framed within a set of fundamental substantive norms the limiting principles of which would be set by the community of states dominated by its leading members. Thus, the appearance of challenge and opposition that has been more sharply drawn since the start of this century might be understood as occurring within a carefully protected orthodoxy the object of which is to protect the primacy of politics (and law) with the state as its apex.
And yet, one of the great ironies of globalization is the way in which its effort to cement a framework orthodoxy after 1945 has served to overturn orthodoxy itself, and in its place, has ushered in an age of heterodoxy that is both ordered but anarchic. This presentation introduces some of the basic trends and actors that have emerged from out of the orthodox conceptual framework of globalization, and the extent to which these are contributing to its transformation as a vector of governance.
I start with the framework question for this discussion of globalization: How does one think through the issues of ordering globalization? (1) Start with a consideration of the contradictions of globalization (2) Consider basic presumptions and actors of the ideological orthodoxy of globalization (3) Identify emerging heterodoxy (a) actors, (b) concepts, and (c ) consequences. This is not to ber understood as either a defense or attack on the premises and operation of globalization. I leave that for the politician and the ideologue. The object here is to stand back for a minute and look dispassionately at what the politician, the ideologue, the intellectual and the zealot have wrought in giving vent to their passions over the last half century.
Perhaps the most useful way of approaching globalization is to understand its structures as a double edged sword. It cuts in two directions simultaneously providing both benefits and birdens but not in equal measure to all who are bound up in its operation. Those who have been its champions argue that (1) globalization strengthens commercial and financial interdependence and cooperation among different countries through robust markets and production undertaken through global supply chains; (2) globalization appears to continue to drive policy and to serve as the crux of contemporary societal development; (3) intensifies efforts to construct conceptually coherent systems that are meant to facilitate interactions among states relating to the free movement of goods, enterprises, capital, and, to some extent, people across borders; and (4) serves as a basis for maximizing aggregate wealth and social progress across states. But at the same time, one sees in globalization characteristics that have served those who would change the character and direction of globalized discourse. In particular they argue (1) globalization has increased the gap between both rich and the poor individuals within states, and between developed and developing states; (2) that individuals and states participate unequally in the processes and rewards of globalization as an economic, societal, cultural and political phenomenon; and (3) that the acceleration and deepening of globalization has also accelerated and deepened resistance among individuals within even the most globalized states, and by states that feel increasingly left behind.
But it is important to remember that all are not bound up within its structures. Globalization bifurcates economic regulation: an elite global structure of economic activity and residual localized economic activity disconnected from global flows. Since it is usually members of the globalized elites who speak to the issues (on their behalf or to aid the "voiceless") there is a tendency to assume that all are as bound up in its logic as they are. But reality is quite different. And many, including the "voiceless"--or at least some of them--are far removed from globalization, its structures and logic. Thus the essence of globalization is not the creation of a global system, but instead its principal marker is the way it has divided the world between those bound together across borders, and those who whom borders are the principal means of ordering their lives.
Yet whether one stands at the forefront of globalization or within the vanguard of those who oppose it (whatever that means, and increasingly it is not clear what that means except in context) the contemporary expression of globalization, and anti-globalization, has acquired a more or less specific orthodoxy. One can understand that orthodoxy as centered around the premise that the constriction of globalization represents the contemporary means by which society expresses the structures of centralization and de-centralization of its own organization. The centralizing forces are organized within supra-national system building driven by Western states: (1) WTO systems; (2) Trans-Pacific Partnership (TPP) and the negotiation of the Transatlantic Trade and Investment Partnership (TTIP) and Trade in Service Agreement (TISA). But they also include other centralizing systems building as well: the People’s Republic of China. China’s One Belt One Road (OBOR) Framework promises a different approach and perhaps one that serves developing states better. But globalization can be bound up in de-centralizing systems (national or multilateral) as well. These might take the form of protectionism, either in the service of development or as derogations from some or most of the global ordering otherwise applicable. Alternatively de-centralizing forces may take the form of nationalism, in the sense that states rather than (or through) their enterprises drive the implementation of state projections into global markets. Decentralization may also serve to segment globalization, especially when it combines elements of protectionism (either national or multilateral) or nationalism. These might be accomplished through the usual instruments of legal ordering: Bilateral Trade Agreements, and Regional Trade agreements. The political ideology serving as the foundation of these efforts varies, though the objective is the same. Thus one finds examples of Western markets based forms, Marxist Markets based forms and variations of Western socialist models.
