Today's date:
Fall 2000

Globalization's Valley of Tears

Jürgen Habermas
, the German philosopher, is author of the seminal work, Legitimation Crisis.

Frankfurt—"The all-important question today," we read in the introduction to a book entitled Global Dynamics and Local Environments, "is whether, beyond the limits of the nation state, at the supranational and global levels, capitalism’s potential for wreaking ecological, social and cultural havoc can be brought back under control." The market’s capacity to steer the economy and bring new information to light is beyond question. But markets only respond to messages coded in the language of prices. They are insensible to their own external effects, those they produce in other domains. This gives the liberal sociologist Richard Munch reason to fear that we will be faced with the depletion of nonrenewable resources, cultural alienation on a mass scale and social explosions unless we succeed in politically fencing in markets which are, as it were, running away from enfeebled and overburdened nation states.

It is true that states in advanced capitalist societies have stepped up, rather than defused, capitalism’s capacity to commit ecological mayhem in the post-war period, and that they have built up social security systems with the help of welfare-state bureaucracies hardly given to encouraging their clients to take charge of their own lives.

Yet, in the third quarter of the last century, the welfare state did succeed in substantially offsetting the socially undesirable consequences of a highly productive economic system in Europe and other OECD states. For the first time in its history, capitalism did not thwart fulfillment of the republican promise to grant all citizens the equal opportunity to exercise their rights. Confronted with the homeless, whose numbers are silently increasing before our very eyes, we are reminded of Anatole France’s bon mot: the right to "spend the night sleeping out under a bridge" should not be the only one everybody enjoys.

If we read our constitutions in this material sense, as texts about achieving social justice, then the idea of citizens prescribing laws for themselves—according to which those subject to the law should regard themselves as the ones who make the law—takes on a political dimension: that of a society which deliberately acts upon itself. In constructing the welfare state in post-war Europe, politicians of all stripes were guided by this dynamic conception of the democratic process.

Today, we are coming to an awareness that this idea has so far been realized only in the framework of the nation state. But if the nation state is reaching the limits of its capacities in the changed context defined by global society and the global economy, then two things stand and fall with this form of social organization: the political domestication of a capitalism unleashed on a planetary scale, and the unique example of a broad democracy that works at least reasonably well. Can this form of the democratic self-transformation of modern societies be extended beyond national borders?
I propose to examine this question in three stages. We need first to see how the nation state and democracy are interconnected, and to identify the source of the pressures this unique symbiosis is currently being subjected to. I shall then briefly describe, in the light of this analysis, four political responses to the challenges raised by the post-national constellation; these responses also see the parameters of the ongoing debate about a "Third Way." Finally, using this debate as a springboard, I shall map out an proactive position on the future of the European Union. If, in discussing their future, the generally privileged citizens of our region wish to take the viewpoints of other countries and continents into account, they will have to deepen the European Union along federative lines so as to create, as citizens of the world, the requisite conditions for global domestic politics.

THE CHALLENGES FACING DEMOCRACY AND THE NATION STATE | The trends that are today attracting general attention under the catch-all rubric "globalization" are transforming a historical constellation characterized by the fact that state, society and economy are, as it were, co-extensive within the same national boundaries. The international economic system, in which states draw the borderline between the domestic economy and foreign trade relations, is being metamorphosed into a transnational economy in the wake of the globalization of markets. Especially relevant here are the acceleration of worldwide capital ?ows and the imperative assessment of national economic conditions by globally interlinked capital markets. These factors explain why states no longer constitute nodes endowing the worldwide network of commercial relations with the structure of interstate or international relations. Today, it is rather states which are embedded within markets than national economies which are embedded within the boundaries of states.

Needless to say, the ongoing erosion of borders is not just characteristic of the economy. The study of "global transformation" recently published by David Held and his collaborators contains, over and above chapters on world trade, capital markets and multinational corporations —whose production networks span the planet—chapters on global domestic politics, peace-keeping and organized violence, the new media and communications networks, burgeoning migratory movements and hybrid cultural forms. The "disenclavement" of society, culture and the economy, which is proceeding apace, is impinging on the fundamental conditions of existence of the European state system, which was erected on a territorial basis beginning in the 17th century, and still positions the most important collective actors on the political stage.

