June 15, 2017

The Sovereign Myth

I recently had the privilege of sitting on a roundtable on the contemporary crisis with three very incisive and insightful political scientists: Sheri Berman, Mark Blyth, and Christopher Parker. (It was a plenary session of the Canadian Political Science Association, chaired by my colleague Dietlind Stolle, and is available by podcast here.)

That conversation crystallized something for me about how we diagnose what has gone wrong in the last several years, which in turn affects how we think about where to go from here.

My colleagues were generally sympathetic to an explanation that I think a lot of people endorse, but that is fundamentally misleading: The people are frustrated that they’ve lost democratic control of their lives and their economies.

In this post I’ll argue that that’s wrong, not as a description of voters’ psychologies, but as an implied history. They never had such control; it’s not available, and never was. This matters a great deal for understanding what choices lie ahead. There is no option of restoring what this explanation implies sovereign democratic states used to have. Holding out the promise of it invites perpetual frustration, exploitable by opportunistic demagogues. I don’t have any simple recipe for either getting us out of the current upsurge of populist nationalism, or for forestalling its return in the future. (Yes, I still think it’s current, notwithstanding recent European elections — a topic for another day.) But the answer is not to hold out the prospect of a return to a sovereign control over the world by democratic electorates.

The Golden Age That Never Was

The imagined Golden Age in these kinds of stories of the fall from democratic grace is the postwar era; it’s often referred to as les trente glorieuses, the thirty glorious years of high economic growth, broadly distributed, during which most Western market democracies built substantial welfare and regulative states after World War II. The chronology varies from one country to another, but roughly speaking the Golden Age is taken to have ended sometime around 1970-75, opening political space for a very different political-economic model to take hold — with the election of Thatcher and Reagan, and the reconciliation of Mitterrand’s Socialist government in France to the market. Mitterrand’s turn toward monetary and fiscal restraint looms large in this history; the international economic environment (particularly the partly fixed-exchange European Monetary System) meant that he couldn’t follow through on his ideological commitments and aspirations. Over the rest of the 1980s and early 1990s, the international financial institutions (the World Bank, the IMF) then supposedly imposed “neoliberalism” on much of the developing world — and, after 1989, on eastern and central Europe as well. Neoliberalism in this sense — there are far too many senses— includes fiscal austerity, privatization, free capital movement, and free trade.

That’s the story. For about 30 years, democratic electorates were economically sovereign. For about the last 40, they haven’t been. And the result has been both economic decay (income stagnation, rising inequality, hollowed-out industrial bases) and political anger and frustration. The people want to take back control of their economies and their societies. Thus, to critics of neoliberalism, the populist upsurge is a kind of dark morality play; we’re being punished for Margaret Thatcher’s sins.

I’m not going to try to adjudicate the longstanding debate among economists about the character and causes of the various slowdowns in Western economies since the 1970s, to say nothing of how we should think about them in connection with the escape from dire poverty of billions of people in the developing world. Rather, I want to focus on the entangled idea of sovereignty or self-determination.

One of the defining organizational facts about the state as we know it — the modern Weberian state that crystallized in Europe over the course of early modernity — is that it is symbiotic with transnational finance. In part, but it’s an important part, the modern state is a creation of the bond market, and so is the modern democratic state. Medieval mercantile cities had long been able to borrow money at better interest rates than other political units. In early modernity, states that were relatively representative and relatively commercial learned that they could do the same. First Holland, then England, gained crucial advantages in international competition from their ability to borrow cheaply; the credit market trusted representative governments that incorporated important parts of the commercial classes much more than they trusted absolute monarchs. And Britain’s ability to out-borrow France eventually contributed to the bankruptcy of the latter state and the onset of the Revolution.

No State is an Island Entire of Itself

This is uncontroversial but, from many ideological perspectives, uncomfortable. It means that the growth, stability, and expansion of powerful states governed by representative democracy was in part a creation of the credit market, bondholders, and international finance. That’s not a world in which democratic decision makers ever had unconstrained sovereign decision-making authority over public finance, even in the powerful core states of the international system. It also means that the representative state emerged out of a kind of market competition for creditworthy providers of government. The representation of those who would have to be taxed in the future to repay the debt was taken as much more credible than a king’s prediction that his son would probably find the money somewhere. Moreover, the innovative financial instruments that characterize modern financial markets were often created by, or around, public or quasi-public entities like the Bank of England and the Dutch East India Company. And once these processes got underway, the validity of transnational debt in the nineteenth and twentieth centuries was often enforced at gunboat-point by powerful states.

