Globalization and its influence on state sovereignty has been undoubtedly a topic of broad discussions and hot debates among academics, experts and policy makers. A popular idea developed recently is “the end of the welfare state” concept echoing that of The End of The History articulated by Francis Fukuyama. The end-of-the-welfare-state advocates usually claim the increasing economic globalization is limiting a number of policy options available to states, which entails a retrenchment of the welfare-state in developed nations. Yet, however clear the standpoint is, no comprehensive and profound explanation is provided on the roots of the phenomenon. Likewise, no policy implications are given based on the analysis of the changing nature of state sovereignty.
The proposed response to the article aims to fill in this gap. I would like to first pick up on the strong elements of the above-mentioned argument. I will then challenge this standpoint by claiming new trends are rising in the world that are anti-globalist in nature. My ultimate argument will be that globalization is in fact coming to a end. The world is entering a new era of post-globalization which could entail renaissance of the welfare-state.
The proponents of “the end of the welfare state” concept assert that capitalism has been changing the nature of state sovereignty. Namely, increasing globalization has undermined the sovereignty of nation-states to enact their own policies. Such limitations come from three main channels – trade and economic integration, financial markets and competition for employment. Furthermore, the neo-liberal ideology has asserted the primacy of the market over everything else, which is manifested via serious cutbacks to the welfare- state. All in all, the state's capacity to fulfil the 'welfare contract' has been undermined in the name of 'competitiveness and economic efficiency'.
The followers of the idea outlined are persuasive about the thesis of globalization-welfare state interrelation in the developed nations. As a rule, there is also an attempt to provide a comprehensive overview of the concept of sovereignty. However, a number of important factors are omitted from such analysis, and several terminological confusions are created. All this, in my opinion, decreases the validity of the argument articulated.
As far as terminology is concerned, several remarks can be made. First of all, the concept of globalization is confined to the economic dimension only. There are talks about trade and economic integration, currency devaluation, international competition etc., while other important aspects of globalization are skipped, such as political, national, and cultural. In this regard, such phenomena as supranational entities (EU), transformation of national identities ('global citizenship'), and multiculturalism could be analysed in view of their influence onto the welfare-state. Secondly, the general assertion is the changing nature of sovereignty has led to understanding a nation-state as a 'welfare state'. However, few scholars specify that a welfare-state is a phenomenon of the more developed Western society. In other words, not all nation-states are welfare-states. Such disambiguation is critical in analyzing the ways globalization is affecting the capacity of welfare-states to conduct their policies. Finally, not all definitions are articulated in these discussions, e.g. 'capitalism', 'neo-liberal', 'developed democracies'.
It is the conceptual side of the argument, however, that needs most elaboration in my opinion. Let me explain in detail what can contribute to a more comprehensive understanding of the topic. I will then conclude my analysis with a counter-argument for the author's thesis, and will reveal the subsequent implications from my argument.
To begin with, the concepts of 'sovereignty' and 'nation-state' need to be analyzed in more detail. The end-of-the-welfare-state advocates tend to demonstrate the shift from 'sovereignty over a state' to 'sovereignty over people'. In both cases it is a state that exercises sovereignty, i.e. we talk about a 'sovereign state'. However, quite a lot in the academic and expert circles are talking rather about the sovereignty of the market, including such scholars as Colin Crouch, Saskia Sassen and Zygmunt Bauman. Thus, Crouch’s main contention is that the key institution of the post-democratic world is the global firm; Saskia Sassen explores economic and corporate citizenship under the hegemony of the world market; Zygmunt Bauman stipulates the sovereignty of a state and nation is being replaced by the sovereignty of the market. Indeed, the traditional national-democratic and social-democratic political model is based on the idea of a state or national sovereignty. Today, in contrast, we can witness the sovereignty of the world market which influences the structure of power, its responsibilities and the state-citizen relationship in every nation-state that ceases to be 'national' and is 'fading away'.
Furthermore, the changing nature of the sovereignty triggers transformation of the nation-state itself. Globalization has weakened the 'national dimension' of nation-states. Today a new type of a state is being constructed all around the globe. This is corporation-state, a candidate for replacing the 'outdated' nation-state that reached its peak of development in the period of 1850-1970's. Corporation-state is an entity of a primarily economic character (vs. political in a nation-state) aimed at minimizing costs and expenses. This is a state that acts as a corporation ruled by the economic effectiveness of the 'survival of the fittest'. The process of constructing such a state is taking place all over the world. It is slower where there is a civil society, a deep religious tradition (especially non-Western one), strong national identity, or where a states has big territory. Where is nothing to confront with, the process is sweeping and even violent.
My second claim to the-end-of-the-welfare-state argumentation is declaring 'a global economic foundation' a root cause for the changing nature of sovereignty and welfare-state. I agree globalization has diminished the sovereign capacity of nation-states for the last thirty years. In my view, however, the main reason for this shift is a deliberate act of the Western elites to dismantle the welfare-state, a process intensified by the end of the Cold War. On the factual side, the decline of 'The Glorious Thirty' (1945-1975) started with abandoning the Bretton Woods system by the US and the 1973 oil crisis. Two years later 'The Crisis of Democracy' report was written by Michel Crozier, Samuel P. Huntington, and Joji Watanuki at the request of the Trilateral Commission. This report clearly challenged the social achievements of the working class during 'The Glorious Thirty' period. It stated that further industrial development would entail a rapid growth of the working and middle classes, which could in turn bring about unwanted political forces. Thus, the shift from the policy of welfare-state to the policy of market fundamentalism (or neo-liberalism) was first initiated by Margaret Thatcher in Great in 1979 and Ronald Reagan in the US in 1981. This was accompanied by a decreasing technological progress, growing deindustrialization, and promoting fantasy to replace science fiction with for the mass culture. In other words, an attempt was made to create the 'New Middle Ages'.
Finally, while many talk about "decreasing the size and scope of the welfare state", perhaps the most important outcome of the process is omitted – social inequality. Increase in social inequality has been an alarming world trend lately affecting the US, the EU and the less prosperous countries. A serious structural social change is taking place with the middle class fading away. The social gap is increasing, with the rich getting richer and the poor getting poorer. Today the growth of GDP and national economies is no longer connected with the growth of well-being of nations, bur rather means increase in revenue of corporations and their top managers. In this regard, 'The New York Times' – a newspaper unlikely to be claimed 'socialist' – declared in one of the recent articles inequality undermines democracy, reporting it 'breeds resentment and political instability, eroding the legitimacy of democratic institutions'.
With all the considerations mentioned above, a question remains open: what happens to globalization? It has been claimed we are witnessing the crisis of the neoliberal model and the US hegemony. Combined with the current global economic crisis, the chances are very likely that globalization will turn drastically into ‘deglobalization’ and ‘regionalization’. And more and more signs are there to indicate the shift is taking place. The current crisis is exceptionally deep and structural, and cannot be resolved without a state interference into economy. In contrast, neo-liberalism hinders the capacity of states to conduct independent policies, and must therefore be reconsidered. The new world economic order will therefore mean decline of neo-liberalism in order to overcome the ongoing crisis. This will inevitably imply re-constructing the welfare-state as healthy, educated and socially-secured population is indispensable for the economic growth.
Let me draw a conclusion at this stage. Unlike the advocates of “the end of the welfare state” concept, who leave an open question on what or who will provide the economic and social rights to citizens, I strongly assert it is crucial to reinforce the welfare-state in order to cope with the challenges of the newly emerging world order. Only a renaissance of the social welfare-state may be a viable alternative to a corporation-state. It is this trend that, optimistically, will make the world economically more stable and politically acceptable.