The post-national constellation is putting an end to this situation, in which politics and the legal system intermesh in constructive ways with economic circuits and national traditions within the borders of territorial states. The trends summed up in the word "globalization" are not only jeopardizing, internally, the comparatively homogeneous make-up of national populations—the prepolitical basis for the integration of citizens into the nation state—by prompting immigration and cultural strati?cation.

Even more tellingly, a state that is increasingly entangled in the interdependencies between the global economy and global society is seeing its autonomy, capacity for action and democratic substance diminish. Leaving aside empirical limitations on state sovereignty, I shall here limit myself to considering three aspects of the erosion of the nation state’s prerogatives: the decline in the state’s capacities for control; growing de?cits in the legitimation of decision-making processes; and an increasing inability to perform the kinds of steering and organizational functions that help secure legitimacy.

WEAKENING OF THE NATION STATE | The loss of autonomy means, among other things, that a state can no longer count on its own forces to provide its citizens with adequate protection from the external effects of decisions taken by other actors or from the knock-on effects of processes originating beyond its borders. In question here are, on the one hand, "spontaneous border violations" such as pollution, organized crime, arms traf?cking, epidemics and security risks associated with large-scale technology, and, on the other, the reluctantly tolerated consequences of other states’ calculated policies, which affect people who did not help formulate them no less than people who did—think, for example, of the risks caused by nuclear reactors that are built beyond a state’s borders and fail to meet its own safety standards.

De?cits in democratic legitimation arise whenever the set of those involved in making democratic decisions fails to coincide with the set of those affected by them. Democratic legitimation is also sapped, less obviously but more durably, whenever the growing need for coordination, due to increasing interdependence, is met by interstate agreements. The fact that nation states are institutionally embedded in a network of transnational agreements and organizations does create equivalents in certain policy areas for prerogatives forfeited at the national level. But the more matters that are settled through intrastate negotiation, and the more important these matters are, the more political decisions are withdrawn from the arenas of democratic opinion formation and will formation—which are exclusively national arenas.

In the European Union the largely bureaucratic decision-making process of the experts in Brussels offers an example of the type of democratic de?cit caused by the shift away from national decision-making bodies to interstate committees of government representatives.

The debate focuses, however, on the restriction of those capacities for intervention which the nation state has heretofore mobilized to carry out legitimating social policies. With the widening gap between nation states’ territorially limited room for action on the one hand, and global markets and accelerated capital ?ows on the other, the "functional self-suf?ciency of the domestic economy" is going by the board: "functional self-suf?ciency should not be equated with autarky....[It] does not imply that a nation must possess a ‘full range’ of products, but only those complementary factors—above all, capital and organization—which the labor supply available in a society needs in order to produce."
Footloose capital that is, as it were, exempt from the obligation to stay at home in its search for investment opportunities and speculative pro?ts can threaten to exercise its exit option whenever a government puts burdensome constraints on the conditions for domestic investment in the attempt to protect social standards, maintain job security or preserve its own ability to manage demand.

Thus, national governments are losing the power to mobilize all the available steering mechanisms of domestic economies, stimulate growth and so secure vital bases for their legitimation. Demand-management policies have counterproductive external consequences on the workings of the national economy—as was the case in the 1980s under the ?rst Mitterrand government—because international stock exchanges have now taken over the function of assessing national economic policies. In many European countries, the fact that markets have supplanted politics is re?ected in the vicious circle of soaring unemployment, strained social security systems and shrinking national insurance contributions. The state is on the horns of a dilemma: The greater the need to replenish exhausted state budgets by raising taxes on movable property and enacting measures to boost growth, the harder it becomes to do so within the con?nes of the nation state.

THE PARAMETERS OF A DISCUSSION | There are two blanket responses to this challenge and two rather more nuanced ones. The polarization between the two camps which advance blanket arguments for or against globalization and deterritorialization has led to a search for a "Third Way" in a somewhat defensive or somewhat offensive variant.