The conceptual basis of these orthodoxies are straightforward and so well internalized that they hardly elicit comment, much less study. These are the basic premises around which both globalization and anti globalization arguments are based. Among the most important is the acceptance of ideologies built around the primacy of politics as an ordering and legitimating device. Within that construct, economics is the object and social ordering is understood as a stabilization mechanism. Tied tio the premise of the primacy of politics is the corollary notion of the centrality of the state as the principal means of ordering politics. Within this politics-state axis, law serves as the core structuring mechanism. It is constructed to produce legitimacy and spawns the well known trends toward legalization and judicialization of social space as the principle structures of implementation.
Within these core principles, the structures of internationalism that support globalization have been constructed. These are built around a number of devices and techniques: (1) constrained delegations of authority from states to state collectives, and (2) the use of public international bodies as disciplinary organs. These disciplinary functions operate in well known though not uncontroversial ways; (1) IFIs and conditionality for ordering macro economic policies, (2) technical assistance for socializing “good governance,” (3) global mechanisms for criminalization of destabilizing activity and to discipline states with weak governance that interfere with the flows of global production; and (4) socialization of ordering societal life through state power— regional human rights organizations and common constitutional traditions.
Yet this system and its premises has produced an irony: the closer it has come to its full realization, the more evident the consequence that success carries a cost. That cost is also straightforward--at its limits, globalization is inimical to the principles and premises on which it is founded.
And thus it is useful to consider the ways in which already globalization's orthodoxy is overturning its own orthodoxy. This serves as one of the great ironies of globalization: the effort to cement a framework orthodoxy after 1945 has served to overturn orthodoxy itself. What that has left in its wake appears more clearly now as a set of emerging heterodoxies that are both ordered but anarchic. The remainder of my remarks are meant to identify some of these emerging trends and actors.
There are a number of ways in which this trend manifests in the organization of political systems. Consider for example the rise in prominence of the business case for human rights as the core basis for discussion of the transposition of political rights into economic systems beyond the reach of any single state. One can see evidence of these transformation in other ways as well: (1) the growing importance of states as economic actors; (2) the growing role of enterprises as governance vehicles; (3) the discovery of the production chain and the MNE as the new “territory” within which regulation is targeted; (4) the growing role of sovereign debt as a driver of governance and sovereign lending as an alternative to domestic sovereign authority; and (5) the role of private financing as a means of global regulation. More important, perhaps is the extraordinary transformation of the character and use of the polity. It remains a potent force for political expression, but now more potent still as the expression (1) of consumer choice and (2) as a factor in the production of value. Lastly, the techniques of governance, in law and politics, has been transformed a swell. It is less the product of normative expression of political will. Assessment techniques, inherently centered in the logic of economics, both as a means of self and collective management, has arisen as an important means of governance, transforming normative discussion into obligations to serve assessment. The control of assessment structures, rather than the consensus over norms, now serves as the principal driver of regulation--for individuals and institutional actors. The object is now not obedience but the internalization of behaviors embedded in of external rankings. Let's look a little more closely at each of these in turn.
Taken together one sees emerging not merely the privatization fo the state and the regulatory authority of the enterprise; one sees as well the transformation of the way in which territory is organized for the most efficient provision of regulation. Where once national borders served that purpose (laws were effective within the territories of states), now the production chain serves that purpose better with respect to the regulation of economic activity. That is, the new "territories" within which regulation may be effectively administered are composed of the jurisdiction of apex enterprises and of the functionally differentiated pathways of global production chains. The OECD has recognized the utility of such divisions of regulatory terrains in its own work. Consider the way in which guidance is now framed through functionally distinct production chains (e.g., here).
