Economics

What Role for the State?

Jul 20, 2012 Kemal Derviş

The financial crisis of 2008 has spurred a global debate on how much government regulation of markets – and what kind – is appropriate. In the United States, it is a key theme in the upcoming presidential election, and it is shaping politics in Europe and emerging markets as well.

WASHINGTON, DC – The financial crisis of 2008 has spurred a global debate on how much government regulation of markets – and what kind – is appropriate. In the United States, it is a key theme in the upcoming presidential election, and it is shaping politics in Europe and emerging markets as well.

For starters, China’s impressive growth performance over the last three decades has given the world an economically successful example of what many call “state capitalism.” Brazil’s development policies have also accorded a strong role to the state.

Questions concerning the state’s size and the sustainable role of government are central to the debate over the eurozone’s fate as well. Many critics of Europe, particularly in the US, link the euro crisis to the outsize role of government there, though the Scandinavian countries are doing well, despite high public spending. In France, the new center-left government faces the challenge of delivering on its promise of strengthening social solidarity while substantially reducing the budget deficit.

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0 Comments on this paragraph, 6 Comments on this article

Jeff Surtees Apr 14, 2014

I agree with much of what you say, save one thing. While some environmental regulation about small things may be appropriate at a local level, regulation of the big things is more consistent when done at a state or national level.
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S vd Niet Jul 24, 2012

Problems need to be dealt with at the level which is most effective, and from this perspective it indeed seems that nation states are sometimes an idle wheel between micro and macro. Yet I feel this is all too pragmatic.

The sovereign state embodies rule of law and does so with democratic legitimacy. This combination is unique.

Local governments are close to the people but have negligible powers when it comes to rule of law, whereas higher forms of government lack democratic legitimation. Even so, disputes, for instance breach of contract, are mostly still settled with appeal to a nation state's rule of law of a sovereign, even though the parties involved are based in different countries.

Also, there aren't just governments out here. Don't forget the people and companies that make things happen. Yet, the relations they enter into are more and more set in judicial terms (again Habermas: 'juridification').

So these trends go against each other: ongoing juridification while legitimatized rule of law resides at an ever less evident playing field. No solutions yet...
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Brian Holmes Jul 24, 2012

These four levels of governance are real. But the larger ones offer no substantial opportunity to experience the very foundation of governmental legitimacy: namely, democratic participation. How can ordinary citizens face the continental and global scales with any sentiment other than those of disempowerment and alienation?

In a collection of essays entitled "The Postnational Constellation," the late Jurgen Habermas raised the question of solidarity beyond the confines of the nation-state. As he wrote with incredible prescience: "The Danes must learn to see a Spaniard, the Germans a Greek, as 'one of us'... There is no form of collective political life in which the necessary equalization of different interest positions and living conditions could arise solely from the cool calculation of individual advantage." Habermas understood grassroots activism, with all the conflict it entails, as the necessary bridge between the national scale and its postnational successors. Only through shared struggle across national boundaries can citizens recognize each other as members of a cosmopolitan community. As he continued in another essay: "The first addressees for this 'project' are not governments. They are social movements and non-governmental organizations; the active members of a civil society that stretches beyond national borders."

I find it supremely ironic that the EU negotiator to the WTO, Pascal Lamy, should be the one to formulate the necessity for the local scale to internalize the global one. Never did transnational social movements show the depth and breadth of their aspirations to democratic participation as powerfully as they did in the global justice movements of the century's turn, whose chief antagonist was the WTO. And never did globalizing bureaucrats like Lamy so clearly show their disdain for citizens' hopes and dreams. Thus the world lost a crucial chance for the creation of democratic institutions at the continental and global scales.

Today, some ten years later, we can only watch as world society is restructured to match the dictates of the corporations and the banks. The betrayal of the transnational elites lies at the heart of this bitter spectacle.
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Frank O'Callaghan Jul 22, 2012

The State is the crucial instrument for society to manage it's world. The 'capture' of the State by minority groups such as the business lobby is a root cause of the current crises.

Our society is at a point of departure to the future. This is always the case. We have decisions to make and implement. These can only be done through the mechanism of the State and perhaps supranationally. Democratic re-engagement and a radical restructuring of our economies and our rapidly degrading environment are necessary.

There is no alternative to the State and it is too important to be left to the 'elites'.
- Procyon Mukherjee Jul 22, 2012
  
  The U.S. engine of growth is still the world's best option, but it is unfortunate that partisanship and political rhetoric is directed towards questions on State, which America had long concluded as a dynamic arm of restitution and rectitude, while doing precious good for those who are not covered under the benefits derived from "free markets". It would have done better if the Republicans and Democrats converged on this topic that the Role of the State is non-negotiable (like the role of corporate is) and differences could be evened out on the focus and allocation of resources. It is regrettable that that these debates not only undermine, but actually denudes whatever good that came of the state intervention in creating the host of opportunities that could not have happened without building of institutions and infrastructure in areas where trade and commerce could do little to create ( I am not undermining the role played by non-State actors and entrepreneurs but); the concert of state and non-state is the crucial success factor, that cannot be missed.
  
  Procyon Mukherjee
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Zsolt Hermann Jul 20, 2012

This is a very important overview article about governance in the global world.
First of all what politicians argue about, especially before elections, usually has nothing to do with reality, those debates simply serve their personal agendas, and most politicians immediately abandon their pre-election views as soon they were elected.
The last paragraph of the article is the crucial one:
"...As Pascal Lamy, the director of the World Trade Organization, has said, it is not only the “local” that has to be brought to the “global”; the inherently “local” political sphere has to internalize the global or regional context. That is a huge challenge for political leadership and communication, but, if it is not met, democracy and globalization will be difficult to reconcile. How to conduct democratic debate with reference to these local, national, continental, and global levels, and to structure a political space that better reflects economic and social space, will be the great challenge of the decades ahead..."
In today's global, interdependent world the importance is not truly about how many levels of governance exists, that should be decided by the practicality of the matter. It is much more important what agenda, purpose, "software" operates and motivates the different levels of governance.
At the moment the way we conduct governance contradicts reality. While in reality we already live in a single, interconnected system, where each action, even planning effects all the included elements which in our case encompasses the whole of humanity, when we talk about governance or usually any other issue we still think from national or even individual point of view.
It is similar to a living body, where the different organs, cells would think they can operate, exist individually, making decision disconnected from the other organs, cells and only connect when they think it is good for them. We can imagine how long such a body would be healthy or would survive.
Thus in a global system each and every level of governing organization, decision making body should be run by the same "software", they should follow the same plan, purpose, and the apply those same principles to their locality, culture.
The global crisis shows us very clearly that the way we presently run our life, our world is unsustainable, self-destructive, and the more we try to push on with this mentality the deeper we sink into the crisis making a swift and "painless" recovery increasingly more difficult.
Instead we should stop and recognize, study the global, integral system we evolved into, take on its conditions and laws, and start building a totally new human system that is adapted to the present reality, conditions, as any other living creature would do in order to survive evolution.
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