Support for globalization is based on the neoliberal orthodoxy which has ushered in the shift toward the supply-side economic policies of the past few decades. Partisans of globalization advocate unconditional subordination of the state to the imperatives of market-led integration of global society; they plead for an "entrepreneurial state" that would abandon the project of decommodifying labor power or even protecting environmental resources. Ratcheted into the transnational economic system, the state would give citizens access to the negative freedoms of global competition, while essentially restricting itself to providing, in business-like fashion, infrastructures that foster entrepreneurial activity and make local production sites attractive from the standpoint of pro?tability. I cannot discuss here the assumptions informing neoliberal models or the venerable doctrinal quarrel over the relationship between social justice and market ef?ciency. Two objections, however, are thrown up by the premises of neoliberal theory itself.

Let us assume that a fully liberalized world economy, characterized by the unfettered mobility of all the factors of production (including labor power), will eventually begin operating smoothly under the conditions projected by advocates of globalization: a world of harmoniously equilibrated production sites and—the grand aim—a symmetrical division of labor. Even if there are grounds for this assumption, it implies acceptance, on the national and international plane, of a transitional period which would see not only a drastic increase in social inequalities and social fragmentation, but the deterioration of moral standards and cultural infrastructures as well. This leads us to ask how long it will take to cross the "valley of tears" and what sacri?ces will have to be made en route. How many people will be marginalized and then left by the wayside before the goal is reached? How many monuments of world culture will fall victim to "creative destruction" and be forever lost?
The question as to what the future holds for democracy is no less a cause for concern. For, to the extent that the nation state is shorn of functions and margins of maneuver for which no equivalents emerge on the supranational level, the democratic procedures and institutional arrangements that enable the associated citizens of a state to change the conditions they live under will inevitably be drained of their real content.

FROM TERRITORIALITY TO XENOPHOBIA | In reaction to the erosion of democracy and the power of the nation state, a coalition has been put together by those resisting the potential or actual social decline of the victims of structural change and the disabling of the democratic state and its citizens. But its energetic desire to stop the sluices ultimately betrays this "party of territoriality" into contesting the egalitarian and universalist bases of democracy itself.

At a minimum, protectionist sentiment is grist for the mill of ethnocentric rejection of diversity, xenophobic rejection of the other and antimodernist rejection of complex social conditions. Such sentiment is directed against anyone or anything that crosses national borders—the arms smugglers and drug dealers or ma?osi who threaten domestic security, the American movies and ?ood of information that threaten national cultures, or the immigrant workers and refugees who, like foreign capital, threaten living standards. Even giving due consideration to the rational kernel of these defensive reactions, it is easy to see why the nation state cannot recover the strength it once had by simply battening down the hatches.

The liberalization of the global economy, which began after World War II and temporarily took the form of an embedded liberalism resting on a system of ?xed exchange rates, has been sharply accelerated since the demise of the Bretton Woods system. But this acceleration was not inevitable. The systemic constraints that are today imposed by the imperatives of a free-trade system, which was powerfully undergirded with the creation of the World Trade Organization (WTO), are the fruits of political voluntarism. Although the United States forced the pace of the various General Agreement on Tariffs and Trade (GATT) rounds, GATT did not involve unilaterally imposed decisions, but rather cumulative negotiated agreements, each with its particular history; these agreements were coordinated in concessive negotiations between a large number of individual governments. And because it is this kind of negative integration of many independent actors that has given rise to the globalized marketplace, projects to restore the status quo ante by unilaterally revoking the functioning system that has emerged from a concerted decision stand no chance of success; any such attempts must expect to meet with sanctions.

The stand-off in the debate between the "parties" of globalization and territoriality has sparked attempts to ?nd a "Third Way." They branch off in two directions, toward a more or less defensive and a more or less offensive variant. One sets out from the premise that, if the forces of global capitalism, now that they have been unleashed, can no longer be domesticated, their impact can be cushioned at the national level. The other pins its hopes on the transformative power of a supranational politics that will gradually catch up with runaway markets.