The character and extent of the drive toward privatization can now be more easily understood. And it can be understood as a principal consequence of the shift from the primacy of politics to that of economics, and a shift from the primacy of states to an environment in which states now share power with others. But this transformation is neither revolutionary nor complete. The state has not disappeared. It remains at the center, within its territory (and for the larger states within its zone of influence and military reach) for public order, for the protection of territorial manifestation of international order, and for the projection of power that power directly or through markets. Likewise, International Organizations remain potent as the collective means through which states produce norms and create assessment mechanisms that can aid in legal and economic coherence among the family of nations. Yet within those widening interstices of power, private enterprises and financial institutions have emerged in a regulatory capacity. The societal sphere has become an object of regulation. These actors are now inter-linked and collectively produce the web of obligation that constitutes the global trading order complete.
But this may be changing. In August, 2016, seven ministries and state owned enterprises, including the People’s Bank of China, along with six other government agencies, issued the “Guidelines for Establishing the Green Financial System” (Yinfa 2016 Doc No 228), with the approval of the State Council (HERE)."The Guidelines include a series of policy incentives to support and incentivize green investment. These incentives include, among others, re-lending operations by the People’s Bank of China, specialized green guarantee programs, interest subsides for green loan-supported projects, and the launch of a national-level green development fund." (Ibid.).
In any case, socialist modernization requires a coordinated approach between economic and societal advancement. State and economic actors undertake responsibility to care for workers and promote correct behavior through provision of services. Assessment technique (self and collective) is also important in Chinese government activities. The internalization of external rankings and the development of internal rankings and assessment frameworks has become an important element of policy and regulatory technique. The development of socialist society through social credit systems bears much study in this respect.
And indeed, it is fair to ask: does the move toward the emerging framework of regulation be better understood as a new regulatory balance rather than an inevitable push to privatization? That question, in turn, reminds us that the processes of globalization (as well as of anti-globalization) is to some extent built on context, one that at its foundation provides a different set of possibilities for strong and well developed states from those of poorer and less developed states (e.g., here). And it ought to serve to remind us as well that the globalization and anti-globalization debates are in fact a conversation among global elites for the control of the narrative of global ordering in which a key issue tends to be the role of the state and the residual power of politics (e.g., here; and here). The answer may well depend on the place occupied by a particular territory within global production. For China and the United States, the trend toward privatization may well constitute a new balancing of the ordering of administrative power. In both cases, the state authority to delegate administrative roles to its instrumentalities (SOEs or enterprises within its regulatory control) represents little more than an intensification of trends that were already on the rise before globalization. And yet, even there the character of those delegations are changing, to the extent add to a regulatory and administrative jurisdiction in enterprises beyond the power of a state to regulate directly. For weaker, poorer and less developed states, and especially for states downstream in global production, the trend appears less a re-balancing and more a transformation of governance. In that context state control is substantially more marginal and private-international authority greater and more autonomous.
Beyond the rarefied halls of global system construction, and the preservation of state power lies another world. That world is filled either with the objects of these discussions--individuals, societies and enterprises substantially removed from the flows of global economic activities (at at its margins). For this very large group, there these conversations are consequentially important--that is important to the extent these may produce effects that intrude on localized societal orderings otherwise detached from the global flows that are the objects of the globalization discussions. Worse, they may become a casualty, one without an effective voice--of economic-political orderings at the "top." Globalization both fractures and erases the localized economic and political structures of states, though the effects will be substantially more pronounced in states that sit within the lower reaches of global production (e.g., here). To some extent this echoes elements of Marxist theories of law and society--yet they appear to reject the Leninist elements that have traditionally been used to activate theory. Yet at the same time, the trends toward new forms of popular movements may represent a reworking of classical democratic theory for the domain of the market rather than for the classical, territoriality based, polity.
Left unanswered in these trends and discussions is the core of what might have animated globalization in part. In a world in which authority is fractured, governance terrains are fluid and functional, and there may be substantial order without a center, how does the governance community approach global problems that might require the sort of order the emerging system avoid? The failure of an answer might point to the weakness of the structures emerging now in globalization. Or it may point to those governance gaps that may yet find new expression in a global order in which states and state authority plays a crucial but not decisive role.