Thus, imagined histories of democratic sovereignty over the economy cannot survive contact with the actual history of the emergence of democratic states. Neither can imagined histories of an immaculately conceived market innocent of the world of coercive states. Modern liberal markets and modern democratic states evolved together, and each contributed to the development of the other in their familiar forms. I think that this history is somewhat more compatible with the kind of theory Andy Sabl recently developed in this space, one that takes seriously the connections and affinities among the fundamental institutions of liberal society: the free commercial market, the constitutional democratic state, civil society governed by associational freedom, and the rule of impersonal law. It’s the attempt to split these apart, whether to celebrate the democratic state alone or the market alone, that runs into trouble.

My point is not only the familiar one (no less crucial and true for being familiar!) that broad economic forces are always outside of any one state’s control. Every local economy is always affected by global economic forces, once markets have been integrated; and this is true regardless of how the local economy is organized. The Soviet Union spared no effort to subject its economy to deliberate planning and control, but it was still at the mercy of global swings in the price of oil. No state can legislate away the existence of changes in relative prices. Neither can a state just decide to have technological innovations or productivity increases, to say nothing of whether there are such innovations elsewhere that have positive spillover effects, or that hurt a local sector by competition. I think all of this is generally recognized — although one might sometimes wonder, given the popularity of claims about nation-states and democratic electorates controlling their economic destinies.

Sovereignty’s Fundamental Attribution Error

But I mean to also emphasize that even the things that states do govern about their economies, they have never sovereignly controlled. The public budget, the tax system, public debt, monetary and exchange policy: these have always been constrained by international actors. Indeed, the finance provided by the international actors has often been a precondition for the states’ ability to decide these matters at all. Once we look at things through that lens, the trentes glorieuses narrative falls apart. The years of the Marshall Plan, the Bretton Woods system, and the European Coal and Steel Community were not an era of autarkic policy-making and local democratic control. And even when Bretton Woods dissolved, the 1973 oil embargo dealt a shock to Western economies, and Britain entered a liberalizing European Economic Community — the confidence that international planners had shaped the economic world for the better rode high. After all, Robert McNamara’s years as head of the World Bank, when he massively expanded its programs and lending (and, thus, the debt of developing countries), lasted until 1981.

I suggest that the sense of control that is often attributed to voters in the olden days was really a sense of satisfaction with outcomes. Long years of economic growth in the West, broadly shared in, and in excess of the expectations of people who had lived through wars and economic collapse, propelled this satisfaction. In retrospect, though, it’s easy to flatter ourselves that, if things went well, it’s because we made such good decisions. Things look rather different when expectations are suddenly, sharply disappointed, as in the 2008 financial crisis and its aftermath. It’s all too easy for opportunistic politicians in such moments to tell the story: the reason why things went so badly is that control was taken away from you — whether by faceless international bureaucrats, greedy financiers, or alien others, whether they have immigrated or are still in their countries of origin, producing and competing against you.

This doesn’t, of course, amount to a strictly economic explanation of support for populist authoritarianism. The simple versions of the “economic anxiety” explanations for who supports such political movements have been widely debunked. But I think it is part of what makes fertile ground for such holist and fear-based political movements. The loss of the feeling of control can, moreover, go past economic questions; the demagogue can promise a restoration of control to the real people on social and cultural matters, too.

But in all these domains, the promise of control will be disappointed.

To the demagogue, the disappointment is a feature, not a bug. A perpetually frustrated and perpetually fearful populace is one that will continue to lend support to demagoguery. The policies adopted by an Erdogan or a Duterte are not meant to solve problems, but to keep the fear of them alive.

Those of us hoping to see decent liberal democratic constitutionalism in the future have to proceed differently. Yes, there has to be hope for a better future; but hope is not the same as autarkic, nationalist, or democratic sovereign control. There are hard questions about how we psychologically coexist with large-scale, impersonal social, cultural, and economic forces that are genuinely outside of anyone’s ability to just decide. Indeed I’ve recently argued elsewhere that we need to think of politics itself as a result of human action but not human design and decision, which even those who understand spontaneous and emergent orders in economics and society have been reluctant to do. It’s difficult to come to terms with. But however we are to manage the difficult psychological task of navigating currents that we didn’t decide into being, the first step will be understanding and admitting that we didn’t decide them.

Jacob T. Levy is Tomlinson Professor of Political Theory and Director of the Yan P. Lin Centre for the Study of Freedom and Global Orders in the Ancient and Modern Worlds at McGill University; author of Rationalism, Pluralism, and Freedom; a blogger at Bleeding Heart Libertarians; and a Niskanen Center Senior Fellow and Advisory Board Member.