The defensive variant has it that it is too late to reverse the subordination of politics to the requirements of a global society uni?ed by the market. Nevertheless, the argument goes, the nation state should not merely play a reactive role, with an eye to creating favorable conditions for investment capital; it should also participate actively in all attempts to provide citizens the skills they need to compete. The new social policy is no less universalistic in its orientation than the old. However, it is not intended to protect people from the typical risks of working life, but, ?rst and foremost, to supply them with the entrepreneurial skills of "achievers," capable of looking after themselves. The well-known adage about "helping people to help themselves" is thus given an economistic slant: It now conjures up a kind of ?tness training that should enable everyone to assume personal responsibility and take initiatives which will allow her to hold her own in the marketplace—not to end up as the kind of "failure" who has to turn to the state for help. In this view, social democrats have to shift the relationship between risk and security involved in the welfare state, to develop a society of "responsible risk-takers" in the spheres of government, business enterprise and labor markets.... Equality must contribute to diversity, not stand in its way. This is, of course, only one aspect of the program; it is, however, pivotal.

THE ETHICAL TRIUMPH OF NEOLIBERALISM | What bothers "old" socialists about the prospect held out by "New Labor" or the "New Center" is not only its normative chutzpah, but also the debatable empirical assumption that jobs, even when they do not take the form of traditional work relationships, remain the "key variable in social integration."
In view of the secular tendency of technical progress to reduce labor time and increase productivity, and the simultaneous rise in the demand for jobs (which comes from women, above all), the opposite assumption—that we are witnessing the "end of a society based on full employment"—is not entirely farfetched. But, if we are to give up the political goal of full employment, then we will either have to scrap the social standards of distributive justice or else consider fresh alternatives that will put considerable strain on national investment climates. Given the conditions prevailing in today’s global economy, it is scarcely possible to implement cost-neutral projects to share the shrinking volume of available work, promote capital ownership among broad layers of the population or institute a basic minimum wage uncoupled from real earnings and pegged above current welfare levels.

In normative terms, advocates of this "Third Way" fall in with the line of a liberalism that regards social equality solely from the standpoint of input, making it a mere matter of equal opportunity. This borrowed moral element aside, however, public perception of the difference between Thatcher and Blair is blurred above all because the "Newest Left" has accommodated the ethical conceptions of neo-liberalism. I have in mind its willingness to be drawn into the ethos of a "lifestyle attuned to the world market," which expects every citizen to obtain the education he needs to become "an entrepreneur managing his own human capital."
Those unwilling to cross this divide may wish to consider a second, offensive variant of the "Third Way." The perspective it offers turns on the notion that politics should take precedence over the logic of the market: To what extent the logic of the market system should be "turned loose," where and in what framework the market should "rule," are ultimately questions which, in a modern society, should be left to deliberative politics to decide. This sounds like voluntarism because this is a normative proposal which, if what has been said so far holds, cannot be put into practice in a national context. However, the attempt to resolve the dilemma between disarming welfare-state democracy or rearming the nation state leads us to look to larger political units and transnational systems that could compensate for the nation state’s functional losses in a way which need not snap the chain of democratic legitimation.

The EU naturally comes to mind as an example of democracy functioning beyond the limits of the nation state. Of course, the creation of larger political entities does not by itself alter the process of competition between local production sites, that is, it does not challenge the primacy of market-led integration per se. Politics will succeed in "catching up" with globalized markets only if it eventually becomes possible to create an infrastucture capable of sustaining a global domestic politics without uncoupling it from democratic process of legitimation.

EUROPE AND THE WORLD | If we observe, from this vantage point, the way the EU has evolved to date, we ?nd ourselves confronting a paradox. The creation of new political institutions—the Brussels authorities, the European Court of Justice and the European Central Bank—by no means implies that politics has taken on greater importance. Monetary union represents the last step in a process which, notwithstanding Schuman’s, de Gasperi’s and Adenauer’s original program, can, in retrospect, be soberly described as "intergovernmental market-creation."
The EU today constitutes a broad continental region which, horizontally, has become a tightly meshed net thanks to the market, but vertically is subject to rather weak political regulation by indirectly legitimated authorities. As member states have transferred sovereignty over their monies to the Central Bank, and thus surrendered the ability to steer their national economies by adjusting exchange rates, the heightened competition we are likely to see within the single currency zone will give rise to problems of new dimensions.

The hitherto nationally structured European economies have reached different levels of development and are marked by different economic styles. Until a uni?ed economy emerges from this heterogeneous mix, the interaction between Europe’s individual economic zones, which are still inserted into different political systems, will generate friction. This holds, to begin with, for weaker economies, which will have to compensate for their competitive disadvantage through wage-cutting; the stronger economies, for their part, fear wage-dumping.

An inauspicious scenario is being written for the existing social security systems, already bones of contention: they remain under national jurisdiction and have very different structures. While some countries fear the loss of advantages derived from lower costs, others fear downward adjustment. Europe is being confronted with an alternative: it can either relieve these pressures by way of the market—via competition between different centers of economic activity and different social protection policies—or resolve them by political means, through an attempt to bring about "harmonization" and gradual mutual adjustment of welfare, labor-market and tax policies. The basic question is whether the institutional status quo, in which states balance out con?icting national interests in interstate negotiation, is to be defended even at the price of a race to the bottom, or whether the European Union should evolve beyond its present form of interstate alliance toward true federation.

Only in the latter case could it summon up the political strength to decide to apply corrective measures to markets and set up redistributive regulatory mechanisms.

THE CAMPS ON EUROPE | Within the parameters of the current debate about globalization, the choice between these alternatives is an easy one for both neoliberals and nationalists. While desperate Euroskeptics are banking on protectionism and exclusion, all the more so now that monetary union has gone into effect, "Market Europeans" are satis?ed with monetary union, which completes the European domestic market. Opposed to both these camps, "Eurofederalists" are striving to transform the existing international accords into a political constitution so as to provide the decisions of the commission, Council of Ministers and Court of Justice with their own basis for legitimacy. Those who adopt a cosmopolitan stance take their distance from all three positions. They regard a federal European State as a starting point for developing a network of transnational regimes that can, even in the absence of a world government, conduct something like a global domestic policy.

However, the central opposition between Eurofederalists and market Europeans is complicated by the fact that the latter have concluded a tacit alliance with erstwhile Euroskeptics seeking a "Third Way" based on the existing monetary union.

The market Europeans would like to preserve the European status quo because it seals the subordination of the fragmented nation states to market-led integration. Thus, a spokesman for the Deutsche Bank can only regard the debate over the alternative "state alliance" or "federal state" as "academic": "In the context of the integration of economic zones, any distinction between civic and economic activity ultimately disappears. Indeed, effacing such a distinction is the main goal being pursued via the ongoing processes of integration."
From this vantage point, competition in Europe is supposed to "lift the taboo" protecting national assets like the public credit sector or state social insurance schemes, which it will then gradually liquidate.

To be sure, the position of the market Europeans rests on an assumption shared by those social-democratic partisans of the nation state who now want to carve out a "Third Way": "In the age of globalization, it is impossible to remove restrictions on state power; [globalization]....demands above all that we reinforce the autonomous, liberal forces in civil society," namely, "people’s individual initiative and sense of personal responsibility."
This common premise explains the turnaround in alliances. Euroskeptics today support market Europeans in their defense of the European status quo, even if their motives and goals differ. They do not want to dismantle welfare policies, but prefer to redirect them toward investment in human capital—and, let us add, they do not quite wish to see all social "shock absorbers" placed in private hands.

Thus the debate between neoliberals and Eurofederalists becomes caught up with the one between defensive and offensive variants of the "Third Way" that is smoldering in the social-democratic camp—between, let us say, Schroeder and Lafontaine. This con?ict touches on more than just the question as to whether the EU can, by harmonizing divergent national ?scal, social and economic policies, win back the leeway that nation states have lost: after all, the European economic zone is still relatively insulated from global competition, thanks to a tightly woven regional network of trade relations and direct investments.

The debate between Euroskeptics and Eurofederalists hinges above all on whether the EU, despite the diversity of its member states, with their many different peoples, languages and cultures, can ever acquire the character of an authentic state or must rather remain the prisoner of neo-corporatist systems of negotiation. Eurofederalists strive to enhance the governability of the union, so as to make it possible to implement pan-European policies and regulations that will oblige member states to coordinate their actions, even when the measures involved have a redistributive effect. From the Eurofederalist point of view, any extension of the union’s capacity for political action must go hand-in-hand with a broadening of the base for its legitimation.

EXTENDING SOLIDARITY | It is beyond dispute that the sine qua non for democratic will formation on a pan-European scale of the kind that can legitimate and sustain positively coordinated redistribution policies is greater solidarity at the base. Social solidarity has hitherto been limited to the nation state; it must be widened to embrace all citizens of the union, so that, for example, Swedes and Portuguese will be ready to stand by one another. Only then can they reasonably be expected to consent to a roughly equal minimum wage or, more generally, to the creation of identical conditions for forging individual life plans, which, to be sure, will continue to display national features.

Skeptics are doubtful; they argue that there exists nothing resembling a European "people" capable of constituting a European state. However, peoples come into being only with their state constitutions. Democracy itself is a juridically mediated form of political integration. Of course, democracy depends, in its turn, on the existence of a political culture shared by all citizens. But there is no call for defeatism, if one bears in mind that, in the 19th-century European states, national consciousness and social solidarity were only gradually produced, with the help of national historiography, mass communications and universal conscription. If that arti?cial form of "solidarity among strangers" came about thanks to a historically momentous effort of abstraction from local, dynastic consciousness to a consciousness that was national and democratic, then why should it be impossible to extend this learning process beyond national borders?
Major hurdles undoubtedly remain. A constitution will not be enough. It can only initiate the democratic processes in which it must then take root. Since agreements between member states will remain a factor even in a politically constituted union, a federal European State will, in any case, be a different caliber than national federal states; it cannot simply copy their legitimation processes.

A European party system will come about only to the extent that the existing parties, in national arenas at ?rst, debate the future of Europe, discovering in the process interests that transcend borders. This discussion must be synchronized throughout Europe in interlinked national public spheres; that is, the same issues must be discussed at the same time, so as to foster the emergence of a European civil society with its interest groups, non-governmental organizations and civic initiatives. But transnational mass media can establish a polyglot communicative context only if the national school systems see to it that Europeans have a common grounding in foreign languages. If that happens, the cultural legacies of a common European history, radiating outward from their scattered national centers, will gradually be brought back together in a common political culture.

WORLD CITIZENSHIP | With its broadened economic base, a federal European State would bene?t from economies of scale that, ideally, would give it certain advantages in the arena of global competition. But if the federative project aimed only to ?eld another global player with the clout of the US, it would remain particularistic, merely endowing what asylum seekers have come to know as "Fortress Europe" with a new—that is, an economic—dimension.

Neoliberals might even counter by beating the drums for the "morality of the market," vaunting the "unpredjudiced verdicts" of a world market that has, after all, already given the emerging economies a chance to exploit their relative cost advantages, relying on their own forces to close a gap which well-meaning development programs have proven incapable of overcoming. I need not say anything about the social costs implied by the dynamics of such development. But it is hard to gainsay the argument that supranational groupings which become political entities capable of action on a global scale are morally unobjectionable only if this ?rst step—the one leading to their creation—is followed by a second.

This prompts us to ask whether the small group of actors capable of political action on the scale of the planet can, within the framework of a reformed international organization, develop the present loosely woven net of transnational regimes and then use it so as to enable a global domestic politics to emerge in the absence of a global government. A politics of that kind would have to be conducted with a view to bringing about harmonization. The long-term aim would have to be the gradual elimination of the social divisions and strati?cation of world society without prejudice to cultural speci?city.

©2000 Aspenia/New Left Review/Suhrkampf Verlag

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